A Prudential Financial, Inc. stockholder claims in a proposed class action that he and other investors were injured by a drop in stock price following the release of the company’s second quarter 2019 financial results. The suit alleges that Prudential and its top executives misled investors with regard to the firm’s financial growth by understating changes in mortality trends that were negatively impacting performance.
The timeline in the lawsuit begins in February 2019, when Prudential filed its financial report for 2018 with the SEC. In the context of mortality trends and other actuarial assumptions, the report allegedly implied that there were no significant changes that would negatively impact the company’s finances.
“Generally, we do not expect trends to change significantly in the short-term and, to the extent these trends may change, we expect such changes to be gradual over the long-term,” the report stated.
The lawsuit alleges that despite these positive representations, the company’s top executives were aware that changes in mortality trends were not merely a future risk but “a contingency that had already manifested itself and was currently impacting Prudential’s performance and outlook.” Consequently, the lawsuit argues, Prudential’s stock prices were trading at artificially inflated prices between February 15, 2019 and August 2, 2019 while the defendants continued to mislead stockholders.
The truth was eventually revealed in late July 2019, the suit says, when Prudential announced its second quarter 2019 financial results. According to the complaint, the company revealed that its finances had been negatively impacted by changes in mortality assumptions, which investors were later told would wipe out $25 million per quarter “for the foreseeable future.” The case says Prudential also disclosed that it would take a $208 million pre-tax charge and implied that guidance would be reduced. Upon this news, Prudential’s stock price reportedly dropped over 15.64 percent over a period of several days.
The lawsuit looks to cover anyone who purchased Prudential securities between February 15, 2019 and August 2, 2019.