Prudential Resumes Share Buyback - Analyst Blog
June 08 2011 - 5:30AM
Zacks
Yesterday, the second largest U.S life insurer
Prudential Financial Inc. (PRU)
announced the resumption of its share repurchase program, with an
authorization to buyback up to $1.5 billion of its outstanding
common stock through June 30, 2012.
Prior to this, in November 2007, Prudential had authorized to
repurchase up to $3.5 billion of its outstanding common stock in
calendar year 2008. During that year, the company had acquired 29.3
million shares of its outstanding common stock for a total cost of
$2.161 billion. But, considering the market conditions in 2008 and
later, Prudential posted its worst loss as its investments in
subprime securities and stocks declined in value. So, the company
suspended the 2008 stock repurchase program effective October 10,
2008.
However, with a gradual improvement in equity markets and the
overall economy, Prudential benefited from growth in its
International Insurance businesses and stability in its core U.S
insurance business. Also, strong results from its operations, focus
on retirement solutions and asset management, driven by net flows
and improving market conditions, favored the company.
The year 2010 testified to Prudential’s significant financial
strength. In November 2010, the company increased its dividend by
60%, thereby restoring its dividend to 2007 level and marking a
significant accomplishment given the challenging economic
environment.
With an excess capital of about $1 billion, we think the company
is poised to participate in the consolidation of the global life
insurance and retirement market. With so much cash available for
transactions, we believe Prudential has the capacity to execute an
accretive acquisition, leading to its inorganic growth.
Newark, New Jersey-based Prudential competes closely with
American International Group Inc.
(AIG), MetLife Inc.,
(MET), and New York Life Insurance Co.
The stock of Prudential carries a Zacks Rank # 3, which translates
into a Hold recommendation over the short term (1-3 months). Also,
over the longer term (6+ months), we rate the stock Neutral.
AMER INTL GRP (AIG): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
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