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Prudential (PRU) Q3 Earnings Lag Estimates, Revenues Rise Y/Y

Prudential Financial, Inc.’s PRU third-quarter 2022 operating net income of $2.13 per share missed the Zacks Consensus Estimate by 3.6%. The bottom line decreased 43.6% year over year.

Prudential Financial's results reflect higher expenses, poor performance of Prudential Global Investment Management (PGIM), U.S. Businesses and International businesses, offset by higher premiums.

Prudential Financial, Inc. Price, Consensus and EPS Surprise

Prudential Financial, Inc. Price, Consensus and EPS Surprise
Prudential Financial, Inc. Price, Consensus and EPS Surprise

Prudential Financial, Inc. price-consensus-eps-surprise-chart | Prudential Financial, Inc. Quote

Behind the Headlines

Total revenues of $21.6 billion increased 10% year over year on higher premiums. The top line beat the Zacks Consensus Estimate by 69.4%. The figure was higher than our estimate of $12.8 billion.

Total benefits and expenses of $20.6 billion were up 15.5% year over year for the quarter. The increase in expenses was mainly attributable to higher insurance and annuity benefits and interest expense. The figure was higher than our estimate of $11.6 billion.

Quarterly Segment Update

PGIM reported adjusted operating income of $219 million,  decreased 33% year over year. This decrease reflects lower asset management fees, due to a reduction in assets under management.

U.S. Businesses’ adjusted operating income was $702 million, down 35.6% from the year-ago quarter. This decrease reflects lower net investment spread results, due to lower variable investment income, and lower net fee income. It was partially offset by favorable underwriting results.

Assurance IQ incurred adjusted operating loss of $44 million, narrower than a loss of $55 million in the year-ago quarter. This lower loss reflects lower expenses, partially offset by lower revenues, due to less case referral income.

International Businesses delivered adjusted operating income of $430 million, down 51.5% from the year-earlier period. This decrease reflects less favorable underwriting results and lower net investment spread results, due to lower variable investment income.

Corporate and other operations incurred adjusted operating loss of $325 million, narrower than a loss of $460 million  a year ago. This lower loss reflects the absence of costs related to the early extinguishment of debt in the year-ago quarter, gains from the sales of certain home office properties, favorable foreign exchange rate impacts and higher income from pension and other employee benefit plans.

Share Repurchase Update

Prudential returned capital worth $829 million in the quarter, including $375 million of share repurchases and $454 million of dividends.

Dividends paid were $1.20 per share, representing a 5% yield on adjusted book value.

Financial Update

Cash and cash equivalents of $20.1 billion at quarter-end increased 28.8% year over year. The figure was higher than our estimate of $12.4 billion.

Debt balance totaled $20.7 billion as of Sep 30, 2022, up 6.8% from the 2021-end level.

As of Sep 30, 2022, Prudential’s assets under management decreased 21.8% year over year to $1.350 trillion.

Adjusted book value per common share — a measure of the company’s net worth — came in at $102.26 as of Sep 30, 2022, down 4.3% year over year.

Operating return on average equity was 8.3% for the third quarter, contracting 620 basis points year over year.

Zacks Rank

Prudential currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other Insurers

Of the insurance industry players that have reported third-quarter results so far, The Hartford Financial Services Group, Inc. HIG, Assurant, Inc. AIZ and Everest Re Group, Ltd. RE beat the respective Zacks Consensus Estimate for earnings.

The Hartford Financial Services reported third-quarter 2022 adjusted operating earnings of $1.44 per share, which outpaced the Zacks Consensus Estimate by 11.6%. The bottom line climbed 14% year over year. Operating revenues of HIG amounted to $3,830 million, which rose 3.6% year over year in the quarter under review.

The top line also beat the consensus mark by 1.8%. Hartford Financial’s total earned premiums improved 7.6% year over year to $4,910 million, which surpassed the Zacks Consensus Estimate of $4,811 million and our estimate of $4,808.2 million. Net investment income of $487 million dropped 25.1% year over year in the third quarter due to a decline in income from limited partnerships and other alternative investments.

Assurant reported third-quarter 2022 net operating income of $1.01 per share, which beat the Zacks Consensus Estimate by 1% but missed our estimate of $2.36. The bottom line decreased 40.2% from the year-ago quarter.

Assurant’s total revenues increased 1.9% year over year to $2.6 billion due to higher net earned premiums and net investment income. The top line, however, missed the Zacks Consensus Estimate by 1.8%. The figure was lower than our estimate of $2.7 billion. Net investment income was up 9.9% year over year to $83.5 million. The figure was higher than our estimate of  $81.8 million.

Everest Re Group’s third-quarter 2022 operating loss per share of $5.28 was narrower than the Zacks Consensus Estimate of a loss of $5.89 but wider than the year-ago loss of $1.34. Everest Re’s total operating revenues of $3.2 billion increased 9.5% year over year on higher premiums earned. The top line, however, missed the consensus estimate by 2.2%.

Gross written premiums improved 6.3% year over year to $3.7 billion, largely driven by double-digit growth in the Insurance segment. However, premiums missed our estimate of $3.9 billion. Net investment income was $151 million, down 48.5% year over year.


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