The life insurers open strongly in the green as interest rates shoot higher following this mornings jobs report. Up the most is Prudential (PRU +3%) after BAML upgrades to Buy and boosts the price target to $103 from $94.
The team views PRU's valuation as attractive after its sluggish start to the year - off 6% vs. a 1% increase in the median life name. There's also increased confidence the company can sustain an ROE above 14%, and a rising equity market means a lower cost of capital for the industry.
Noting PRU's status as a SIFI, BAML takes a conservative view towards buybacks, assuming just $500M over the next five quarters. "However, we would not be surprised if PRU continued its current $1B a year pace of buyback, which we believe would help support the ROE."