Prudential Posts Jump in 3Q Net; CEO Says It Will Weather the Financial Storm

Look up the PowerRating of PRU and see how it has performed over the past week as well as the current proprietary PowerRating.

NEWARK, N.J., Nov 05, 2009 (A. M. Best via COMTEX) -- PRU | Quote | Chart | News | PowerRating -- Prudential Financial Inc. has notched its second straight quarterly profit, reporting $1.1 billion in net income for the third quarter of 2009.

The company had reported a net loss of $118 million for the third quarter of 2008.

Chairman and Chief Executive John Strangfeld said the company has maintained an expectation that it will weather the financial storm better than most and aspires to gain ground on its competition.

During a conference call, Strangfeld said he wasn't declaring victory but said Prudential (NYSE: PRU | Quote | Chart | News | PowerRating) had benefited from a "flight to quality. I would characterize our mindset as confident, not cocky."

Net sales of individual annuities increased to $4.4 billion from $481 million in the third quarter of 2008.

Net realized investment losses in this year's third quarter totaled $360 million from impairments and sales of credit-impaired investments. Contained within those losses were $149 million on asset-backed securities collateralized by subprime mortgages and $62 million of impairments on equity securities.

Prudential reported it had $3.4 billion in net cash at the holding company level, but planned to maintain about $1.5 billion cushion over an 18-month trajectory and look to invest the balance.

Strangfeld briefly discussed the potential for merger and acquisition activity, saying Prudential would prefer to maintain a "like-to approach" versus having to acquire another entity. Finding subscale businesses that would benefit from acquisition has been more challenging in the past three years, he said.

"The opportunity cost of doing something is higher than it would be in more normal times," Strangfeld said, adding that Prudential may be better positioned than most in terms of counter-party status.

He also said that the company would continue to weigh acquisition options in light of long-term opportunity and not based on current market situations.

Prudential, which owns a federal thrift institution, said earlier this year it would not participate in the U.S. Treasury Department's Capital Purchase Program, part of the $700 billion Troubled Asset Relief Program. The company opted for a $1.25 billion offering of common stock, saying it may use the proceeds for cash contributions to its insurance and other subsidiaries, the repayment of short-term borrowings or other debt, or for "potential strategic initiatives" (BestWire, June 1, 2009).

At mid-afternoon on Nov. 5, Prudential's stock was down 5.73% from the previous close, trading at $43.89 a share.

Prudential Insurance Company of America currently has a Best's Financial Strength Rating of A+ (Superior).

(By Al Slavin, senior associate editor, BestWeek)

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