Prudential has said it is well equipped to handle long lifespans because it also offers traditional death-benefit policies that are most profitable when mortality rates are low. While firms including Athene Holding Ltd., the annuity provider tied to Apollo Global Management LLC, are seeking to expand in the pension risk transfer market, other competitors have highlighted risks. Voya Financial Inc. recently stopped seeking such deals, opting instead to focus on operations that require less capital.
Prudential’s net income in the quarter was $284 million, or 65 cents a share, compared with $735 million, or $1.60, a year earlier, according to the statement. The result was hurt by investment losses tied to derivatives.
Asset Management
Adjusted profit at the retirement segment climbed 89 percent to $318 million, helped by a legal settlement, better investment results and lower expenses. At the individual annuities business, profit rose 2.9 percent to $422 million. The asset management operation posted a jump of 13 percent to $224 million.
Earnings at the U.S. individual life and group insurance unit climbed to $181 million from $126 million a year earlier. Prudential’s international insurance operations posted operating profit of $755 million, compared with $738 million a year earlier.
Strangfeld has also been working to recover from a botched sales relationship with Wells Fargo & Co., which signed up customers for Prudential policies without their permission, according to a lawsuit by former employees of the insurer. The CEO halted distribution of those policies through the San Francisco-based lender and promised to reimburse customers.
Book value, a measure of assets minus liabilities, fell to $104.91 a share at the end of December, compared with $128.37 as of Sept. 30. While higher interest rates can help investment income in the long term, they pressure an insurer’s book value. One reason is the decline in derivatives. Also, the market values of bonds fall when rates rise. Insurers say they tend to hold bonds for the long haul, and that investors should look beyond the volatility of results under generally accepted accounting principles.
MetLife Inc., the largest U.S. life insurer, reported a net loss on Feb. 1, fueled by declines in the value of derivative contracts. Results deteriorated at property-casualty operations and Brighthouse Financial, the U.S. retail business that the company plans to spin off. That separation will make Prudential the largest life insurer in the U.S.
This article was provided by Bloomberg News.