Prudential Financial (PRU) Q4 Earnings Miss, Decrease Y/Y
Prudential Financial, Inc. PRU reported fourth-quarter 2022 adjusted operating income of $2.42 per share, which missed the Zacks Consensus Estimate by 5.8%. The bottom line declined 23.9% year over year.
Prudential Financial's results reflect poor performance across most of the segments, lower premiums and net investment income, offset by lower expenses.
Prudential Financial, Inc. Price, Consensus and EPS Surprise
Prudential Financial, Inc. price-consensus-eps-surprise-chart | Prudential Financial, Inc. Quote
Operational Update
Total revenues of $12.6 billion declined 7.9% year over year and missed the Zacks Consensus Estimate by 1.1%. The fall in revenues was due to lower premiums and reduced asset management fees, commissions and other income, decreased policy charges and fee income and net investment income. The figure was higher than our estimate of $12.3 billion.
Total benefits and expenses amounted to $11.5 billion, which fell 5.7% year over year in the fourth quarter. This decrease was on account of lower insurance and annuity benefits and general and administrative expenses. The figure was higher than our estimate of $11.2 billion.
Quarterly Segment Update
Prudential Global Investment Management’s (PGIM) adjusted operating income of $230 million declined 34.3% year over year. The decrease primarily reflects lower asset management fees, due to a reduction in assets under management and lower Other Related Revenues, owing to lower incentive fees, agency income and transaction fees. It was partially offset by lower expenses.
PGIM assets under management of $1.2 trillion in the reported quarter, which fell 19% year over year due to higher interest rates and widening credit spreads, as well as declines in equity markets.
The U.S. Businesses delivered adjusted operating income of $864 million, which decreased 3.5% year over year. 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.
Assurance IQ incurred an adjusted operating income of $29 million against the prior-year quarter’s net operating loss of $10 million. The improvement was driven by higher Medicare commission revenues and lower expenses.
International Businesses’ adjusted operating income decreased 25.4% year over year to $618 million in the fourth quarter. This decrease primarily reflects lower net investment spread results due to lower variable investment income, less favorable underwriting results, including unfavorable policyholder behavior and higher expenses.
Corporate and Other incurred an adjusted operating loss of $526 million, wider than the loss of $489 million reported a year ago. This higher loss reflects higher expenses, partially offset by higher income from pension and other employee benefit plans.
Capital Deployment
Prudential Financial managed to return capital to its shareholders in the form of share repurchases worth $375 million and dividends worth $449 million in the fourth quarter.
Dividend Hike Announced
Concurrent with fourth-quarter results, Prudential Financial’s board of directors approved a 4% hike in the quarterly dividend. With this, the dividend payout now stands at $1.25 per share compared with the prior payout of $1.20. The increased dividend will be paid on Mar 16, 2023 to shareholders of record as on Feb 21.
Financial Update
PRU exited the fourth quarter with cash and cash equivalents of $17.2 billion, which increased 33.8% from the 2021-end level.
Total debt balance of $20.6 billion increased 6.9% from the figure at 2021-end.
As of Dec 31, 2022, Prudential Financial’s assets under management decreased 20.9% year over year to $1.37 trillion.
Adjusted book value per common share, a measure of the company’s net worth, came in at $99.22, which decreased 8.7% year over year.
Operating return on average equity was 9.7% in the fourth quarter, which contracted 210 basis points (bps) year over year.
Full-Year Update
For 2022, the adjusted operating income of Prudential Financial was $9.46 per share. The bottom line declined 35.1% from the 2021 figure. The bottom line missed the Zacks Consensus Estimate by 1.4%.
Revenues for the year totaled $61.6 billion, which climbed 3% from the 2021 level. The top line missed the Zacks Consensus Estimate by 0.3%.
Zacks Rank
Prudential Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Multi-Line Insurers
MGIC Investment Corporation MTG reported fourth-quarter 2022 operating net income per share of 64 cents, which beat the Zacks Consensus Estimate by 8.5% and our estimate of 59 cents. The reported figure increased 4.9% year over year. Insurance in force increased 7.6% from the prior-year quarter to $295.3 billion. The figure was higher than our estimate of $294.9 billion. The insurer witnessed a 20.7% decrease in primary delinquency to 26,387 loans.
MGIC Investment recorded total operating revenues of $291 million, which decreased 0.6% year over year on lower premiums earned. The top line missed the consensus mark by 12.9% and our estimate of $334.1 million. Net premiums written decreased 2.8% year over year to $231.4 million. The figure was lower than our estimate of $260.1 million. Net investment income increased 18.5% year over year to $46.4 million. The figure was higher than our estimate of $44.3 million. Persistency — the percentage of insurance remaining in force from one year prior — was 79.8% as of Dec 31, 2022, up from 62.6% in the year-ago quarter. It compares favorably with our estimate of 66.3%.
Cigna Corporation CI reported fourth-quarter 2022 adjusted earnings of $4.96 per share, which outpaced the Zacks Consensus Estimate by 2.5% and our estimate of $4.84 per share. The bottom line advanced 4% year over year. Adjusted revenues inched up 0.1% year over year to $45,743 million, owing to better pharmacy revenues coupled with higher fees and other revenues. The top line beat the consensus mark by a whisker and exceeded our estimate of $44,354.2 million.
Cigna’s medical customer base came in at 18 million, which grew 5.4% year over year as of Dec 31, 2022. The growth came on the back of a well-performing U.S. Commercial business. The reported figure matched both the consensus mark and our estimate. Total benefits and expenses declined 0.3% year over year to $44,026 million in the quarter under review. The adjusted selling, general and administrative expense ratio of 7.6% deteriorated 20 basis points (bps) year over year.
MetLife, Inc. MET reported fourth-quarter 2022 adjusted operating earnings of $1.55 per share, which missed the Zacks Consensus Estimate of $1.74 and our estimate of $1.77. The bottom line declined 29% year over year. Adjusted operating revenues of MetLife amounted to $15,836 million, which decreased 21.6% year over year. The top line missed the consensus mark of $16,996 million and our estimate of $16,303.1 million. Adjusted premiums, fees and other revenues, excluding pension risk transfer (PRT), were $11,375 million, down 1% year over year.
Total expenses of $14,589 million decreased from $18,783 million a year ago due to lower policyholder benefits and claims. The adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT, increased 30 bps year over year to 20.7%. Net income increased 12% year over year to $1,314 million driven by net derivative and investment gains. Adjusted return on equity, excluding AOCI other than FCTA, deteriorated 400 bps year over year to 11.3%.
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