01—Abstract
Summary
Summary of the 10-K filed February 27, 2014. Cited figures are marked; the original filing is the authoritative source.
Prudential Financial, Inc. reported approximately $1.107 trilliona of assets under management as of December 31, 2013, with operations in the United States, Asia, Europe and Latin America.
The Financial Services Businesses reported a net loss of $713 millionb for 2013, compared with net income of $479 million in 2012. Consolidated net loss attributable to Prudential Financial was $667 million, compared with net income of $520 million in 2012, reflecting realized investment losses of $5.2 billion, largely from derivatives, including net losses on embedded derivatives and hedges tied to certain variable annuities. Adjusted operating income before income taxes for the Financial Services Businesses rose to $6.369 billion in 2013 from $4.027 billion in 2012, led by Individual Annuities ($2.085 billion) and International Insurance ($3.152 billion).
The filing states that the Financial Services Businesses and Closed Block Business are not legally separated, and that Class B Stock dividends and Closed Block results affect Common Stock capacity. The company was designated a Designated Financial Company by the Financial Stability Oversight Council on September 19, 2013, and was identified by the Financial Stability Board as a global systemically important insurer on July 18, 2013.
Both designations bring expected stricter prudential standards, with compliance requirements still being developed. Total dividends declared on Common Stock were $1.73c per share in 2013, and $500 million of share repurchases were completed under the authorization.
02—Key points
Key Highlights
- Consolidated net loss attributable to Prudential Financial, Inc. of $667 million in 2013, versus net income of $520 million in 2012.
- Realized investment losses, net, of $5.206 billion in 2013, driven primarily by derivative losses of $5.688 billion.
- Adjusted operating income before income taxes for Financial Services Businesses increased to $6.369 billion from $4.027 billion.
- Designated as a Designated Financial Company by the FSOC on September 19, 2013, and as a global systemically important insurer by the FSB on July 18, 2013.
- Acquired The Hartford's individual life insurance business on January 2, 2013 for $615 million cash consideration, covering about 700,000 policies with approximately $141 billion net retained face amount in force.
- Common Stock dividends declared of $1.73 per share in 2013, and $500 million of share repurchases under the June 2013 authorization.
- Assets under management of $869.9 billion for Asset Management (including general account) at year-end 2013, up from $827.0 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 27, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $41.46B$84.85B | −51.1% |
| Interest Expense | $1.41B— | — |
| Net Income | -$667.00M$520.00M | −228.3% |
| EPS (Basic) | $-1.55— | — |
| EPS (Diluted) | $-1.55— | — |
05—Questions
Frequently Asked Questions
Why did Prudential report a net loss in 2013?
The filing attributes the consolidated net loss of $667 million mainly to realized investment losses of $5.206 billion, primarily net derivative losses of $5.688 billion. These include losses on embedded derivatives and related hedges for certain variable annuities, and losses on interest rate derivatives as long-term rates rose. Lower pre-tax earnings from yen weakness on Japanese operations also contributed.
What is the Closed Block Business and how does it affect Common Stock holders?
The Closed Block Business holds assets and liabilities for participating individual life and annuity policies in force at demutualization in 2001, along with the IHC debt. The filing states there is no legal separation between the two businesses, so Closed Block net losses, Class B Stock dividends or repurchases would reduce assets legally available for Common Stock dividends. Common Stock dividends also cannot be paid for any period if Class B Stock dividends are not paid at least equal to the lesser of CB Distributable Cash Flow or the Target Dividend Amount.
What new regulatory status does Prudential have?
On September 19, 2013, the Financial Stability Oversight Council determined that Prudential Financial is a Designated Financial Company under Dodd-Frank, making it subject to supervision by the Federal Reserve Bank of Boston and stricter prudential standards. The FSB also identified the company as a global systemically important insurer on July 18, 2013. The filing says the company cannot yet predict the final requirements, including capital and liquidity rules.
How large is Prudential's investment portfolio?
As of December 31, 2013, the general account investment portfolio totaled $325.3 billion for the Financial Services Businesses and $66.0 billion for the Closed Block Business, according to the filing. Fixed maturities made up most of this portfolio, with public and private fixed maturities at fair value of $286.9 billion in available-for-sale securities on the consolidated balance sheet.
06—Continue