Prudential forecasts dismal 3Q results

Prudential Financial Inc. yesterday pre-released third quarter results for its financial services businesses, warning investors of large investment losses.
OCT 10, 2008
Prudential Financial Inc. yesterday pre-released third quarter results for its financial services businesses, warning investors of large investment losses. The Newark, N.J.-based carrier said it expected realized investment losses, including losses on sales of credit-impaired securities, to be between $325 million and $375 million. That includes losses and impairments on Prudential’s holdings of securities from Washington Mutual Inc. in Seattle and Lehman Brothers Holdings Inc. and American International Group Inc., both of New York. That range is more than triple the realized investment losses from its financial services businesses during the comparable period in 2007: Then, those losses only amounted to $105 million. Prudential’s financial services businesses include the company’s insurance, investment and international insurance and investments divisions, as well as corporate and other operations. After-tax adjusted operating income for the FSB will be between $275 million, or 67 cents per common share, and $375 million, or 90 cents per common share. Those results stem from an estimated negative pre-tax impact of $700 million, or $1.26 per common share, on the adjusted operating income. The company forecasts charges of $80 million relating to a net decrease in amortization of deferred policy acquisition, plus related costs in the company’s individual life insurance business. The carrier will get hit with another pre-tax charge of $380 million on the company’s individual annuity business, reflecting an updated profitability estimate for the business that’s related to declines on customer account values through the end of September. The company is also absorbing its share of a charge in its retail securities brokerage joint venture with Wachovia Corp. related to settling investigations of underwriting and selling auction rate securities. That charge comes out to a $235 million tab for Prudential. Despite the spate of bad news, Prudential stated that it believed its capital position as of Sept. 30 is consistent with its “AA” ratings objectives and that it has the liquidity to meet its requirements.

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