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Analyzing Prudential Financial’s Group Insurance Segment

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Benefits ratio

Prudential Financial (PRU) has provided the expected range for its 2017 benefits ratio. Considering that range, the ratio is at the lower end, which is beneficial. A lower benefits ratio is a good thing. In group disability and group life, the segment witnessed positive momentum in underwriting results in 2017.

The Group Insurance segment saw a rise in adjusted operating income, from $220 million in 2016 to $253 million in 2017. The segment generated revenues of $5.5 billion in 2017 compared to $5.3 billion in 2016. Between 2016 and 2017, the segment saw a rise in net investment income of $29 million, mainly due to a rise in income for non-coupon investments.

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Earnings

The Group Insurance segment saw a decline in earnings from $43 million in 4Q16 to $22 million in 4Q17. However, in 3Q17, the earnings were $61 million. The segment saw a rise in benefits and expenses, from $5.1 billion in 2016 to $5.2 billion in 2017. The segment posted annualized new business premiums of $34 million in 4Q17 compared to $37 million in 4Q16.

Prudential Financial’s EBITDA (earnings before interest, tax, depreciation, and amortization) margin was 14% on an LTM (last-12-month) basis. The EBITDA margins for Reinsurance Group of America (RGA), MetLife (MET), and CNO Financial Group (CNO) are 22.7%, 0.82%, and 24.9%, respectively, on an LTM basis.

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