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What happened
Financial services and life insurance company shares Prudential financial (NYSE: PRU) rose 31.3% in the first half, according to data provided by S&P Global Market Intelligence.
Prudential Financial saw its profitability improve after the impacts of the pandemic hurt it last year. The company has taken initiatives to transform its business portfolio while saving $ 750 million in costs by 2023, including $ 400 million this year.
So what
Last year, Prudential was hit hard by the pandemic and as a result recorded a net loss of $ 146 million. This came after a profit of $ 4.1 billion in 2019.
The financial services company was hit by investment losses totaling $ 3.8 billion as well as a 9% drop in premium income from the previous year. Together, that brought total revenue down 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 over the previous year, and net profit was $ 2.8 billion in the quarter after posting a loss of $ 270 million the previous year.
Image source: Getty Images.
Prudential has worked to change its business portfolio and earnings profile, seeking to shift to less market and rate sensitive products. One of these products is FlexGuard, an indexed variable annuity that offers clients different levels of protection and the ability to increase their retirement income. FlexGuard sales reached $ 1.6 billion in the first quarter, up from $ 1.2 billion in the fourth quarter, and represented 84% of its annuity sales.
With this backbone, along with his cost reduction measures, CEO Charlie Lowrey said, “We expect Prudential Financial to become a higher growth, less market sensitive and more agile company. ”
Now what
Prudential Financial is a strong company that is on the right track to recover, and its stocks still appear to be downgraded. It trades relatively inexpensively with a P / E of 15.1 and a futures P / E of 7.6 which makes it look even cheaper. Not only that, but it’s also a great income stock with a 4.55% dividend yield.
Management’s strategic change in its business mix and cost savings helped the stock recover in the first half of the year and are positive signs for shareholders.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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