Prudential Financial Inc, the second-largest U.S. life insurer, reported a quarterly profit that fell far short of market estimates, mainly because of losses tied to its derivatives program.
Overall charges and losses during the quarter totaled $1.13 billion, with derivatives-linked losses forming the majority.
Nearly half of the losses stemmed from a stronger dollar, particularly against the Japanese yen. Japan accounts for about a third of the company's international premiums. The dollar rose 5.2 percent against the yen in the third quarter from a year earlier.
Prudential, like other insurers, is heavily exposed to persistently low interest rates and wild swings in foreign exchange rates. But it has long had a substantial derivatives program designed to smooth out that risk.
The company reported operating earnings on an adjusted basis of $2.20 per share, well below the average analyst estimate of $2.41 per share.
Operating income from the individual annuities business halved to $367 million. Profit in its U.S. life insurance business fell 88 percent to $24 million in the quarter ended Sept. 30, hurt by one-time charges.
Net profit in the financial services businesses attributable to the company was $465 million, or 99 cents per share, for the quarter ended Sept. 30, from $966 million, or $2.04 per share, a year earlier.
The company's financial services business includes individual annuities, retirement services and investment management businesses.
Prudential's shares fell after the news, which was reported after regular stock trading ended Wednesday. Shortly before 6 p.m. in New York, the shares were down 2.4 percent at $86.80, after rising 1 percent to close the regular session at $88.91. Up to Tuesday's close, the stock had lost about 4 percent this year.
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