A Tale Of Two Balance Sheets – US-FOREX.US
When insurance companies Prudential Financial and Allstate report earnings on Wednesday, investors will get a glimpse into the health of non-bank financial services companies. On both fronts there’s some cause for optimism, say analysts but Prudential is by far the stronger of the two.J.P. Morgan analyst Jimmy S. Bhullar believes that after issuing 1.2 billion in stock and another 1 billion in debt, Prudential has successfully shore up its balance sheet that “should enable the company to absorb investment losses, maintain its ratings and gain shares from weaker competitors in select markets.”Bhullar expects that Prudential will beat the consensus earnings estimates of 5.57 a share for 2010. He’s looking for 5.90 a share. Meanwhile, Prudential has no large amounts of debt coming due until 2011 and its management has weaned the company from dependence on the commercial paper market.The road may be rougher for Allstate
says analyst John Hall of Wells Fargo Securities. Allstate qualified for Troubled Asset Relief Protection funds but then never availed itself of the money and instead completed a 1 billion debt offering. Allstate’s investment portfolio is worth 94 billion and it has some exposure to commercial and residential real estate as well as private partnerships that need addressing.Hall says that Allstate shares are trading at 1.1 times book value. Historically, it has traded at 1.5 times. He believes that building a capital cushion is the catalyst that will eventually send the stock back to its normal multiples.Both insurers report after the closing bell Wednesday and have conference calls scheduled for Thursday morning.