Prudential A Franchise Pick As Jefferies Initiates Coverage On 12 Life Insurers

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Jefferies analyst Colin Devine initiated coverage on the shares of Prudential Financial and eleven other life insurers in the United States.


The analysts recommended a Hold rating for eight life insurers and Buy rating for Prudential and three other firms in the industry.

Devine believed that the insurance industry is reasonably healthy, but it is confronted by several challenges including low LT rates, legacy liabilities and regulatory uncertainty.

Prudential shares have attractive valuation


In a note to investors, Devine believed that the shares of Prudential have attractive valuation, but underappreciated. The analyst perceived a turnaround because the company has good growth potential and a balanced mix of businesses that can deliver a 14% to 16% ROE.

According to him, Prudential’s “high and rising ROE supports a boost to multiple from current 12x P/B ex OC.”  Devine also noted that the management of the company consistently demonstrated its ability to navigate through the macro challenges faced by its domestic and international insurance businesses.

Jefferies recommended a Buy rating for the shares of Prudential with a $100 price target.

Jefferies believes CNO Financial is poised to accelerate earnings growth

Jefferies also initiated a Buy rating for shares of CFO Financial with a $20 price target. Devine believed that the life insurer is poised to accelerate its earnings growth because it has a balanced mix of businesses (supplemental health, fixed annuities and individual life).

The analysts also believed that CFO Financial’s earnings headwinds from low interest rates may be a near-term overhang. Devine is confident with the strategy of the company to deliver 40-50 bps in annual ROE gains.

According to Devine, Jefferies’ rating for the stock reflects their view that CFO on the life insurer’s ROE improvement. The product offerings and middle market focus of CFO Financial are expected to deliver 8% to 10% earnings growth and 12% to 13% ROE over the long-term.

Jefferies’ ratings on other life insurers

Jefferies also initiated coverage on the following life insurers:

  • Genworth Financial- Buy with $10 price target
  • Principal Financial Group- Buy with $58 price target
  • Torchmark Corporation- Hold with $55 price target
  • Ameriprise Financial- Hold with $135 price target
  • Lincoln National Corporation- Hold with $55 price target
  • StanCorp Financial- Hold with $70 price target
  • Assurant- Hold with $70 price target
  • AFLAC Incorporated- Hold with $65 price target
  • FBL Financial Group- Hold with $60 price target
  • American Equity Investment Life Holding: Hold with $30 price target



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