Prudential Financial Subpoenaed In Ongoing Probe

Prudential Financial has confirmed it has received subpoenas from regulators as part of an ever-widening probe into the insurance industry’s sales practices.

Speaking from Newark, N.J., during the company’s third-quarter earnings conference call, Arthur Ryan, chairman and CEO said Prudential is in the process of reviewing its “affected businesses” to determine whether there have been any violations.

It is the first time the Newark- based financial services giant has publicly acknowledged its involvement in the probe. Ryan did not specify which agency or agencies had issued the subpoenas.

“Like other major insurance companies, we have received requests for information in connection with the investigation, and we are cooperating fully with these inquiries,” Ryan said.

Last month, New York’s Attorney General, Eliot Spitzer, filed a lawsuit against Marsh & McLennan, the world’s largest insurance broker, accusing the firm of conspiring with other insurance companies and rigging bids to trick clients into thinking they were getting the best deal on their insurance.

Since then, state regulators and insurance commissioners nationwide, including New Jersey, have launched their own investigations against a host of other insurers, including MetLife, Cigna and Warren-based Chubb, as well as insurance brokers like Aon and Willis Group.

Despite the dark cloud hanging over the industry, Prudential had a lot to smile about yesterday. It posted a 150 percent gain in third- quarter profit, beating Wall Street estimates by 15 cents per share.

Prudential reported quarterly net income of $548 million, or $1.08 per share, vs. $220 million, or 44 cents per share, in the third quarter last year.

Third-quarter adjusted operating income — excluding one-time charges totaling $123 million before taxes — came in at $460 million, or 92 cents per share. The consensus forecast of analysts surveyed by Thomson First Call was 77 cents per share.

Prudential attributed its strong showing, in part, to the retirement business it purchased from Cigna in April, as well as strong results in its annuity business, following its May 2003 acquisition of American Skandia.

Ryan also raised the company’s profit outlook for 2004 and said he expects per-share earnings of $3.30 to $3.40 a share, above the estimate of $3.15 to $3.25 a share the company provided in its second-quarter report.

Andrew Kligerman, a life insurance analyst at UBS Investment Research, said he viewed Prudential’s revised guidance as “conservative,” adding he expects the company to hit the top end of that range.

Kligerman has a12-month price target of $56 on Prudential. Following the conference call, Morgan Stanley upped its 2005 earnings estimate for Prudential Financial to $4.35, from $4.25. Prudential said it will provide more detail on 2005 guidance at an investor event in December.

In the third quarter, the company said it repurchased 8.1 million shares for $372 million, close to the company’s quarterly share repurchase guidance of $375 million. The average price per share repurchased was $45.93, the company said.