Prudential Posts Biggest Profit in More Than 2 Years (Update1)

By Andrew Frye
Bloomberg News
November 4, 2009

Nov. 4 (Bloomberg) -- Prudential Financial Inc., the second-largest U.S. life insurer, reported its biggest profit in more than two years and raised the 2009 earnings forecast as rising markets pushed up the value of investments.

The third-quarter net income was $1.08 billion, compared with a loss of $176 million in the year-earlier period, the Newark, New Jersey-based company said today in a statement distributed by Business Wire. Excluding some investment returns and results from policies sold before the company went public, earnings were $1.59 a share, beating the $1.33 average estimate of 16 analysts surveyed by Bloomberg.

Life insurers are returning to profit this year after the industry lost $52 billion last year on slides in the value of stocks and bonds backing policies and retirement products called variable annuities. Chief Executive Officer John Strangfeld turned down a U.S. bailout and tapped private investors for capital to expand as hobbled rivals Hartford Financial Services Group Inc. and Lincoln National Corp. scaled back.

"They should continue to chug along," said Paul Howard, an analyst with Janney Montgomery Scott LLC's Langen McAlenney division in Hartford, Connecticut. "Relative to Lincoln and Hartford, Prudential definitely held on to the brand name better."

Prudential fell 45 cents, or 1 percent, to $46.56 as of 4:40 p.m. in New York Stock Exchange composite trading, and has gained 54 percent this year. The 24-company KBW Insurance Index, which includes Prudential, is up 21 percent this year.

Prudential's Outlook

Prudential's full-year earnings may be $5.40 to $5.60 a share, the company said today. Its August forecast was $5 to $5.20 a share.

Prudential had a 23 percent increase in the sale of equity- linked retirement products called variable annuities in the second quarter, according to data from trade group LIMRA International. Hartford's sales dropped 69 percent and Lincoln declined 40 percent. Sales at MetLife Inc., the biggest U.S. life insurer, advanced 27 percent, while the overall market slipped 24 percent.

"The current environment provides growth opportunities for the strongest companies," Strangfeld said in the statement.

The individual annuities business returned to profitability as the value of customer accounts rose in the market rally. The segment produced operating income of $166 million in the third quarter, compared with a loss of $307 million in the year- earlier period.

Strangfeld applied for a federal bailout last year, then turned down a government injection in June as markets recovered. Hartford, based in the Connecticut city of the same name, took $3.4 billion in U.S. cash, while Philadelphia-based Lincoln accepted $950 million. New York-based MetLife shunned aid.

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