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Prudential (PRU) to Insure Verizon's Pension Liabilities
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Prudential Financial Inc. (PRU - Free Report) recently announced that it has been selected for a pension risk transfer (PRT) transaction from Verizon Communications Inc., along with Reinsurance Group of America, Incorporated (RGA - Free Report) . Under this agreement, the companies will settle $5.9 billion of pension liabilities and secure 56,000 Verizon retirees and their beneficiaries who started their benefits prior to Jan 1, 2023.
This move bodes well for Prudential’s Retirement Strategies business, whose market is expected to grow over time. Prudential has been a leader in the pension risk transfer market, helping companies reduce risks related to pension liabilities, such as interest rate risk, earnings volatility and participant longevity. Prudential completed 11 transactions in 2023 worth approximately $6 billion. It also closed a $5 billion deal with Shell in early 2024. The trend of pension risk transfer is not showing any signs of slowing down, as high interest rates are resulting in favorable funding positions of more than 100%. Prudential expects a healthy pipeline to continue in 2024.
RGA and PRU will irrevocably assume and guarantee 50% of the total benefit obligations, whereas in some cases, PRU will assume 100% of obligations. This transaction is the second-largest PRT between Verizon and Prudential. PRU had earlier assumed $7.5 billion worth of obligations of Verizon’s retirees in 2012. Prudential Insurance Company of America, a subsidiary of Prudential Financial, will take on the responsibilities of administrative services for the pension plan. The subsidiary will make payments to retirees and their beneficiaries on behalf of PRU and RGA beginning from Jul 1, 2024.
This transaction marks PRU’s completion of four of the six largest U.S. pension risk transfers on record. PRU is expected to create unique deal structures and customized risk management solutions to win clients in the thriving pension risk transfer market. Moves like these are expected to benefit PRU’s results in the future.
Zacks Rank & Price Performance
Prudential currently carries a Zacks Rank #3 (Hold).
Shares of Prudential have gained 14.2% in the past year compared with the industry’s growth of 8.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the finance sector are Cboe Global Markets (CBOE - Free Report) and Coinbase Global (COIN - Free Report) .
Cboe Global delivered a trailing four-quarter average earnings surprise of 4.1%. The Zacks Consensus Estimate for CBOE’s 2024 earnings suggests a year-over-year rise of 6.4%. It presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coinbase has an excellent track record of beating earnings estimates in each of the last four quarters, the average being 377.6%. The Zacks Consensus Estimate for COIN’s 2024 EPS indicates a year-over-year increase of 173%. It currently sports a Zacks Rank #1.
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Prudential (PRU) to Insure Verizon's Pension Liabilities
Prudential Financial Inc. (PRU - Free Report) recently announced that it has been selected for a pension risk transfer (PRT) transaction from Verizon Communications Inc., along with Reinsurance Group of America, Incorporated (RGA - Free Report) . Under this agreement, the companies will settle $5.9 billion of pension liabilities and secure 56,000 Verizon retirees and their beneficiaries who started their benefits prior to Jan 1, 2023.
This move bodes well for Prudential’s Retirement Strategies business, whose market is expected to grow over time. Prudential has been a leader in the pension risk transfer market, helping companies reduce risks related to pension liabilities, such as interest rate risk, earnings volatility and participant longevity. Prudential completed 11 transactions in 2023 worth approximately $6 billion. It also closed a $5 billion deal with Shell in early 2024. The trend of pension risk transfer is not showing any signs of slowing down, as high interest rates are resulting in favorable funding positions of more than 100%. Prudential expects a healthy pipeline to continue in 2024.
RGA and PRU will irrevocably assume and guarantee 50% of the total benefit obligations, whereas in some cases, PRU will assume 100% of obligations. This transaction is the second-largest PRT between Verizon and Prudential. PRU had earlier assumed $7.5 billion worth of obligations of Verizon’s retirees in 2012. Prudential Insurance Company of America, a subsidiary of Prudential Financial, will take on the responsibilities of administrative services for the pension plan. The subsidiary will make payments to retirees and their beneficiaries on behalf of PRU and RGA beginning from Jul 1, 2024.
This transaction marks PRU’s completion of four of the six largest U.S. pension risk transfers on record. PRU is expected to create unique deal structures and customized risk management solutions to win clients in the thriving pension risk transfer market. Moves like these are expected to benefit PRU’s results in the future.
Zacks Rank & Price Performance
Prudential currently carries a Zacks Rank #3 (Hold).
Shares of Prudential have gained 14.2% in the past year compared with the industry’s growth of 8.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the finance sector are Cboe Global Markets (CBOE - Free Report) and Coinbase Global (COIN - Free Report) .
Cboe Global delivered a trailing four-quarter average earnings surprise of 4.1%. The Zacks Consensus Estimate for CBOE’s 2024 earnings suggests a year-over-year rise of 6.4%. It presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coinbase has an excellent track record of beating earnings estimates in each of the last four quarters, the average being 377.6%. The Zacks Consensus Estimate for COIN’s 2024 EPS indicates a year-over-year increase of 173%. It currently sports a Zacks Rank #1.