© Reuters. FILE PHOTO: The Prudential Financial Inc logo is seen in this illustration taken April 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
By Judy Godoy
(Reuters) – A US appeals court on Tuesday partially revived a shareholder’s lawsuit against Prudential Financial Inc (NYSE:) alleging that the insurer hid a deficit in its individual insurance policy reserves in 2019.
Investors have a reasonable claim, the 3rd US Court of Appeals said, as the insurer wrongly reduced the fatality rate among policyholders as “normal” on June 5, 2019, less than two months before Prudential had to increase its reserves by $208 million. To make up for an unexpected number. of deaths affecting one set of policies.
A Prudential spokesperson did not immediately respond to a request for comment.
A Michigan pension fund sued the Newark, N.J., insurance company and three of its executives in November 2019, alleging that false statements led to a 10% drop in the share price.
Based on testimony from former employees, the investors alleged that Prudential already knew in February that there had recently been an unexpected number of deaths among the holders of 700,000 insurance policies that the company had purchased from another insurer.
Prudential and the executives moved to dismiss the lawsuit, arguing that the appropriate level of reserves was a matter of opinion and that investors did not adequately allege that the company was dishonest in its belief.
A New Jersey judge agreed with the company in 2020, saying that shareholders did not point to facts that would show Prudential and that executives knew reserves were deficient.
And while it revived investor claims about the mortality data, the Philadelphia-based appeals court agreed that the appropriate level of reserves was a matter of opinion, affirming the dismissal of those claims.
The case is the City of Warren Police and Fire Retirement System et al. V. Prudential Financial Inc et al., No. 21-1147, 3rd US Court of Appeals.