Prudential - Steven Wevodau
Prudential Financial Honored as a Top 50 Company By LATINA Style Magazine - Posted by Steven Wevodau
NEWARK, N.J.–(BUSINESS WIRE)–Prudential Financial, Inc. (NYSE:PRU - News), was honored yesterday by LATINA Style magazine during the 2008 LATINA Style 50 Awards Ceremony and Diversity Leaders Conference in Washington, D.C.
LATINA Style, a national magazine for the contemporary Hispanic woman, ranked Prudential among its top 50 companies that provide best-in-class development opportunities for Latinas.
Grace Torres, vice president, Mutual Fund Administration accepted the award on behalf of Prudential. “It’s an honor to represent Prudential at this prestigious event,” Torres said.
“Since joining Prudential in 1994, I have seen the company’s ongoing commitment to providing professional development opportunities not only to Latinas, but all employees. I am so proud to work for a company that values diversity and inclusion, not just through programs and initiatives, but in every aspect of the business,” said Torres.
The 50 Best Companies are chosen from more than 1,000 prominent U.S. corporations. Companies responding to LATINA Style’s questionnaire are evaluated based on the issues identified by their readers as most important in the workplace. Areas of evaluation include: number of Latina executives, mentoring programs, Latina board members, educational opportunities, alternative work policies, dependent and child care support, employee benefits, women’s issues, job retraining, affinity groups and Hispanic relations. Prudential is one of two N.J.-based companies to receive the award.
Prudential Financial, Inc. (NYSE: PRU - News), a financial services leader with approximately $558 billion assets under management as of December 31, 2008, 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/.
Contact:
Prudential Financial, Inc. Nacema Blake, 973-802-5405 Nacema.Blake@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.
PruLife Return of Premium (ROP) Term Now Available in New York State
posted by Steven Wevodau
NEWARK, N.J.–(BUSINESS WIRE)–PruLife Return of Premium (ROP) Term is now available in New York State. Issued by Pruco Life Insurance Company (Pruco Life Insurance Company of New Jersey in NY and NJ) and previously approved in most states (not approved in MN, WA and UT), PruLife ROP Term offers consumers the powerful combination of valuable death benefit protection and the guaranteed return of all premiums paid if the insured lives past the end of the level premium-paying period selected (15, 20 or 30 years). Returned premiums do not include any amount of outstanding loans with interest. Policies lapsed or cancelled before the end of the initial level premium-paying period will result in only a partial return of premium or no return at all.
“People seeking life insurance are often conflicted between the affordability of term coverage and the desire for the cash value feature that permanent policies can offer,” said Jim Avery, president, Individual Life Insurance, The Prudential Insurance Company of America. “The advantage of PruLife ROP Term is that it provides both a death benefit that’s payable while the coverage is inforce and a “living benefit” in the form of a full premium refund if the insured outlives the initial protection period.”
Unlike traditional term insurance policies, PruLife ROP term builds cash value. The cash value, which does not earn interest, is guaranteed to grow and become equal to the premiums paid by the end of the initial level premium-paying period (15, 20 or 30 years).
Should the insured want a permanent life insurance policy, PruLife ROP Term (contract number PLTIR 2006) can be converted during the conversion period. If the individual wishes to retain the policy after the end of the level premium-paying period, premiums are payable to age 95 and increase every year.
Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey, and The Prudential Insurance Company of America are Prudential Financial companies located in Newark, NJ. Each is responsible for its own financial condition and contractual obligations. All guarantees are based on the claims paying ability of the issuing company. Our policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force. A licensed financial professional can provide costs and complete details.
Prudential Financial, Inc. (NYSE: PRU - News), a financial services leader with approximately $602 billion of assets under management as of September 30, 2008, 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/.
IFS-A159924, Ed. 1/2009
Contact:
Prudential Financial, Inc. Janet Gillespie, 973-802-8012 janet.gillespie@prudential.com
Outlook for Life Insurance Discussed in Wall Street Transcript Insurance Report
posted by Steven Wevodau
67 WALL STREET, New York–January 14, 2009 - The Wall Street Transcript has just published its Insurance issue, a report offering a timely review of the sector to serious investors and industry executives. This 36-page feature contains a roundtable forum and industry commentary through in-depth interviews with top management from 3 firms and 2 analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics include: Impact of the credit crisis, Poor equity markets, Variable annuity business outlook, Disability insurance, Increase in claims, Exposure to subprime and derivatives, Default risk, Raising capital, Hoarding cash resources, Cutting expenses, Mergers and acquisition activity , Market volatility, Management quality, Regulatory outlook, Access to TARP funds, Treasury loan to AIG, Credit ratings, Trader’s market and pair trades, Investor interest, Stock picks, Stocks to avoid.
Contents: Roundtable Forum - Life Insurance: Randy Binner, Friedman, Billings, Ramsey Group, Inc.; John Nadel, Sterne Agee & Leach, Inc.; Property-Casualty/Reinsurance: Michael G. Paisan, Stifel Nicolaus & Company, Inc.; Outlook for Property & Casualty Insurance: J. Paul Newsome, Sandler O’Neill + Partners, LP. CEO Interviews (average 2,500 words): Top management from 3 sector firms examine the outlook for their firm and sector. Firms interviewed include: American Financial Group, Inc., Employers Holdings, Inc., Greenlight Capital Re, Ltd. Companies include: AIG (AIG); Prudential Financial (PRU); MetLife (MET); Assurant (AIZ); Aflac (AFL); Reinsurance Group of America (RGA); Hartford Financial (HIG); Principal Financial (PFG); Unum (UNM); Genworth (GNW); Lincoln National (LNC); StanCorp (SFG); Allianz (AZ).
In the following brief excerpt from the 36-page report, the roundtable discusses the outlook for the sector and for investors.
TWST: John, as you look back at 2008, what has been the driving force in the life insurance business? Has it really been the financial crisis?
Mr. Nadel: Yes, I think that’s exactly right. The forces have really been twofold in the life insurance sector in my view. They’ve been credit and the poor performance of the equity markets. So every company has had its piece of credit whether it came in the early stages in the form of the subprime residential mortgage-backed securities or if it’s come more recently through the broad decline in valuations across every asset class, from corporates to commercial mortgage-backed securities and the ongoing pressure on residential mortgage-backed securities and other asset-backeds. Every company has had exposure there. And then you’ve got your variable annuity companies, which have had the double-whammy. The impact of credit on their general account investment portfolios and then the impact of the down equity markets both on the earnings off of their variable annuity businesses plus the incremental capital that they need to continue to put up against the variable annuity businesses as the guarantees go further and further in the money.
TWST: Randy, same question, how would you characterize what went on and what drove things for 2008?
Mr. Binner: John certainly laid it out very well. We had identified credit as a huge issue just over a year ago and have worked on it a lot this year by trying to identify who had exposure to what risky assets and, more important, what we thought the losses would be, and as you said, there were definitely stages of it. I’d say that we all understood that it was a levered credit play in a lot of ways with the average leverage of 7 times invested assets to equity. I believe what you saw was that we all handicapped the credit exposures for what the economy supported and then we got past this point maybe a few days after the GSE bailouts in September, when things got a lot worse from a credit and stock market perspective. After that, some of the more levered credit plays became un-investable because the generally higher leverage no longer made the group relatively well insulated, but relatively more exposed. I believe from that point in time we’ve been one of the worst performing verticals in the overall market.
In addition to credit, the deposit-based products and variable annuity guarantees have obviously been the things that pop up when the S&P moves below 900. That is a particular problem for Hartford (HIG) and Lincoln (LNC), but also for MetLife (MET) and Prudential Financial (PRU) to a lesser extent. But, at the end of the day, it all comes back to credit because while the variable annuity exposure may decrease earnings or hit your capital base, you still need that capital base relative to the inevitable credit losses.
Finally, I’d add, the recession exposure of disability insurance products was another area where investors have been cautious and are going to continue to be cautious.
TWST: Where does the disability work into this, Randy?
Mr. Binner: In the last recession, Unum (UNM) most notably, which is the largest disability provider in the US and the UK, saw higher losses coming out of the last recession due to higher claim incidents, but, more objectively, they had more severe or longer claims as they struggled to get people back to work. So, the general idea that incidence of claims will go up in periods where consumer confidence is waning and unemployment is rising is well established. Claims have a tendency to go up due to natural ramifications of a bad economic environment, mental issues, substance abuse, soft tissue problems or possibly fraud. MetLife saw a bit of a crack on that in their benefit ratio last quarter, but we really haven’t seen it from other insurers yet.
TWST: What names are you pointing people to, Randy?
Mr. Binner: Aflac is our top pick. It’s a very solid, protection-focused company. You get a very reliable EPS stream that is not market sensitive, and from a credit perspective they do relatively well. I think I said before that no insurance company is perfect but their more risky exposure is concentrated exposure to bank and financial debt from Europe and Japan. Clearly, there have been issues there but at least you know what names you can monitor and track. Also, 70% of their operations are in Japan, which is giving you a benefit on earnings from the strong yen versus the dollar. And you know, sales are going to be tough for them, but I think that’s priced into the stock. Also, their earnings base is intact and finally, longer term, the idea of selling cancer insurance and supplemental health policies, is a strong secular growth story both in the US and Japan.
Then you move to relative calls like MET and PRU, that we have already covered. Companies like Principal, which is a great franchise and a great company, good management team - they have too much credit exposure relative to their excess capital base in order for me to get comfortable recommending the stock. They may be able to out earn the credit losses, but we continue to caution people on a story like that.
TWST: John, what names are at the top of your list?
Mr. Nadel: I agree on a couple of those with Randy. My top pick is Assurant (AIZ). It’s a specialty insurance company as well. It’s got four or five niche-oriented businesses, and no equity sensitivity in their earnings stream either. They’ve benefited in one of their businesses from the housing crisis. It doesn’t seem like anybody in the insurance business should benefit from a crisis, but their specialty property business has tripled in size in about three years owing to higher mortgage delinquencies and default rates. That’s a company that is well managed. They are really good capital allocators and are extremely cheap on a valuation basis and even on a relative basis to everything. That’s a name that we would highlight as one of our top picks. As Randy indicated when he was talking about Aflac, I don’t agree on the Aflac call, but I would characterize Assurant similar in that it’s a stock that can be long for the long term.
I like MET and PRU a lot. There are not going to be smooth stories here I don’t think, not unless credit improves dramatically, but I do suspect that investors today in those names are going to be well rewarded long term as they come out the other side of however long this lasts. They will come out bigger, stronger with more market share, more opportunity for expense efficiencies and better margins coming out the other side.
The last one that we would highlight is a bit of a specialty company as well and that is Reinsurance Group of America (RGA). It’s a pure play life reinsurance company. It’s not quite as cheap as it was maybe a month or two ago when they raised some equity, but their equity raise was much more about a proactive opportunity to take advantage of some new business opportunities here as a bunch of the primary life insurers are looking for opportunities and ways to relieve capital strain, unlock capital. RGA is one of those companies that by essentially being a partner with the life companies and reinsuring some of their businesses, they can provide that capital relief to the primary companies and also benefit for themselves long term. RGA is a company that we think has significant value, it’s still a buy-rated stock, but it’s performed really well here on a relative basis over the course of the past couple of months. I’d look for an opportunity in the mid-$30s as a great entry point.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 36-page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
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Sector Snap: Life insurers fall on outlook worries
posted by Steven Wevodau
US life insurers’ shares fall after Goldman Sachs, S&P take cautious view of sector
“As asset values are impaired and liabilities increase, excess capital positions will be eroded,” Neczypor wrote in the report.
A handful of companies remain at risk for credit deterioration, including Principal Financial Group Inc., Hartford Financial Services Inc., Prudential Financial Inc. and Lincoln National Corp., Neczypor wrote.
MetLife Inc., the largest U.S. life insurer, should fare better because of its “diversification and sizable capital cushion,” he added.
Rating agency Standard & Poor’s raised its own concerns on the sector, saying continued turmoil in the credit and equity markets is taking a big toll on the U.S. life insurance sector. As a result, the agency said it plans to either downgrade some life insurers or change the outlook on some ratings to “Negative” in the next six months.
“The companies at greater risk are dealing with lower capital levels, increased risk in their investments or liabilities and weaker competitive positions,” S&P wrote.
Within the past year, insurers have been under pressure to maintain solid capital positions to avoid damaging downgrades by ratings agencies. Keeping high ratings is key for insurers because lower ratings can mean higher costs, and in some cases, even a loss of business.
In recent months, some companies have taken action to bolster capital. Hartford Financial raised $2.5 billion of capital in October and contributed all of it to its life insurance operations. That same month, MetLife raised $2.3 billion in a stock offering.
Shares of Hartford Financial lost $3.05, or 16.8 percent, to $15.11 in afternoon trading, while MetLife lost $2.78, or 8.7 percent, to $29.09.
The Office of Thrift Supervision, a Treasury Department agency, said Friday that it approved applications from Hartford Financial and Lincoln National to acquire existing savings and loans and become thrift holding companies.
Insurance companies that own thrifts, which are federally regulated, are eligible to apply for a piece of the $700 billion in government bailout funds.
Shares of Lincoln National fell $2.16, or 10.8 percent, to $17.94.
Among other life insurers, Principal Financial was down $2.13, or 10.2 percent, to $18.81, while Prudential shed $3.79, or 11.9 percent, to $28.10.
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