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DJ Prudential Financial Swings to Annual Loss, Plans to Resume Stock Buybacks in 1Q

· 02/04/2021 16:42
By Maria Armental

Prudential Financial Inc. swung to a $374 million loss in 2020, stung by low interest rates and the economic fallout from the coronavirus pandemic, but the insurance firm laid out plans to boost returns to investors, including resuming stock repurchases in the first quarter.

This was its first annual loss since 2013.

Prudential, the U.S.'s largest life insurer by assets, on Thursday reported a fourth-quarter profit of $819 million, down from $1.13 billion a year earlier. On a per-share basis, profit fell to $2.03. Adjusted profit was $2.93 a share.

Analysts surveyed by FactSet expected $2.40 a share, or $2.57 a share as adjusted.

The quarter's results included about $1.2 billion before taxes of net realized investment losses and related charges and adjustments, driven by losses on derivatives.

The Federal Reserve last year cut short-term interest rates to near zero, part of a response package to address inflation and high unemployment rates. Low rates and bond buying are intended to support borrowing, spending and investment in order to bolster economic activity.

But for insurers like Prudential, which typically generate a substantial part of their profit from investing client's premiums in high-quality bonds until claims are due, lower interest rates mean lower returns on those investments.

Faced with ultra-low interest rates, Prudential and other insurers moved to overhaul their product lineups.

On Thursday, Chief Executive Charles Lowrey said in a statement that Prudential remained committed to cutting about $750 million in costs and said that the company would reallocate $5 billion to $10 billion of capital over the next three years to double the earnings contribution of Prudential's higher-growth businesses and halve individual annuities.

In addition, he said, Prudential plans to spend about $10 billion in dividends and share repurchases during that time, including resuming stock repurchases in the first quarter under the company's $1.5 billion authorization for the year.

Prudential, a large money manager for pension plans and other institutional clients, said its assets under management as of Dec. 31 stood at $1.721 trillion, compared with $1.648 trillion as of Sept. 30 and $1.551 trillion a year earlier. Assets under management at the company's global investment management arm reached a record $1.499 trillion, Prudential said.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

February 04, 2021 16:42 ET (21:42 GMT)

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