UPDATE 1-Prudential profit beats as annuities business shines

Wed Nov 6, 2013 4:55pm EST

* 3rd-qtr net profit $981 mln vs $627 mln loss year earlier

* 3rd-qtr operating earnings/shr $2.94vs est $2.10

Nov 6 (Reuters) - Prudential Financial Inc, the second-largest U.S. life insurer, reported higher-than-expected adjusted quarterly profit, driven its retirement services and annuities business.

The company said operating earnings in its U.S. retirement solutions and investment management business more than doubled to $1.26 billion in the third quarter from $506 million a year earlier.

On an adjusted operating basis, income from annuities business almost tripled to $821 million for the quarter.

The company, however, booked pre-tax charges of about $1.7 billion tied to changes in currency rates and derivatives.

Insurers, who use derivatives to hedge against fluctuations in interest rates, are being squeezed as the U.S. Federal Reserve's monthly bond buying program has kept interest rates low to boost spending.

Larger rival MetLife Inc reported a third-quarter profit that narrowly missed analysts' estimates as the largest U.S. life insurer paid more in claims and benefits to policyholders.

Net income of financial services businesses attributable to the company was $981 million, or $2.07 per share, for the quarter ended Sept. 30, compared with a loss of $627 million, or $1.34 per share, a year earlier.

On an adjusted operating basis, Prudential earned $2.94 per share in the three months ended Sept. 30.

Analysts on average had expected earnings of $2.10 per share on revenue of $12.48 billion, according to Thomson Reuters I/B/E/S.

U.S. regulators voted in September to designate the insurer as systemically risky, bringing it under stricter regulatory oversight.

The insurer said in October that it will not ask a federal court to overturn the designation by the U.S. risk council.

Shares of the Newark, New Jersey-based Prudential closed at $81.79 on the New York Stock Exchange on Wednesday.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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