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JPMorgan analysts upgraded Prudential Financial (NYSE:PRU) from Neutral to Overweight and stated that Voya Financial (NYSE:VOYA) remains the firm’s top pick in a note to clients on Tuesday.
The analysts, who have a $114 price target on PRU and an $83 price target on VOYA, said the firm’s long-term fundamental outlook for the life insurance sector remains negative, but they are “incrementally upbeat on stocks.”
“Expected healthy near-term results, the strong equity market, and a pullback in valuation levels make us more constructive on stocks, especially insurers that have a lower-risk liability profile and strong balance sheets,” they wrote.
VOYA is JPMorgan’s top pick, given its capital-light liability profile, the positive outlook for business trends, and depressed valuation, while the analysts explained that their firm upgraded PRU due to its superior business mix, healthy balance sheet, negative sentiment, and the stock’s significant underperformance.
“We expect life insurers to report healthy results in 1Q23, but our view of capital flexibility is more cautious,” the analysts added. “In our view, 1Q23 results will be marked by rising yields and spread income, higher fee income in equity-sensitive products, declining COVID mortality claims, and robust margins in morbidity products (especially group disability). On the other hand, we were already expecting a slowdown in the pace of share repurchases at the beginning of the year and anticipate an even greater moderation with heightened macro uncertainty.”
