Prudential
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/.
Tags: Prudential, Steve Wevodau Prudential, Steven Wevodau Prudential
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.
Tags: Prudential, Steve Wevodau Prudential, Steven Wevodau Prudential
posted by Steven Wevodau
US life insurers’ shares fall after Goldman Sachs, S&P take cautious view of sector
CHARLOTTE, N.C. (AP) — Shares of U.S. life insurers fell Monday after Standard and Poor’s warned it will be a difficult year and a Goldman Sachs report remained cautious on the sector.Goldman Sachs analyst Christopher Neczypor said a recent rally on the sector’s shares is “unwarranted,” and warned investors that holding onto the stocks could be risky.
“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.
Tags: Lincoln National, Principal Financial, Prudential, Steve Wevodau Lincoln National, Steve Wevodau Principal Financial, Steve Wevodau Prudential, Steven Wevodau Lincoln National, Steven Wevodau Principal Financial, Steven Wevodau Prudential
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.
Tags: Prudential, Steve Wevodau Prudential, Steven Wevodau Prudential
Stephen Womack, Financial Mail
4 January 2009
Millions of investors with
endowments, savings bonds and pensions will get bad news to start 2009.
Friends Provident is due to kick off the bonus season later this week followed by Norwich Union next week. The two insurers have about three million with-profits customers.
Standard Life plans to declare at the end of this month with other big names such as Prudential and Legal & General making their announcements in February.
Virtually all policies maturing this year will pay out less than plans that matured a year ago. Insurers are slashing the all-important terminal or final bonus, reflecting a year of disastrous investment performance.
With-profits funds hold a mix of UK and international shares, bonds, commercial property and cash, which all suffered bruising losses last year.
Tom McPhail, head of pensions research at adviser Hargreaves Lansdown in Bristol, says: ‘The reality is that virtually everything except gilts and cash has gone down in value and insurers can do only a limited amount to shield investors from these falls.’
The exact picture of how each insurer’s with-profits fund performed last year will emerge only gradually, but an analysis by McPhail for Financial Mail suggests the typical fund will have lost about 20% of its value.
In theory, the value of a with-profits endowment or pension does not vary directly in line with changes in value of the underlying investments. Instead, the insurance company smooths any investment growth over the life of the policy - this means holding back some of the profits in good years to mitigate losses in the bad years.
Each company declares annual bonuses, which are added to the policy to increase its value. Once added, they cannot be taken away. But insurers are increasingly hedging their bets by paying a higher proportion of returns through a final bonus.
This gives them more flexibility to alter returns in line with today’s more erratic markets - and means the effect of smoothing is reduced.
Saran Allot-Davey, who runs financial planner Heron House in Newport, South Wales, says: ‘With-profits may reduce some of the market risk, but you end up swapping it for another type of risk. You are at the mercy of what each insurer does to its bonuses.’
Stock markets were so poor last year that many companies have made extra cuts to their terminal bonuses over the past 12 months. Prudential cut them in November as well as February. Standard Life made cuts in August, October and January.
The combined effect means that a Standard 25-year £50 a month mortgage endowment, which was paying £37,763 at the end of January 2008, is now worth only £32,932 at maturity. And that figure is expected to fall further when Standard reports new bonus rates at the end of this month.
Richard Johnstone, 60, who lives near Ross-on-Wye, Herefordshire, has two endowments maturing this month. The first with Scottish Widows will pay £23,700 - far less than the £32,500 projection when Richard bought the policy in 1989. It represents a compound return on his monthly premiums of £69.12 or less than 3.5% per year.
Richard, who worked in IT, says: ‘I was flabbergasted when I saw the letter from Scottish Widows. If I were relying on this to pay off a mortgage, I would be in huge trouble. I’m amazed how much the values have changed in just six months.’
As recently as last May, Richard had been sent an update from Scottish Widows saying the fund had grown by 5%, leaving him on track for a maturity value of £27,700. But changes to terminal bonuses have wiped £4,000 (14.4%) off the investment.
Richard, who is divorced, says: ‘There must be hundreds of thousands of other savers in for a nasty shock.’ He is still waiting for a maturity statement from a second endowment with Prudential. ‘That policy had been holding up relatively well, but now I’m not sure what to expect,’ he says.
Allot-Davey says: ‘With endowments you do not have control over your investment. Unlike a unit trust, you cannot let it run for another year or two in the hope markets recover.’
…but NU has some good news at last
Delays - and doubts - have beset the ‘reattribution’ process involving Norwich Union’s with-profits fund.
But the insurer insists the deal is progressing and eligible policyholders who choose to swap some of their rights in exchange for a windfall should receive cheques by summer.
Endowments
Get the best advice on endowments and with-profits
NU’s parent company, Aviva, announced in 2006 that it was committed to carving up a vast pool of assets - then valued at £5bn - that had accumulated in NU’s withprofits fund over decades. The ownership of this money is questionable.
While the company wanted to pocket the lion’s share, policyholders, represented by Clare Spottiswoode, have fought for the biggest possible slice for themselves.
But the process has been dogged by controversy, with some critics claiming that such deals should not be allowed at all.
Last July, Aviva and Spottiswoode announced a compromise that would see £1bn shared among one million policyholders, triggering average cash payments of £1,000.
Last October, as panic swept the markets, doubts surfaced over whether the deal would proceed at all.
But last week NU said the next phase, where eligible policyholders will receive letters telling them how much their windfall would be, would take place in the next ‘few months’.
Tags: Prudential, Standard Life, Steve Wevodau Standard Life, Steven Wevodau Standard Life
By Andrea Felsted, Insurance Correspondent
Published: December 26 2008 17:38 | Last updated: December 26 2008 17:38
The financial crisis must seem like a walk in the park for Tidjane Thiam after being the victim of a coup d’état.
The 46-year-old finance director of Prudential – often dubbed the most interesting man in insurance – spent six years in politics in his native Ivory Coast before a military coup toppled the government in 1999.
When pressed on how he would benchmark the current financial crisis, he says: “I have got a few unusual benchmarks. When I went to the Ivory Coast there was a 50 per cent devaluation of the currency in the three months following my arrival.”
After an early career at McKinsey in Paris, Mr Thiam was asked by the president of Ivory Coast to return to the country, which was then in the throes of an economic crisis.
So, in 1994, he took charge of an independent adviser to the government on investment projects and then became minister for development. But in December 1999 Ivory Coast suffered the coup, leading to him being briefly detained by the military.
Although the military leadership offered Mr Thiam the role of chief of staff, he decided to leave the country, returning to McKinsey until he was headhunted by Aviva in 2002.
Threat to profit
New financial reporting rules that could cut some life assurers’ profits and solvency capital are breaking down under the weight of the financial crisis, the finance director of Prudential has warned.
European life assurers have pledged to move to so-called market consistent embedded value (MCEV), a stricter version of the standard they already use to value the policies on their books, by the end of next year. This would mean reporting under MCEV in spring 2010, although this timetable could slip as the rules are being reviewed.
Companies that write large numbers of annuity contracts, such as Prudential, Legal & General and Aviva, are expected to be particularly hard hit by the change.
Tidjane Thiam, finance director of Prudential, said the MCEV methodology was buckling under current economic conditions, such as extreme volatility in equity markets, and a significant increase in the return that investors demand for holding bonds that are more risky than gilts.
“We are in an economic environment where the method as initially designed breaks down,” he said.
The group of European insurance finance directors driving MCEV, known as the CFO Forum, has bowed to pressure to rethink the rules as they could produce misleading results in turbulent financial markets. This could lead to changes to the principles, and some observers expect the rules to be watered down or delayed.
Mr Thiam described the decision to re-examine the standard as a “courageous and a constructive step”.
Mr Thiam said the Pru was prepared for reporting under MCEV.
According to analysts at Citigroup, a move to MCEV would almost eradicate the profit the Pru makes from writing new UK life assurance policies.
Mr Thiam would not comment on the Pru’s figures under MCEV.
Tags: Prudential, Steve Wevodau Prudential, Steven Wevodau Prudential
POSTED BY STEVEN WEVODAU
Analysts says insurers may need more capital; downgrades Genworth, Prudential
CHARLOTTE, N.C. (AP) — Some insurers may be forced to raise equity capital as they continue to face a challenging economic environment, an analyst said Friday.JPMorgan Securities analyst Jimmy S. Bhullar said he also expects book value for most insurers to decline between 15 percent and 20 percent in the fourth quarter.
“For long-term focused investors willing to digest possible downside in the near term, the group is attractive,” Bhullar wrote in a note to clients. “However, we are waiting for operating trends to improve and/or valuations to correct further before becoming more positive on the sector.”
Bhullar said the decline in equity markets, low variable-investment income and a stronger U.S. dollar will pressure earnings results in the near-term.
As a result, he downgraded shares of Genworth Financial Inc. and Prudential Financial Inc. from “Overweight” to “Neutral,” and reduced fourth-quarter earnings estimates for the two companies.
Bhullar now expects Genworth to earn 40 cents per share in the fourth quarter. His previous estimate of 43 cents per share was in line with an average estimate by analysts polled by Thomson Reuters.
The downgrade and earnings estimate reduction reflect concerns about further deterioration in the mortgage-insurance business and limited capital, Bhullar said.
Thursday, Genworth said it would cut about 1,000 jobs as a result of the deteriorating economic climate. The company, based in Richmond, Va., has about 7,300 employees around the world.
Shares of Genworth closed at $3.34 Thursday.
Bhullar lowered his fourth-quarter earnings estimate for Prudential to a loss of $1.08 per share from a profit of $1.45 per share to reflect the company’s high equity and credit market exposure.
“We remained concerned that the company could need additional capital if the credit markets do not improve given its high exposure to residential and commercial real estate,” Bhullar wrote.
Analysts, on average, forecast a loss of 60 cents per share for the quarter. Shares of Prudential closed at $30.74 Thursday.
Not all is grim in the sector, however.
Bhullar upgraded Assurant Inc. from “Neutral” to “Overweight,” saying the company’s limited investment portfolio risk and lack of exposure to equity-market sensitive businesses positions it “defensively” in terms of capital adequacy.
He also upgraded Unum Group from “Underweight” to “Neutral,” but reduced his fourth-quarter earnings estimate by a penny to 65 cents per share.
Analysts, on average, forecast earnings of 63 cents per share for the quarter.
“Consensus estimates for most insurers are likely to be revised lower given challenging macro conditions, but we see limited risk to Unum’s forecast,” Bhullar wrote.
Tags: Equity Capital, Genworth, Prudential, Steve Wevodau Genworth, Steve Wevodau Prudential, Steven Wevodau Genworth, Steven Wevodau Prudential
TAIPEI (MarketWatch) — Prudential PLC Taiwanese life insurance unit, Nan Shan Life Insurance Co., the Economic Daily News reported Tuesday, citing unnamed market sources.
Alfred Cheung, chief financial officer of Prudential Life Assurance Co. in Taipei, declined to comment on the matter, the Chinese-language newspaper reported.
Taipei-based Nan Shan, which is 95%-owned by AIG, is Taiwan’s second-largest life insurer by gross premiums, after Cathay Life Insurance Co.
Tags: Prudential, Steve Wevodau, Steven Wevodau
Fitch Ratings downgrades Prudential Financial on concern about capital pressures
NEW YORK (AP) — Fitch Ratings lowered ratings on Prudential Financial Inc. Tuesday, citing concern that the insurer will need additional capital over the next year.
Fitch cut Prudential’s senior debt rating to “A-” from “A” and the financial strength ratings of Prudential’s life insurance subsidiaries to “AA-” from “AA.” The rating outlook is “Negative.”
The ratings agency said the downgrades reflect higher than expected volatility in earnings and capital, as well as liquidity needs at the holding company level to both meet large debt maturities through the end of 2009, and address subsidiary capital needs, in an “environment of capital markets volatility and diminished financial flexibility.”
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 October, Prudential said financial market turmoil drove a third-quarter loss and forced the company to withdraw its forecast for the remainder of the year. Of the Newark, N.J., insurer’s three divisions, the investment division reported the largest decline, a loss of $92 million, compared with a profit of $311 million, a year ago.
Fitch noted Prudential has the potential to realize additional capital if it exercises its minority interest in its retail-brokerage joint venture with Charlotte, N.C.-based Wachovia Corp. Prudential could also apply for preferred capital available through the U.S. government’s Troubled Asset Relief Program.
Potential debt financing alternatives include participation in the Federal Reserve’s Commercial Paper Funding Facility for up to $11.1 billion and membership in the Federal Home Loan Bank of New York for up to $6.7 billion.
Prudential shares closed at $17.15 Monday, down more than 20 percent, or $4.55, on a day that saw the broader market get hammered.
Tags: Prudential, Steven Wevodau, Steven Wevodau Insurance
POSTED BY STEVEN WEVODAU
Analyst cuts Prudential’s estimates, citing investment losses and potential need for capital
CHARLOTTE, N.C. (AP) — Continued declines in equity markets and the potential for a capital raise — including offloading its joint venture with Wachovia Corp. — led an analyst on Monday to cut his earnings estimates and price target for insurer Prudential Financial Inc.Citi Investment Research analyst Colin Devine cut his fourth quarter and 2008 earnings estimates because of “sub-par performance” from the company’s domestic variable annuity and 401(k) group pension businesses and continued declines in equity markets on fee based revenues.
“To be certain, Prudential has issues; a lot of them,” Devine wrote in a research note to clients.
Devine lowered his fourth-quarter earnings estimate to $1.54 per share from $2.01 per share, and his 2008 estimate to $5.95 per share from $7.40 per share.
Analysts polled by Thomson Reuters, on average, forecast quarterly earnings of $1.40 per share and $5.97 per share for the year.
Devine slashed his price target to $30 from $80, but raised his rating for the Newark, N.J. company to “Buy” from “Hold.” He said he believes the market has significantly over-discounted the company’s shares.
Prudential’s shares closed Friday at $21.70. In premarket trading Monday, the shares were down 35 cents to $21.35.
Devine said Prudential may need to raise capital by year-end, as many insurance firms have been hit hard in recent quarters by investment losses as the stock markets have sunk. It could consider monetizing the company’s nearly 25 percent stake its retail-brokerage joint venture with Charlotte, N.C.-based Wachovia, he said.
“We expect Prudential will attempt to either negotiate an early exit from the joint venture or potentially sell its stake to a third-party,” Devine wrote.
Tags: Prudential, Steve Wevodau, Steven Wevodau Insurance
