On Thursday, Barclays (LON:BARC) analyst Alex Scott adjusted the price target for Prudential Financial (NYSE:PRU) stock, increasing it slightly to $128 from $127, while maintaining an Equalweight rating on the company's shares. The adjustment follows Prudential (LON:PRU)'s strategic moves in Japan, including the establishment of PrismicLife Solutions & Brokerage, a registered insurance broker in the country.
Prudential Financial has recently completed a significant transaction in Japan, involving the reinsurance of $7 billion of reserves that support US dollar-denominated Japanese whole life insurance policies. This move increases Prismic's assets under management to $17 billion. As part of the transaction, Prudential is making an equity investment of $100 million, complemented by a $400 million investment from a consortium of external investors. The company's strong financial position is reflected in its last twelve months revenue of $72.97 billion and an overall "GOOD" financial health score from InvestingPro, which offers comprehensive analysis through its Pro Research Reports covering 1,400+ top US stocks.
The total value of the transaction is estimated at $400 million, encompassing the release of capital, ceding commission, taxes, and the net present value (NPV) of future income. The $100 million Prudential is investing will fund the equity investment portion of the deal. The company anticipates a modest upturn in after-tax annual adjusted operating income as a result of this deal. This expected increase includes a reduction in earnings from the international business, which is believed to be balanced by a rise in PGIM asset management fees and projected earnings within the Corporate & Other segment.
The transaction is designed to assist Prudential with the upcoming shift to the new economic solvency ratio (ESR) capital regime in Japan, which is set to take effect in March 2026. Additionally, it potentially allows for the release of capital, aligning with the company's proactive financial management strategies.
In other recent news, Prudential Financial has seen several adjustments to its stock price targets and EPS estimates. Piper Sandler, Keefe, Bruyette & Woods, Evercore ISI, and Jefferies have all revised their assessments of the company due to recent developments. Prudential's asset management business, PGIM, reported lower than expected assets under management (AUM) for the fourth quarter of 2024, leading to a reduction in Piper Sandler's price target. This was compounded by an "immaterial error" in Prudential's financial results, which led to a downward adjustment of its operating EPS and revisions to future EPS estimates by Keefe, Bruyette & Woods, Evercore ISI, and Jefferies.
Moreover, Prudential's variable investment income (VII) showed improvement in the fourth quarter, a positive development amidst these adjustments. Despite the EPS revisions, Jefferies maintained a Buy rating for the company, emphasizing Prudential's long-term potential.
In addition to these financial updates, Prudential Financial has approved a $1 billion stock buyback plan as part of its capital management policy. The company also announced significant leadership transitions, with Andrew Sullivan set to become CEO in 2025, succeeding Charles F. Lowrey. Caroline Feeney and Jacques Chappuis will assume new roles as Global Head of Insurance and Retirement, and president and CEO of Prudential's global investment management business, PGIM, respectively. These are all part of the recent developments at Prudential.
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