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Earnings: Prudential, Genworth, CNO, RGA, Sun Life

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Prudential Financial Inc. recorded $947 million in negative market experience updates.

The experience updates, and investment market turmoil related to COVID-19, led to Prudential posting a loss for the first quarter.

(Related: Publicly Traded Life and Annuity Issuers Prepare to Talk About COVID-19 With Investors)

The Newark, New Jersey-based life insurer is reporting a $270 million net loss for the first quarter on $13.3 billion in revenue, compared with $937 million in net income on $13.6 billion in revenue for the first quarter of 2019.

The U.S. individual solutions division is reporting $353 million in adjusted operating income before income taxes on $2.7 billion in revenue, compared with $577 million in adjusted operating income before income taxes on $2.7 billion in revenue.

The company has $5.3 billion in cash and other liquid assets, compared with $5.5 billion a year earlier. It will be paying a dividend of $1.10 per common share.

Individual Life Insurance

Here’s what happened to sales of key life products at Prudential between the first quarter of 2019 and the latest quarter:

  • Term Life: $40 million (down from $51 million)
  • Guaranteed Universal Life: $29 million (up from $21 million)
  • Other Universal Life: $30 million (flat)
  • Variable Life: $88 million (up from $61 million)

Sales through Prudential’s own advisors increased to $35 million, from $34 million.

Sales through outside distributors increased to $152 million, from $129 million.

Individual Annuities

Variable annuity sales fell to $1.7 billion, from $2 billion.

Fixed annuity sales fell to $211 million, from $298 million.

Here’s what happened to sales through specific distribution channels between the first quarter of 2019 and the latest quarter:

  • Insurance Agents: $674 million (down from $680 million)
  • Wirehouses: $310 million (down from $452 million)
  • Independent Marketing Organizations: $43 million (up from none)
  • Independent Financial Planners: $767 million (down from $1 billion)
  • Banks: $133 million ( down from $174 million)

In other earnings news:

Genworth Financial Inc., Richmond, Virginia (Stock symbol: GNW)

Genworth’s long-term care insurance (unit) produced a small operating in the first quarter, but financial market turmoil hurt the value of derivatives supporting the company’s annuities.

The company is reporting a $66 million net loss for the latest quarter on $1.8 billion in revenue, compared with $174 million in net income on $2 billion in revenue for the year-earlier quarter.

The LTCI unit produced $1 million in adjusted operating income for the quarter, up from a loss of $20 million for the year-earlier quarter.

The adjusted operating loss at Genworth’s life insurance unit increased to $77 million, from $2 million.

Genworth has $575 million in cash and liquid assets at the parent company level, up from $405 million a year earlier.

China Oceanwide Holdings Group Co. Ltd. of Beijing has been trying to acquire Genworth for years. The companies now have all needed U.S. approvals and reapprovals, and China Oceanwide is finalizing its funding arrangements Genworth says.

CNO Financial Group Inc., Carmel, Indiana (Stock symbol: CNO)

CNO posted a net loss for the first quarter partly because it adopted the new Current Expected Credit Losses (CECL) reporting standard early. Companies that use the CECL standard must estimate how the total value of anticipated credit losses on their bond holdings and other credit-related investments has changed each quarter.

CNO is reporting a $21 million net loss for the latest quarter on $717 million in revenue, compared with $52 million in net income on $1 billion in revenue for the first quarter of 2019.

CNO recorded a $55 million charge for the change in allowance for credit losses and for other-than-temporary impairment losses, compared with a $2.2. loss for that other-than-temporary impairment losses in the year-earlier quarter.

Net operating income, which excludes a variety of gains and charges, increased to $84 million, from $66 million.

The company has $482 million in cash and cash equivalents, compared with $622 million a year earlier.

Here’s what happened to new annualized premiums, or sales, from some types of products CNO sells:

  • Supplemental health insurance: $28 million (up from $22 million)
  • Medicare supplement insurance: $9.7 million (down from $12 million)
  • Interest-sensitive life insurance: $8.1 million (up from $8 million)
  • Traditional life insurance: $33 million (up from $32 million)
  • Long-term care insurance: $5.9 million (up from $5.8 million)

Reinsurance Group of America Inc., Chesterfield, Missouri (NYSE:RGA)

RGA  says turmoil in the financial markets hurt its performance in the first quarter by reducing the current value of embedded derivatives.

The Chesterfield, Missouri-based life and health reinsurer is reporting an $88 million net loss for the latest quarter on $3.2 billion in revenue, compared with $170 million on $3.4 billion for the first quarter of 2019.

The company reported a loss partly because it recorded a $34 million charge related to bonds that went bad, and partly because it recorded $251 million in other investment losses. In the year-earlier quarter, RGA recorded a total of $8 million in revenue from those two items.

The company’s U.S. and Latin America traditional reinsurance business is reporting a $55 million adjusted operating loss for the latest quarter on $1.5 billion in revenue, compared with $18 million in adjusted operating income on $1.5 billion in revenue for the year-earlier quarter.

The company’s U.S. and Latin America asset-intensive financial solutions unit is reporting a $38 million in pre-tax loss on $113 million in revenue, compared with $65 million in pre-tax income on $228 million in revenue for the year-earlier quarter.

At the asset-intensive solutions unit, here’s what happened to the value of certain types of annuities reinsured, between the first quarter of 2019 and the latest quarter:

  • Deferred fixed annuities: $11 billion (up from $8.3 billion)
  • Indexed annuities: $3.5 billion (down from $3.7 billion)
  • Variable annuities: $2.7 billion (up from $2.3 billion)

Cash and cash equivalents increased to $2.8 billion, from $2 billion.

RGA says it received $54 million in excess claims for U.S. life insurance in the first quarter, with higher claim frequency for insureds ages 70 and older.

The claims could be due to COVID-19, but proving that is difficult because of lags in reporting and incomplete cause of death attribution, RGA says.

Sun Life Financial Inc., Toronto (Stock symbol:TSX)

Sun Life is reporting the equivalent of $292 million in net income in U.S. dollars for the first quarter on $4.8 billion in revenue, compared with $469 million in net income on $8.6 billion in revenue for the first quarter of 2019.

“Underlying net income,” which excludes many efforts to reflect the current value of accounting assumptions, assets and other factors, increased to $574 million, from $540 million.

In the United States, Sun Life sells medical stop-loss coverage for self-insured group health plans, and just about all other benefits products other than major medical insurance.

The U.S. group benefits business is reporting the equivalent of $122 million in net income for the latest quarter on $1.5 billion in revenue, compared with $93 million in net income on $1.7 billion in revenue for the year-earlier quarter.

The company says in an investor presentation slidedeck that it has a strong balance sheet and risk culture, with no U.S. variable annuities or long-term care insurance.

The company says in a discussion of the U.S. group benefits business that it has added coverage for COVID-19 to its critical illness insurance product.

— Read New COVID-19 Report Shows Outbreak Continuing to Smolderon ThinkAdvisor.

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