Insurer Prudential Financial (NYSE:PRU) is expected to benefit from a more positive outlook for the US life insurance industry as the company reports its Q3 results on November 1, after the market closes.
The consensus EPS estimate is $3.13 (+46.9% YoY) and the consensus revenue estimate is $12.76 billion.
Over the past two years, PRU has beaten EPS estimates 50% of the time and beat revenue estimates 0% of the time.
Over the past three months, EPS estimates have been revised up three times and down seven times. Revenue estimates have seen two upward revisions and four downward revisions.
PRU, which had posted robust performance in its US unit in the second quarter, thanks to a higher net investment differential and more favorable underwriting policies, is likely to see the same unit improve its results this quarter.
In September, Jefferies had upgraded the company from ‘underperform’ to ‘hold’, citing various favorable macro/market conditions and growth in spread-based and group benefits, among others.
“For the first time in a long time, we’re seeing different ways to win in life,” analyst Suneet Kamath wrote in a note to clients.
However, Kamath had added that he was concerned about the company’s financial flexibility given the excess risk-based capital and excess cash at the holding company level.
The company had a robust second quarter, thanks to a 67% increase in the US business unit, and reported adjusted operating earnings per share of $2.94.
SA contributor Seeking Profit had said earlier in October that Prudential’s (PRU) core businesses had performed well, but one-off items have weighed on its book value.
In search of profits, it added, the company’s partnership with Warburg Pincus will help remove market-sensitive liabilities from the balance sheet and provide capital for distribution to shareholders.
In September, PRU and private equity firm Warburg Pincus said they were among investors seeking to jointly provide $1 billion in equity to establish a Bermuda-based life and annuity reinsurance company, to be called Prismic Life Reinsurance.
The company’s peer Principal Financial Group (PFG) exceeded market expectations, reporting third-quarter non-GAAP earnings per share of $1.72, helped by strong underwriting results.
Shares in PRU are down 8.8% year-to-date and down 13.73% over a year.
Brokerage Evercore ISI said it sees reasons to be more constructive than bearish on the life insurance sector as it expects it to be a net beneficiary of the current interest rate environment.
“Underwriting trends should be generally favorable despite some continued excess mortality claims and a recent increase in LTC claims after three years of a favorable outlook,” Evercore ISI analysts said.