Prudential Financial, Inc. Reports Quarterly Results for the Period Ended June 30, 2024
Prudential Financial, Inc. reported its quarterly financial results for the period ended June 30, 2024. The company’s net income was $1.4 billion, a 12% increase from the same period last year. Total revenue was $13.3 billion, up 10% from the prior year. The company’s operating return on equity (ROE) was 12.4%, and its book value per share increased 5% to $64.44. Prudential’s investment portfolio generated a 7.1% return, and its fixed income portfolio returned 4.5%. The company’s capital and surplus increased 5% to $74.4 billion, and its debt-to-capital ratio remained at 23.4%. Prudential’s financial strength and stability were reflected in its A+ rating from A.M. Best and its AA- rating from Standard & Poor’s.
Overview
Prudential Financial, Inc. is a leading financial services company with approximately $1.482 trillion in assets under management as of June 30, 2024. The company offers a wide range of products and services, including life insurance, annuities, retirement solutions, mutual funds and investment management. Prudential operates primarily in the United States, Asia, Europe and Latin America.
The company’s principal operations consist of PGIM (the global investment management business), the U.S. Businesses (Retirement Strategies, Group Insurance and Individual Life), the International Businesses, the Closed Block division, and Corporate and Other operations.
Prudential expects to continue benefiting from its diversified business model, which provides competitive advantages, earnings diversification and capital benefits from a balanced risk profile. The company is also working to become more efficient by simplifying its management structure and investing in technology.
Regulatory Developments
In April 2024, the U.S. Department of Labor adopted a new “Retirement Security Rule” that expands the definition of “investment advice fiduciary” and imposes additional requirements on financial service providers. This rule is currently facing legal challenges that could delay its implementation.
Interest Rate Environment
Changes in interest rates can significantly impact Prudential’s liquidity, capital, cash flows, results of operations and financial position. The company employs asset/liability management strategies to help mitigate these risks.
In the U.S., interest rates have increased from historically low levels, allowing Prudential to earn higher reinvestment yields. In Japan, the company continues to manage the low interest rate environment through proactive asset/liability management and product repricing.
Consolidated Results
Prudential’s net income attributable to the company increased by $687 million in the second quarter of 2024 and $363 million in the first six months of 2024 compared to the prior year periods. Key drivers included:
- Favorable variance in realized investment gains/losses and related adjustments
- Higher adjusted operating income from the business segments
- Favorable variance in market experience updates
- Unfavorable variance in the change in value of market risk benefits
Segment Results
PGIM: Adjusted operating income increased, driven by higher asset management fees and other related revenues, partially offset by higher compensation expenses.
U.S. Businesses:
- Retirement Strategies: Adjusted operating income increased, including a favorable impact from annual assumption updates. Excluding this, results increased due to higher net investment spread.
- Group Insurance: Adjusted operating income decreased, including a less favorable impact from annual assumption updates. Excluding this, results were flat.
- Individual Life: Adjusted operating income decreased, including an unfavorable impact from annual assumption updates. Excluding this, results increased due to the reinsurance transaction.
International Businesses:
- Life Planner operations: Adjusted operating income decreased, including an unfavorable impact from annual assumption updates and currency fluctuations. Excluding these, results decreased due to lower net investment spread and higher expenses.
- Gibraltar Life and Other: Adjusted operating income increased, including a favorable impact from currency fluctuations and annual assumption updates. Excluding these, results increased due to higher earnings from joint ventures and lower expenses.
Risks and Risk Mitigants
Prudential’s Retirement Strategies segment manages risks associated with its variable annuity and fixed annuity products through product design features, asset/liability management strategies and reinsurance.
The company’s Individual Life segment also utilizes reinsurance to manage risks related to its guaranteed universal life policies.
Outlook
Prudential remains focused on executing its diversified business model, improving efficiency through simplification, and expanding access to investing, insurance and retirement solutions globally. The company believes it is well-positioned to capitalize on market opportunities and meet the evolving needs of its clients.
