PRUDENTIAL FINANCIAL INC PRU
November 18, 2019 - 2:59pm EST by
85bears
2019 2020
Price: 13.00 EPS 0 0
Shares Out. (in M): 2,600 P/E 0 0
Market Cap (in $M): 34,000 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT 0 0

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Description

PRU.LN - Summary

Prudential plc (“Prudential” or “the Group”) is in the midst of a breakup that has the potential to create significant value for shareholders.  Having just separated its M&GPrudential asset management business, Prudential is left with 2 primary businesses, a crown jewel Asian insurance business (“Prudential Corporation Asia” or “PCA”) and a US life insurance business focused on variable annuities (“Jackson National Life” or “JNL”).  PCA and JNL account for similar levels of earnings and balance sheet equity for the Group, but PCA accounts for the preponderance of the value of the Group. Prudential understands that addressing JNL or separating it from PCA can unlock significant value for the Group, so the company is now actively working to figure out the long term strategy and funding solutions for JNL.  

 

Background

See the company presentation for a good overview of the business. (https://www.prudentialplc.com/~/media/Files/P/Prudential-V3/demerger-transaction-documents/investor-presentation.pdf)

 

The overall performance of Prudential has been solid.  The Group has generated consistent growth in profits and cash flows.

 

 

The performance is generating ROE of ~20% and ROTE of high 20s%.

 

But this has not helped the stock as it has been flat for the last 5 years.

 

And Prudential still trades at a relatively undemanding valuation including a 3% dividend yield and 10x EPS.

 

Crown Jewel - An Impressive Asian Insurance Asset

The PCA business at Prudential is a market leader in a growing market and has delivered solid financial performance.

 

The insurance market in Asia has been fast growing driven by population growth and increasing wealth.

 

Despite the growth, penetration is low, implying continued strong growth into the foreseeable future.

 

Strong performance has helped PCA to generate impressive growth over the last decade.