The virus that causes Covid-19 pneumonia has been spreading, interest rates have been falling, and stock prices have been flying up and down like a broken drone.
Moody’s Investors Service warned Wednesday that, if the new low, low interest rates persist, that could hurt U.S. life insurers’ creditworthiness.
But a team of Morgan Stanley securities analysts who took a close look at one big life insurer — Prudential Financial Inc. — say the company appears to be prepared for what lies ahead.
The analysts have based that conclusion on talks with Prudential managers during a “virtual roadshow meeting.”
Normally, executives from Prudential and other companies that sell stock to the public go on the road during the roadshows, to talk to securities analysts face-to-face. This year, because of the Covid-19 pandemic, companies and analysts are meeting through teleconferencing systems.
Here are three things the Morgan Stanley analysts say about Prudential, drawn from the analysts’ roadshow meeting commentary.
1. Access to Cash
At the Prudential virtual roadshow meeting, given all of the investment market volatility, “one of the key questions revolved around liquidity,” the Morgan Stanley analysts write in a commentary on the meeting.
The top-level holding company ended 2019 with more than $4 billion in cash, and another $4 billion in credit lines, or corporate credit card equivalents, with 20 banks, the analysts write.
Prudential has not had to use any of the credit lines, the analysts write.
Prudential also has access to another $5.5 billion in cash from an alternative trust funding source and from the federal Home Loan Bank system, the analysts say.
2. Operating Position
For Prudential, it looks now as if high Covid-19 mortality levels could do more to cut obligations at the company’s pension risk transfer operation than to increase life insurance claims, the analysts say.