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Prudential reports $1.1 billion profit, exceeding estimates

By Zachary Tracer

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(Bloomberg) — Prudential Financial Inc., the No. 2 U.S. life insurer, reported second-quarter profit that beat analysts’ estimates as results improved at the company’s main units.

Operating earnings, which exclude some investments and the results of policies sold before the firm went public, were $2.49 a share, 14 cents more than the average estimate of analysts surveyed by Bloomberg. Net income was $1.09 billion, compared with a loss of $514 million a year earlier, Newark, New Jersey-based Prudential said today in a statement.

Chief Executive Officer John Strangfeld, 60, is counting on pension-transfer deals and acquisitions to help Prudential maintain a return on equity of at least 13 percent to 14 percent. The deals add to funds that Prudential oversees at its asset-management operation, which has hired more than 40 managers since last year.

Improvements in ROE were “driven by steady organic growth, accretion from recent M&A and pension closeout transactions, and ongoing share repurchases,” Jimmy Bhullar, an analyst at JPMorgan Chase & Co., said in a research note, using the company’s ticker symbol. “Our outlook for operating trends in PRU’s major businesses is positive.”

Prudential rose 1 percent to $86.57 at 4:15 p.m. in New York. The stock has declined 6.1 percent this year, compared with the 4.8 percent slump by larger rival MetLife Inc. Results were announced after the close of regular trading.

MetLife reported results last week that fell short of analysts’ estimates as operating profit slumped at the group benefits business.

Book Value

Book value at Prudential’s main business rose to $85.35 a share on June 30. The measure of assets minus liabilities was $78.87 three months earlier. Net investment income climbed 2.3 percent to $2.97 billion at the main unit.

Prudential gets about half its profits from international units, mainly in Japan. The company expanded in the country in 2011 with the acquisition of insurers Star and Edison from American International Group Inc.

Prudential recorded $231 million in costs from foreign currency fluctuations, fueled by swings in the yen. The insurer said the loss was cushioned by adjustments to other accounts that aren’t reflected in results. In last year’s second quarter, Prudential said fluctuations in the yen relative to other currencies contributed to a pretax charge of about $1.6 billion. International Business

At the international business, operating profit rose to $884 million from $850 million. Prudential said in June that it had reduced annual costs by about $250 million at the business after integrating Star and Edison. Prudential also has operations in countries including South Korea and Brazil.

The U.S. retirement solutions and investment management division posted operating profit of $876 million, compared with $851 million a year earlier. The operation has benefited from the pension transfer deals and from climbing account values on products sold to individuals.

Prudential has struck deals to take on pension obligations from companies including General Motors Co. and Verizon Communications Inc. Visteon Corp. agreed last month to buy a group annuity contract from Prudential to cover about $350 million of the manufacturer’s pension liabilities. U.K. phone- company BT Group Plc bought longevity insurance from Prudential, according to a statement last month.

See also:

AIG puts in solid second quarter performance

Axa first-half profit rose 22%, led by life, savings

Swiss Re falls most since April as profit misses on life drop

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