Prudential sees sharply lower 3rd-quarter profit

Prudential Financial pre-announces 3rd-quarter results well below year-ago results

Associated Press
October 9, 2008 4:08 pm ET

NEWARK, N.J. (AP) -- Prudential Financial Inc. on Thursday said it expects its third-quarter profit fall sharply, hurt by a series of hefty charges and negative results from investments.

The insurer said it expects after-tax adjusted operating income for the quarter ended Sept. 30 to fall between $275 million, or 67 cents per share, and $375 million, or 90 cents per share. That compares with adjusted profit of $1.97 per share for the third quarter of 2007.

Prudential said the results will be weighed by charges of $700 million, or $1.26 per share. Of that total, about $380 million, or 68 cents per share, reflect costs for the company's individual annuity business. Charges of $115 million, or 21 cents per share, are related to investment results for its fixed income and equity investment funds.

The charges also include $235 million, or 42 cents per share, relating to a previously announced settlement concerning the underwriting, sale and subsequent auction of certain auction rate securities by subsidiaries of Wachovia Securities, with which Prudential has a securities brokerage joint venture.

Prudential also said it expects investment losses for the third quarter between $325 million and $375 million, including losses and impairments on holdings of securities issued by the now bankrupt Lehman Brothers Holdings Inc., American International Group Inc., and Washington Mutual.

The investment losses are not part of the operating income forecast. Insurers emphasize operating income because it excludes costs like investment losses that they do not consider reflective of trends in their business.

"While our results have been negatively affected by current financial market conditions, we are comfortable with our risk profile and believe that we are in a strong position to manage through the current environment," said Chairman and Chief Executive John Strangfeld.

Prudential shares dived $10.02, or 23.2 percent, to close at $33.27. They earlier hit $25.51, the stock's lowest point since it went public in December 2001.


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