Oct. 29 (Bloomberg) -- Prudential Financial Inc., the second-biggest U.S. life insurer, had a third-quarter loss as turmoil in global credit markets cut the value of investments. The company withdrew its 2008 earnings forecast.

The net loss was $166 million compared with net income of $867 million a year earlier, the Newark, New Jersey-based company said today in a statement. Revenue fell 16 percent to $7.04 billion as asset management fees plunged by more than half. Profit after one-time items was 74 cents a share, missing the 79- cent average estimate of 14 analysts surveyed by Bloomberg.

Life insurers including Prudential and MetLife Inc. lost more than 40 percent of their market value in trading this month as investment losses squeezed liquidity, raising concern they will need to raise capital. American International Group Inc., once the world's largest insurer, ceded control to the U.S. last month after losses from bad bets tied to housing.

``Unfavorable financial market conditions are having a substantial negative effect on reported results of our domestic businesses and market values in our investment portfolio,'' Chief Executive Officer John Strangfeld said in the statement.

Prudential fell $1.25, or 3.5 percent, to $35.25 in New York Stock Exchange composite trading today as of 4:10 p.m. The results were released after markets closed. The shares have dropped 62 percent this year.

Prudential told investors in July it expected to record after-tax operating income of $7.50 to $7.80 a share this year.

Commercial Paper

The company said today in a filing with U.S. regulators that it is eligible to take part in the Federal Reserve's Commercial Paper Funding Facility and could sell as much as $9.8 billion of paper to the government. Losses tied to subprime mortgages may be $550 million after taxes over a five-year period.

Prudential said that its share of a brokerage venture with Wachovia Corp. led to a $215 million loss. That includes costs of $235 million for the settlement of investigations into auction- rate securities handled by the venture.

Wachovia, the Charlotte, North Carolina-based bank that reported a $23.9 billion loss last week, combined its retail brokerage with Prudential's in 2003 in a cashless transaction. San Francisco-based Wells Fargo & Co. agreed to buy Wachovia for about $14 billion this month.

Prudential said Oct. 9 that the biggest drop in housing since the Great Depression had pushed down the value of fixed- income investments, reducing operating profit for the financial services businesses. By that measure, the company expected earnings of $275 million to $375 million, or 67 cents to 90 cents a share, for the third quarter.

Investment Losses

Realized investment losses were $547 million, including writedowns on securities in Lehman Brothers Holdings Inc., AIG and Washington Mutual Inc. The company this month said it expected the losses to be $325 million to $375 million.

``While not a clean quarter, we are comfortable that the abnormal items truly were one-time in nature,'' Morgan Stanley analyst Nigel Dally said in a note following the company's Oct. 9 announcement.

Assets under management fell 7.1 percent to $602 billion in the quarter, Prudential said.

(Prudential will hold a conference call Oct. 30 at 11 a.m. New York time to discuss results. To listen, dial +1-877-777-1971 or +1-612-332-0226 or visit http://www.investor.prudential.com.)

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

Last Updated: October 29, 2008 18:59 EDT