By Kit Norton
Prudential Financial stock was hit with another downgrade on Monday as Wall Street continues to take a wary stance on the insurer amid the ongoing misconduct investigation into its Japanese subsidiary.
Morgan Stanley analysts Bob Jian Huang and Jie Cheng on Monday downgraded Prudential stock to Underweight from Equal Weight and cut their price target to $92 from $106.
Prudential stock declined 0.3% to $98.28 on Monday. Since the insurer announced Jan. 16 the the findings of an internal investigation into incidents of misconduct involving current and former employees, the shares have dropped about 16%.
The analysts wrote Monday that the downgrade was due to uncertainty around the situation in Japan. Last month, Prudential Financial said its Japan affiliate has voluntarily extended a suspension of new sales in that market by another 180 days to have additional time to complete governance and other reforms.
Prudential has warned of an expected $525 million to $575 million hit to 2026 pretax adjusted operating income. That estimated range includes the $300 million to $350 million previously reported. The company also expects the situation to be a drag on next year's pretax adjusted operating income as well, to the tune of $400 million to $450 million, mostly from the loss of new sales during the suspension.
The 180-day extension comes after an initial 90-day suspension announced in February. That action was in response to news that an internal investigation at Prudential had found "multiple inappropriate cases involving improper investment solicitation and the like by current and former employees" within its Japan operations.
Japan accounted for 22% of Prudential's sales in 2025, the company disclosed in its 10-K filing for 2025. Given the magnitude of the impact, it isn't surprising that analyst concerns have been growing.
Morgan Stanley lowered its Prudential earnings estimates by 5% and 4% for 2026 and 2027. However, the firm also warned that the fallout could become far worse.
"Looking at past, substantiated misconduct from Japanese life insurers, we believe the situation may not be remedied soon, and as such we expect the stock to face continued valuation pressure in the interim," Huang and Cheng wrote.
"Moreover, post sales suspension sales and revenue recovery is uncertain, with the risk that policies lapse and reputational damage to Prudential, adding longer-term uncertainties," they added.
The Morgan Stanley downgrade is the latest for Prudential Financial. On April 21, Barclays analysts downgraded shares to Underweight and a day later Jefferies downgraded the stock to Hold from Buy.
Overall, FactSet has an average Hold rating on Prudential with a average price target on $98.07. The average price target has been reduced 16% since Jan. 16.
"We believe Prudential is in a relatively worse position that peers," wrote the Morgan Stanley analysts.
Write to Kit Norton at kit.norton@barrons.com
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(END) Dow Jones Newswires
May 04, 2026 11:19 ET (15:19 GMT)
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