(Bloomberg) — Prudential Financial Inc., the second-largest U.S. life insurer, said profit declined 50 percent on investment losses tied to derivatives.

Net income fell to $512 million from $1.03 billion a year earlier, Newark, New Jersey-based Prudential said Wednesday in a statement. Operating profit, which excludes some investments and the results of policies sold before the firm went public, was $2.20 a share, missing the $2.41 average estimate of 18 analysts surveyed by Bloomberg.

Prudential, led by Chief Executive Officer John Strangfeld, gets about half its profit from international units, mainly in Japan. The company uses derivatives to cushion the effects of swings in stocks, bonds and currencies. Japan’s yen declined about 7.6 percent against the dollar in the quarter, weighing on reported results.

“The yen is weakening and it will continue to weaken,” Sean Dargan, an analyst at Macquarie Group Ltd., said in an interview before results were announced. Still, Prudential “has very high returns in its Japan business.”

Prudential fell 1.9 percent to $87.25 at 4:33 p.m. in extended trading in New York, after results were announced. The stock had slipped 3.6 percent this year in regular trading, trailing the 9.5 percent advance of the Standard & Poor’s 500 Index.

Prudential said it recorded $576 million of pretax losses tied to currency fluctuations, fueled by changes in the yen. A year earlier, gains tied to currency swings were $1.17 billion. Some fluctuations are countered with adjustments to other accounts that aren’t included in net income.

Investment losses

The insurer said overall pretax net realized investment losses doubled to $1.13 billion from last year’s third quarter. The figure includes swings tied to derivatives used to cushion fluctuations in asset values.

Book value increased to $86.76 per share on Sept. 30 at Prudential’s main business. The measure of assets minus liabilities was $85.35 a share three months earlier. Prudential said it repurchased $250 million of stock in the quarter at an average price of $89.41 a share.

Operating profit jumped 8.6 percent to $845 million at the international-insurance segment. Annualized new-business premiums rose to $683 million from $644 million.

Prudential said last week that it would pay $530 million to $620 million for 34 percent to 40 percent of Chile’s AFP Habitat SA. The insurer plans to own Habitat in a joint venture with Inversiones La Construccion SA.

Chile deals

MetLife Inc., the largest U.S. life insurer, announced on Oct. 29 that profit more than doubled on growth at its operations in the Americas. MetLife acquired a Chilean pension manager, AFP Provida SA, last year.

Prudential expanded outside the U.S. with the 2011 acquisition of Japanese life insurers Star and Edison from American International Group Inc. The following year, Prudential agreed to buy a U.S. life insurer from Hartford Financial Services Group Inc.

Operating profit fell 33 percent to $823 million at the U.S. retirement-solutions and investment-management business on declines at the individual annuities unit, which took a charge of $36 million after a review of the operation’s future prospects. That compares with a benefit of $451 million from the review a year earlier.

Strangfeld has struck deals to take on pension obligations from firms including Motorola Solutions Inc. and Bristol-Myers Squibb Co., adding assets his insurer can manage. In the U.K., Prudential has agreed to insure companies including Legal & General Group Plc against the risk that retirees live longer than expected.

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