Prudential Financial (NYSE:PRU) on Wednesday reported financial results for its second quarter after the market close. The financial services giant delivered revenue and earnings that exceeded Wall Street's expectations, and shares edged up 1% in after-hours trading as of 6:30 p.m. ET.
Prudential's revenue rose 12% year over year to $12.5 billion, exceeding consensus estimates of $11.2 billion. Net income climbed 29% to $1.4 billion, or $3.03 per share. And after-tax adjusted operating income, which excludes realized investment gains and losses, increased 15% to $1.35 billion, or $2.91 per share. Analysts were expecting only $2.47 in adjusted earnings.
Segment operating results
Prudential's U.S. Retirement Solutions and Investment Management division delivered adjusted operating income of $981 million, a 12% rise from the year-ago quarter. Helping to drive those results was a 41% jump in adjusted operating income in Prudential's annuities business, which was boosted by financial-markets gains and higher asset-based fees.
Prudential's U.S. Individual Life and Group Insurance division also enjoyed strong growth, with adjusted operating income climbing 53% to $312 million in the second quarter, although most of the gains were due to favorable actuarial assumption adjustments.
Finally, Prudential's International Insurance segment reported adjusted operating income of $842 million, a decline of nearly 5% from the year-ago period, with a negative impact from actuarial assumption adjustments and foreign exchange rate fluctuations taking a toll.
Capital return program
Prudential continues to gobble up its own stock, with the company acquiring 2.9 million shares at a total cost of $250 million, or $84.86 per share, during the quarter. Including this quarter's purchases, Prudential has acquired 58.9 million shares since the company began its share repurchase program in July 2011, at a total cost of $3.9 billion, for an average price of $66.18 per share.
Prudential delivered impressive performance in its individual life insurance business, with U.S. sales jumping 26% year over year to $130 million with increases across its universal, term, and variable life product lines. The company also continues to make progress with the integration of the individual life business it acquired from The Hartford in 2013, with expected cost savings likely to provide a further boost to profitability in the coming quarters.
Retirement segment performance was also strong, with account values rising 13% year over year to $372.6 billion. Management noted that "four significant pension risk transfer transactions" contributed to $5.7 billion of retirement net inflows in the current quarter, giving evidence that Prudential is continuing to find success in striking deals to manage the pension operations of large corporations.
Rounding out the list of bright spots during the quarter was a 6% increase, to $471.1 billion, in institutional and retail assets under management, including net inflows (excluding money market) of $6.4 billion. The combination of increased client contributions and market-related gains can be a powerful combination for rising assets under management, and I expect Prudential to continue to benefit from solid increases in asset-based fees in the years ahead.