Prudential, Allstate Swing To Fourth-Quarter Profits

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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