On Jul 6, we issued an updated research report on Prudential Financial Inc. PRU.
Prudential is well positioned for long-term growth both organically and inorganically. The company stands to benefit from a strong international presence and penetration in the pension risk transfer business, benefitting from American’s aging population among others.
Prudential has been gaining scale in Brazil. This combined with its strong footprint in Japan and focus on penetrating China should drive its international division’s performance.
The U.S. Census Bureau projects that nearly 25% of the population will be 65 years or more by 2050. Given Prudential’s vast distribution network, superior brand image and time-tested presence, it will capitalize on the huge demand for retirement benefit products for baby boomers.
The company’s inorganic story looks impressive with the acquisition of the Individual Life Insurance business of The Hartford Financial Services Group HIG in Jan 2013, and Uni.Asia Life Assurance Berhad, a mid-sized life insurer in Malaysia, in Jan 2014. With the acquisition of the Individual Life Insurance business, Prudential has become one of the top five individual life insurance companies in the U.S. with new recurring premium sales, greater scale, expanded product offerings and broader distribution capabilities.
Moreover, a solid financial position is aiding Prudential to return capital to its shareholders via dividend increase and share buybacks.
However, the sustained low interest rate environment, poor disability margins, exposure to products like annuities and universal life are weighing on the positives. Moreover, complying with the SIFI capital standards could limit the company’s ability to deploy capital.
With respect to quarterly performance, this Zacks Rank #2 (Buy) multiline insurer delivered positive earnings surprises in two of the last four quarters, with the highest surprise delivered in the last reported quarter.
Prudential is set to report its second-quarter earnings results on Aug 5. The Zacks Consensus Estimate for the same is currently pegged at $2.47, translating to a year-over-year decline of 0.8%
Investors interested in multiline insurers can take a look at Assured Guaranty Ltd. AGO and Cigna Corp. CI. While Assured Guaranty sports a Zacks Rank #1 (Strong Buy), Cigna carries a Zacks Rank #2.
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