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Prudential Financial, Inc. Message Board

  • bluecheese4u bluecheese4u Nov 7, 2012 5:36 PM Flag

    Prudential Financial, Inc. Announces Third Quarter 2012 Results

    Prudential Financial, Inc. Announces Third Quarter 2012 Results

    NEWARK, N.J.--(BUSINESS WIRE)--Nov. 7, 2012-- Prudential Financial, Inc. (NYSE:PRU)


    After-tax adjusted operating income for the Financial Services Businesses of $722 million, or $1.53 per Common share, compared to 84 cents per Common share for year-ago quarter.


    Significant items included in current quarter adjusted operating income:

    Pre-tax net charge of $48 million in Individual Annuities to strengthen reserves for guaranteed death and income benefits, net of reduced amortization of deferred policy acquisition and other costs, including impact of annual review of actuarial assumptions.

    Pre-tax charges totaling $42 million in Retirement, including writeoff of intangible assets related to an acquired business and impact of annual review of actuarial assumptions.

    Pre-tax charge of $27 million in Individual Life, and pre-tax benefit of $7 million in Group Insurance, reflecting annual review of actuarial assumptions.

    Pre-tax benefit of $20 million in International Insurance’s Life Planner operations, reflecting annual review of actuarial assumptions.

    Pre-tax benefit of $60 million in International Insurance’s Gibraltar Life operation from the partial sale of an investment, through a consortium, in China Pacific Group.

    Pre-tax charge of $34 million in International Insurance’s Gibraltar Life operation for integration costs relating to the acquisition of AIG Star Life Insurance Co., Ltd. and AIG Edison Life Insurance Company.

    Pre-tax charges totaling $94 million in Corporate and Other operations, reflecting impact of annual review of actuarial assumptions on retained obligations relating to certain pre-demutualization policyholders and writeoff of issuance costs on debt securities redeemed prior to maturity.


    Net loss of Financial Services Businesses attributable to Prudential Financial, Inc. of $661 million, or $1.41 per Common share.

    The net loss reflected pre-tax losses of $684 million from changes in value of product embedded derivatives and derivatives used to hedge associated product risks, as well as mark to market of derivatives under a capital hedge program. The net loss also reflects pre-tax charges of $521 million from net changes in value relating to foreign currency exchange rates and changes in market value of derivatives primarily resulting from changes in value of the Japanese yen in relation to other currencies. These currency-driven value changes were largely offset by corresponding adjustments to accumulated other comprehensive income which are not reflected in net income or loss. In addition, the net loss reflects a pre-tax loss of $685 million from divested businesses, primarily related to long-term care insurance.


    Other financial highlights:

    GAAP book value for Financial Services Businesses, $37.1 billion or $79.51 per Common share at September 30, 2012, compared to $32.8 billion or $69.07 per Common share at December 31, 2011. Book value per Common share excluding total accumulated other comprehensive income, $59.35 at September 30, 2012 compared to $58.02 at December 31, 2011.

    Net unrealized gains on general account fixed maturity investments of the Financial Services Businesses of $17.8 billion at September 30, 2012 compared to $10.5 billion at December 31, 2011; gross unrealized losses of $2.4 billion at September 30, 2012, compared to $4.3 billion at December 31, 2011.

    During the third quarter, the Company acquired 2.7 million shares of its Common Stock under its current share repurchase authorization at a total cost of $150 million, for an average price of $55.77 per share. From the commencement of share repurchases in July 2011 through September 30, 2012, the Company has acquired 31.3 million shares of its Common Stock under its share repurchase authorizations at a total cost of $1.65 billion, for an average price of $52.72 per share.

    Prudential Financial, Inc. (NYSE:PRU) today reported after-tax adjusted operating income for its Financial Services Businesses of $722 million ($1.53 per Common share) for the third quarter of 2012, compared to $406 million (84 cents per Common share) for the year-ago quarter. The net loss for the Financial Services Businesses attributable to Prudential Financial, Inc. was $661 million ($1.41 per Common share) for the third quarter of 2012, compared to net income of $1.562 billion ($3.18 per Common share) for the year-ago quarter. Information regarding adjusted operating income, a non-GAAP measure, is provided below.

    For the first nine months of 2012, after-tax adjusted operating income for the Financial Services Businesses amounted to $2.079 billion ($4.41 per Common share) compared to $1.969 billion ($4.02 per Common share) for the first nine months of 2011. Net income for the Financial Services Businesses attributed to Prudential Financial, Inc. for the first nine months of 2012 amounted to $554 million ($1.21 per Common share) compared to $2.880 billion ($5.85 per Common share) for the first nine months of 2011.

    The Company acquired AIG Star Life Insurance Co., Ltd. and AIG Edison Life Insurance Company on February 1, 2011. Results of the Financial Services Businesses include the results of these businesses from the date of acquisition.

    As a result of the Company’s decision to discontinue sales of long-term care policies, for which results were formerly reported within the Group Insurance segment, results from long-term care insurance have been classified as divested businesses and excluded from adjusted operating income for all periods presented.

    “Our current quarter results benefited from solid performance across our businesses. In our U.S. businesses, solid sales and net flows are driving organic growth of quality business virtually across the board. Our recently announced agreement to acquire The Hartford’s individual life insurance business, together with two major ground breaking pension risk transfer transactions, will complement our organic growth, enhancing our leadership positions in attractive markets and contributing toward achievement of our longer term objectives. Our international insurance business continues to perform well, building on success in serving protection and retirement needs through multiple distribution channels,” said Chairman and Chief Executive Officer John Strangfeld.

    Adjusted operating income is not calculated under generally accepted accounting principles (GAAP). Information regarding adjusted operating income, a non-GAAP measure, is discussed later in this press release under “Forward-Looking Statements and Non-GAAP Measures,” and a reconciliation of adjusted operating income to the most comparable GAAP measure is provided in the tables that accompany this release.

    Financial Services Businesses

    Prudential Financial’s Common Stock (NYSE:PRU) reflects the performance of its Financial Services Businesses, which consist of its U.S. Retirement Solutions and Investment Management, U.S. Individual Life and Group Insurance, and International Insurance divisions and its Corporate and Other operations.

    In the following business-level discussion, adjusted operating income refers to pre-tax results.

    The U.S. Retirement Solutions and Investment Management division reported adjusted operating income of $504 million for the third quarter of 2012, compared to $42 million in the year-ago quarter.

    The Individual Annuities segment reported adjusted operating income of $207 million in the current quarter, compared to a loss of $192 million in the year-ago quarter. Current quarter results include a net charge of $48 million to reflect an updated estimate of profitability for this business including updates of economic and other actuarial assumptions based on an annual review and refinements which resulted in a $106 million charge, and the impact of favorable current quarter market performance on customer accounts relative to our assumptions which resulted in a $58 million benefit. Results for the year-ago quarter included a net charge of $421 million to reflect an update of estimated profitability, primarily driven by the impact of unfavorable market performance on customer account values relative to our assumptions while also including updates of actuarial assumptions based on an annual review. Excluding the effect of the foregoing items, adjusted operating income for the Individual Annuities segment increased $26 million from the year-ago quarter, primarily reflecting higher asset-based fees due to growth in variable annuity account values.

    The Retirement segment reported adjusted operating income of $110 million for the current quarter, compared to $111 million in the year-ago quarter. Current quarter results include a $29 million charge to write off intangible assets relating to an acquired business, and a $13 million charge from a net increase in amortization of deferred policy acquisition and other costs primarily reflecting an annual review of actuarial assumptions. Results for the year-ago quarter included a $24 million charge based on an annual review. Excluding these items, adjusted operating income of the Retirement segment increased $17 million from the year-ago quarter, as a greater contribution from investment results and higher fees associated with growth in retirement account values were partly offset by less favorable case experience on traditional retirement business in the current quarter.

    The Asset Management segment reported adjusted operating income of $187 million for the current quarter, compared to $123 million in the year-ago quarter. The increase reflects an approximately $55 million greater contribution from results of the segment’s incentive, transaction, strategic investing and commercial mortgage activities, driven primarily by increases in value of fixed income and real estate funds. The remainder of the increase in segment results came primarily from higher asset management fees reflecting growth in assets under management, net of expenses.

    The U.S. Individual Life and Group Insurance division reported adjusted operating income of $147 million for the third quarter of 2012, compared to $156 million in the year-ago quarter.

    The Individual Life segment reported adjusted operating income of $112 million for the current quarter, compared to $111 million in the year-ago quarter. Current quarter results include a charge of $27 million from a net increase in amortization of deferred policy acquisition and other costs reflecting updates of actuarial assumptions based on an annual review, while results for the year-ago quarter included a $27 million benefit from updates based on an annual review. Excluding these items, adjusted operating income increased $55 million from the year-ago quarter. Current quarter results benefited from improved mortality experience in comparison to the year-ago quarter. In addition, results for the year-ago quarter included a net negative impact of approximately $15 million from adjustments of amortization of deferred policy acquisition and other costs as a result of separate account performance less favorable than our assumptions.

    The Group Insurance segment reported adjusted operating income of $35 million in the current quarter, compared to $45 million in the year-ago quarter. Current quarter results benefited $7 million from refinements of group life and disability reserves reflecting updates of actuarial assumptions based on an annual review, while results for the year-ago quarter included a net benefit from similar reserve refinements totaling $22 million. Excluding these items, adjusted operating income increased $5 million from the year-ago quarter, reflecting a greater contribution from investment results partly offset by less favorable group life claims experience.

    The International Insurance segment reported adjusted operating income of $783 million for the third quarter of 2012, compared to $660 million in the year-ago quarter.

    Adjusted operating income of the segment’s Life Planner insurance operations was $393 million for the current quarter, compared to $331 million in the year-ago quarter. Current quarter results benefited $20 million from refinements of reserves and related items reflecting updates of actuarial assumptions based on an annual review. Excluding this item, adjusted operating income increased $42 million from the year-ago quarter. The increase reflected continued business growth and a favorable impact of $14 million in comparison to the year-ago quarter from foreign currency exchange rates including the impact of the Company’s currency hedging programs.

    The segment’s Gibraltar Life and Other operations reported adjusted operating income of $390 million for the current quarter, compared to $329 million in the year-ago quarter. Current quarter results include a benefit of $60 million from the partial sale of an investment, through a consortium, in China Pacific Group. In addition, results for the current quarter reflect absorption of $34 million of integration costs related to the Star and Edison businesses acquired on February 1, 2011. Results for the year-ago quarter include a benefit of $84 million from a partial sale of the investment in China Pacific Group and charges of $43 million for integration costs related to the acquisition. Excluding these items, adjusted operating income increased $76 million from the year-ago quarter. This increase reflected continued business growth, and approximately $40 million of cost savings resulting from business integration synergies compared to approximately $5 million in the year-ago quarter. Current quarter results also benefited $13 million in comparison to the year-ago quarter from foreign currency exchange rates including the impact of the Company’s currency hedging programs.

    Corporate and Other operations resulted in a loss, on an adjusted operating income basis, of $452 million in the third quarter of 2012, compared to a loss of $349 million in the year-ago quarter. Current quarter results include a charge of $78 million to strengthen reserves for obligations relating to certain pre-demutualization policyholders, reflecting the impact of an annual review of actuarial assumptions, and a charge of $16 million to write off bond issuance costs on debt securities redeemed prior to maturity. Results for the year-ago quarter included a charge of $99 million to increase reserves for estimated claims based on use of new Social Security Master Death File criteria to identify deceased policy and contract holders, and a charge of $20 million for a contribution to be made to an insurance industry solvency fund. Excluding these items, the loss from Corporate and Other operations increased $128 million, from $230 million in the year-ago quarter to $358 million in the current quarter. This increase was primarily driven by higher expenses and by higher interest expense, net of investment income, reflecting a greater level of capital debt in the current quarter.

    Assets under management amounted to $1.005 trillion at September 30, 2012, compared to $901 billion at December 31, 2011, and $871 billion at September 30, 2011.

    The net loss of the Financial Services Businesses attributable to Prudential Financial, Inc. amounted to $661 million for the third quarter of 2012, compared to net income of $1.562 billion in the year-ago quarter.

    The current quarter net loss includes $1.303 billion of pre-tax net realized investment losses and related charges and adjustments. Net realized investment losses for the current quarter include net losses of $684 million from products that contain embedded derivatives and associated derivative portfolios that are part of a hedging program related to the risks of these products as well as mark to market of derivatives under a capital hedge program. These losses were largely driven by updates of actuarial assumptions based on an annual review. The foregoing current quarter net loss also includes pre-tax losses of $521 million representing net changes in value relating to foreign currency exchange rates and changes in market value of derivatives primarily resulting from changes in value of the Japanese yen in relation to other currencies. These currency-driven value changes were largely offset by corresponding adjustments to accumulated other comprehensive income which are not reflected in net income or loss. Net realized investment losses also reflect losses from impairments and sales of credit-impaired investments amounting to $107 million.

    At September 30, 2012, gross unrealized losses on general account fixed maturity investments of the Financial Services Businesses amounted to $2.385 billion, including $1.750 billion on high and highest quality securities based on NAIC or equivalent ratings. Gross unrealized losses include $520 million related to asset-backed securities collateralized by sub-prime mortgages. Gross unrealized losses on general account fixed maturity investments of the Financial Services Businesses at September 30, 2012 include $1.334 billion of declines in value of 20% or more of amortized cost. Gross unrealized losses on general account fixed maturity investments of the Financial Services Businesses amounted to $4.256 billion at December 31, 2011. Net unrealized gains on general account fixed maturity investments of the Financial Services Businesses amounted to $17.800 billion at September 30, 2012, compared to $10.493 billion at December 31, 2011.

    The net loss for the current quarter also reflects pre-tax losses of $685 million from divested businesses, including a $698 million charge related to long term care insurance to reflect updates of actuarial assumptions based on our annual review.

    In addition, the net loss for the current quarter reflects pre-tax increases of $264 million in recorded asset values and $254 million in recorded liabilities representing changes in value which are expected to ultimately accrue to contractholders. These changes primarily represent interest rate related mark-to-market adjustments.

    Net income of the Financial Services Businesses for the year-ago quarter included $1.817 billion of pre-tax net realized investment gains and related charges and adjustments, and increases of $10 million in recorded assets and decreases of $68 million in recorded liabilities for which changes in value are expected to ultimately accrue to contractholders, in each case before income taxes. Net income for the year-ago quarter also included $43 million of pre-tax income from divested businesses.

    Closed Block Business

    Prudential’s Class B Stock, which is not traded on any exchange, reflects the performance of its Closed Block Business.

    The Closed Block Business includes our in-force participating life insurance and annuity policies, and assets that are being used for the payment of benefits and policyholder dividends on these policies, as well as other assets and equity that support these policies. We have ceased offering these participating policies.

    The Closed Block Business reported income from continuing operations before income taxes of $69 million for the third quarter of 2012, compared to $46 million for the year-ago quarter.

    The Closed Block Business reported net income attributable to Prudential Financial, Inc. of $43 million for the third quarter of 2012, compared to $32 million for the year-ago quarter.

    For the first nine months of 2012, the Closed Block Business reported income from continuing operations before income taxes of $97 million, compared to $91 million for the first nine months of 2011. The Closed Block Business reported net income attributable to Prudential Financial, Inc. of $59 million for the first nine months of 2012, compared to $64 million for the first nine months of 2011.

    Consolidated Results

    There is no legal separation of the Financial Services Businesses and the Closed Block Business, and holders of the Common Stock and the Class B Stock are both common stockholders of Prudential Financial, Inc.

    On a consolidated basis, which includes the results of both the Financial Services Businesses and the Closed Block Business, Prudential Financial, Inc. reported a net loss attributable to Prudential Financial, Inc. of $618 million for the third quarter of 2012 compared to net income of $1.594 billion for the year-ago quarter, and reported net income attributable to Prudential Financial, Inc. of $613 million for the first nine months of 2012 and $2.944 billion for the first nine months of 2011.

    Share Repurchases

    During the third quarter of 2012, the Company acquired 2.7 million shares of its Common Stock at a total cost of $150 million, for an average price of $55.77 per share. These repurchases were under an authorization in June 2012 by Prudential’s Board of Directors to repurchase at management’s discretion up to $1.0 billion of the Company’s outstanding Common Stock through June 2013. From the commencement of repurchases in July 2011, through September 30, 2012, the Company acquired 31.3 million shares of its Common Stock at a total cost of $1.65 billion, for an average price of $52.72 per share.

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