Prudential Financial reported financial losses from the Omicron variant surge throughout the fall of 2021.
The insurer’s group insurance business posted a loss of $205 million in the fourth quarter, compared with a loss of $87 million in the fourth quarter of 2020.
“We have a high concentration of large employer accounts in retail and healthcare,” said Andy Sullivan, executive vice president and head of US operations. “If you think about it, these are employers who have a high number of frontline workers who are on the road and exposed daily. Additionally, many of these workers are in geographic areas with low vaccination rates.”
The poor results continued a trend starting in the third quarter, when Prudential announced an adjusted operating loss of $135 million in the group life and disability insurance segment.
Similarly, the fourth quarter saw some shift in COVID infection rates to older ages, but “we’re still seeing a significant increase in incidence rates in the under-55 population,” Sullivan said. . “And that population tends to have larger dollar amount policies.”
Overall, it was another successful quarter for Prudential. The insurer reported quarterly earnings of $3.18 per share, beating Zacks consensus estimate of $2.39 per share. Prudential reported net income of $1.2 billion, compared with $819 million in the year-ago quarter.
Annuity sales
Prudential has moved away from traditional variable annuities in recent quarters, while relying on robust sales of its FlexGuard range, an indexed product introduced in 2020, to keep the segment healthy.
“Our product pivots performed well, as evidenced by continued strong sales of our buffered annuities, which amounted to nearly $6 billion for the year, representing 87% of individual annuity sales,” said Rob Falcon, Vice President. “These sales reflect client demand for investment solutions that offer the potential for equity market appreciation, combined with downside protection.”
In the annuity segment, Prudential reported adjusted operating income of $486 million in the fourth quarter, compared with $440 million in the year-ago quarter. The increase “reflects higher commission income, net of distribution fees and other associated costs, higher net income on investment spread, including higher variable investment income and lower expenses,” it said. the insurer said in its earnings release.
Account value of $182 billion increased 3% from the prior year quarter, reflecting market appreciation, partially offset by net outflows. Gross sales of $1.6 billion in the fourth quarter reflect FlexGuard’s continued success, according to the release.
Individual life insurance
Prudential continues to successfully drive variable life insurance sales, said Charles Lowrey, President and CEO, and sees success in integrating artificial intelligence into its sales processes.
“We use AI to quickly and accurately assess risk in our life insurance business,” Lowrey said, “and to speed up the application and underwriting process. The application of innovative technology has generated significant efficiencies for our global business in 2021 while delivering a significantly better experience for our customers.”
In the life segment, Prudential reported adjusted operating profit of $81 million in the fourth quarter, compared with a loss of $65 million in the year-ago quarter. This increase reflects “more favorable underwriting results and higher net investment spread results, including higher variable investment income, partially offset by higher expenses, driven by a legal reserve,” it said. the press release.
Sales of $182 million in the current quarter were down 24% from the prior year quarter. The decline is primarily due to higher sales before product price revisions in the prior year quarter.
Editor-in-chief of InsuranceNewsNet, John Hilton has covered business and other beats in more than 20 years of daily journalism. John can be reached at [email protected] Follow him on Twitter @INNJohnH.
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