Prudential Financial saw improvements to its profitability after impacts from the pandemic hurt it last year. The company has undergone initiatives to transform its business mix while also saving $750 million in costs by 2023, with $400 million of that coming this year.
Last year, Prudential was hit hard by the pandemic and posted a net loss of $146 million as a result. This came after a $4.1 billion profit in 2019.
The financial services company was hurt by investment losses totaling $3.8 billion along with a decline in premium revenue of 9% from the year before. Together this caused total revenue to drop 12% to $57 billion.
But investors are optimistic about signs of a turnaround. In the first quarter, revenue of nearly $17 billion was a 26% improvement from the year before, and net income came in at $2.8 billion in the quarter after posting a $270 million loss the year before.
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Prudential has worked toward changing its business mix and earnings profile, looking to pivot toward products that are less market- and rate-sensitive. One such product is FlexGuard, an indexed variable annuity that gives customers different levels of protection and the ability to boost income in retirement. FlexGuard sales grew to $1.6 billion in the first quarter from $1.2 billion in the fourth quarter, and accounted for 84% of its annuity sales.
With this pivot, along with its cost-saving measures, CEO Charlie Lowrey said, "We expect Prudential Financial to emerge as a higher-growth, less market-sensitive, and more nimble company."
Prudential Financial is a solid company that is on track for recovery, and its stock still looks to be discounted. It trades relatively cheaply with a P/E of 15.1, and a forward P/E of 7.6 that makes it look even cheaper. Not only that, but it's also a great income stock with a dividend yield of 4.55%.
Management's strategic shift in its business mix and its cost savings have helped the stock recover in the first half of the year, and are positive signs for shareholders.
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