Prudential Financial Faces Derivative Lawsuit Settlement
Prudential Financial shareholders are seeking approval from a New Jersey judge for a $10 million settlement to resolve a derivative lawsuit alleging the company withheld crucial mortality data. The lawsuit originated from statements made during a June 2019 investor conference, where Prudential executives claimed that recent mortality experience was within normal volatility and below previous levels. However, plaintiffs argued that these statements were misleading and allowed Prudential to repurchase over $300 million in company stock at artificially inflated prices.
On July 31, 2019, Prudential announced a pre-tax charge of $208 million to increase life insurance reserves due to negative mortality experience and revised mortality assumptions. The following day, executives disclosed that these revised assumptions would negatively impact earnings in the future. Consequently, Prudential’s stock price dropped by more than $20 per share over the next two weeks. The adverse mortality experience was related to a block of The Hartford life policies that Prudential reinsured in a 2013 deal worth $615 million, involving approximately 700,000 policies with a face amount of around $135 billion.
The lawsuit, brought by shareholders on behalf of Prudential, alleges that the company’s executives caused significant financial losses through their actions. Several individual lawsuits were consolidated by the U.S. District Court for the District of New Jersey. A related securities lawsuit led by City of Warren Police and Fire Retirement System reached a $35 million settlement in 2024. After initial dismissal in 2020, the Third Circuit partially reversed the lower court’s decision, allowing allegations based on reports from former Prudential employees to proceed. Notably, the Third Circuit found that Prudential was internally discussing the need for a significant charge to Individual Life as early as May 2019.
Prudential has since transitioned to new leadership under CEO Andrew Sullivan, who released the company’s first earnings report recently. The New Jersey district court preliminarily approved the $10 million derivative lawsuit settlement on April 7. Judge Stanley R. Chesler is expected to finalize the settlement on June 9, pending no unforeseen complications.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
