Shares of Prudential Financial, Inc . PRU gained 6.74% year to date, significantly outperforming the Zacks categorized Multi line industry's growth of 2.50%. We expect the company to retain its momentum owing to a number of positives such as widespread international operations and deeper reach in the pension risk transfer (PRT) market.
The multi line insurer will continue to benefit from its reach and in-depth expertise in the pension risk transfer (PRT) business. Moreover, the company is on track to establish its leadership in the PRT market, which has potential and complements the company's group annuity management skills.
The Zacks Rank #3 (Hold) multi line insurer's international operations have positioned it well for long-term growth. The company is expected to benefit from the AFP Habitat buyout, which was completed in the first quarter of 2016. The transaction, which expands its international footprint, is anticipated to result in stable growth, steady earnings, and cash flow generation.
Additionally, Prudential has successfully generated investors' value by implementing shareholder-friendly measures, such as dividend payments and share repurchases, over time. The company also maintains active capital management through share buyback. In 2016, the company paid back $3.2 billion to investors through share buybacks and dividend payouts. Prudential has taken several actions to improve its capital flexibility and reduce volatility.
However, unfavorable currency impact and regulatory control remain headwinds.
Nonetheless, Prudential carries a VGM score of B. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of these three. Currently, Prudential seems to be undervalued as the stock is trading at 1.04x price to book multiple over a period of one year. This compares favorably with the Multi line industry's multiple of 1.26x. Also, the company has a trailing 12-month return on equity (ROE) of 8.0%, which is higher than the industry average of 6.2%. Furthermore, the company's expected long-term earnings growth is pegged at 8.50%.
Stocks to Consider
Some better-ranked stocks from the insurance industry include American Financial Group, Inc. AFG , Argo Group International Holdings, Ltd. AGII and The Progressive Corporation PGR . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
American Financial offers P&C insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Argo Group International Holdings underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all of the last four quarters with an average beat of 36.54%.
The Progressive Corporation offers personal and commercial property-casualty insurance, and other specialty property-casualty insurance and related services primarily in the United States. The company delivered a positive surprise in two of the last four quarters with an average beat of 1.32%.
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