Tags: Prudential | Financial | Profit | Quarters

Prudential Financial Posts First Profit in 5 Quarters

Wednesday, 06 November 2013 06:40 PM

Prudential Financial Inc., the No. 2 U.S. life insurer, swung to a profit in the third quarter, fueled by pension-transfer deals and the acquisition of a unit from Hartford Financial Services Group Inc.

Net income of $1.04 billion compares with a $584 million loss a year earlier, Newark, New Jersey-based Prudential said Wednesday in a statement. Operating profit, which excludes some investments and the results of policies sold before the firm went public, was $2.94 a share, beating the $2.11 average estimate of 20 analysts surveyed by Bloomberg.

Chief Executive Officer John Strangfeld, 59, is benefiting from deals struck last year to take on pension obligations from Verizon Communications Inc. and General Motors Co. and life insurance policies from Hartford. Aided by climbing equity markets, Prudential posted operating return on equity of about 15 percent in the first half of this year, on pace to beat the company’s 2013 target.

“The earnings are going to be pretty strong because of the strong equity markets and what happened with interest rates,” Ed Shields, an analyst at Sandler O’Neill & Partners LP, said by phone before results were announced.

Prudential shares have rallied 53 percent this year, beating the 24 percent advance of the Standard & Poor’s 500 Index. Larger rival MetLife Inc. is up 46 percent.

Investment Management

The U.S. retirement solutions and investment management unit recorded adjusting operating income of $1.26 billion, compared with $506 million a year earlier, fueled by improvements in capital-market performance and an assumptions update. The pension deals drove an $82 million improvement in investment results from a year earlier, Prudential said.

Investment income climbed 9.2 percent to $2.87 billion. Book value at Prudential’s main business fell to $70.25 a share on Sept. 30 from $71.93 three months earlier.

Prudential said it repurchased $250 million worth of shares in the quarter, paying an average of $78.45 apiece. The insurer authorized a $1 billion buyback in June.

The last time Prudential posted a quarterly profit was the three months ended June 30, 2012. Results as measured by generally accepted accounting principles were hurt in late 2012 and early this year by costs tied to derivatives and fluctuations in the yen.

MetLife, Australia

MetLife last week reported operating earnings of $1.34 per share, missing analysts’ estimates by 2 cents on costs to increase reserves for disability claims in Australia. Profit climbed in the Americas and slipped in Asia, the New York-based insurer said.

Bond yields have climbed this year on speculation the Federal Reserve may scale back some of its stimulus. The interest rate on the 10-year Treasury was 2.61 percent on Sept. 30, almost a percentage point higher than a year earlier. That benefits insurers like Prudential, which primarily invest in bonds to back future obligations to policyholders.

Prudential purchased Hartford’s individual life business for $615 million in a reinsurance transaction, adding about 700,000 policies. GM shifted more than $25 billion in pension obligations and Verizon offloaded about $7.5 billion. The deals add to assets Prudential manages, while letting the other firms focus on their main businesses.

Prudential last month abandoned its challenge to a designation by a U.S. panel as a non-bank systemically important financial institution. The finding subjects the company to increased regulatory oversight from the Fed. American International Group Inc. has also been designated a SIFI, while MetLife is in the final stage of the process.

Prudential is scheduled to discuss its outlook for next year on a conference call tomorrow. Last year, the company reduced its projections for stock and bond returns when it reviewed assumptions.

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Prudential Financial Inc., the No. 2 U.S. life insurer, swung to a profit in the third quarter, fueled by pension-transfer deals and the acquisition of a unit from Hartford Financial Services Group Inc.on loss a year...
Wednesday, 06 November 2013 06:40 PM
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