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Prudential Set to Grow on Core Strength; Low Interest a Drag


On Sep 16, 2016, we issued an updated research report on Prudential Financial Inc. PRU.

Prudential has been growing its pension risk transfer business and has more than $75 billion in pension account values. The company strives to build its leadership position in the pension risk transfer market which presents great potential and is an excellent fit for its group annuity management skills.

Prudential Financial has expanded its international presence, mainly in Japan, Korea and China, which provided it with better organic growth opportunities than peers. Its inorganic portfolio remains impressive with strategic acquisitions.

Prudential Financial’s solid operational performance helps it sustain robust capital and liquidity position. This, in turn, helps the company engage in effective capital deployment to generate value for investors.

The insurer’s dominant market presence and diversified business have been supporting its favorable earnings growth, substantial risk-adjusted capitalization and favorable long-term operating performance as well as sustained solid operating performance across most of its segments.

A.M. Best retained the issuer credit ratings of “a” of Prudential Financial. The company, along with its subsidiaries, enjoys strong ratings from credit rating firms. This helps it in retaining investors’ confidence as well as maintaining credit worthiness in the market.

However, low interest rate environment may hamper the insurer’s investment results. Also, underperforming group disability business and regulatory control may hurt the bottom line.

Also, Prudential Financial’s exposure to products like annuities and universal life, which guarantee minimum return, will strain its capital.

The Zacks Consensus Estimate moved south for by a dime to $8.88 for 2016 but increased by a couple of cents to $10.32 for 2017. The expected long-term earnings growth is currently pegged at 9%.

Stocks to Consider

Some better-ranked multi line insurers are MGIC Investment Corp. MTG, CNO Financial Group CNO and James River Group Holdings, Ltd. JRVR. While MGIC Investment sports a Zacks Rank #1 (Strong Buy), both CNO Financial and James River Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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