Prudential Insurance Company Review
Prudential is one of the best known of the US life insurance companies, largely for its legendary slogan, "own a piece of the rock." The rock refers to the rock of the Gibraltar, a supposedly impregnable British fortress in Spain that is pictured on the company's logo. The rock has been used as a corporate symbol since the 1890s while the piece of the rock slogan appeared in the 1970s. An earlier slogan was "Prudential has the strength of Gibraltar."
Prudential was started in Newark, New Jersey, in 1875 by John Fairfield Dryden who started selling policies to the working class. In the early days, the company offered policies with premiums as low as 3 cents and prospered. Within a year the company had 5,000 customers; today, Prudential has around 50 million.
Over the years, Prudential has been a pioneer in the sales of consumer insurance and investment products. It was the first American company to offer variable annuities and it issued the first variable appreciable life insurance policy in 1984. The company entered the investment arena in 1998 by establishing Prudential International Investments.
Prudential did not take Troubled Asset Relief Funds from the federal government during the 2008 financial meltdown. It did, however, take over some assets from the American International Group (AIG) which collapsed and had to be bailed out by the federal government. In 2010 Prudential announced that it was acquiring AIG subsidiaries Star Life Insurance and Edison Life Insurance.
Financial Ratings for Prudential
Prudential enjoys good ratings from the four major US financial firms but investors should realize that Prudential's policies are issued by a number of subsidiaries. Some of these subsidiaries have different ratings than the parent company. Three of these subsidiaries, including Prudential Insurance Company of America, PRUCO Life Insurance Company, and Prudential Retirement Insurance and Annuity Company, are rated by all four analysis firms.
A.M. Best gave all of Prudential's operations in the US a rating of A+, its second best rating. This means that Best's experts think that Prudential has a strong financial position but with room for improvement.
Fitch also gave all three of the company's operations in the US a rating of AAA. This means that Fitch's analysts thought that Prudential's financial strength was exceptionally strong. The Retirement Insurance and Annuity division also got this rating. AAA is the highest rating that Fitch gives for insurer financial strength.
Standard & Poor's (S&P) gave Prudential's operations in the US a financial strength rating of AA-. This rating is slightly lower. It means that S&P's reviewers feel that the insurer is financially strong but there may be long term liabilities. These concerns could come from the two subsidiaries of AIG that the company agreed to buy in 2010.
Moody's rated Prudential's financial strength at A2, which is a fairly high rating. The rating signifies that Moody's experts feel that the company is financially strong but it has room for improvement.
Prudential also owns Jackson National Life Insurance Company, which operates independently and is reviewed separately. The effect that Jackson's operations have on Prudential's financial strength is hard to ascertain.
Prudential Mutual Funds
Some people may not be aware that Prudential offers non-life insurance services to investors. These include mutual funds managed by its Pruco Securities subsidiary, brokerage accounts, and retirement accounts. Investors can also buy shares in other mutual funds through the company.
The Prudential has a fairly large family of in house funds for investors to choose from. These funds are divided into sub categories like: large cap, small cap, mid cap, municipal bond, money market, global bond, taxable bond, international stock, and specialty funds. The offerings seem to be fairly normal, but the number of international offerings is limited. The fund management is done by outside firms and not the insurer itself.
Fact sheets about most but not all of the funds can be downloaded at the company's site. These have a fairly good break down of the funds' details but don't include such basic information as Morningstar Ratings. More detailed information is available from the web pages for the individual funds.
Prudential also offers PruChoice, an investment advice program. This helps individuals manage their funds but may be outside the average financial planning budget. A $25,000 minimum investment is needed for this service which sound like the basics offered by most mutual fund companies.
Prudential Brokerage Accounts
Prudential also offers five types of brokerage accounts to its customers. These include: non-qualified accounts, qualified accounts, education saving accounts, 529 accounts (education IRA), and managed money programs. All of these products are available to investors and presumably give access to the company's annuities and insurance policies.
The non-qualified account is simply a very basic investment account that lets people put funds in a money market to be used to invest in stocks, mutual funds and other products. The basic brokerage account is called the investor account. This product doesn't differentiate itself from products found elsewhere. Nevertheless, it could be a good choice for Prudential annuity holders.
Tax-deferred qualified accounts offered by Prudential include the Investor IRA, which is designed for long term investors, and the Command IRA, which is designed for investors between 59½ and 70½ who can withdraw funds without tax penalties. The 529 plans are geared towards persons with higher incomes.
Prudential also has two fee-based investment advisory services available to the public through its Prudential Financial Planning Services subsidiary. These programs are available to those with the Command IRA and some other investments.
The average investor interested in stocks, ETFs, or mutual funds could probably find a better deal elsewhere. Persons with higher incomes and little investment experience might benefit from Prudential's services. So would persons who purchase insurance products through the company. Any investor would be well advised to shop around and see what is available before going with the Rock.