NU Online News Service, Feb. 13, 1:45 p.m. – Prudential Financial Inc., Newark, N.J., is reporting a $506 million net loss for the fourth quarter of 2001 on $7.5 billion in revenue, compared with a $268 million net loss on $7.2 billion in revenue for the fourth quarter of 2000.
Net results for the latest quarter include a variety of unusual costs. Among the unusual items are $25 million in losses on businesses Prudential has sold or closed; $402 million in investment losses; and $502 million in costs related to Prudential’s Dec. 13, 2001, demutualization.
Closed Block Business
Holders of annuities and life insurance policies in the closed block business collect dividends based on the performance of a particular class of business.
Prudential stopped offering the participating products after it demutualized, but it still includes the closed block results when compiling its official, company-wide financial statements.
The unit recorded a $103 million net loss for the fourth quarter on $2.1 billion in revenue, compared with $63 million in net income on $2.3 billion in revenue for the fourth quarter of 2000.
Financial Services Business
Prudential has put what it thinks of as its core insurance and financial services operations in its financial services business.
The financial services business generated a $403 million net loss for the fourth quarter on $5.2 billion in revenue, compared with a $331 million net loss on $4.6 billion in revenue for the fourth quarter of 2000.
Adjusted income for the financial services unit, which excludes $546 million in unusual charges, increased to $105 million, from $41 million, Prudential says.
The financial services business spent $78 million to restructure the individual life insurance unit in the fourth quarter and $21 million to restructure the private client group, which handles investments for wealthy customers.
The unit also lost $196 million invested in Enron Corp., Houston, and it lost at least $70 million more due to credit losses involving other debt issuers, according to company figures.
U.S. Individual Products
Prudential’s U.S. individual life, annuity and investment operations are part of the financial services business.
The individual life operation earned $31 million in adjusted income for the fourth quarter on $525 million in revenue, up from a $31 net loss on $466 million in revenue, but revenue from new sales of life and variable annuity products was weak.
New sales fell to $82 million, from $124 million, for individual variable, universal, term and corporate-owned life insurance, and to $330 million, from $383 million, for variable annuities.
Sales of fixed annuities increased to $31 million, from $30 million, Prudential says.
Individual life sales fell 25%, to $51 million, for Prudential’s own agents, but plummeted 45%, to $31 million, for third-party distributors.
U.S. Employee Benefits
The benefits operations are part of Prudential’s financial services business.
At the employee benefits division, adjusted income fell to $24 million on $1.5 billion in revenue, from $76 million on $1.5 billion in revenue.
Group insurance products sold well during the fourth quarter: new sales increased to $115 million, from $47 million, for group life, and to $31 million, from $25 million, for group disability.
But new sales of defined contribution plans fell to $782 million, from $1.4 billion.