Prudential (PRU) & Units' Ratings Retained by A.M. Best

A.M. Best has retained the Long-Term Issuer Credit Ratings (ICR) of ‘a-’of Prudential Financial, Inc. PRU. Concurrently, the rating giant reiterated the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICR of ‘aa-’ of the domestic life and health insurance subsidiaries of Prudential.

Prudential’s two recently issued senior unsecured notes also received Long-Term IRs of ‘a-’ ratings from A.M. Best. The outlook for all the ratings is stable.

The rating affirmations came on the back of Prudential’s sustained solid operational performance, solid enterprise risk management, promising business profile and a sturdy balance sheet.

The company has a track of delivering statutory income for the last five years, riding on its leading presence in core business lines. The company now has more than $65 billion as funded pension account value besides a strong presence in the unfunded U.K. risk transfer business market.

Also, Prudential boasts a consolidated international presence, dominated by its Japan operations, constituting about two-fifths of the company’s total operating earnings. The company also enjoys a leading position in the variable annuity market, banking on its diversified product offerings.

Prudential enjoys a solid balance sheet, given its access to diversified sources of liquidity and capital markets. However, an extended use of captives to finance redundant reserves for term and universal life products drags the positive. Also, a significant concentration of annuity reserves, higher than the industry average allocation to commercial mortgages, weighs on the positives.

Shares of Prudential have outperformed the industry in a year. The stock has rallied 12.3%, lagging the industry’s increase of 11.4%. Prudential’s vast distribution network, penetration and control over the pension risk transfer business besides a strong international presence and a robust capital position will continue to drive the shares up. The company carries a Zacks Rank #2 (Buy).

Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence plus maintaining a stock’s credit worthiness. While rating downgrades not only damage business but also increase the cost of future debt issuances. We believe that such ratings will help Prudential retain investors’ trust and write more businesses going forward.

Other Stocks to Consider

Investors interested in other top-ranked multiline insurers can also look at Loews Corporation L, MGIC Investment Corporation MTG and Cigna Corporation CI.

Loews Corporation provides commercial property and casualty insurance in the United States, Canada, the United Kingdom, Continental Europe and Singapore. The company came up with an average four-quarter beat of 564.31%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MGIC Investment provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. The company delivered an average four-quarter beat of 27.11%. The stock carries a Zacks Rank of 1.

Cigna provides insurance and related products and services in the United States and internationally. The company pulled off an average four-quarter positive surprise of 14.56%. The stock carries a Zacks Rank of 2.

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