What makes you say they were "speculating"? They have nearly a trillion dollars in net assets under management. They have a Japanese and asian insurance presence. They bought AIG Star and AIG Edison (both japan businesses) and already had a japanese presence. And the derivatives write down has a corresponding adjustment in accumulated income that doesn't show up in reported income for the quarter.
The market dip today for PRU I think is more related to the shortfall in adjusted income compared to estimates than this writedown. They also have some fairly large unrealized losses in sub-prime. And group disability isn't doing well, and, as reported, they don't seem to be driving towards their return on equity targets.
All that said, it seems dirt cheap to me, but has for a while.
I don't know how else to describe a loss of 1.5 billion. Most companies hedge-Prudential obviously didn't, and made a bet that the yen would increase against the dollar-instead it went the other way. In my view they have some very detailed explaining to do.
agreed, they are big in asia, naturally they have currency risk. I suppose they can hege it all but when the US$$ goes down they would get hurt as well. Annuity guarantees will be the death of alot of these companies, as an insurance agent I can see the writing on the wall.