Prudential has US$735 million profit on growth in US, abroad

[NEW YORK] Prudential Financial, the second- largest US life insurer, posted a fourth-quarter profit of US$735 million fueled by growth in international operations and US policy sales.

Net income was US$1.60 a share, compared with a loss of US$1.46 billion, or US$2.69, a year earlier, the Newark, New Jersey-based company said Wednesday in a statement. Operating income, which excludes some investing results, was US$1.94 a share, missing the US$2.30 average estimate of 18 analysts surveyed by Bloomberg.

Chief Executive Officer John Strangfeld has expanded beyond the US, striking deals in Chile and Japan, and its international operations now account for more than a quarter of its revenue. Profit at the international insurance operation climbed 7.6 per cent to US$738 million, fueled by stronger sales. US individual life sales surged 38 per cent to US$179 million.

Prudential gained less than 1 per cent to $64.06 at 4:03 p.m. in New York, and has declined 21 per cent this year. Results were released after the close of regular trading.

Full-year net income surged to US$5.64 billion from US$1.38 billion in 2014. Assets under management rose to US$1.18 trillion from US$1.17 trillion as of Sept 30.

The US retirement solutions and investment management division posted fourth-quarter operating profit of US$776 million, compared with US$823 million in the same period a year earlier. Earnings at the US individual life and group insurance unit slipped to US$126 million from US$162 million on a charge tied to an increase in reserves backing policies.

Book value, a measure of assets minus liabilities, decreased to US$92.39 a share on Dec 31, compared with US$93.87 at the end of September, the insurer said in a financial supplement.

Results included an US$80 million charge to compensate clients for lost income tied to the insurer's securities-lending programme. The company said in a filing that it plans to "implement a remediation plan for the benefit of customers." Prudential spokesman Scot Hoffman declined to comment.

Prudential notified watchdogs including the US Securities and Exchange Commission that "in some cases we failed to maximise securities-lending income due to a long-standing restriction benefiting the company that limited the availability of loanable securities for certain separate account investments," according to the filing.

"We intend to fully cooperate with regulators in this matter."

MetLife, the largest US life insurer, reported Feb 3 that fourth-quarter profit tumbled 45 per cent to US$834 million amid pressure from investments in hedge funds and private equity. Chief Executive Officer Steve Kandarian said last month that he's weighing a spinoff, sale or public offering of much of the insurer's US retail operation, partly due to MetLife's designation as a systemically important financial institution, a tag that may come with higher capital rules.

Prudential, which has also been designated a SIFI, affirmed its business mix in a statement last month. Separately, Strangfeld said that he'd be open to deals to add blocks of life insurance coverage or pension assets as insurers such as MetLife and American International Group narrow their focus.

BLOOMBERG