We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • Interest Rate Declines ‘Not Helpful,’ Prudential CFO Says

    February 10, 2015 by Cyril Tuohy, cyril.tuohy@innfeedback.com

    Every so often a nugget of an understatement glimmers from the dense jargon of earnings conferences like a speck of tarnished gold in a prospector’s pan.

    Last week was such a week, when Robert Michael Falzon, Prudential’s chief financial officer and executive vice president, told an analyst in a conference call that lower interest rates were making life very difficult for the life insurance giant.

    “To state the obvious, further declines in interest rates are not helpful, but I would be careful not to extrapolate the fourth quarter sensitives,” Falzon told Citigroup analyst Erik James Bass about investment hedges.

    In fact, the subject of interest rates — usually referred to these days in the context of lower rates — was referred to 25 times in last week’s conference call.

    A rising dollar is simply compounding the projection challenges.

    Of this we can be certain: Lower interest rates appear to be driving the insurance C-suite as well as the analysts absolutely nuts.

    For Prudential and the analysts who follow the company, last week’s drama wrought by interest rate changes began after the market closed Feb. 4. That’s when the company released its fourth quarter and full-year 2014 earnings.

    The consensus analyst forecast for fourth quarter earnings was for $2.38 per share, but the forecast collapsed and quickly turned into a rout as the company delivered $2.12 per share, an earnings “miss” of nearly 11 percent.

    As the shockwaves reverberated after hours among Wall Street, analysts scrambled to redo their spreadsheets in preparation for the Feb. 5 Q&A with Prudential’s executives.

    At the opening bell, investors punished the stock, which experienced declines during the day of more than 5 percent.

    During the conference call, analysts seem to be having a hard time figuring out Prudential’s reported hedges and foreign exchange positions in an attempt to paint a picture of the company’s latest financial numbers and reconcile them with December forecasts.

    With Prudential reporting a $1.5 billon drop in estimated excess capital capacity from earlier forecasts in December, analysts were flummoxed.

    Nigel P. Dally, a managing director at Morgan Stanley, was said to have called the decline in capital capacity “mysterious.”

    But it was left up to analyst Suneet L. Kamath of UBS to step up and put into words what many of the analysts were likely feeling: “I apologize, maybe I’m sleep deprived, but I’m confused in terms of this whole capital capacity thing,” he said.

    If Falzon and the lieutenants in charge at Prudential projected more certainty than some analysts in connecting lower interest rates to the drop in capital capacity and the underwhelming quarterly financial results, they betrayed the difficulty of projecting future capital needs in an era of interest rate volatility.

    For example, Falzon said that extreme interest rate volatility over the past several weeks meant that interest rate movements whipsawed by as much as 20 and 30 basis points every week. As a result, the company’s capital ratios change rapidly.

    Falzon said recent interest rate declines had a negative impact on the company’s “underhedge.”

    The underhedges are used to manage a portion of Prudential’s variable annuity interest rate risk, but as rates declined, they triggered changes in the company’s capital requirements and that sent company managers scrambling for funds at the holding company level, company officials said.

    Lower rates in the fourth quarter also caused “a higher statutory provision based on year-end asset adequacy testing,” Falzon said.

    Mark B. Grier, vice chairman and a member of Prudential’s Enterprise Risk Committee, also said that lower interest rates “have resulted in an increase in the amount of debt that we characterize as capital.”

    In the fall of 2013, as interest rates began to rise, insurance carriers were turning in better earnings on their fixed-income portfolios and some market observers were heralding the end of an extended period of low interest rates as the Federal Reserve stopped buying bonds with the improving economy.

    Instead, rates continued to drift downward last year, and have continued to drop since the beginning of the year.

    Originally Posted at InsuranceNewsNet on February 10, 2015 by Cyril Tuohy, cyril.tuohy@innfeedback.com.

    Categories: Industry Articles
    currency