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Prudential net rises but core profit falls

11 February, 2011

Prudential Financial Inc.'s PRU -2.18%  third-quarter profit rose 29% in its financial services business on a jump in premiums, as a surge in realized investment gains countervailed much higher insurance and annuity benefits.
However, its operating earnings, which exclude investment effects, dropped more than expected.
Shares were down 3.1% at $52 after hours.
Adjusted operating earnings in the U.S. retirement and investment-management division plunged 95% to $43 million, a stark contrast to the second quarter's fivefold surge. The annuities segment swung to a loss as it included charges to strengthen reserves for guaranteed minimum benefits and for amortization, while the prior-year period had a gain.
The international insurance division saw operating earnings rise 39% to $751 million, while U.S. insurance was down 17%.
In recent periods, the operating bottom line strengthened on growth in both the U.S. retirement and international insurance businesses. In the second quarter, profit soared in U.S. retirement, and U.S. insurance also increased earnings after several quarters of decline.
Overall in the latest period, Prudential's financial-services business posted a profit of $1.51 billion, or $3.06 a share, up from $1.17 billion, or $2.46 per share, a year earlier. Those results exclude Prudential's closed block of business, representing life-insurance and annuity policies offered when Prudential was owned by its policyholders.
Adjusted operating income, which excludes items and investment gains and losses, fell to $1.07 a share from $2.12 a share. Financial-services revenue increased 27% to $9.95 billion.
Analysts surveyed by Thomson Reuters anticipated earnings $1.54 a share on revenue of $10.13 billion.
Insurance and annuity benefits jumped 44%, driving a matching percentage increase in overall expenses.
Realized investment gains surged to $1.62 billion from $284 million a year earlier.