Prudential, Allstate Swing To Fourth-Quarter Profits
February 10 2010 - 9:09PM
Dow Jones News
The financial services arm of Prudential Financial Inc. (PRU)
and Allstate Corp. (ALL) swung to fourth-quarter profits as
revenues improved and investment results rose, suggesting the
insurance industry is starting to stabilize.
Prudential benefited from a one-time gain on the sale of its
stake in a joint venture retail brokerage to Wells Fargo & Co.
(WFC). Allstate strengthened its financial position during the
quarter.
With their moves back into the black, the insurers joined
Lincoln National Corp. (LNC), Genworth Financial Inc. (GNW) and
Hartford Financial Services Group Inc. (HIG) in posting improved
results after the industry was battered at the end of 2008 by the
volatile financial markets. Still, the insurers face a challenging
economy and indicated they see uncertain economic and market
conditions continuing.
Douglas Meyer of Fitch Ratings called Prudential's results in
line with other life insurers and said the earnings didn't contain
any surprises.
In the latest quarter, Prudential's financial-services business
reported a profit of $1.79 billion, or $3.79 a share, compared with
a year-earlier loss of $1.66 billion, or $3.89 a share. Operating
earnings, which exclude investment gains and losses and other
items, amounted to $1.07 a share, from a year-earlier loss of
$2.04.
In December, Prudential estimated financial-services earnings of
87 cents to $1.07. Analysts surveyed by Thomson Reuters were
looking for financial-services operating earnings of $1.11 a share
on revenue of $6.86 billion.
Financial-services revenue grew 16% to $6.79 billion.
Still, shares of Prudential, one of the largest U.S. life
insurers, sank 3.3% to $47.25 in after-hours trading after the
company reported results that missed analyst expectations.
Prudential spokesman Bob Defillippo said the company reached the
top end of its December guidance for the quarter.
"We believe we hit our numbers and we are very pleased with our
performance," Defillippo said. "We aren't sure how analysts missed
it."
In addition to improving its financial footing, Allstate worked
to achieve customer loyalty and differentiate itself from the
competition, Thomas Wilson, Allstate's chairman and chief
executive, said in an interview. He said the next challenge is to
start growing again.
Allstate, the second largest U.S. homeowners and auto insurer by
premium volume, reported a fourth-quarter profit of $518 million,
or 96 cents a share, compared with a year-earlier loss of $1.13
billion, or $2.10 a share. Operating earnings, which exclude
investment gains and losses, rose to $1.09 a share from 96 cents.
Analysts estimated $1.01, according to a poll by Thomson
Reuters.
Revenue rose 23% to $8.06 billion.
Catastrophe losses rose 26% to $328 million, while realized
investment losses shrank to $33 million from $1.93 billion.
Analyst David Havens of Nomura Securities lauded Allstate's
turnaround, which has it "reverting back to the dull and boring
credit that bond investors expect it to be."
Fitch Ratings analyst Douglas Pawlowski offered measured
approval. Despite an "overall improvement" in Allstate's operating
performance, its realized investment losses are still "significant"
and pulling down earnings and the company still has $2.9 billion in
unrealized losses in its structured finance portfolio, he said.
Fitch Ratings maintains a negative outlook on Allstate's
rating.
Allstate shares rose 0.5% to $28.75 in after-hours trading.
-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141;
lavonne.kuykendall@dowjones.com
(John Kell contributed to this report.)
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