Prudential Financial Inc. and other insurers say they will be reporting profits for the third quarter despite the recent economic turmoil.
Prudential, Newark, N.J., says after-tax adjusted operating income for its financial services businesses will be between $275 million and $375 million for the third quarter, down from $905 million for the third quarter of 2007.
Prudential says the operating results will include $700 million in charges, including:
- $325 million to $375 million in charges for pretax losses on investments in securities issued by Lehman Brothers Holding Corp., New York; American International Group Inc., New York; and Washington Mutual Inc., Seattle.
- $235 million for Prudential’s share of a legal settlement involving Wachovia Securities, a retail securities brokerage joint venture owned by Prudential and Wachovia Corp., Charlotte, N.C. The settlement resolved charges of improper security sales practices by subsidiaries of Wachovia Securities.
- $45 million in charges related to Prudential’s acquisition of A.G. Edwards & Sons Inc., St. Louis.
Prudential originally had expected to release earnings Oct. 29.
In addition to preannouncing earnings, Prudential announced that it is suspending its stock buyback program because of the recent market volatility. During the first 3 quarters, Prudential spent $2.1 billion on buying back about 29 million shares of common stock.
Andrew Kligerman, an analyst with UBS Investment Research, New York, called the halt of the buyback program “both appropriate and not surprising” in a commentary on the Prudential announcements titled “Not So Bad.”
Shortly after Prudential announced that it still expects to report operating profits for the third quarter, Lincoln National Corp., Philadelphia, and Torchmark Corp., McKinney, Texas, said they expect to report positive net income for the quarter.
Lincoln National expects to report net income of $120 million to $180 million, and operating earnings of $280 million to $320 million.
“Even in difficult economic conditions, our core retirement and insurance businesses performed well,” Lincoln National President Dennis Glass says in a statement. “While external conditions have pressured our earnings and stock price and have led to higher asset impairments, our liquidity position is strong both at the holding company and within our insurance operations.”
Consolidated retail net flows of cash into insurance and retirement products fell to $1.7 billion, from $2.1 billion, and the company expects to recognize about $400 million in investment losses for the quarter.
But Lincoln National says it still has about $500 million more excess capital than it needs to support the current AA rating at its Lincoln National Life Insurance Company subsidiary.
“The company has no current plans to raise equity capital,” Lincoln National says.
But Lincoln National says it plans to save about $50 million per quarter by cutting its dividend to 21 cents per share, from 41.5 cents per share.
Torchmark says it expects to report $63 million in net income for the latest quarter, down from $133 million in net income for the third quarter of 2007.
Net operating income will increase to $132 million, from $130 million, Torchmark says.
The net results will include a $70 million charge related to losses on investments in struggling financial institutions.
“In spite of this impairment, cash flows remain strong and Torchmark’s capital is sufficient to support its current operations,” Torchmark says.
Torchmark is expecting the ultimate value of many of the “other than temporarily impaired” investments to increase from the current fair value, the company says.
Earlier this week, a fourth insurer, MetLife Inc., New York, said it expects to report $600 million in operating earnings for the third quarter.
Additional information was contributed to this article by Allison Bell.