Prudential Financial (PRU) faces continued pressure from its voluntary suspension of new policy sales in Japan, with uncertainty around recovery in sales, revenue, and reputation, Morgan Stanley said in a note Monday.

The company updated its earnings outlook after its Prudential Life Insurance unit in Japan decided to extend a voluntary sales suspension by another 180 days through November. Media reports also indicate that Japan's Financial Services Agency is conducting on-site inspections, and there are suggestions the company may have been aware of some of the problems, according to the note.

Based on past cases of misconduct in Japan's life insurance sector, Morgan Stanley said the situation may not be resolved soon. While Prudential's case is different, "we believe it is more likely to experience longer term structural pressure on sales and annualized net premiums, given the breadth of the misconduct and the associated sales suspension," the firm said.

Based on an estimated pretax operating earnings impact of $525 million to 575 million in 2026 and $400 million to $450 million in 2027, the firm said it is reducing its earnings per share estimates to $13.43 for 2026 and $14.73 for 2027.

Morgan Stanley downgraded Prudential Financial from equal-weight to underweight, and cut its price target to $92 from $106.

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