Prudential
Americans Don’t Understand Long-Term Care Insurance - Posted by Steven Wevodau
- Press Release
- Source: Prudential Financial, Inc.
- On 11:56 am EST, Tuesday November 3, 2009
NEWARK, N.J.–(BUSINESS WIRE)–An aging American workforce is increasingly concerned about long-term care needs and the benefits available through employers, according to a report released by Prudential Financial, Inc. (NYSE: PRU - News).
But the Prudential study, Long Term Care Insurance, shows only a small number of employees understand the benefits of long-term care insurance, with only about one-quarter of workers planning to use insurance to fund long-term care expenses.
“As Baby Boomers begin thinking about life after age 60, they grasp the implications of longer lives, post-retirement finances and lifestyles and nursing care costs,” said Lori High, president of Prudential’s Group Insurance business. “As a result, workers are more aware of their own future long-term care needs and the impact on their retirement lifestyle.”
Those with care-giving experience place greater value on employee benefits including long-term care insurance, because they’ve seen how inadequate insurance coverage can drain resources. Unfortunately, there remains a gap between this recognition and action to provide an adequate solution through the purchase of long-term care insurance, according to High.
Consider these findings:
- Three in 10 workers said they don’t have a plan or don’t expect to need long-term care services for them or their spouse.
- Among those that do have a plan, their expectations may be unrealistic given the rising costs of long-term care. The most common sources of funding cited for long-term care were 401(k) or retirement savings, followed by Medicare.
- The education gap is greater for women. Women tend to do more of the care giving and have more experience with care giving, yet they are less likely to have a plan for their own long-term care needs compared with men.
Prudential’s Long Term Care Insurance was conducted in conjunction with the company’s sponsorship of Long Term Care Insurance Month. Held each November, Long Term Care Insurance Month is an industry-wide effort coordinated by the nonprofit American Association for Long-Term Care Insurance in response to growing concern about the large number of Americans who lack adequate long-term care insurance protection.
“Americans recognize the importance of each dollar spent on employee benefits – both employers and their employees – and are looking for the best coverage their money can buy,” High said.
Long Term Care Insurance, the third in a series of five reports, stems from the company’s broad Study of Employee Benefits: 2009 and Beyond report fielded via the Internet during April and May of 2009. It consists of three distinct surveys: one among benefits plan sponsors, one among benefits plan participants, and one among employee benefits brokers and consultants. The surveys were conducted for Prudential by the Center for Strategy Research, Inc., a Boston-based, independent, market research firm. Click here for a copy of Long Term Care Insurance.
Prudential’s Group Insurance business manufactures and distributes a full range of group life, long-term and short-term group disability, long-term care, and corporate and trust-owned life insurance in the U.S. to institutional clients primarily for use in connection with employee and membership benefits plans. Group Insurance also sells accidental death and dismemberment and other ancillary coverages and provides plan administrative services in connection with its insurance coverages.
Prudential Financial, Inc. (NYSE: PRU - News), a financial services leader with approximately $580 billion of assets under management as of June 30, 2009, has operations in the United States, Asia, Europe, and Latin America. Leveraging its heritage of life insurance and asset management expertise, Prudential is focused on helping approximately 50 million individual and institutional customers grow and protect their wealth. The company’s well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Prudential’s businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. For more information, please visit http://www.news.prudential.com/.
Group Insurance benefits are issued by The Prudential Insurance Company of America, Newark, NJ. Prudential and The Rock logo are registered service marks of The Prudential Insurance Company of America.
0164462-00001-00
Contact:
Prudential Financial, Inc. Laurita Warner, 973-802- 8614 Laurita.warner@prudential.com
JOHN DORFMAN: Bad news is good news for bargain hunters
posted by Steven Wevodau
The drop in home prices helps first-time home buyers. And the slow-motion crash in the stock market is good for value investors if they are fortunate enough to have some cash on hand.
As the year begins, there are more than seven dozen stocks that meet three stringent bargain-hunting criteria:
They are down 50 percent or more in the past 200 days.
They sell for less than book value (corporate net worth per share).
Their stock price is less than 8 times the company’s earnings, a modest multiple by historical standards.
In normal times, such bargains would be hard to find. But 13 months into a recession, and after 14 months of a fierce bear market, there are dozens of such stocks.
Using Bloomberg stock-screening software, I combed through 1,764 U.S. stocks with a market value of $500 million or more. I found 88 potential bargains that meet those three criteria. Here are five stocks that struck me as especially interesting.
Prudential Financial Inc. of Newark, the second-biggest life insurer in the U.S., is the largest of the lot. Prudential shares sell for only 5 times earnings and 0.69 times book value. The stock fell 67 percent last year.
Why is Prudential so inexpensive? Insurance companies generally don’t make the bulk of their profits directly from their insurance operations. The premiums they collect and the claims they pay are often roughly in balance.
Pru’s cash flow
These companies have tremendous cash flow, however, and they usually invest the cash at a profit, most often in bonds or bond-like instruments. Alas, “bond-like instruments”includes a variety of mortgages and mortgage securities, many of which have plunged in the past year. Prudential also invests in commercial real estate, which also has fallen in value.
Prudential is implementing job cuts. It reported a loss of $166 million in the third quarter. Yet the fact that the company is passing through bad times doesn’t mean it will collapse. I think the stock is worth buying if you intend to hold it for three to five years.
Another battered large-company stock I like is Valero Energy Corp., a refiner based in San Antonio. Valero shares fell 69 percent last year, and now can be bought for what seem to me to be bargain multiples — 5 times earnings, 0.10 times revenue and 0.69 times book value.
Investors are focusing on negative factors for refiners, such as people driving fewer miles than they did a year ago. They are ignoring positive news, such as a decline in the price of oil, which for refiners is a raw-material cost.
Steal U.S. Steel
United States Steel Corp. is selling for the rarely seen multiple of 2 times earnings. Does it have troubles? Certainly. But it has reduced the burden of its high labor costs and post- retirement benefits, strengthened its balance sheet and rationalized its fleet of steel mills.
The price of steel climbed from 2003 through May 2008, rising to a peak of $2,996 a ton from around $315. Then it fell all the way to $535 in November, but has since recovered to near $900.
Last month, a report from Goldman Sachs & Co. upgraded the steel industry to a buy, based partly on a belief that “unprecedented supply cuts from steel producers around the world” would set the stage for price increases.
U.S. Steel’s stock displays rock-bottom valuations. It sells for 0.72 times book value and 0.19 times revenue, along with that aforementioned price-earnings ratio of 2. It yields 3.1 percent in dividends.
Good travels
Expedia Inc., an online travel agency based in Bellevue, Wash., is my next selection. Its stock fell 74 percent last year as investors worried that high energy prices and a recession would cripple travel. Expedia also faces vigorous competition from Priceline.com Inc., Orbitz Worldwide Inc. and others.
Those are legitimate concerns, yet I think it’s notable that through September, Expedia’s earnings had stayed within a few pennies of their quarterly peak, reached in June 2008.
You can buy Expedia shares for 8 times earnings, 0.50 times book value and 0.85 times revenue.
Finally, I recommend Janus Capital Group Inc., a Denver-based money-management firm. The shares trade at $8.87, down 76 percent in 2008 and down from more than $43 a share in 2000.
After suffering performance woes and a drain of top talent in recent years, Janus has been attempting a turnaround. Its revenue in the third quarter last year was $243 million, a decline from $285 million in the same quarter of 2007. Not too bad, considering that we’ve been in a fierce bear market.
Janus sells for 8 times earnings, 0.87 times book value and 1.25 times revenue. I would like to see the company increase its dividend, currently only 4 cents a share.
Disclosure note: I own shares in U.S. Steel personally and for clients. At this writing, I do not own the other four stocks recommended in this column.
Options: A Collar Play in Prudential - posted by Steve Wevodau
By Jud Pyle, chief investment strategist for the Options News Network
Shares of Prudential Financial(PRU Quote - Cramer on PRU - Stock Picks) were down nearly 4% at one point today to $31.50. But considering that shares of PRU spent most of November below $30, this is a slight pullback. In fact, on Nov. 20, PRU bottomed at $13.73, meaning that even with today’s pullback, the shares are up more than 120% from their lows. One option investor made trades today to position for limited upside in PRU.
The Feb 25 puts have traded over 6,000 times today vs. open interest of 400. The Feb 35 calls also have traded more than 6,000 times vs. an open interest of roughly 750. What was happening here is the customer was buying the put and selling the call. This strategy is typically referred to as a collar.
In this instance, the customer sold the Feb 35 calls for around $3 and bought the Feb 25 puts for around $1.90. So all together they were collecting about $1.10 for the spread. The reason that this strategy is called a collar is because if the investor is long stock, he has effectively “collared” his returns. If the stock goes below 25 at expiration, the puts kick in and the customer does not lose any more money. In exchange for that protection, the customer has sold off the upside in the form of the 35 calls. If the stock is above 35 at expiration, the investor will be called away on their shares, thus capping their gain.
This collar trade also gives us a chance to look at something called skew. It’s a term that option traders use to describe the difference in implied volatilities from one strike to the next in the same expiration month. For example, in this trade, the price of $1.90 in the Feb 25 puts translates to an implied volatility of roughly 120 with the stock at $31.90, while the price of $35 in the Feb 35 calls translates to an implied volatility of closer to 95.
A collar trade like this does not mean that investors should run right out and sell their shares. But it is a good exercise to at least pay attention to how far the shares have come and how fast. It also gives insight into what kind of implied volatility differences at least one investor is willing to pay for downside protection.
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
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