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Prudential Financial Inc. Reports Operating Results (10-K)

February 24, 2012 | About:
10qk

10qk

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Prudential Financial Inc. (PRU) filed Annual Report for the period ended 2011-12-31.

Prudential Finl has a market cap of $28.85 billion; its shares were traded at around $61.09 with a P/E ratio of 9.5 and P/S ratio of 0.7. The dividend yield of Prudential Finl stocks is 2.4%.

Highlight of Business Operations:

2011 to 2010 Annual Comparison. Benefits and expenses, as shown in the table above under Operating Results, increased $68 million, from $2,315 million in 2010 to $2,383 million in 2011. Absent the impact of annual reviews conducted in both periods, benefits and expenses increased $115 million, from $2,468 million in 2010 to $2,583 million in 2011. On this basis, amortization of deferred policy acquisition costs increased $26 million driven by changes in estimated total gross profits primarily reflecting the impact of less favorable market conditions on separate account fund performance in 2011 compared to 2010, as well as the impact of higher actual gross profits on current period amortization. Absent the impact of the annual reviews, policyholders benefits, including interest credited to policyholders account balances, increased $15 million primarily reflecting an increase in interest credited to policyholders from higher universal life account balances from increased policyholder deposits and increases in policyholder reserves driven by growth in our term and universal life blocks of business. Partially offsetting the increase in policyholders benefits, including interest credited to policyholders account balances, was less unfavorable mortality experience of $12 million in 2011 compared to 2010. Interest expense increased $52 million primarily reflecting higher borrowings related to the financing of regulatory capital requirements associated with statutory reserves for certain term and universal life insurance policies.

2011 to 2010 Annual Comparison. Revenues, as shown in the table above under Operating Results, increased $610 million, from $5,458 million in 2010 to $6,068 million in 2011. Group life premiums and policy charges and fee income increased $526 million, from $3,539 million in 2010 to $4,065 million in 2011. This increase primarily reflects higher premiums from non-retrospectively experience-rated contracts reflecting growth in the business from new sales and continued strong persistency of 95.8% in 2011 compared to 92.1% in 2010, as well as higher premiums from retrospectively experience-rated contracts resulting from the increase in policyholder benefits on these contracts, as discussed below. 2011 also includes an increase of $14 million from premium adjustments on two large group life non-retrospectively experience-rated cases, as discussed above. In addition, group disability premiums and policy charges and fee income, which include long-term care and dental products, increased by $71 million, from $1,146 million in 2010 to $1,217 million in 2011 primarily reflecting growth of business in force and from new sales partially offset by higher premiums in 2010 associated with the assumption of existing liabilities from third parties, which is offset in policyholders benefits, as discussed below. Also, contributing to the increase in revenue is higher investment income in 2011 primarily from higher invested assets due to growth in the businesses offset by lower portfolio yields and lower income on alternative investments in 2011.

2010 to 2009 Annual Comparison. Revenues increased by $173 million, from $5,285 million in 2009 to $5,458 million in 2010. Group life premiums and policy charges and fee income increased by $125 million, from $3,414 million in 2009 to $3,539 million in 2010, primarily reflecting higher premiums from retrospectively experience-rated group life business resulting from the increase in policyholder benefits on these contracts as discussed below. Also contributing to the increase were higher premiums from non-retrospectively experience-rated group life business primarily reflecting growth of business in force resulting from new sales, partially offset by a decrease in premiums associated with the assumption of existing liabilities from third parties, which is offset in policyholders benefits, as discussed below, as well as the lapse of certain business and repricing of other business up for renewal, as discussed above. Group disability premiums and policy charges and fee income, which include long-term care and dental products, increased by $25 million, from $1,121 million in 2009 to $1,146 million in 2010. This increase primarily reflects higher premiums due to growth of business in force resulting from new sales, and continued strong persistency of 92.1% in 2010 compared to 90.9% in 2009, partially offset by a decrease in premiums associated with the assumption of existing liabilities from third parties, which is offset in policyholders benefits, as discussed below.

Revenues from our Life Planner operations increased $823 million, from $6,443 million in 2009 to $7,266 million in 2010, including a net favorable impact of $296 million from currency fluctuations. Excluding the impact of currency fluctuations, revenues increased $527 million, from $6,909 million in 2009 to $7,436 million in 2010. This increase in revenues came primarily from increases in premiums and policy charges and fee income of $363 million, from $5,717 million in 2009 to $6,080 million in 2010. Premiums and policy charges and fee income from our Japanese Life Planner operation increased $274 million, from $4,361 million in 2009 to $4,635 million in 2010, primarily reflecting growth of business in force and continued strong persistency, partially offset by a benefit recognized in the prior year from the migration to a new policy valuation system discussed above. Net investment income increased $132 million, from $1,136 million in 2009 to $1,268 million in 2010, primarily due to investment portfolio growth, partially offset by lower yields in our Japanese investment portfolio compared to the prior year.

2011 to 2010 Annual Comparison. The loss from Corporate and Other operations, on an adjusted operating income basis, increased $204 million, from $923 million in 2010 to $1,127 million in 2011. Corporate and Other operations recorded a $93 million increase in expenses for estimated payments arising from use of new Social Security Master Death File matching criteria to identify deceased policy and contract holders. See Note 23 to the Notes to Consolidated Financial Statements for further details regarding this matter. Corporate and Other operations also recorded a $20 million charge related to a voluntary contribution to an insurance industry insolvency fund, related to Executive Life Insurance Company of New York. Greater net charges from other corporate activities, primarily reflecting increased retained corporate expenses, including corporate advertising, contributed to the increased loss. The increase in net charges from other corporate activities was partially offset by more favorable results from corporate foreign currency hedging activities and reduced charges compared to the prior period for certain retained obligations relating to pre-demutualization policyholders to whom we had previously agreed to provide insurance for reduced or no premium in accordance with contractual settlements related to prior individual life insurance sales practices remediation. Capital debt interest expense increased $67 million due to a greater level of capital debt, which includes the issuance in November 2010 of $1 billion of debt for the acquisition of the Star and Edison Businesses. Investment income, net of interest expense, excluding capital debt interest expense, increased $39 million due to higher income in our corporate investment portfolio including higher income on equity method investments. Higher levels of short-term liquidity have been maintained throughout 2010 and into 2011 to provide additional flexibility to address our cash needs in view of changing financial market conditions. On February 1, 2011, we used a portion of cash and short-term investments in Corporate and Other operations to partially fund the purchase price related to our recent acquisition of the Star and Edison Businesses. Also, in June 2011, Prudential Financials Board of Directors authorized the Company to repurchase, at managements discretion, up to $1.5 billion of its outstanding Common Stock through June 2012. During 2011, the Company made share repurchases of $999.5 million. See Liquidity and Capital Resources for additional details.

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