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Prudential’s Earnings Plummet Due To Investment Losses

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Prudential announced that recent earnings declined more than 50%
year-over-year decline.  Net income fell from $966 million in the
third quarter of 2013 to $465 million in 2014. Operating earnings per
share of $2.20 was also down from $2.89 a year ago.  Prudential’s
performance suffered due to a combined effect of net realized losses
on investments, but the revenues increased 9% year-over-year to about
$11.7 billion.

But, we expect the growth in Prudential’s retirement and life
insurance business to continue.  There are more and more companies in
the U.S. offering pension lump-sum buyouts–which stockbrokers love
more than anything.  Recently, Prudential got in on two lump-sum
pension buyouts, worth more than $4.5 billion from Motorola Solutions
and Bristol-Myers Squibb.   If the past is any predictor, we suspect
that we will may be seeing more unhappy retirees and son to be
retirees in the future, from the ongoing lump-sum pension buyouts.  By
introducing new customers to the marketplace for variable annuities,
the stockbrokerage and investment firms are very excited, but there is
much more risk for the employees and future retirees.

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