Prudential Financial Inc (PRU)

Prismic Transactions
Q: Can you provide an update on Prismic transactions and expectations for this year?
A: Prudential completed an initial $10 billion transaction with Prismic and is actively working on a pipeline of multiple insurance transactions, including balance sheet optimization, new sales solutions, and third-party blocks with a focus on Japan. They would be disappointed if they haven't entered into an additional transaction before year-end. - - -

Annuity Sales Outlook
Q: Will the recent move in interest rates dampen annuity demand, and how is pricing affected?
A: Despite potential interest rate declines, the annuity market remains extremely strong, on pace to deliver a third straight record year, outpacing last year's run rate by over 20%. Prudential is well-positioned with a broad product portfolio and had record sales in three distinct products this quarter, two of which are less sensitive to interest rates. They are prepared to adapt pricing quickly to changing market conditions. -

Interest Rate Sensitivity
Q: How do changes in short-term and long-term rates affect earnings?
A: Changes in short-term rates have minimal impact due to offsetting positions in cash and interest rate derivatives. Prudential has benefited from the rise in long-term rates over the past few years, significantly increasing portfolio yields domestically and internationally. If rates decline, new money rates would reduce, but there is a healthy spread between new money rates and portfolio yields. A disciplined ALM approach significantly reduces future spread volatility. -

PGIM Flows Variability
Q: What are the trends in PGIM flows, and outlook for the year?
A: PGIM's flows have become more variable, especially on the institutional side, due to large overfunded pension clients derisking or exploring pension risk transfers. Year-to-date institutional flows are positive at $17 billion. Retail flows have improved significantly, with year-to-date flows flat and a $1.1 billion positive inflow into fixed income retail products this quarter. They expect near-term variability but are confident in long-term net inflows. -

Assumption Review Impact
Q: What drove the unfavorable impact in Individual Life from the assumption review, and is there an ongoing effect?
A: The negative impact to Individual Life was primarily due to lower guaranteed universal life surrender experience post-COVID, as individuals retain their policies at higher levels than previously assumed based on updated experience data and industry studies. There is a small ongoing operating income impact from the assumption update. -

Variable Investment Income Outlook
Q: Do you expect real estate equity returns to improve in the back half of the year?
A: Prudential's real estate investment group forecasts continued valuation declines across the industry through the remainder of the year, with declines in the low single digits. While close to an inflection point, they do not believe they are at the trough yet. -

Capital Deployment and Buybacks
Q: What is your appetite for buybacks given strong capital levels and low stock multiple?
A: Prudential remains well-capitalized and continues to invest in business growth, including closing three large pension risk transfer transactions exceeding $10 billion in liabilities. They continue to pay dividends from insurance subsidiaries, with highly liquid assets increasing. They will remain thoughtful in capital deployment, focusing on preserving financial strength and flexibility, investing in businesses for long-term growth, and returning capital to shareholders. -

Japanese Sales Outlook
Q: How are you viewing sales trends in Japan amid yen volatility?
A: Sales in Japan are up 10% year-over-year, with strong growth in Life Planner, independent agent, and bank channels. 20% of sales this quarter came from recent product introductions, including both life and annuity products, expanding yen and U.S. dollar offerings. Japanese consumers remain interested in U.S. dollar products, and recent yen movement makes them more affordable. -

Group Insurance Results
Q: What drove the strong results in Group Insurance, and expectations for the benefits ratio?
A: The strong performance was due to favorable mortality, effective claims management, double-digit growth in the supplemental health business, and growth in under 5,000 lives and association market segments. The benefits ratio was 81%, below the target range of 83% to 87%; they expect to be towards the lower end of that range for the year. -

International Expansion Opportunities
Q: Are you looking to accelerate international growth through M&A?
A: Prudential aims to accelerate growth in select emerging markets by extending leadership in Latin America, strengthening their footprint in emerging Asia—particularly India and Indonesia—and investing in market leaders in Africa. While open to opportunistic, programmatic M&A to accelerate growth, organic growth remains the top priority. -