Prudential Has $735 Million Profit on Growth in U.S., Abroad

  • Fourth quarter compares with $1.46 billion loss a year ago
  • Insurer has fallen more than 21 percent this year in New York

Prudential Financial Inc., the second-largest U.S. life insurer, posted a fourth-quarter profit of $735 million fueled by growth in international operations and U.S. policy sales.

Net income was $1.60 a share, compared with a loss of $1.46 billion, or $2.69, a year earlier, the Newark, New Jersey-based company said Wednesday in a statement. Operating income, which excludes some investing results, was $1.94 a share, missing the $2.30 average estimate of 18 analysts surveyed by Bloomberg.

Chief Executive Officer John Strangfeld has expanded beyond the U.S., striking deals in Chile and Japan, and its international operations now account for more than a quarter of its revenue. Profit at the international insurance operation climbed 7.6 percent to $738 million, fueled by stronger sales. U.S. individual life sales surged 38 percent to $179 million.

Prudential gained less than 1 percent to $64.06 at 4:03 p.m. in New York, and has declined 21 percent this year. Results were released after the close of regular trading.

Full-year net income surged to $5.64 billion from $1.38 billion in 2014. Assets under management rose to $1.18 trillion from $1.17 trillion as of Sept. 30.

U.S. Units

The U.S. retirement solutions and investment management division posted fourth-quarter operating profit of $776 million, compared with $823 million in the same period a year earlier. Earnings at the U.S. individual life and group insurance unit slipped to $126 million from $162 million on a charge tied to an increase in reserves backing policies.

Book value, a measure of assets minus liabilities, decreased to $92.39 a share on Dec. 31, compared with $93.87 at the end of September, the insurer said in a financial supplement.

Results included an $80 million charge to compensate clients for lost income tied to the insurer’s securities-lending program. The company said in a filing that it plans to “implement a remediation plan for the benefit of customers.” Prudential spokesman Scot Hoffman declined to comment.

SEC Notified

Prudential notified watchdogs including the U.S. Securities and Exchange Commission that “in some cases we failed to maximize securities-lending income due to a long-standing restriction benefiting the company that limited the availability of loanable securities for certain separate account investments,” according to the filing. “We intend to fully cooperate with regulators in this matter.”

MetLife Inc., the largest U.S. life insurer, reported Feb. 3 that fourth-quarter profit tumbled 45 percent to $834 million amid pressure from investments in hedge funds and private equity. Chief Executive Officer Steve Kandarian said last month that he’s weighing a spinoff, sale or public offering of much of the insurer’s U.S. retail operation, partly due to MetLife’s designation as a systemically important financial institution, a tag that may come with higher capital rules.

Prudential, which has also been designated a SIFI, affirmed its business mix in a statement last month. Separately, Strangfeld said that he’d be open to deals to add blocks of life insurance coverage or pension assets as insurers such as MetLife and American International Group Inc. narrow their focus.

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