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DJ Prudential Reports 27% Drop In Profit, Resumes Share Buybacks

· 02/04/2021 17:12
By Maria Armental

Prudential Financial Inc.'s fourth-quarter profit fell 27%, stung by low interest rates and the economic fallout from the coronavirus pandemic, but the firm laid out plans to boost returns to investors, including resuming stock repurchases in the first quarter.

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.

For the year, Prudential swung to a $374 million loss, the first annual loss since 2013.

The Federal Reserve last year cut short-term interest rates to near zero, part of a response package to address the pandemic and high unemployment rates. Low rates and bond buying are intended to support borrowing, spending and investment 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 ultralow interest rates, Prudential and other insurers moved to overhaul their product lineup.

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.

On Thursday, Chief Executive Charles Lowrey said in a statement that Prudential would reallocate $5 billion to $10 billion of capital over the next three years with hopes of doubling the earnings contribution of Prudential's higher growth businesses and halving 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. It had suspended repurchases in April.

--Leslie Scism contributed to this article.

(END) Dow Jones Newswires

February 04, 2021 17:12 ET (22:12 GMT)

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