JPMorgan upgraded Prudential Financial (NYSE:PRU) from Neutral to Overweight, while Voya Financial (NYSE:VOYA) remains their top pick in a recent report to clients. According to the analysts, they are incrementally upbeat on life insurance stocks due to the strong equity market, increasing expected near-term results, and lower valuations. With their $114 price target on PRU and a $83 price target on VOYA, the firm is optimistic about the long-term outlook for the sector, as well as the balance sheets and risk-liability profiles at both companies.
VOYA is JPMorgan’s main focus for investment, as the company is capital-light and the outlook for business trends are stable to slightly increasing. Additionally, the valuation of VOYA is depressed and creates a good opportunity for investors to break into the market. PRU also offered an appealing projection, due to their superior business mix, healthy balance sheet, and negative sentiment among the public, which has led to the stock’s underperformance.
However, there is also caution in the report, especially as it relates to capital flexibility. In the near-term, they anticipate rising yields and spread income, higher fees in equity-sensitive products, a reduction in COVID-related mortality claims, and increased margins in morbidity products. JPMorgan also expects share repurchases to slow down at the beginning of the year because of the heightened economic uncertainty.
Prudential Financial, Inc. is an American publicly traded Fortune Global 500 and Fortune 500 company whose subsidiaries provide insurance, investment management, and other financial products and services to both retail and institutional customers. The company is headquartered in Newark, New Jersey, and its significant operations include Prudential Financial Securities Incorporated, Prudential Securities LLC, and the money management firm Prudential Investment Management.
The note from JPMorgan was authored by Michael Adam, Investment Research Analyst, and Anare Foote, Investment Research Associate. Both firm members cover European insurance companies in their research. Adam is responsible for executing investment research strategies for the banking, insurance, and real estate sectors, while Foote covers non-life insurance in Europe as well as the life and non-life sectors in the U.S.