Where is Prudential Financial Investing for Its Growth?
Prudential Financial Reports Strong Earnings on Life and Retirement
Investment across product categories
Prudential Financial (PRU) is making investments across its product categories and regions for future growth. The company is focusing on the full-service options that have helped it lower its unit costs. The company can now manage its unit costs more effectively, which has resulted in an improved sales force.
Overall, the sector remains highly competitive, and sales and cash flows from operations are expected to be volatile for most of the companies in this sector. Prudential Financial is enhancing its competitive position by investing in the development of strong sales channels. In 2Q15, Prudential Financial generated significant business from its retail clientele. In July, the company closed the State of Connecticut transaction, valued at over $4 billion.
Outlook for benefit ratios
Prudential Financial is expecting a benefit ratio between 80%–92% for its Life segment. In 2Q15, the segment’s benefit ratio stood toward the lower end of that range, reflecting strong operating performance. In the Disability segment, the benefit ratio is expected to be in the range of 88%–92%. The company has successfully improved its claims management capabilities and expects improvement in its targeted benefit ratio over the next few years. The lower benefit ratio in the range of 80%–92% should help to improve its pricing and its valuations.
Prudential Financial’s operating margin over the past 12 months stood at 3.25% as compared to its peers:
Manulife Financial Corporation (MFC): 9.90%
Metlife (MET): 13.66%
BlackRock (BLK): 40.38%
Together, these companies form 2.91% of the Financial Select Sector SPDR ETF (XLF).
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