Prudential Shrugs Off Omicron Losses To Post Strong 4Q Earnings

Prudential Financial reported financial losses from the flare-up of the Omicron variant throughout the fall 2021.

The insurer's group insurance business reported a loss of $205 million in the fourth quarter, compared to an $87 million loss in the 2020 fourth quarter.

"We have a high concentration of large retail and healthcare employer accounts," explained Andy Sullivan, executive vice president and head of U.S. Businesses. "If you think about it, those are employers that have a high number of frontline workers that are out and about and exposed on a daily basis. Also, many of those workers are in low vaccination geographies."

The poor results continued a trend from the third quarter, when Prudential reported an adjusted operating loss of $135 million in the group life and disability segment.

Likewise, the fourth quarter saw some shift in COVID infection rates to older ages, but "we're still seeing significant increase in incidence rates in the under-55 population," Sullivan said. "And that population tends to have larger dollar amount policies."

On the whole, it was another successful quarter for Prudential. The insurer reported quarterly earnings of $3.18 per share, beating the Zacks Consensus Estimate of $2.39 per share. Prudential reported net income of $1.2 billion, compared to $819 million in the year-ago quarter.

Annuity Sales

Prudential pivoted away from traditional variable annuities in recent quarters, while relying on robust sales of its FlexGuard line, an indexed-linked product introduced in 2020, to keep the segment healthy.

"Our product pivots have worked well, demonstrated by continued strong sales for our buffered annuities, which were nearly $6 billion dollars for the year, representing 87% of individual annuity sales," said Rob Falzon, vice chairman. "These sales reflect customer demand for investment solutions that offer the potential for appreciation from equity markets, combined with downside protection."

In the annuity segment, Prudential reported adjusted operating income of $486 million in the fourth quarter, compared to $440 million in the year-ago quarter. The increase "reflects higher fee income, net of distribution expenses and other associated costs, higher net investment spread results, including higher variable investment income, and lower expenses," the insurer said in its earnings release.

Account values of $182 billion were up 3% from the year-ago quarter, reflecting market appreciation, partially offset by net outflows. Gross sales of $1.6 billion in the fourth quarter reflect the continued success of FlexGuard, the release said.

Individual Life Insurance

Prudential continues to push variable life sales, with success, said Charles Lowrey, president and CEO, and is seeing success incorporating artificial intelligence into its sales processes.

"We use AI to quickly and accurately assess risk in our life insurance businesses," Lowrey said, "and to expedite the application and underwriting process. The application of innovative technology generated significant efficiencies for our global businesses during 2021 while delivering a dramatically better experience for our customers."

In the life segment, Prudential reported adjusted operating income of $81 million in the fourth quarter, compared to a loss of $65 million in the year-ago quarter. This increase reflects "more favorable underwriting results and higher net investment spread results, including higher variable investment income, partially offset by higher expenses, driven by a legal reserve," the earnings release said.

Sales of $182 million in the current quarter decreased 24% from the year-ago quarter. The decrease was primarily driven by higher sales ahead of product repricing in the year-ago quarter.

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.

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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.