Prudential shareholders ask court to OK $10M derivative suit settlement

Prudential Financial shareholders are asking a New Jersey judge to approve a $10 million settlement to end a derivative lawsuit over allegedly withheld mortality data.

The lawsuit dates to a June 2019 investor conference, when Prudential executives stated that “recent mortality experience had been within the range of normal volatility and below previous experience,” court documents say.

Plaintiffs alleged that defendants, which include current and former executives, failed to correct or qualify these statements and permitted Prudential to repurchase over $300 million of company stock at “artificially inflated prices.”

On July 31, 2019, Prudential announced a pre-tax charge of $208 million taken primarily to increase life insurance reserves to address negative mortality experience and revised mortality assumptions.

“The following day, executives disclosed that the revised mortality assumptions would negatively impact earnings for the foreseeable future,” a court summary states. “Prudential's stock price fell by more than $20 per share over the next two weeks of trading.”

The adverse mortality involved a block of The Hartford life policies that Prudential reinsured in a January 2013 deal. That acquisition involved a cash payment of $615 million, and Prudential took over the reinsurance of approximately 700,000 Hartford life insurance policies, totaling around $135 billion in face amount.

“Defendants' alleged misconduct caused Prudential to lose millions of dollars on the stock repurchases and exposed Prudential to liability,” the summary says.

A derivative lawsuit is brought by a shareholder on behalf of a corporation against individuals, often directors or officers, who have allegedly harmed the company. Essentially, shareholders can sue when the corporation itself fails to sue or act on a cause of action against those causing harm.

Several individual shareholders filed lawsuits against Prudential that were later consolidated by the U.S. District Court for the District of New Jersey.

A related lawsuit

A related securities lawsuit -- led by lead plaintiff City of Warren Police and Fire Retirement System -- reached a $35 million settlement in 2024. In 2020, a district court dismissed the case, finding that allegations based on reports of former Prudential employees should be discounted.

Upon appeal, the Third Circuit reversed the lower court in part, finding that allegations were based on the facts provided by former employees. In particular, the Third Circuit allowed that as early as May 2019, Prudential was internally discussing that the company “would need to take a significant charge to Individual Life.”

Prudential has since moved on from former CEO Charles Lowrey and recently released its first earnings report under new CEO Andrew Sullivan.

On April 7, the New Jersey district court preliminarily approved the $10 million derivative lawsuit settlement. Barring unforeseen complications, Judge Stanley R. Chesler is expected to sign off on the final settlement June 9, court documents say.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.