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The insurance division of Prudential Insurance Company has reported operating income of $32 million. This is down $524 million for the comparable quarter of the previous year. In addition to this, annuity income is down $512 million, and is shown as a $307 million loss. A loss of $92 million was reported for the investment division, a drop of $403 million. Retirement however, is the rare positive area, having grown by $68 million to $133 million. The international insurance and investments division is the only division to at least hold its weight. This division reports a $497 million profit, down just $40 million.

There was however, a decrease in assets under management and administration to $714.4 billion, down $53.9 billion.
Analysts have been told by Prudential company Chairman and CEO John Strangfeld that the underlying performance of their business is solid. In addition he says that sales and cash flows remain positive despite the present market conditions, while it is reported that premiums are up $125 million compared with the prior-year quarter to $2,798 million, and show an improvement for the year to date. There is a problem though and that is that investment income is half of the company’s revenue, and the serious decline in asset values has severely affected this, including the one-time third quarter loss of $300 million with regard to investments in Lehman Brothers and American International Group (AIG:NYSE).

At the present time unrealized losses have reached a total of $5.9 billion, and are up $2 billion in the quarter. This represents those assets that Prudential believes will ultimately maintain their value. This includes $500 million in impaired fixed securities. For the next five years, Prudential believes that it faces a potential $550 million loss.

Prudential refuses to enumerate the surplus of capital that it believes it holds but that is not reported on the balance sheet. One analyst made the point that in the past it has always been discussed, so why not now? CFO Richard Carbone responded by saying that his company is reluctant to produce numbers that may possibly not be accurate. He added that the present economic climate forces them to be very cautious about applying assumptions that they would not have done one year ago.

The example was given to him of Hartford whose stock prices were down significantly because it had been evasive over capital discussions. Carbone responded that on the basis of an S&P 500 at 900, Prudential’s anticipation for risk-based capital coverage is at 350 to 400; currently it is about 350. The closing today found S&P at 954.

Like most insurance companies, Prudential operates a securities lending program, and at the end of the quarter it amounted to $6.9 billion, a quarter of it being Treasuries. It says that it has available to it to pledge to the program, an additional $10 billion in assets, but that this is not "mission critical," so the company it is not worried about the ongoing pressure on the underlying asset values. CEO Strangfeld, referring to liquidity, said that the company has sufficient assets to meet their needs of the parent company and its subsidiaries.