Q3 2024 Earnings Summary
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Pension Risk Transfer (PRT) | Continued leadership across Q2―Q4 2023 calls: closed large transactions (e.g., exceeded $10B in liabilities), emphasized strong market demand, and future pipeline. | Captured 40% of the U.S. PRT market, reaching over $16B in sales YTD, including a $6.3B U.S. funded transaction (second deal with IBM). Expects continued strong growth. | Consistent high market share and confidence in growth |
Annuities and Retirement Strategies | Q2 2024: $3.5B in individual retirement sales; Q1 2024: $3.3B, best in a decade; Q4 2023: launched new products and saw strong FlexGuard sales. | Posted $3.6B in individual annuity sales, best quarter in over a decade, with five products surpassing $1B each in annual sales. Benefiting from aging demographics. | Consistent strong performance and diversification efforts |
Japan Surrenders (Yen Depreciation) | Q2 2024: No direct mention of yen-driven surrenders; mention of unfavorable policyholder behavior updates. Q1 2024: No mention. Q4 2023: Modestly elevated surrenders. | Noted elevated U.S. dollar policy surrenders due to weaker yen, impacting earnings. Some moderation as yen strengthened but expect near-term pressure. | Increasing surrenders tied to currency shifts |
PGIM’s Investment Performance | Previously described as strong: 83% (Q2), 80% (Q1) of AUM beating benchmarks, robust long-term outperformance, and ongoing inflows. | Cited 86% of AUM outperforming benchmarks over the past year and 79%+ over 5 and 10 years, with AUM at $1.4T (up 15% YoY). | Slight improvement in performance metrics |
Group Insurance Performance | Q2: 13% sales growth, 81% ratio; Q1: 18% growth, ~85% ratio; Q4: ratio ~83%, lowered guidance range. | 3% YTD sales growth, benefit ratio of 83.4% at the low end of the target, supported by partnerships and claims technology. | Stable growth with continued diversification and strong claims management |
Changes to EPS Guidance Approach | No mention in Q2, Q1, or Q4 2023 calls. | Announced plan to eliminate quarterly EPS baseline in favor of intermediate-term targets starting 2025, aiming for a longer-term outlook. | New guidance framework |
Capital Efficiency Improvements (Wilton Re) | Q2: General pivot to capital-efficient products but no Wilton-specific deals. Q1: GUL reinsurance transaction to reduce market sensitivity. Q4: Similar moves with other reinsurers. | Reinsured $11B guaranteed universal life block with Wilton Re, reducing GUL reserves by 60%; further 50% reduction in traditional VA portfolio. | Ongoing strategy to redeploy capital and reduce risk |
G&A Expense Control | Q2: Expenses lower than expected, but projecting higher spend in Q3; Q1: Aiming to keep expenses flat despite a 7% rise; Q4 2023: 100 bps improvement in admin ratio. | No explicit mention of new G&A control measures; noted higher expenses for enterprise investments. | Continued focus on efficiency but mixed quarter-to-quarter outcomes |
Assurance IQ Wind-Down | Discussed in Q1: Wind-down moving results to divested businesses; minimal earnings impact. Q2 and Q4: No mention. | No mention this quarter. | Concluded topic, no recent references |
Valuation Declines in Real Estate Investments | Q2: Projected continued declines in low single digits; Q1: Expected 5–10% industry decline, larger for office; Q4: ~16% correction so far, possibly 20% total. | No mention of valuation declines in Q3. | No new update on real estate valuations |
Competition in Annuities and Broader Markets | Q2: Called market rational but competitive, brand advantage; Q1: Brand/distribution strengths driving record annuity sales; Q4: No direct mention. | No specific commentary on competitor actions; emphasis on strong annuity sales and diversified offerings. | Steady environment with continued focus on brand and product differentiation |
Demographic Tailwinds (Aging Population) | Q2: Discussed $137T retirement opportunity; Q1: Emphasized growth from ~11,000 daily retirees; Q4: No mention. | Cited 11,000 people turning 65 daily, 30M more by 2030, boosting annuity demand. | Consistent driver of strong retirement/annuity growth |
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Capital Deployment Strategy
Q: How will you use capital freed from reinsurance deals?
A: We aim to balance capital deployment by maintaining our strong balance sheet, investing in growth, and returning excess capital to shareholders. This quarter, we returned over $700 million to shareholders. Our consistent process involves supporting strong sales across our businesses, including new products, while being good stewards of capital. -
Prismic Reinsurance Update
Q: What's the update on Prismic's reinsurance activities?
A: We have an active pipeline of multiple reinsurance transactions focusing on balance sheet optimization, new sales financing, and third-party blocks, particularly in Japan. We've established a dedicated licensed team in Tokyo to advance these opportunities and expect our next transaction to be a back book deal, potentially in Japan. -
Back Book Deal Impact
Q: Will a Prismic back book deal affect earnings?
A: Reinsuring blocks may initially reduce earnings since we cede associated income, but it frees up capital we can redeploy for growth. In Japan, such deals release reserves and capital due to high margins, providing better risk-adjusted returns despite a temporary earnings impact. -
Japan Product Margins
Q: How do margins on new retirement products compare to old ones?
A: We're pleased with the profitability in Japan and don't expect an impact on margins despite the product mix shift. Retirement investment product sales increased about 30% year-to-date, accounting for the majority of Japan sales this quarter. -
Annuity Sales Growth
Q: What's driving annuity sales, and is it sustainable?
A: We achieved over $3.5 billion in sales this quarter, our best in over a decade. Growth comes from diversifying our annuity portfolio—now with five products exceeding $1 billion in sales this year. With aging demographics and increased demand for protected savings, we expect strong performance to continue into 2025. -
Japan Sales Mix
Q: Are you seeing a shift back to yen products in Japan?
A: Approximately 30% of our Japan sales were yen-based this quarter, nearly doubling over the last three years. We've intentionally expanded our yen-based offerings and see success in this diversification strategy amid changing interest rates. -
Excess Mortality Impact
Q: Do you expect persistent excess mortality, and are reserves adequate?
A: Our assumptions reflect continued excess mortality through 2028 before returning to pre-pandemic trends. We regularly monitor mortality trends, and our diversified business provides natural hedges. We believe our reserves are prudent and sufficient to handle potential impacts. -
PGIM Institutional Outflows
Q: What drove institutional outflows in PGIM this quarter?
A: We experienced variability due to overfunded defined benefit plans derisking, leading to net outflows. However, year-to-date, we have positive $14 billion in third-party institutional flows and $15 billion in affiliated flows. We expect fixed income flows to normalize as rates stabilize. -
Potential Non-Core Sales
Q: Any non-core business blocks you might sell?
A: We'll consider additional opportunities that meet our strategic and financial objectives. We've reduced our traditional variable annuities portfolio by 50% and guaranteed universal life reserves by 60%. We'll continue reviewing our portfolio for such opportunities. -
Changes to Earnings Disclosure
Q: What changes are you making to quarterly disclosures?
A: We'll eliminate the quarterly EPS baseline and introduce new intermediate-term financial targets starting in 2025. We'll also preannounce variable investment income, providing greater insight into our financial outlook. -
Group Business Partnerships
Q: Can you discuss partnerships in Workplace Solutions?
A: We've executed partnerships focused on enhancing the customer enrollment experience and claims management. For example, we're working with a leading-edge technology firm to transform benefits enrollment and with Evolution IQ to expedite disability claim evaluations. -
Medical Stop Loss Business
Q: How significant will the stop loss business be over time?
A: Our entry into medical stop loss complements our diversification strategy. We'll scale thoughtfully with disciplined underwriting and reinsurance partnerships. Initially, it will be a small portion of our business mix, but we see long-term potential as we grow strategically. -
Prismic Japan Team
Q: Tell us about the Prismic team in Japan and deal opportunities.
A: We've established a licensed team in Tokyo to pursue reinsurance opportunities. There's significant demand due to the new economic solvency regime affecting long-duration, foreign currency-denominated liabilities. We believe our credibility and expertise position us well in this market. -
UK Longevity Blocks
Q: Are there tailwinds for UK longevity blocks?
A: Yes, with UK pension funding levels reaching 113%, we expect around $70 billion in pension risk transfer market size this year. We're pleased to be a leader in the UK and other markets like the Netherlands, and we continue to see strong opportunities. -
PGIM Management of Japanese Assets
Q: Does PGIM manage all assets backing Japanese liabilities?
A: The vast majority of these assets are managed by PGIM. If they transfer to Prismic, PGIM would continue managing them, generally on third-party terms, which is accretive to PGIM.