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Avoid Prudential, Add These Insurance Stocks to Your Portfolio

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Prudential Financial, Inc. (PRU - Free Report) has been witnessing downward revisions over the last 60 days. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.5% downward and for 2019, moved 1.8% south. Shares of Prudential have gained 1.7% in a year, underperforming the industry’s growth of 5.6%

The stock carries a Zacks Rank #4 (Sell) with an unimpressive Growth Score of D. Back-tested results show that stocks with a favorable Growth Score of A or B combined with a bullish Zacks Rank #1 (Strong Buy) or 2 (Buy) comfortably outperform others.

Prudential has also been grappling with increasing expenses, weighing on the operating income expansion and inducing volatility in the bottom line. While total benefits and expenses increased 23% in the last five years, the operating margin contracted 270 basis points in the past three years.

The company has delivered an average four-quarter negative earnings surprise of 0.60%.

Prudential’s exposure to products like annuities and universal life, which guarantee minimum return, might strain its capital. Its results have been suffering due to additional reserve accretion required when the low interest rate increases the value of these liabilities. The company also expects near-term challenges in sales.

The Fed has scheduled its meeting on Mar 20 and 21, 2018. It had earlier hinted at three rate hikes in the current year. The anticipation of the first rate raise this month as indicated by the Federal Reserve earlier at the Jan 31 meeting has restored hope. The interest rate now ranges between 1.25% and 1.50%.

Prudential has been deemed a systematically important financial institution (SIFI) by the Financial Stability Oversight Council. Capital requirements for insurance SIFIs will be based on an insurance capital framework. Stricter capital standards might slow down the pace of capital deployment.

Choosing the Stocks

There are other worthy options for investors not as big a name as Prudential but certainly with promises of greater returns in their pockets.

We have boiled down to three favorable stocks with potential to enrich one’s portfolio. Our search is refined by using a solid Zacks Rank, northbound estimate revisions, Value Score of A or B and growth projections. Stocks with a Value Score of A or B coupled with Buy-rated stocks are the best bets on offer.

Carmel, IN-based CNO Financial Group Inc. (CNO - Free Report) administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products. The company has a Zacks Rank #2 with a Value Score of A. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.7% upward and for 2019, moved 3.1% north, respectively, over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 2018 and 2019 reflects a year-over-year improvement of 0.5% and 9%, respectively.

Shares of CNO Financial have gained 11.1% in a year, substantially outperforming the industry’s rise. Shares of the company are presently undervalued, reading at a P/B ratio of 0.8 compared with the industry’s 1.5 tally.



Loews Corporation (L - Free Report) provides commercial property and casualty insurance in the United States, Canada, the United Kingdom, Continental Europe and Singapore. The company has a Zacks Rank of 2 and a Value Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 3.7% upward and for 2019, moved 3.2% north, respectively, over the last 60 days.

The consensus mark for 2018 and 2019 represents a year-over-year gain of 22.4% and 7.6%, respectively.

Shares of Loews have climbed 9.3% in a year, higher than the industry’s increase. Shares of the company are presently undervalued, reading at a P/B ratio of 0.7 lower than the industry’s tally.



American Equity Investment Life Holding Company (AEL - Free Report) provides life insurance products and services in the United States. The company is a Zacks #2 Ranked player with an attractive Value Score of A. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.9% upward and for 2019, moved 2.5% north, respectively, over the last 60 days.

The Zacks Consensus Estimate for 2018 and 2019 translates to a respective year-over-year ascent of 7.6% and 5.9%.

Shares of American Equity Investment have rallied 28.2% in a year, ahead of the industry’s gain of 3.2%. Shares of the company are presently undervalued, reading at a P/B ratio of 1 compared with the industry’s 3.9.



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