Prudential Slips as Economic Uncertainty From Virus Persists

(Bloomberg) -- Prudential Financial Inc. shares fell the most in almost five months as it kept share buybacks on pause amid lingering uncertainty over the impact of the Covid-19 outbreak.

• “Until we have better visibility into the depth and the duration of the pandemic, possible recession and the credit cycle, which still may be before us, we’re going to maintain our financial flexibility,” Chief Executive Officer Charles Lowrey told analysts on the company’s third-quarter earnings call Wednesday. Shares declined despite a surprise jump in profit and faster-than-expected cost cuts.

Key Insights

• Prudential is looking for ways to battle low interest rates, which have weighed on results. It’s repricing products and pivoting to products that are less rate-sensitive, according to a statement Tuesday.
• The life insurer maintained its estimate that for every 100,000 deaths from Covid-19, it would see a decline of $70 million in earnings.
• Net income rose to $1.49 billion in the third quarter from $1.42 billion a year earlier. Prudential now aims to cut $250 million more in expenses by the end of 2023, bringing the total to $750 million.
• Its asset-management unit, PGIM, has been a bright spot, and posted record adjusted profit as clients assets jumped 11% from a year earlier to the highest ever. The results were driven by investment earnings, agency revenue and higher fees.
• The CEO signaled some interest in dealmaking to reshape the business. “We will also explore strategic opportunities for blocks of business, including reinsurance and other transactions” to sell assets, Lowrey said on the analyst call. With proceeds of potential sales, the company could buy back stock or pursue acquisitions. “There could be some very interesting things on the market,” though the hurdle for deals is high given where the firm’s stock is trading, he said.

Market Reaction

• Shares fell 6.9% to $63.09 on Wednesday, the biggest decline since June. The stock is down 33% this year.

Get More

• Earnings per share beat forecasts. After-tax adjusted operating income was $3.21 a share, surpassing the $2.71 median estimate of 11 analysts.
• Prudential’s statement is here. Its presentation is here.

©2020 Bloomberg L.P.