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Prudential Financial Profit Rises 23% on Gains

Wednesday, 02 Nov 2011 04:44 PM

Prudential Financial Inc., the second-biggest U.S. life insurer, said third-quarter profit advanced 23 percent as international results improved after the purchase of two Japanese units.

Net income rose to $1.53 billion from $1.24 billion a year earlier, the Newark, New Jersey-based company said Wednesday in a statement. Operating profit, which excludes results of policies sold before the company went public and some investments, was $1.07 a share, missing the $1.53 average estimate of 20 analysts surveyed by Bloomberg.

Chief Executive Officer John Strangfeld bought Star Life Insurance Co. and Edison Life Insurance Co. from American International Group Inc. in February for $4.8 billion to expand a Japanese business that Prudential has been building for two decades.

“Japan’s a pretty good market,” Edward Shields, an analyst with Sandler O’Neill & Partners LP, said before the earnings announcement. “The Star-Edison acquisition was an ideal situation where they could bolt on a mature business to what they already had.” Shields rates Prudential a “buy.”

Prudential advanced 4.2 percent to $53.67 Wednesday before results were released. It has slipped 8.6 percent this year, better than the 15 percent slide in the 24-company KBW Insurance Index. MetLife Inc., the biggest U.S. life insurer, has fallen 22 percent in 2011.

The integration of the Japan businesses is “going extremely well,” Prudential Vice Chairman Mark Grier said on Sept. 8. Japan, the second-biggest life insurance market, accounted for about 18 percent of the world’s policy sales in 2010, according to a study by Swiss Re.

The country’s population is “old, but they’re rich,” Ed Baird, chief operating officer of Prudential’s international business, said in June. There’s room for Prudential to grow because $10 trillion is held in savings accounts and deposits in Japan, Grier said in September.

Strangfeld, 57, is reshaping the business and buying back stock to improve return on equity to 13 percent to 14 percent. Prudential’s ROE, a measure of how well the firm reinvests shareholder money, was less than 10 percent last year.

Prudential has exited property-casualty insurance and sold a stake in a securities brokerage under Strangfeld, who is also chairman. It agreed last month to sell a stake in a Mexican private pension-fund manager to Grupo Financiero Banorte SAB.

Prudential announced in June a $1.5 billion buyback, following a 64 percent increase last year in the company’s annual dividend. MetLife has said its plan to repurchase shares and raise the dividend was blocked by the Federal Reserve. MetLife, headed by CEO Steven Kandarian, needed approval from the Fed because of the size of the company and its banking operations. Prudential doesn’t require Fed consent

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Prudential Financial Inc., the second-biggest U.S. life insurer, said third-quarter profit advanced 23 percent as international results improved after the purchase of two Japanese units.Net income rose to $1.53 billion from $1.24 billion a year earlier, the Newark, New...
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Wednesday, 02 Nov 2011 04:44 PM
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