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February 05, 2015 at 05:01 AM
(Bloomberg) — Prudential Financial Inc., the second- largest U.S. life insurer, posted a fourth-quarter loss on costs tied to restructuring, currency fluctuations and reserves. The stock fell in extended trading.
The loss widened to $1.46 billion from $460 million a year earlier, the Newark, New Jersey-based insurer said today in a statement. Operating earnings, which exclude some investing results, were $2.12 a share, missing the $2.38 average estimate of 18 analysts surveyed by Bloomberg.
Chief Executive Officer John Strangfeld, 61, is working to keep return on equity at the company’s 13 percent to 14 percent target. Results have been pressured by a decline in foreign currencies like the yen relative to the dollar and by interest rates near record lows.
“Rates are lower, so there’s more pressure on investment income,” Randy Binner, an analyst at FBR Capital Markets, said by phone before results were announced. “The biggest thing that’s beyond their control that people worry about is the yen.”
Prudential slipped 4.3 percent to $76.44 in extended trading at 4:54 p.m. in New York, after results were announced. The stock had declined 12 percent this year in regular trading. Life insurers have slumped amid a plunge in interest rates that sent the yield on the 10-year Treasury to its lowest levels since 2013.
Losses fueled by swings in the yen relative to other currencies were $2.45 billion, the insurer said. Prudential said in December that it hedged 2015 earnings at 91 yen to the dollar. A year earlier, Prudential said results included $1.2 billion of pretax currency losses, mainly tied to the yen.
International expansion
Prudential gets about half its profit from units outside the U.S., mainly in Japan. The insurer struck a deal in October to buy as much as 40 percent of Chilean pension provider AFP Habitat SA. To expand in Japan, Prudential in 2011 acquired Star Life Insurance Co. and Edison Life Insurance Co. from American International Group Inc.
The international insurance operation posted operating profit of $686 million, up from $647 million a year earlier.
Prudential said it recorded about $143 million in pretax costs to set aside more funds to back future claims on some policies, weighing on results at the U.S. units. That figure includes adjustments tied to market performance, the insurer said.
