Prudential Had a Choppy Second Quarter

Prudential reported a messy second quarter. Adjusted earnings per share of $1.74 missed the FactSet consensus estimate of $2.37 as the firm took a large hit to increase its reserves during its annual assumption review. Specifically, as the pandemic enters an endemic phase, Prudential increased its mortality assumption. Variable investment income though down from the year-ago period was strong and we expect this to continue to moderate in the coming quarters. As we tweak our model, we are slightly reducing our fair value estimate to $95 from $97 to reflect recent macroeconomic headwinds. Given Prudential’s performance and financial profile, we are also reducing the Morningstar Uncertainty Rating to Medium from High.