August 7, 2013 / 9:39 PM / 4 years ago

UPDATE 1-Insurer Prudential Financial's profit beats on higher fee income

* 2nd-quarter adj operating earnings/share $2.30 vs est $1.99

* U.S. retirement solutions earnings nearly triple

* Asset management fees up 35 pct

Aug 7 (Reuters) - Prudential Financial Inc, the second-largest U.S. life insurer, reported a bigger-than-expected quarterly adjusted profit, driven by gains in its retirement services business and higher fee income from asset management services.

The company said operating earnings in its U.S. retirement solutions and investment management business nearly tripled to $847 million in the second quarter from $306 million a year earlier.

On an adjusted operating basis, fee from asset management rose 35 percent to $1.25 billion, while policy charges and fee income rose 35 percent to $1.46 billion.

Net loss of financial services businesses attributable to the company was $524 million, or $1.13 per share, in the quarter ended June 30, compared with a profit of $2.23 billion, or $4.69 per share, a year earlier.

The company booked pre-tax charges of about $1.6 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 an 80 percent fall in its quarterly profit due to derivative losses but still managed to beat analysts’ estimates as operating earnings increased in the company’s retail insurance business.

On an adjusted operating basis, Prudential earned $2.30 per share.

Analysts on average had expected earnings of $1.99 per share on revenue of $12.20 billion, according to Thomson Reuters I/B/E/S.

Prudential shares, which have gained 26 percent since the company last reported its quarterly results, were up 1.4 percent in extended trading. The stock closed at $79.37 on the New York Stock Exchange on Wednesday.

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