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$PRU 1Q15 10-Q: With disputes arising out of Chapter 11 bankruptcy petition filed by Lehman Brothers Holdings Inc., PRU previously recorded losses related to a portion of its counterparty exposure on derivative transactions previously held with Lehman Brothers & its affiliates. PRU recorded no estimated recoveries related to this matter for 1Q15.
$PRU said its Japan business is well-capitalized and this is evident in the existing solvency margin ratio and in its internal economic ratios. The company does not expects its capital redeployment in Japan to be affected in any way by the evolution of the solvency margin regime in Japan and does not intend to change its distribution targets.
$PRU said POJ Prudential sales were up about 41% in 1Q17. This was partly due to the accelerated sale in front of the standard discount rate change and partly due to product mix. There is also a shift to US dollar product. Dollar product sales were up 50% while Japanese yen product sales were up only 38%.
During 1Q17, $PRU acquired 2.9MM shares of its common stock for $312.5MM, for an average price of $108.23 per share. From the commencement of repurchases in July 2011, through March 31, 2017, $PRU has acquired 93MM shares of its common stock at a total cost of $6.7Bil, for an average price of $72.15 per share.
$PRU said International Insurance constant dollar basis sales were up 8% to $825MM in 1Q17, reflecting increases in sales in Japan and other key markets. Retirement account values stood at $395.5Bil at March 31, up 6% from a year earlier.
$PRU doesn't anticipate a meaningful impact on capital levels or solvency margins in Japan because of the discount rate reduction. The company has already discontinued all of its Japanese Yen single premium whole life offerings. Going forward, there might be some repricing of products in Japan, the company said.
$PRU returned over $900MM of capital to shareholders in 4Q16 through dividends and share repurchases. For 2017, the Board has authorized $1.25Bil of share repurchases. With regards to the low interest rates, the company said that it is not immune to the multi-year impact of low interest rates in its two primary markets; the US and Japan.
$PRU said that its corporate expenses were higher than it anticipated in 2016. This was due to higher long-term and deferred compensation expenses related to stronger-than-expected equity returns, higher legal costs and losses on a tax advantage investment.
In 4Q16, $PRU’s Individual Annuities gross sales were $1.7Bil, including $1.1Bil without retained exposure to equity market related living benefit guarantees, reflecting risk diversification strategies. Retirement gross deposits and sales were $8.9Bil. US Individual Life sales were $183MM, up 2% from 4Q15.
Financial services company $PRU reported a decrease in 4Q16 earnings. Net income was $284MM or $0.65 per share versus $735MM or $1.60 per share for 4Q15. The 4Q16 net income includes $824MM of pretax net realized investment losses and related charges and adjustments.
$PRU said that the $125-175MM range of expense levels in 4Q16 is the trend that was there in the year ago quarter and the company expects it to continue in 2016. On funding status, $PRU said the low rate environment did lower the funding status in the aggregate and added that it is seeing some level of acceptance of lower rates for longer periods.
$PRU stated that its asset management earnings rose $11MM in 3Q16, driven by higher asset management fees. Individual life earnings on the other hand declined $72MM YoverY to $111MM, which was impacted by a negative fluctuation in claims experience.
At 3Q16-end, $PRU's cash and liquid assets amounted to $3.5Bil, declining $500MM sequentially, while financial and total leverage ratios at quarter-end was within targets. $PRU stated that it expects to move the evaluation of its dividend level to 1Q17, to better align with the capital planning cycle.
$PRU's earnings and margins in its individual annuities business performed well in 3Q16, though the company saw some sales pressure in the quarter. The company expects individual annuities to represent a strong source of earnings and cash flows going forward, having lower volatility and more transparency.