Prudential Swings To Profit On Strength Of Fee-Based Business

By Cyril Tuohy

InsuranceNewsNet

Fee income from its annuity, asset management and retirement business, helped Prudential swing to profit in the second quarter with net income of $1 billion, or $2.22 per share, compared with a loss of $517 million, or a loss of $1.12 per share in the year-ago period, the company reported.

The company also reported second quarter after-tax operating income of $1.17 billion, or $2.49 per share, up from $1.09 billion, or $2.30 share in the year-ago period.

Prudential easily beat consensus analyst estimates for the second quarter of $2.35 per share, according to Thomson Reuters.

“We are benefiting from growth of fees, especially in our annuities and asset management businesses, continued strong performance in our retirement business, and the contribution of the individual life insurance business we acquired from The Hartford,” Prudential chairman and chief executive officer John Strangfeld said in a statement.

The company’s U.S. Retirement Solutions and Investment Management division reported second-quarter pretax operating income of $876 million, compared with $851 million in the year-ago period, the company also said.

In the Individual Annuities segment, the company reported pretax operating income of $390 million compared with $400 million in the year-ago period.

Excluding the effect of one-time charges, pretax operating income in the individual annuities segment increased $69 million compared with the year-ago period due to higher asset-based fees and growth in variable annuity account values, the company said.

The annuities business was helped by a strong stock market performance and lower risk profiles, and management is “comfortable” with the profitability and risk “of what we’re selling today,” Strangfeld said in a conference call with analysts.

Prudential continues to lower the exposure of its annuity business to equities, he also said.

In the Retirement segment, the company reported second quarter pretax operating income of $286 million, compared with $279 million in the year-ago period due to better investment results.

The U.S. Individual Life and Group Insurance division delivered second quarter pretax operating income of $204 million, compared with $163 million in the year-ago period, with group insurance benefiting from better claims experience.

Excluding integration costs of The Harford’s individual life business, individual life increased $14 million compared to the year-ago period, due to lower expenses and investment results.

Recent declines in the number of life insurance agents and consultants have slowed, Strangfeld also said.

Prudential’s Asset Management segment also reported second quarter pretax operating income of $200 million compared with $172 million in the year-ago period due to higher fees reaped in connection with the growth in assets under management, the company said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.