Prudential Earnings: Business Mix Continues To Shift Toward Lower Market Sensitivity

No-moat-rated Prudential Financials’ second-quarter results were largely in line with our expectations. The company reported aftertax adjusted operating income of $1.09 billion or $2.94 per share in the current quarter, versus $0.89 billion or $2.34 per share in the prior-year second quarter. These second-quarter results reflect underlying business growth, benefits of a higher interest-rate environment, and favorable underwriting experience, which elevated expenses and lower variable investment income partially offset. The adjusted book value per share, which removes the impact of accumulated other comprehensive income, was reported at $97.38 per share versus $97.91 per share in the second quarter of the previous year. The company paid a quarterly dividend of $1.25 per share, which represents approximately 5.3% dividend yield as of the current stock price. We are maintaining our $105 fair value estimate after incorporating the second-quarter results.