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COVID-19 related market turmoil pushes Prudential to $271mn Q1 net loss

6th May 2020 - Author: Luke Gallin

Prudential Financial, Inc. has reported a net loss of $271 million for the first-quarter of 2020, driven by significant net realised investment losses, impairment related losses, and losses related to market experience updates.

prudentialA net loss of $271 million compares with net income of $932 million reported for the same period in 2019, while adjusted operating income declined from $1.259 billion to $939 million, year-on-year.

The company explains that the Q1 2020 net loss included $698 million of pre-tax net realised investment losses and related charges and adjustments, including $224 million from impairment related losses, and a significant $947 million of pre-tax losses related to market experience updates.

In comparison, net income in Q1 2019 included $587 million of pre-tax net realised investment losses and related charges and adjustments, including $67 million from impairment related losses.

So, it’s clear that Prudential’s Q1 result has been adversely impacted by the uncertain and volatile nature of financial markets as a result of the COVID-19 pandemic, ultimately pushing the firm to a quarterly loss.

RMS

Commenting on the current crisis and the company’s first-quarter performance, Charles Lowrey, Chairman and Chief Executive Officer (CEO), said: “First, we would like to share our thanks and gratitude to all of the emergency and medical responders who are on the front lines of the global pandemic crisis. The health and security of our employees and their families remain our utmost priority. Their wellbeing enables us to address the evolving health and financial needs of our customers and our community as the pandemic and its economic impact reverberates more broadly.

“While market turbulence related to the pandemic adversely impacted our first quarter financial results, Prudential remains ‘Rock’ solid with robust risk management, a strong balance sheet, and significant resources to continue to fulfill the promises we have made.

“Looking ahead, execution of our key initiatives remains on track, and we are accelerating a number of our actions. Backed by our financial strength and guided by our purpose, we strive to solve the financial challenges of our changing world in support of an inclusive global recovery.”

By segment, and the firm’s global investment management business, PGIM, reported adjusted operating income of $164 million in Q1 2020, down from $214 million a year earlier. U.S. businesses reported a decline in adjusted operating profit to $619 million from $881 million a year earlier, while the U.S. Workplace Solutions reported lower adjusted operating income of $289 million.

The Retirement segment saw its adjusted operating income fall slightly to $245 million, while Group Insurance reported adjusted operating income of $44 million in Q1 2020, against $53 million in Q1 2019. U.S. Individual Solutions produced adjusted operating income of $353 million in the quarter, compared with $577 million a year earlier.

Additionally, both Individual Annuities and Individual Life also reported declines in adjusted operating income, to $373 million and operating loss of $20 million, respectively. Assurance IQ fell to a loss of $23 million in the first-quarter of the year.

Prudential’s International Businesses, comprised of Life Planner, Gibraltar Life and Other, reported adjusted operating income of $751 million in Q1 2020, which is down on the $922 million posted in Q1 2019.

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