Prudential (PRU) Divests Full-Service Retirement Business

Prudential Financial Inc. PRU has divested its full-service retirement business to Empower for $3.55 billion. This move aligns with Prudential’s strategy to transform into higher growth, less market-sensitive and more nimble business.

Prudential inked the agreement to sell its full-service retirement plan recordkeeping and administration business on Jul 21, 2021. The agreement included the sale of defined contribution, defined benefit, non-qualified and rollover IRA business in addition to its stable value and separate accounts investment products and platforms.

Empower, the second-largest retirement provider in the United States, stands to gain as the acquisition expands its reach across the retirement services market to more than 16.6 million individuals and $1.4 trillion in assets under management.

Prudential has emerged as one of the top five individual life insurance companies in the United States with new recurring premium sales, greater scale, expanded product offerings and broader distribution capabilities. The financial services leader remains focused on repricing as well as moving toward lower risk and less capital-intensive products. As it transforms to become a higher growth, less market-sensitive business, it expects to double its growth businesses to more than 30% of earnings and the individual annuities business to 10% or less of earnings.

In tandem with its growth strategy, PRU closed the sale of a portion of its in-force legacy variable annuity block to Fortitude Re for a total transaction value of $2.2 billion.

Prudential undertakes several strategic initiatives, which poise it well for long-term growth. Last July, PGIM agreed to acquire Montana Capital Partners, which will enhance PGIM's capabilities and further expand its $250 billion alternatives platform. PRU remains upbeat about expanding its international footprint with a focus on directing earnings mix to higher-growth markets. Prudential has a strong international presence that gives it more organic growth opportunities than its peers.

Shares of this Zacks Rank #3 (Hold) insurer have gained 7.5% year to date, outperforming the industry’s increase of 2.6%. Its sustained solid operational performance is likely to help the stock keep the momentum alive going forward.

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Stocks to Consider

Some better-ranked stocks from the property and casualty insurance sector are United Fire Group UFCS, Kinsale Capital Group KNSL and American Financial Group AFG. While United Fire currently sports a Zacks Rank #1 (Strong Buy), Kinsale Capital and American Financial Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 275.45%. In the past year, the UFCS stock has declined 11.5%.

The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 60 days.

Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has rallied 36.5%.

The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 5.9% and 8.2% north, respectively, in the past 60 days.

The bottom line of American Financial surpassed earnings estimates in each of the last four quarters, the average being 39.58%. In the past year, the insurer has rallied 24.2%.

The Zacks Consensus Estimate for American Financial’s 2022 and 2023 earnings has moved 3.3% and 8.2% north, respectively, in the past 60 days.

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