Prudential (PRU) Q2 Earnings Miss Estimates, Revenues Beat

Prudential Financial, Inc.’s PRU second-quarter 2022 operating net income of $1.74 per share missed the Zacks Consensus Estimate by 33.6%. The bottom line decreased 51.7% year over year.

Prudential Financial's results reflect poor performance of Prudential Global Investment Management (PGIM), U.S. Businesses and International businesses.

Prudential Financial, Inc. Price, Consensus and EPS Surprise

Prudential Financial, Inc. Price, Consensus and EPS Surprise

Prudential Financial, Inc. price-consensus-eps-surprise-chart | Prudential Financial, Inc. Quote

Behind the Headlines

Total revenues of $13.8 billion increased 9.2% year over year on higher premiums, policy charges and fee income, asset management fees, commissions and other income. The top line beat the Zacks Consensus Estimate by about 9.7%.

Total benefits and expenses of $12.9 billion were up 19.6% year over year for the quarter. The increase in expenses was mainly attributable to higher insurance and annuity benefits and general and administrative expenses. The figure, however, was higher than our estimate of $11.4 billion.

Quarterly Segment Update

PGIM reported adjusted operating income of $206 million, which decreased 34.6% year over year. This decrease reflects lower Other Related Revenues, due to lower seed and co-investment income and asset management fees.

U.S. Businesses’ adjusted operating income was $370 million, down 64.7% from the year-ago quarter. This decrease includes an unfavorable comparative impact from the annual assumption update and other refinements of $1.4 billion but a gain on the sale of a block of legacy variable annuities of $852 million. Excluding these items, the current-quarter results primarily reflect lower net investment spread results and lower net fee income. It was partially offset by a gain on a strategic investment and more favorable underwriting results.

Assurance IQ incurred adjusted operating loss of $61 million, wider than a loss of $38 million in the year-ago quarter. This higher loss includes an unfavorable impact from the annual assumption update and other refinements of $17 million in the current quarter. Excluding this item, current-quarter results primarily reflected lower revenues, partially offset by lower expenses.

International Businesses delivered adjusted operating income of $555 million, down 30.9% from the year-earlier period. This decrease reflects an unfavorable comparative impact from the annual assumption update and other refinements of $17 million. Excluding this item, current-quarter results primarily reflect lower earnings from joint venture investments, lower net investment spread results, and less favorable underwriting results, partially offset by business growth.

Corporate and Other Operations incurred adjusted operating loss of $259 million, narrower than $336 million loss a year ago. This lower loss includes an unfavorable comparative impact from the annual assumption update and other refinements of $1 million.

Share Repurchase Update

Prudential returned capital worth $832 million in the quarter, including $375 million of share repurchases and $457 million of dividends.

Dividends paid were $1.20 per share, representing a 5% yield on adjusted book value.

Financial Update

Cash and cash equivalents of $14.3 billion at quarter-end decreased 5.2% year over year. The figure, however, was higher than our estimate of $12.8 billion.

Debt balance totaled $20.2 billion as of Jun 30, 2022, up 4.3% from the 2021-end level.

As of Jun 30, 2022, Prudential’s assets under management decreased 18.5% year over year to $1.410 trillion.

Adjusted book value per common share — a measure of the company’s net worth — came in at $104.19 as of Jun 30, 2022, down 0.2% year over year.

Operating return on average equity was 6.6% for the second quarter, contracting 760 basis points year over year.

Zacks Rank

Prudential currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other Insurers

Of the insurance industry players that have reported second-quarter results so far, The Hartford Financial Services Group, Inc. HIG, Willis Towers Watson Public Limited Company WTW and Chubb Limited CB beat the respective Zacks Consensus Estimate for earnings.

The Hartford Financial Services Group reported second-quarter 2022 adjusted operating earnings of $2.15 per share, which beat the Zacks Consensus Estimate by 41.5%. The bottom line, however, decreased 8% year over year.

Hartford Financial’s operating revenues amounted to $3,765 million, which improved from $3,568 million in the second quarter of 2022. Also, the top line beat the consensus mark by 1.5%. Total earned premium of $4,810 million beat the consensus mark of $4,776.3 million and increased from $4,460 million a year ago. Net investment income of $541 million declined from $581 million a year ago due to lower annualized return on alternative investments. The reported figure was below the Zacks Consensus Estimate of $564.5 million.

Willis Towers Watson delivered second-quarter 2022 adjusted earnings of $2.32 per share, which beat the Zacks Consensus Estimate by 0.4%.  The bottom line improved 9% year over year.

Willis Towers Watson posted adjusted consolidated revenues of $2.03 billion, down 3% year over year on a reported basis. Revenues increased 3% on an organic basis. The top line however missed the Zacks Consensus Estimate by 2.3%. Adjusted operating income was $314 million, down 1% year over year. Margin expanded 30 bps to 15.5%.

Chubb reported second-quarter 2022 core operating income of $2.40 per share, which outpaced the Zacks Consensus Estimate by about 17%. The bottom line also improved 16% from the year-ago quarter. Net premiums written improved 7.9% year over year to $10.3 billion in the quarter. Net premiums earned rose 8.4% to $9.6 billion. Adjusted net investment income was a record $950 million, up 0.5%.

Property and casualty underwriting income was a record $1.4 billion, up 21.1% from the year-ago quarter. Chubb incurred an after-tax catastrophe loss of $241 million, 6.6% wider year over year. The combined ratio improved 150 bps on a year-over-year basis to a record 84% in the quarter under review.

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