Metlife Inc (MET), Hartford Financial Services Group Inc (HIG), Travelers Companies Inc (TRV) – Insurance Stocks Rally: Two To Buy, Two To Avoid

The reason why I am negative on these companies has little to due with their business prospects, but rather their valuations. As shown by the chart below, both Chubb and Travelers Companies Inc (NYSE:TRV) are trading well above book value and close to historic high valuations. Given this, I believe it will be difficult for either name to make a sharp move higher anytime soon. Simply put, both Chubb and Travelers Companies Inc (NYSE:TRV) are too expensive.

TRV Price / Book Value data by YCharts

Diversion

As shown by the chart below, over the past three months, as the stock market as a whole has rallied, we have already started to see a divergence between MetLife/Hartford versus Chubb/Travelers Companies Inc (NYSE:TRV). I expect this divergence to continue.

TRV data by YCharts

Conclusion

As the bull market in insurance stocks continues, I would look to go long with MetLife or Hartford and avoid Chubb and Travelers. My main reason for this view is valuation. Metlife Inc (NYSE:MET) and Hartford Financial Services Group Inc (NYSE:HIG) trade well below book value, while Chubb and Travelers trade well above book value. Specifically, I am not looking for a big sell off in Chubb or Travelers Companies Inc (NYSE:TRV), but rather a failure to keep pace with the move higher in names such as Hartford and MetLife. In addition to the attractive valuations, MetLife’s 2.5% dividend yield and Hartford’s progress on its transformation strategy make both companies solid investments.