Prudential Beats Q1 Estimates On Robust Investment Income

Prudential Financial (NYSE:PRU) reported solid results for the first quarter last week. The company’s revenue increased 6% year-over-year (y-o-y) to over $12 billion, driven by an 11% surge in net investment income and a 12% surge in asset management income. This also helped the company increase its adjusted operating earnings by 24% y-o-y to about $1.24 billion or $2.79 a share in Q1 2017, which beat analysts’ estimates of $2.64 a share.

Prudential’s stock, like those of other insurance majors, has risen dramatically in the last year (over 43%) on strong financial results in the last three quarters, improving bond yields, and expectations of a corporate tax cut and ease in the regulatory environment under the Trump administration.

In the first quarter, Prudential’s operating income improved across divisions — U.S. Retirement, U.S. Life and Group Insurance, International Insurance, and Corporate and others — primarily driven by higher investment income compensating for declining or flat premiums.

International Operations

Prudential’s international revenues grew 7% y-o-y to over $5.4 billion in Q1 2017, driven by growth in both Life Planner and Gibraltar operations. Japan contributed a significant portion of this growth, as the total number of individual policies in force in Japan, excluding Gibraltar, increased over 7% y-o-y to about 3.6 million by the end of last quarter. In terms of bottom line, operating income from the international segment increased 2.5% y-o-y to $799 million owing to a 6% rise in operating profits in the Gibraltar Life business and flat income in the Life Planner operations.

U.S. Operations

In the U.S. market, Prudential’s retirement solutions and investment management division’s revenues increased by 6% to $3.9 billion, and operating income before taxes grew about 50% y-o-y to over $1 billion, driven primarily by strong top line and bottom line growth in the Individual Annuities, Retirement, and Asset Management businesses. In the Retirement business, adjusted operating income jumped 81% to $397 million driven by better investment results and lower expenses.

In Prudential’s U.S. individual life and group insurance business — unlike the fourth quarter, when operating income improved by 44% y-o-y on strong performances in both the Individual Life and Group Insurance segments — operating income grew by just 4% owing to a 2% decline in the Individual Life operating income, driven by lower income from asset management fees in the business segment.

See our full analysis of Prudential

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research