Prudential Financial Inc.

Case Details

Class Period:
February 15, 2019 – August 2, 2019
Date Filed:
November 27, 2019
Case Number:
2:19cv20839
Jurisdiction:
New Jersey District Court

Case Summary

The complaint alleges that during the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding Prudential's business and prospects. Specifically, defendants failed to disclose the following facts: (a) the Company's reserve assumptions failed to account for adversely developing mortality experience in its Individual Life business segment; (b) the Company was not over-reserved, but instead, its reported reserves, particularly for the Individual Life business segment, were insufficient to satisfy its future policy benefits liabilities; and (c) the Company had materially understated its liabilities and overstated net income as a result of flawed assumptions in calculating mortality experience. As a result of this adverse information being withheld from the market, the price of Prudential common stock was artificially inflated to more than $105 per share during the Class Period. On July 31, 2019, the Company announced disappointing second quarter 2019 financial results, including earnings per share of $3.14, which missed analyst consensus estimates by $0.09, and disclosed that the Company would take a pre-tax charge of $208 million as a result of its market experience update. In the earnings release, Prudential's CEO acknowledged that changes in "mortality assumptions" had negatively impacted the Company's results and would "trim" near-term momentum. On August 1, 2019, the Company held a conference call to discuss its second quarter 2019 financial results. On the call, defendants revealed that the change in mortality assumptions would require a negative earnings impact of $25 million per quarter for the foreseeable future, wiping out approximately one third of the earnings attributable to the Individual Life business segment. As a result of these disclosures, Prudential's stock price declined more than 10% to close at $91.09 per share on August 1, 2019. Then on August 2, 2019, Prudential filed its quarterly report on Form 10-Q with the SEC for the second quarter of 2019, which provided additional information concerning the Company's adjustments to operating income by segment, including that the $208 million pre-tax charge to reserves was entirely attributable to the Individual Life business segment. As a result of these further negative disclosures, Prudential's stock price declined another 5.6%, falling to $88.56 per share on August 2, 2019 and to $85.95 per share on August 5, 2019.

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