U.S. life insurer Prudential Financial Inc. (PRU) reported second-quarter earnings of $2.49 per share, beating the Zacks Consensus Estimate of $2.35. Earnings also grew 8.3% on a year-over-year basis.
Results benefited from strong growth in the Annuities, Retirement, and Asset Management businesses as well as synergies from the acquisition of the individual life business of Hartford Financial Services Group, Inc. (HIG) in January last year. The company’s bottom-line strength was also supported by lower share count due to share buyback.
Meanwhile, total revenue came in at $11.1 billion, down 5.2% year over year primarily due to lower premium, partly offset by higher policy charges and fee income, net investment income and asset management fees and commissions. Reported revenues were, however, in line with the Zacks Consensus Estimate.
Total benefits and expenses were $9.5 billion in the quarter, down 7% year over year. The decline was primarily led by a 12% fall in insurance and annuity benefits.
Quarterly Segment Update
U.S. Retirement Solutions and Investment Management reported adjusted operating income of $876 million, up 2.9% year over year. The upside was driven by higher contribution from Retirement and Asset Management segments.
Adjusted operating income at U.S. Individual Life and Group Insurance increased 25.2% year over year to $204 million, led by strong contribution from its Group Insurance sub-segment, along with growth in the Individual Life insurance segment.
Adjusted operating income at International Insurance increased 4% year over year to $884 million led by improved revenues from both Life Planner and Gibraltar operations.
Corporate and Other Operations’ adjusted loss stood at $341 million, compared with a loss of $347 million recorded in the year-ago quarter.
Meanwhile, Prudential’s assets under management increased 5.3% year over year to $1.17 trillion as of Jun 30, 2014.
Financial Position
Adjusted book value per share as of Jun 30, 2014, was $63.67, up 5.8% from the Dec 2013 level.
During the second quarter, the company bought back 3.0 million shares of its common stock for $250 million.
Prudential presently carries a Zacks Rank #3 (Hold).
Our Take
Prudential has a well diversified business profile with an extensive reach across different markets. The company is positioned to benefit from a rise in share of aging Americans. Moreover, the acquisition of the Hartford Individual Life Insurance business remains on track and will boost Prudential’s individual life insurance in the U.S.
Prudential’s presence in Japan, South Korea and Brazil is also expected to aid long-term growth.
Additionally, Prudential’s Retirement segment is set to largely benefit from its entry into the pension risk transfer business deals with General Motors Co., Verizon Communications Inc. and Visteon Corp.
Other Insurance Stocks
Other life insurance players like Lincoln National Corporation (LNC) and Protective Life Corp. (PL) reported favorable second-quarter earnings, beating the Zacks Consensus Estimate by 10 cents and 11 cents, respectively. On the other hand, MetLife Inc.’s (MET) earnings missed the Zacks Consensus Estimate by 2 cents.
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