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How Prudential’s US Individual Solutions Division Performed

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May. 11 2018, Updated 1:23 p.m. ET

Individual annuities

Prudential Financial (PRU) released its 1Q18 earnings results on May 2. The company’s US Individual Solutions division is further divided into two segments:

  • Individual Life
  • Individual Annuities

The Individual Annuities segment generated adjusted operating income of $519 million in 1Q18 compared to $468 million in 1Q17. However, these amounts are inclusive of significant items. After excluding these items, the segment’s adjusted operating income rose $54 million in 1Q18 on a YoY basis on the back of policy fees after deducting related risk management costs as well as other costs.

The Individual Annuities segment’s net policy fees in 1Q18 rose on a YoY basis because of a decline in risk management costs as well as higher variable annuity account values. Moving forward, the company expects to see increased FCF (free cash flow) from its Individual Annuities segment.

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Individual life

Prudential Financial’s Individual Life business’s operating income amounted to $36 million in 1Q18, while in 1Q17 it was $118 million. The segment generated revenues of $1.4 billion in 1Q18, while revenues came in at $1.44 billion in 1Q17.

The Individual Life business generated total annualized new business premiums amounting to $125 million in 1Q18. Of the total, third-party distribution channel contributed $95 million, while annualized new business premiums from Prudential advisors were $30 million. The total annualized new business premiums in 1Q18 declined YoY mainly because of a decline in the sales of the guaranteed universal life product.

Prudential’s individual life business is focusing on maintaining strong relations with its distribution partners and also plans to focus on customer satisfaction.

The beta value of Prudential Financial is 1.5, while peers (XLF) MetLife (MET), Aflac (AFL), and Hartford Financial Services (HIG) have beta values of 1.01, 0.80 and 0.76, respectively.

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