Sign in

    Prudential Financial Inc (PRU)

    CEO Change
    Board Change

    Business Description

    Prudential Financial, Inc. (PRU) is a global financial services leader operating primarily in the United States, Asia, Europe, and Latin America, offering a diverse range of financial products and services . The company engages in investment management, insurance, and retirement solutions, catering to various market segments from mass middle to affluent markets . Its operations are structured into several segments, each contributing to its competitive advantages, earnings diversification, and capital benefits .

    1. PGIM (Global Investment Management) - Manages approximately $1.298 trillion in assets, providing investment management services across various asset classes, significantly contributing to earnings through asset management fees and investment income .
    2. U.S. Businesses - Offers retirement investment and income products, group life and disability insurance, and individual life insurance, serving different market segments from mass middle to affluent markets .
    3. International Businesses - Focuses on life insurance, retirement products, and investment products in markets such as Japan, Brazil, Argentina, and Mexico, with a strong presence in Japan through its Life Planner operations .
    4. Closed Block Division - Includes certain in-force participating insurance and annuity products, accounted for separately from other divested and run-off businesses .
    5. Corporate and Other Operations - Encompasses various corporate functions and other business activities not included in the main segments .

    Q2 2024 Summary

    Initial Price$117.32April 1, 2024
    Final Price$117.53July 1, 2024
    Price Change$0.21
    % Change+0.18%

    What went well

    • Prudential's annuity market continues to be extremely strong, with the market on pace to deliver a third straight record year, outpacing last year's run rate by over 20% . Prudential has the broadest product portfolio ever, achieving record sales in three distinct products, and possesses the ability to adapt pricing quickly in changing markets .
    • Prudential holds competitive advantages with its broad product portfolio, differentiated distribution, and strong brand, operating in a rational market . The company maintains pricing discipline to ensure delivery for both customers and shareholders .
    • Focused on international growth by creating a select portfolio in emerging markets, including extending leadership in Latin America, strengthening presence in India and Indonesia, and investing in market leaders in Africa . Prudential is open to opportunistic programmatic M&A to accelerate growth in these markets .

    What went wrong

    • Potential Decline in Annuity Sales Due to Decreasing Interest Rates: The company acknowledges that "in a decreasing interest rate environment, we could see some pullback from the record sales levels, particularly in fixed annuities."
    • Variability in PGIM's Institutional Flows: PGIM's flows have become "more variable" due to clients derisking or exploring pension risk transfers, leading to "more than normal institutional money in motion" and potential short-term challenges.
    • Delayed Impact from Emerging Markets Expansion: The growth in emerging markets is expected to "take time to develop" and is focused on the "medium and long term," suggesting limited near-term earnings contributions and exposure to risks inherent in developing markets.

    Q&A Summary

    1. 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.

    2. 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.

    3. 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.

    4. 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.

    5. 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.

    6. 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.

    7. 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.

    8. 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.

    9. 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.

    10. 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.

    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    PGIM8988492,723-8323,6389909631,021
    U.S. Businesses9,0757,01820,632-8,61928,10615,9668,40213,972
    - Institutional Retirement4,8892,7377,847-4,44311,03011,5384,0419,473
    - Individual Retirement1,0951,1193,367-1,0644,5171,2141,2461,310
    - Group Insurance1,5641,5984,738-1,6156,2851,6341,5861,643
    - Individual Life1,5271,5644,680-1,4976,2741,5801,5291,546
    - Assurance IQ--------
    International Businesses5,0154,72314,304-5,3618,6824,7134,5124,417
    - Life Planner----9,5962,5502,3672,247
    - Gibraltar Life----9,0862,1632,1452,170
    Corporate and Other116542158346830(36)71
    Closed Block Division------811817
    Other Divested and Run-off-------384
    Total Revenue17,04513,49837,874-17,52350,89423,50914,88319,490
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States----31,031---
    Japan----15,538---
    Other countries----7,410---
    International Businesses-----4,713-4,417
    - Life Planner-----2,550-2,247
    - Gibraltar Life and Other-----2,163-2,170
    Domestic Operations--------
    Foreign Operations--------
    - Korea--------
    Total Revenue----53,97923,509-19,490
    KPIs - MetricFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Variable Annuity Account Values (USD Million)**117,300109,100104,10098,864-115,300115,300128,793
    **Fixed Annuity Account Values (USD Million)**6,5005,7006,0006,600-7,7008,6009,558
    **Average Amortized Cost of U.S. Dollar-Denominated Fixed Maturities (USD Billion)**60.160.261.162.7-66.767.069.2
    **Average Amortized Cost of Australian Dollar-Denominated Fixed Maturities (USD Billion)**4.94.74.3--3.73.72.8
    **Loan-to-Value Ratio for Commercial Mortgage Loans (%)**--5958-585960
    **Debt Service Coverage Ratio for Commercial Mortgage Loans (Times)**--2.482.46-2.452.442.42
    **PICA’s RBC Ratio (%)**383383375--435435435
    **Prudential of Japan Solvency Margin Ratio (%)**800772762787-759759762
    **Gibraltar Life Solvency Margin Ratio (%)**914903887948-940940947
    **Net Amount at Risk (USD Million)**11,33210,88513,4179,753-8,9709,3587,878
    **Cash Surrender Value (USD Million)**201,238199,158189,023197,418-198,600195,478199,533
    **Weighted-Average Crediting Rate (%)**2.873.112.872.78-3.553.232.82
    **Annualized New Business Premiums (USD Million)**319490491598-517519588

    Executive Team

    NamePositionStart DateShort Bio
    Charles F. LowreyExecutive Chairman (effective March 31, 2025, for 18 months)March 31, 2025Charles F. Lowrey was elected Chairman in April 2019 and has served as CEO, President, and Director since December 2018. He joined Prudential in March 2001 after a career at J.P. Morgan .
    Robert M. FalzonVice Chair (retiring effective July 11, 2025)December 2018Robert M. Falzon has been with Prudential since 1983. He was elected Director in August 2019 and has served as Vice Chair since December 2018. Previously, he was EVP and CFO from March 2013 to November 2018 .
    Ann M. KapplerExecutive Vice President, General Counsel, and Chief Compliance OfficerFebruary 2024Ann M. Kappler was elected EVP and General Counsel in September 2020 and named Chief Compliance Officer in February 2024. She joined Prudential in 2009 .
    Kenneth Y. TanjiExecutive Vice President and Chief Financial OfficerDecember 2018Kenneth Y. Tanji was elected EVP and CFO in December 2018. He joined Prudential in 1988 and has held various positions, including CFO of Prudential’s International Businesses in 2013 .
    Andrew F. SullivanCEO (effective March 31, 2025)March 31, 2025Andrew F. Sullivan was appointed CEO effective March 31, 2025. He joined Prudential in 2011 and has held various leadership positions, including EVP and Head of International Businesses and Global Investment Management since January 2023 .
    Caroline A. FeeneyGlobal Head of Insurance and Retirement (effective March 31, 2025)March 31, 2025Caroline A. Feeney is set to become Global Head of Insurance and Retirement effective March 31, 2025. She currently serves as EVP and Head of U.S. Businesses since January 2023 .
    Lucien A. AlziariExecutive Vice President and Chief Human Resources OfficerJune 2017Lucien A. Alziari was elected EVP in October 2018 and has served as Chief Human Resources Officer since June 2017. Before joining Prudential, he was EVP and CHRO at A.P. Moller-Maersk .
    Stacey GoodmanExecutive Vice President and Chief Information OfficerJuly 2019Stacey Goodman was elected EVP and CIO in July 2019. Before joining Prudential, she served as CIO at Freddie Mac and held leadership roles at CIT Group, Bank of America, UBS, and PaineWebber .
    Timothy L. SchmidtSenior Vice President and Chief Investment OfficerDecember 2018Timothy L. Schmidt was elected SVP and CIO in December 2018. He joined Prudential in July 2010 and previously served as Head of Global Portfolio Management .
    Carmine Di SibioIndependent Director, Board of DirectorsJuly 1, 2024Carmine Di Sibio serves as an Independent Director on the Board of Directors for Prudential Financial, Inc., with his appointment effective July 1, 2024 .

    Questions to Ask Management

    1. Given the potential dampening of demand for annuity products in a decreasing interest rate environment, especially in fixed annuities, how do you plan to sustain growth in your annuity sales, and what specific strategies are you implementing to adapt your pricing and product offerings?
    2. As you work on building a select portfolio in international markets, particularly in emerging regions like Latin America, Asia, and Africa, what challenges do you foresee in these markets, and how do you plan to address them, especially considering uncertainties in accelerating growth through M&A activities?
    3. With PGIM's recent decision to run off certain quantitative funds, how has this impacted your overall investment performance, and what steps are you taking to mitigate any associated pressures or declines in investment returns?
    4. The Group Insurance benefit ratio has been below your target range for the first half of the year; what factors have contributed to this deviation, and how do you plan to manage the benefit ratio going forward to ensure it aligns with your target without compromising growth?
    5. Regarding Prismic, you've indicated you'd be disappointed if no additional transactions occur before year-end; what obstacles are you encountering in closing more transactions, and how confident are you in meeting your growth objectives for Prismic in the current market environment?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateDecember 2023
    End Date/DurationJanuary 1, 2024 - December 31, 2024
    Total Additional Amount$1.0 billion
    Remaining Authorization$250 million (as of September 30, 2024)
    DetailsManage capital based on market conditions, compliance with laws, and opportunities for growth

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q3 2024
    • Guidance:
      • Earnings Per Share (EPS): Baseline EPS expected to be $3.48 per share, with an adjusted EPS of $3.56 if specific third-quarter items are excluded .
      • Underwriting Experience: Expectation of $30 million of favorable seasonality .
      • Investments: Higher investments in initiatives to support growth .
      • Capital Position: Strong capital position with regulatory capital ratios exceeding AA objectives .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024
    • Guidance:
      • Earnings Per Share (EPS): Baseline EPS of $3.48 for Q3 2024, adjusted EPS of $3.56 excluding specific items .
      • Corporate and Other Loss: Full-year 2024 expected loss lowered to $1.8 billion .
      • Benefit Ratio for Group Insurance: Benefit ratio was 81%, expected to be towards the lower end of the 83% to 87% target range for the year .
      • Variable Investment Income: Continued valuation declines in real estate investments expected, with declines in the low single digits .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024
    • Guidance:
      • Earnings Per Share (EPS): Baseline EPS of $3.43 for Q2 2024, adjusted EPS of $3.50 excluding specific items .
      • Capital Position: Strong capital position with regulatory capital ratios exceeding AA objectives and cash and liquid assets of $4.2 billion .
      • Pension Risk Transfer (PRT) Business: Healthy pipeline expected, supported by favorable funding positions over 100% .
      • Group Insurance Benefit Ratio: Total benefit ratio just under 85%, within the 83% to 87% target range .
      • Commercial Mortgage Loans: About $2 billion or 4% of the portfolio expected to mature in 2024, with about 10% per year through 2028 .
      • Regulatory Transition in Japan: Preparing for the new ESR regime effective April 1, 2025 .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024
    • Guidance:
      • Earnings Per Share (EPS): Baseline EPS of $3.36 per share for Q1 2024, adjusted EPS of $3.50 excluding specific items .
      • Benefits Ratio for Group Insurance: Lowered to 83% to 87% for the year .
      • Share Repurchases: Up to $1 billion authorized for 2024 .
      • Dividend Increase: 4% increase beginning in Q1 2024, marking the 16th consecutive annual increase .
      • RBC Ratio: PICA's year-end RBC ratio expected to be greater than 425% .

    Latest news

    Recent developments and announcements about PRU.

    Corporate Leadership

      Leadership Change

      ·
      Dec 3, 2024, 10:16 PM

      Andrew Sullivan is appointed as the next CEO of Prudential Financial, effective March 31, 2025. He is currently the Executive Vice President and Head of International Businesses and Global Investment Management. Caroline Feeney will become the Global Head of Insurance and Retirement, a newly created position, effective the same date. Charles F. Lowrey will continue as Executive Chairman for 18 months. Robert Falzon, Vice Chair, will retire after 42 years with the firm, effective July 11, 2025 .

      CEO Change

      ·
      Dec 3, 2024, 10:16 PM

      Prudential Financial, Inc. announced that Andrew F. Sullivan will become the new President and CEO, effective March 31, 2025. He will succeed Charles F. Lowrey, who will remain with the company as Executive Chairman .

      Board Change

      ·
      Dec 3, 2024, 10:16 PM

      Andrew F. Sullivan has been appointed as the President and CEO of Prudential Financial, Inc., and will join the Board of Directors, effective March 31, 2025. Robert M. Falzon, the Vice Chairman, will resign from the Board effective March 31, 2025, and retire from the company on July 11, 2025 .

    Financial Reporting

      Auditor Changes

      ·
      Jan 13, 2014, 12:00 AM

      Change in Auditor for The Prudential Employee Savings Plan

      Effective January 13, 2014, The Prudential Employee Savings Plan engaged SB & Company, LLC as its new independent registered public accounting firm. This decision was approved by the Administrative Committee of the Plan. During the two fiscal years ended December 31, 2013, and through January 13, 2014, the Plan had not consulted with SB & Company, LLC regarding any accounting principles or audit opinions .