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Prudential Financial, Inc. Announces Second Quarter 2013 Results

Stocks in this article: PRU

The segment’s Gibraltar Life and Other operations reported adjusted operating income of $482 million for the current quarter, compared to $304 million in the year-ago quarter. Results for the current quarter reflect absorption of $6 million of integration costs related to the Star and Edison businesses acquired on February 1, 2011, while results for the year-ago quarter include $38 million of such costs. Excluding these integration costs, adjusted operating income increased $146 million from the year-ago quarter. This increase reflected an approximately $80 million greater contribution from investment results, about half of which came from non-coupon asset classes primarily driven by favorable market performance, and approximately $25 million from a greater level of policy surrenders, net of less favorable mortality experience. Current quarter results also benefited from continued business growth, and from approximately $55 million of cost savings resulting from business integration synergies compared to approximately $40 million in the year-ago quarter. Current quarter results also benefited $11 million in comparison to the year-ago quarter from foreign currency exchange rates including the impact of the Company’s currency hedging programs.

Corporate and Other operations resulted in a loss, on an adjusted operating income basis, of $347 million in the second quarter of 2013, compared to a loss of $225 million in the year-ago quarter. Current quarter results include a charge of $16 million to write off bond issuance costs on debt securities redeemed prior to maturity. Excluding this charge, the loss from Corporate and Other operations increased $106 million in comparison to the year-ago quarter, reflecting higher expenses and greater interest expense, net of investment income.

Assets under management amounted to $1.044 trillion at June 30, 2013, compared to $1.060 trillion at December 31, 2012 and $961 billion at June 30, 2012.

The net loss of the Financial Services Businesses attributable to Prudential Financial, Inc. amounted to $524 million for the second quarter of 2013, compared to net income of $2.229 billion in the year-ago quarter.

The current quarter net loss includes $2.230 billion of pre-tax net realized investment losses and related charges and adjustments. The foregoing net loss includes pre-tax losses of $1.560 billion representing net changes in value relating to foreign currency exchange rates primarily resulting from changes in value of the Japanese yen in relation to other currencies. These currency-driven value changes were largely offset by corresponding adjustments to accumulated other comprehensive income which are not reflected in net income or loss. Pre-tax net realized investment losses for the current quarter also include net losses of $953 million from changes in market value of derivatives primarily related to the Company’s investment duration management programs. In addition, current quarter pre-tax net realized investment losses include net losses of $124 million from products that contain embedded derivatives and associated derivative portfolios that are part of a hedging program related to the risks of these products as well as mark to market of derivatives under a capital hedge program. Net realized investment losses also reflect losses from impairments and sales of credit-impaired investments amounting to $34 million. The foregoing losses were partly offset by net gains from general portfolio activities.

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