Prudential Financial Returns to Profit in First Quarter
May 13, 2014 by Best's News Service
NEWARK, N.J. – Prudential Financial Inc. swung to a first-quarter 2014 profit, after a net loss last year.
Net income was $1.2 billion, compared with a net loss of $735 million the same period a year ago. “We believe we are off to a good start to achieve our goals for 2014,” said Prudential Financial Chairman and Chief Executive Officer John Strangfeld in an earnings call. “Our annuities, retirement and asset-management businesses have benefited from sustained growth in account values and assets under management.”Total revenues dropped to about $11 billion from $11.8 billion the same period a year ago.
“Our retirement business had its best-ever quarter,” Strangfeld said, noting “outstanding results” were driven by improved investment spreads in both institutional investment products and full-service retirement.
Higher fees also contributed to earnings growth this quarter, Strangfeld said. Although the company recorded no pension-risk-transfer transactions, “we continue to believe that PRT is an attractive opportunity that will develop further over time.”
Prudential Financial and American International Group Inc. (NYSE: AIG) are among 15 financial institutions that will receive additional oversight from a committee formed by the Federal Reserve because they were deemed systemically important financial institutions. The companies included on the list of SIFIs will be overseen by the Large Institution Supervision Coordinating Committee, which is comprised of economists and other financial experts from regional Federal Reserve banks.
Mark Grier, vice chairman, said the supervisory environment is evolving with the Federal Reserve and the company is working on questions about reporting and the capabilities that it needs to be effectively supervised by the Fed.
Grier said there will be challenges to align what Prudential does for stress tests with what’s expected. But he said that is an area in which the company has refined its capabilities going back to the beginning of the financial crisis. “The point of that isn’t that we won’t have to do some things differently, but we are coming into this with a lot of work already done around the things that we understand and also around the quality and credibility of the work we do in stress testing — the things that we understand as they affect our capital and solvency issues,” he said.
Prudential is confident that it can meet “any reasonable standards that may be put up with respect to both the process of testing and the results of that testing,” said Robert Falzon, chief financial officer.
Falzon said the existing stress-testing framework the Fed has used is very bank-centric. The Fed will need to migrate its own stress testing away from those areas that are appropriate to banks to those that are more appropriate to insurance industry, Falzon said.
MetLife remains under Stage Three review by the Financial Stability Oversight Council for potential designation as a non-bank systemically important financial institution, according its CEO Steven Kandarian during his company’s recent earnings call.
The Prudential Insurance Company of America currently has a Best’s Financial Strength Rating of A+ (Superior).
On the afternoon of May 8, Prudential Financial’s (NYSE: PRU) stock was trading at $83.25 a share, up 2.90% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
BN-NJ-5-8-2014 1631 ET #
