Prudential (PRU) Q4 Earnings Miss, Revenues Beat Estimates

Prudential Financial, Inc.’s (NYSE:PRU) fourth-quarter 2018 operating net income of $2.44 per share missed the Zacks Consensus Estimate by 15.3%. The bottom line also declined 9.3% year over year.

The company witnessed weak performances across all its segments. Including one-time items, net income per share of $1.99 declined 76.9% year over year.

Behind the Headlines

Total revenues of $17.8 billion grew 16.9% year over year on the back of higher premiums, net investment income as well as asset management fees, commissions and other income. Moreover, the top line beat the Zacks Consensus Estimate by 26.7%.

Total benefits and expenses of nearly $16.5 billion increased 20.4% year over year in the quarter. This increase in expenses was mainly attributable to higher insurance and annuity benefits, interest credited to policyholders’ account balances, interest expense, and amortization of acquisition costs.

Prudential Financial, Inc. Price, Consensus and EPS Surprise

Full Year Highlights

Operating net income of $11.69 per share missed the Zacks Consensus Estimate by 3.6%. The bottom line however improved 10.5% year over year.

Revenues of $51.8 billion improved 9% from 2017. However, it missed the Zacks Consensus Estimate of $54 4 billion.

Quarterly Segment Update

PGIM — global investment management businesses — reported adjusted operating income of $243 million, down 20.6% year over year. This downside was attributable to a $67-million lower contribution from other related revenues, partially offset by higher asset management fees reflecting a rise in assets under management.

PGIM assets under management were $1.2 trillion at the end of the reported quarter.

U.S. Workplace Solutions’ adjusted operating income was $219 million, down 20.4% from the year-ago quarter on lower contribution from Retirement segment, partially offset by higher contribution from Group Insurance segments.

U.S. Individual Solutions reported adjusted operating income of $419 million was down 34.4% from the prior-year quarter. This unfavorable outcome was due to lower aid from Individual Annuities and loss incurred at Individual Life segments.

International Insurance delivered adjusted operating income of $736 million, down 5.3% from the year-earlier period owing to lower income at both Life Planner Operations and Gibraltar Life & Other Operations.

Corporate and Other Operations incurred adjusted operating loss of $329 million, narrower than loss of $463 million in the year-ago quarter.

Financial Update

Cash and cash equivalents of $15.4 billion at year end increased nearly 6% year over year.

As of Dec 31, 2018, Prudential Financial’s assets under management and administration increased 0.2% to $1.6 trillion year over year. Adjusted book value, a measure of the company’s net worth, came in at $96.06 as of Dec 31, up 8.3% year over year.

Operating return on average equity was 13%, matching the higher end of 12-13% target.

Debt balance totaled $19.8 billion as of Dec 31, 2018, up 6.9% year over year.

Prudential Financial deployed more than $3 billion in share buybacks and dividends in 2018.

On Feb 6, the board of directors announced dividend of $1.00 per share, payable on Mar 14, 2019, to shareholders of record on Feb 20, 2019. This translates to an 11% increase over the prior year dividend level.

Zacks Rank

Prudential Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among the other insurance industry players who have reported fourth-quarter earnings so far, the bottom line of Aflac Incorporated (NYSE:AFL) and Reinsurance Group of America Incorporated (NYSE:RGA) beat their respective Zacks Consensus Estimate while the same at Torchmark Corporation (NYSE:TMK) met expectations.

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