Prudential Financial (PRU) Q1 Earnings Miss on Higher Expenses
Prudential Financial, Inc. PRU reported first-quarter 2023 adjusted operating income of $2.66 per share, which missed the Zacks Consensus Estimate by 11.9% and our estimate of operating income of $3.07. The bottom line declined 16.1% year over year.
Total revenues of $15,104 million increased 10.5% year over year, beating the Zacks Consensus Estimate by 13.7%. The rise in revenues was due to higher premiums, asset management fees, commissions and other income and net investment income. The figure was higher than our estimate of $12,905.3 million.
Prudential Financial's first-quarter results were affected by declining operating income year over year for all of its segments and rising expenses. Improving premiums and net investment income partially offset the negatives.
Prudential Financial, Inc. Price, Consensus and EPS Surprise
Prudential Financial, Inc. price-consensus-eps-surprise-chart | Prudential Financial, Inc. Quote
Operational Update
Total benefits and expenses amounted to $13,838 million, which rose 18% year over year in the first quarter. This increase was due to higher insurance and annuity benefits, interest credited to policyholders' account balances, interest expenses and general and administrative expenses. The figure was higher than our estimate of $11,442.2 million.
Quarterly Segment Update
Prudential Global Investment Management’s (PGIM) adjusted operating income of $151 million declined 19.7% year over year. The metric missed the Zacks Consensus Estimate by 17.5% and our estimate of $180.4 million. The decrease primarily reflects lower asset management fees due to a reduction in assets under management in the quarter. The negatives were partially offset by higher other-related revenues.
PGIM assets under management of $1.3 trillion in the reported quarter fell 10% year over year due to higher interest rates, net outflows and declining equity markets.
The U.S. Businesses delivered an adjusted operating income of $760 million, which decreased 6.5% year over year. The metric missed the Zacks Consensus Estimate by 19.6% and our estimate of $955.9 million. The downside was due to lower net investment spread results because of lower variable investment income and lower net fee income. It was partially offset by more favorable underwriting results.
International Businesses’ adjusted operating income decreased 11.7% year over year to $840 million in the first quarter. The metric beat the Zacks Consensus Estimate by 11.8% and our estimate of $743.4 million. This decrease primarily reflects lower net investment spread results due to lower variable investment income and less favorable underwriting results.
Corporate and Other incurred an adjusted operating loss of $485 million, wider than $416 million reported a year ago. The metric beat the Zacks Consensus Estimate by 18.9% and our estimate of a loss of $416.6 million. This higher loss reflects higher expenses, partially offset by higher net investment income.
Capital Deployment
Prudential Financial managed to return capital to its shareholders in the form of share repurchases worth $250 million and dividends worth $468 million in the first quarter.
Financial Update
PRU exited the first quarter with cash and cash equivalents of $17,425 million, which increased from $14,086 million at 2022-end.
Total debt balance of $21.2 billion increased from $20.2 billion at 2022-end.
As of Mar 31, 2023, Prudential Financial’s assets under management and administration decreased 20.9% year over year to $1.6 trillion.
Adjusted book value per common share, a measure of the company’s net worth, came in at $97.29, which decreased 4.7% year over year.
Operating return on average equity was 11.2% in the first quarter, which contracted 80 basis points year over year.
Zacks Rank
Prudential Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Some Other Insurers
Of the other insurance industry players that have reported first-quarter 2023 results so far, the bottom-line results of Chubb Limited CB, Arch Capital Group Ltd. ACGL and AXIS Capital Holdings Limited AXS beat the Zacks Consensus Estimate.
Chubb reported first-quarter 2023 core operating income of $4.41 per share, which outpaced the Zacks Consensus Estimate by 0.9%. The bottom line improved 15.1% from the year-ago quarter. Net premiums written of CB improved 16.6% year over year to $10.7 billion in the quarter.
Net investment income was $1.11 billion, up 34.7%. The figure was higher than our estimate of $957.3 million. P&C underwriting income was $1.21 billion, down 5.5% from the year-ago quarter.
Arch Capital’s first-quarter 2023 operating income of $1.73 per share surpassed the Zacks Consensus Estimate by 14.6%. Earnings also surpassed our estimate of $1.42. The bottom line increased 57.3% year over year. ACGL’s operating revenues of $3.1 billion rose 41.1% year over year. It beat the Zacks Consensus Estimate by 8.7% and surpassed our estimate of $2.9 billion.
Net premiums written climbed 30% year over year to $3.4 billion. Net investment income increased 9.9% year over year to $199 million and beat our estimate of $81 million. Underwriting income increased 24.5% year over year to $570 million.
AXIS Capital posted first-quarter 2023 operating income of $2.33 per share, beating the Zacks Consensus Estimate by 23.2%. The bottom line increased 11.5% year over year. Total operating revenues of $1.3 billion missed the Zacks Consensus Estimate by 6.7%.
However, the top line rose 0.6% year over year on higher net investment income. The net investment income of AXS increased 47.2% year over year to $134 million. Underwriting income of $139.4 million increased 0.4% year over year.
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