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Strong VA Sales Aid Pru

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Strong variable annuity earnings and a solid performance by the Wachovia securities distribution channel fueled a 30% increase in second-quarter profits at Prudential Financial Inc.[@@]

Prudential, Newark, N.J., is reporting $754 million in net income for the second quarter on $5.8 billion in revenue, up from $519 million in net income on $5.1 billion in revenue for the second quarter of 2004.

Suneet Kamath, a life industry analyst at Bernstein Research Inc., New York, says one plus for the company this period was an entry for $161 million in positive variable annuities flow on sales of $1.8 billion. During the previous 3 quarters, cash flowed out of Prudential VA contracts.

Fixed annuity sales were up a “surprising” 24% from the second quarter of last year. “The primary driver here was the impact of a sales promotion in the Wachovia channel,” Kamath writes in a comment on Prudential’s earnings.

The insurance division reported adjusted operating income of $266 million for the quarter, up from last year’s $238 million. “While this segment has benefited from good mortality results in recent quarters, the company has also been reducing costs within its career agency,” Kamath says.

The investment division posted adjusted income that nearly doubled to $150 million from $72 million in the second quarter of 2004, due in part to gains at the commercial real estate asset-management business.

Prudential recorded a $136 million pre-tax charge for “retained litigation.” The charge could be a good thing, because it may be a sign that Prudential is expecting to reach a settlement in connection with market-timing litigation, Kamath writes.