Prudential Financial Turns To Q3 Loss, Revenue Declines

RTT News
October 29, 2008


(RTTNews) - Wednesday, financial services provider Prudential Financial Inc. (PRU) reported a loss for the third quarter compared to a profit last year, hurt by investment losses and a decline in revenues. Citing current market volatility and extraordinary events and developments affecting financial markets generally, the company withdrew its earnings guidance for 2008.

The Newark, New Jersey-based company posted a net loss for its Financial Services Businesses of $108 million or $0.23 per share for the quarter, compared to net income of $860 million or $1.88 per share a year ago. Net loss for the recent quarter includes $547 million of pre-tax net realized investment losses and related charges and adjustments. The net loss for the current quarter also reflects pre-tax decreases of $534 million in recorded asset values and $388 million in recorded liabilities representing changes in interest rate related mark-to-market adjustments. Additionally, net loss for the current quarter includes $3 million of pre-tax losses from divested businesses. Net income for the current quarter also includes income from discontinued operations of $5 million.

Net income for the year-ago quarter included $180 million of pre-tax net realized investment losses and related charges and adjustments, increases of $36 million in recorded assets and $6 million in recorded liabilities, and losses of $27 million from divested businesses. In addition, net income included losses from discontinued operations of $4 million.

After-tax adjusted operating income for the Financial Services Businesses declined to $308 million, or $0.74 per share, for the quarter from $976 million, or $2.13 per share, in the prior-year period.

On average, seventeen analysts polled by First Call/Thomson Financial expected the company to earn $0.94 per share.

On a consolidated basis, which includes the results of both the Financial Services Businesses and the Closed Block Business, Prudential Financial reported a net loss of $166 million for the quarter compared to net income of $867 million in the same period last year.

Prudential's Class B Stock, which is not traded on any exchange, reflects the performance of its Closed Block Business. The Closed Block Business reported a net loss for the third quarter of 2008 of $58 million, compared to net income of $7 million for the year-ago quarter.

John Strangfeld, Chairman and Chief Executive Officer said, "Unfavorable financial market conditions are having a substantial negative effect on reported results of our domestic businesses and market values in our investment portfolio." said chairman and chief executive officer John Strangfeld.

Total revenues for the Financial Services Business declined to $6.146 billion for the quarter from $6.771 billion in the prior-year period. The Street estimated revenues of $6.72 billion for the quarter.

Premiums increased to $2.798 billion from $2.673 billion last year, while net investment income edged up to $2.076 billion from to $2.070 in the same period last year. Policy charges and fee income declined to $709 million from the year-ago period. Asset management fees, commissions and other income plunged to $563 million from $1.301 billion recorded in the year-ago period.

Segment wise, the Insurance division reported adjusted operating income of $32 million for the quarter, down from $556 million in the year-ago quarter. The Investment division had a loss of $92 million compared to adjusted operating income of $311 million in the year-ago quarter. Operating income of the International Insurance and Investments division declined to $497 million from $537 million a year ago. Corporate and Other operations recorded a wider loss of $21 million compared to $12 million in the year-ago quarter.

Assets under management amounted to $602 billion as on September 30, 2008 compared to $637 billion a year earlier and $648 billion as on December 31, 2007.

For the first nine-months, the company reported net income of $544 million or $1.32 per share for the Financial Services Businesses, compared to $2.720 billion, or $5.86 per share, in the corresponding period last year. After-tax adjusted operating income decreased to $1.905 billion or $4.43 per share from $2.693 billion or $5.80 per share for the same period last year.

On a consolidated basis, the company reported net income of $493 million for the first nine months of 2008 compared to $2.833 billion for the same period in the previous year.

Year-to-date, total revenues were $20.016 billion compared to $20.088 billion in the same period last year.

During the quarter, the company acquired 5.4 million shares of its common Stock, at a total cost of $375 million. In light of recent market volatility and extraordinary events and developments affecting financial markets generally, including market conditions for issuance of certain capital instruments such as hybrid securities, the company said it has suspended all purchases of its common Stock under its existing share repurchase program effective October 10, 2008.

MetLife Inc. (MET), a competitor in the field, reported a decrease in third quarter net income available to common shareholders of $600 million or $0.83 per share, compared to $985 million or $1.29 per share in the same quarter of last year. Operating earnings declined to $639 million or $0.88 per share from $1.113 billion, or $1.46 per share, for the prior period last year. Total revenues were $13.38 billion, up from $11.68 billion in the prior year quarter.

PRU closed Wednesday's trading down $1.25 or 3.42% at $35.25 on a volume of about 5.89 million shares.

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