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Prudential International Fell on Gibraltar and Dollar

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International Insurance

Prudential Financial’s (PRU) International Insurance segment reported adjusted operating income of $780.0 million in 3Q16, compared to $812.0 million in the prior year’s quarter. The company saw lower business across its life planner operations, Gibraltar Life, and corporate and other operations.

The US dollar is expected to remain in range-bound value in 4Q16 and 2017, despite an expected rise in interest rates. A stable or weak dollar could boost Prudential’s revenue from international operations.

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Life Planner Operations

The Life Planner Operations segment reported adjusted operating income of $391.0 million in 3Q16. That was less than its adjusted operating income of $398.0 million in 3Q15.

Foreign currency exchange rates and currency hedging programs had an unfavorable impact of $23.0 million compared to the previous year’s quarter. Excluding this impact, operating income rose $16.0 million, mainly due to organic growth, favorable policy surrender experience, and higher return from net investment. The current quarter saw a $10.0 million better-than-expected favorable claim experience.

The Financial Select Sector SPDR ETF (XLF) invests 1.5% of its portfolio in Prudential Financial. MetLife (MET), Chubb (CB), and Allstate (ALL) have weights of 1.5%, 0.70%, and 2.8%, respectively, in XLF.

Gibraltar Life

The Gibraltar Life segment reported adjusted operating income of $389.0 million compared to $414.0 million in the corresponding quarter last year. Currency exchange and hedging programs had a negative impact of $30.0 million compared to the prior year’s quarter.

Excluding these changes, operating income rose $5.0 million, mainly due to business growth and a contribution from the AFP Habitat acquisition in March 2016. These were largely offset by higher expenses due to employee benefit plans and office relocations.

Prudential expects higher underwriting margins and core growth for its international business, backed by continued growth in the Eurozone.

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