The company’s financial performance so far this year has been robust. In the first quarter, its after-tax adjusted operating income zoomed nearly 42% from the prior year, while its operating return on average equity jumped 480 basis points to 16.2%. The company realized record-high earnings in retirement segment and achieved a 22% increase in U.S. Individual Life earnings amid initial contribution from in-force business acquired from Hartford Financial Services Group Inc (NYSE:HIG). Continued growth in these segments is expected. The company sees defined benefit risk transfer as an emerging market for its organic business growth, as private sector defined benefit plan assets top $2.2 trillion.
Prudential Financial Inc (NYSE:PRU) offers a dividend yield of 2.4% on a payout ratio of only 19%. The expected EPS CAGR of 12.5% for the next five years coupled with this low payout ratio suggests high potential for further dividend growth in the future. Prudential Financial Inc (NYSE:PRU) is trading at a 20% discount to its book value and a 33% discount to its industry, based on the price-to-book ratios.
Protective Life
Protective Life Corp. (NYSE:PL) has also pursued the acquisition path. In April, the company struck a deal to acquire MONY Life Insurance Company from Europe’s second largest insurer, AXA SA, for $1.06 billion. The acquisition will expand Protective Life Corp. (NYSE:PL)’s life insurance portfolio and will be accretive to earnings starting this year. Protective Life Corp. (NYSE:PL) suspended share repurchases for 2013 due to MONY Life Insurance Company acquisition.
The company has been adjusting its product mix to boost margins and profitability. The insurer’s actual operating performance exceeded plans in each of the past three years. In its latest earnings report for the first quarter, the company reported “higher life sales, moderation in variable annuity sales, solid performance in the investment portfolio, and continued robust spreads in the stable value segment.” It saw a continued expansion in account balances in its annuities segment, with balances up 18% from the prior year. Life marketing sales were especially robust and 24% above plan. The latest acquisition looks likely to help the insurer surpass its financial performance plan presented earlier this year, which saw operating EPS almost flat compared to the actual operating EPS from the year earlier and 2014 operating EPS up 10.5% from 2013.
Protective Life Corp. (NYSE:PL) pays a dividend yield of 2.1% on a payout ratio of 21% of the current-year EPS estimate. Given its low payout ratio and the forecast EPS CAGR of 8% for the next five years, it may be concluded that dividends have room to grow in the future. The stock is trading at a 30% discount to book value. While the stock does not have the strongest underlying EPS growth trend, its recent acquisition makes it better positioned for long-term growth.
Symetra Financial
Symetra Financial Corporation (NYSE:SYA), which sells group health, retirement and life insurance, and employee benefits, has nearly six decades of operating history. It is also known as an insurer in which Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B)-controlled entities hold sizable stakes; see what companies Buffett loves. Retirement, benefits, and individual life account for 56%, 26%, and 18% of its pretax adjusted operating income. In its portfolio valued at $27.4 billion at the end of the March quarter, the share of products with fixed maturities stood at 85.2%.
