Life insurance: compelling backdrop, valuations
We believe that the life insurers are at a very attractive juncture with multiple factors providing a favourable backdrop, including: i) stronger net flows on the back of the strengthening economy and growing consumer confidence, ii) rising interest rates leading to improving net investment income, iii) better cost control driving increased operating leverage, iv) greater clarity around LTC issues, and v) attractive valuations with both stocks trading on 0.95-1.0x FY19 BVPS with forecast operating ROEs of 12.5-13.5%. With BVPS growth of 8-9% pa and dividend yields of ~4%, total returns of ~12% are compelling even without a multiple re-rating.Metlifecare and its subsidiaries are engaged in providing accommodation and care of the aged through the ownership and management of a retirement village which includes nursing homes, geriatric hospitals, apartments and villas. In addition, Co. provides a number of ancillary and support services ranging from domestic services, such as household cleaning and meals preparation, through to the provision of specialist home nursing care.
Prudential is a parent holding company. Co., together with its subsidiaries, is an international financial services group with its principal operations in Asia, the U.S. and the U.K. In Asia, Co. has operations in Hong Kong, Indonesia, Malaysia, Singapore and other markets. In the U.S., Co.'s principal subsidiary is Jackson National Life Insurance Company. In the U.K., Co. operates through its subsidiaries, primarily The Prudential Assurance Company Limited and M&G Investment Management Limited. Co. provides a range of retail financial products and services and asset management services throughout these territories.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
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