Prudential Financial Inc. said the relationship with Wells Fargo & Co. that led to a whistle-blower lawsuit and state probes over suspected sales abuses generated a tiny fraction of the life insurer’s revenue.
“We do not gauge the importance of this matter in financial terms, but for purposes of this call, it’s probably useful to put some financial parameters around it,” Steve Pelletier, chief operating officer of the insurer’s U.S. operation, said at an event Thursday discussing the company’s outlook for 2017. “MyTerm sales through Wells Fargo, based on annualized new business premiums, were approximately $4 million from the beginning of the relationship through the third quarter of 2016.”
The insurer earned a total of $28.5 billion in premiums last year, and more than $50 billion of revenue, a figure that also includes fee income and investment returns. While lost sales from the suspended relationship may be easy to replace, the Newark, New Jersey-based company has other headaches tied to MyTerm.
Prudential is seeking to assure customers, regulators and shareholders that the company is addressing concerns that Wells Fargo clients were signed up for policies without their authorization. The company on Monday halted sales through the bank and said it would reimburse customers who were charged for coverage they didn’t want.
Wells Fargo has already agreed to pay $185 million in fines tied to abuses with banking products and canceled incentive programs that were faulted for encouraging overly aggressive sales tactics. Former Prudential employees said in a whistle-blower lawsuit last week that the insurer covered up an internal inquiry into shady practices and didn’t want to upset relations with the San Francisco-based bank. Regulators from California and New Jersey announced investigations Monday.
The insurer will respond to information requests from government watchdogs, but is limited about what it can say about probes and litigation, Pelletier said. The company is conducting its own review.
The MyTerm program offers coverage with relatively low death benefits for customers who might not otherwise buy policies. The insurance was available at kiosks in Wells Fargo branches or online using the bank’s accounts, according to the complaint.
“We stand behind our MyTerm product and the value that it’s provided since we launched it in 2007,” Pelletier said. “Prudential has acted responsibly since we initiated our distribution relationship of MyTerm with Wells Fargo in June 2014.”
The plaintiffs in the lawsuit said that many policies sold through Wells Fargo were canceled shortly after they were opened.
Prudential climbed 3.5 percent to $107.67 at 11:57 a.m. in New York on Thursday, extending its gain for the year to 32 percent. The company also projected 2017 operating profit of $10.15 to $10.65 a share. That compares with an average estimate of $10.33 in a Bloomberg survey of analysts.