On Dec 17, 2015, we issued an updated research report on Prudential Financial Inc. PRU.
Prudential is regarded to be a niche player in the life insurance market. A consistent operating performance on the back of its high performing asset management business, a strong international presence, and deeper reach in the pension risk transfer market position Prudential for long-term growth. Moreover, expansion of its international business is satisfactory. The expected long-term earnings growth of the insurer is pegged at 11%.
The company’s inorganic story remains impressive with the prudent acquisitions. Also, Prudential is set to benefit from the huge demand for retirement benefits products for baby boomers.
Additionally, the insurer regularly engages in investor-friendly moves like share buybacks and dividend hikes. Last month, the company’s Board of Directors approved a 21% hike in its dividend. Over the last six years, the company has paid back $9 billion in capital to its shareholders. Moreover, Prudential targets capital deployment of $1.5 billion through share repurchases in 2016.
Also, the company’s robust capital and liquidity position shields it from market volatility and enables it to retain the financial strength and flexibility needed to pursue new opportunities in accordance with its long-term strategy. Based on its operational strength, Prudential expects to generate earnings in the range of $9.75–$10.25 per share in 2016, which translates to 2.6–6.7% jump year over year.
However, an underperforming group disability business affected the company’s growth. The business segment recorded poor disability margins, which put pressure on overall results. Also, implementation of stricter capital standards will have an adverse effect on Prudential’s capital deployment.
With regard to quarterly results, Prudential’s third-quarter 2015 operating net earnings missed the Zacks Consensus Estimate. However, the bottom line improved year over year on higher contribution from Retirement Solutions and Investment Management, and U.S. Individual Life and Group Insurance segments. This Zacks Rank #3 (Hold) multiline insurer delivered positive surprises in two of the last four quarters, with an average beat of 5.48%.
Stocks to Consider
Some better-ranked multiline insurance providers are Assured Guaranty AGO, FBL Financial Group, Inc. FFG and Old Republic International Corporation ORI. While Assured Guaranty and FBL Financial carry a Zacks Rank #2 (Buy), Old Republic sports a Zacks Rank #1 (Strong Buy).
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