As the first-quarter earnings season winds down, Penson Worldwide, Prudential Financial, and Sun Life Financial reported their earnings with mixed results.
Penson Worldwide said Thursday, May 6, that profits dropped to $140,000, or 1 cent a share, compared to a profit of $169 million, or 7 cents a share, from the same quarter last year. Penson's revenues edged up, though, to $66.8 million compared to $67.4 million.
Penson, based in Dallas, said that excluding $1.3 million in expenses related to severance and the Broadridge Financial transaction, profits would have been just under $1 million, or 4 cents a share.
"We continue to believe that this is going to be a challenging year from a financial metric point of view," Philip Pendergraft, Penson's CEO, said, "As you know, there are two major drivers to our revenue stream; interest rates and industry volumes. We do not expect to see any improvement in interest rates this year. Retail volumes were generally flat to down slightly across the industry in the first quarter, much as we expected. Of note April volumes especially in our U.S. securities business have been strong and were the best since September of last year."
Clearing and commission fees were off slightly as stronger equity and futures volumes in the U.S. were offset by the deconversion in December 2009 of E*Trade Canada, which was purchased by Scotiabank.
Based on the size and composition of Penson's customer interest earning and interest paying average balances for the first quarter 2010, the company estimates that each 25 basis point increase in the federal funds rate would increase net interest revenue by approximately $1 million per quarter.
Prudential Roars Back
On Wednesday, May 5, Prudential Financial, the second largest U.S. life insurer, posted a stronger-than-expected first quarter profit, helped by rising profits from its annuity business as financial markets rebounded.
The company, based in Newark, said first-quarter profit was $536 million, or $1.15 a share, compared with a loss of $5 million, or 1 cent a share, in the same quarter last year.
Adjusted operating income, which excludes investment results and other items, was $1.49 a share, compared with analysts' average estimate of $1.31 a share, according to Thomson Reuters.
Net variable annuity sales surged to $3.2 billion from $665 million, which helped lift overall annuity operating income to $260 million from $17 million in the same quarter a year earlier.
The U.S. Retirement Solutions and Investment Management division income of $514 million for the first quarter of 2010, compared to $175 million in the year-ago quarter.
The U.S. Individual Life and Group Insurance divisionreported income of $144 million for the first quarter of 2010, compared to $133 million in the year-ago quarter.
The International Insurance and Investments division reported profits of $496 million for the first quarter of 2010, compared to $432 million in the year-ago quarter.
Assets under management(AUM) totaled $693 billion at March 31, 2010, compared to $542 billion a year earlier and $667 billion in fourth quarter of 2009.
Sun Life Swings to a Profit
Sun Life Financial, based in Toronto, reported a better than expected first-quarter profit on Wednesday, more than reversing a loss in the first quarter a year ago, as markets and favorable interest rates boosted earnings.
Canada's third largest life insurer said it had profits of $409 million Canadian dollars ($397 million), or 72 Canadian cents a share, in the three months ended March 31. That compared with a loss of $213 million Canadian dollars, or 38 Canadian cents a share, a year earlier, when the financial crisis pummeled the big equity investments of life insurers and Sun Life was forced to strengthen reserves.
Analysts had expected per share earnings of 62 Canadian cents, according to Thomson Reuters.
Sun Life said return on equity, a key measure of profitability, rose to 10.5%, up from 7.6% in the fourth quarter, and negative 5.5% a year earlier.
Assets under management (AUM) rose 16% from the first quarter of 2009 to $435 billion Canadian dollars.
"While there are still headwinds in credit markets, our focus on risk management and a strategy of diversifying across product lines and geographies has allowed Sun Life to achieve a solid start in 2010," Chief Executive Donald Stewart said in a statement.
U.S. operations turned a profit after two consecutive quarterly losses, as improved distribution contributed to a 45% increase in sales of variable annuities.
Sun Life reiterated its expectation that adjusted earnings from operations in 2010 will be in the range of $1.4 billion Canadian dollars to $1.7 billion Canadian dollars.