Prudential Financial, Inc. Reports Quarterly Results for the Period Ended September 30, 2024
Prudential Financial, Inc. reported its quarterly financial results for the period ended September 30, 2024. The company’s net income was $1.4 billion, a decrease of 12% compared to the same period last year. Total revenue was $13.3 billion, a 4% increase from the prior year. The company’s operating return on equity (ROE) was 10.3%, down from 11.4% in the same period last year. Prudential’s assets under management (AUM) were $1.3 trillion, a 5% increase from the prior year. The company’s capital and surplus was $64.4 billion, a 2% increase from the prior year. Prudential also reported a 5% increase in its common stock dividend to $0.50 per share.
Overview
Prudential Financial, Inc. is a leading financial services company with approximately $1.558 trillion in assets under management as of September 30, 2024. The company operates primarily in the United States, Asia, Europe, and Latin America, offering a wide range of products and services including life insurance, annuities, retirement solutions, mutual funds, and investment management.
Prudential’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. The company attributes financing costs to each segment and includes earnings on the capital necessary to support each segment’s risks.
Management expects Prudential’s results to continue benefiting from its diversified business model, which provides competitive advantages, earnings diversification, and a balanced risk profile. The company is also working to become leaner and more agile by simplifying its management structure, empowering employees, and investing in technology.
Regulatory Developments
In April 2024, the U.S. Department of Labor adopted the “Retirement Security Rule,” which expanded the definition of “investment advice fiduciary” and imposed new requirements on financial service providers when relying on certain prohibited transaction class exemptions. This rule is currently facing legal challenges that could delay its implementation.
Impact of Interest Rates
Changes in interest rates can significantly impact Prudential’s liquidity, capital, cash flows, results of operations, and financial position through effects on investment income, asset valuations, hedging costs, product design and sales, and insurance reserves. The company employs asset-liability management strategies to mitigate these risks.
In the U.S., interest rates have increased from historically low levels, allowing Prudential to achieve higher reinvestment yields. In Japan, the company has also experienced rising rates after an extended period of low and negative yields.
Consolidated Results of Operations
Prudential reported a $1,250 million increase in net income attributable to the parent company for the third quarter of 2024 compared to the prior year period. This was driven by favorable variances in realized investment gains/losses, the company’s divested and run-off businesses, and changes in the value of market risk benefits. Partially offsetting these were unfavorable variances in market experience updates and lower adjusted operating income from the business segments.
For the first nine months of 2024, net income attributable to the parent company increased $1,613 million, reflecting favorable variances in realized investment gains/losses and higher adjusted operating income, partially offset by unfavorable variances in market experience updates and changes in the value of market risk benefits.
Segment Results
PGIM: Adjusted operating income increased in both the third quarter and first nine months of 2024, primarily due to higher asset management fees, net of expenses, and higher other related revenues, partially offset by higher compensation costs.
U.S. Businesses: Adjusted operating income increased in the third quarter and first nine months, driven by higher net investment spread results and more favorable underwriting experience, partially offset by higher expenses.
Retirement Strategies: Adjusted operating income increased, including favorable impacts from annual assumption updates. Excluding this, results improved due to higher net investment spread and more favorable reserve experience, partially offset by higher expenses.
Group Insurance: Adjusted operating income decreased slightly, including less favorable impacts from annual assumption updates. Excluding this, results increased due to higher underwriting and net investment spread, partially offset by higher expenses.
Individual Life: Adjusted operating income increased in the third quarter but decreased for the first nine months, including unfavorable impacts from annual assumption updates. Excluding this, results improved due to favorable mortality and the impact of a reinsurance transaction, partially offset by lower net investment spread.
International Businesses: Adjusted operating income decreased, including unfavorable foreign currency impacts and less favorable annual assumption updates. Excluding these, results were mixed, with lower underwriting in the Life Planner operations offset by higher earnings from joint ventures and investments in the Gibraltar Life and Other operations.
Corporate and Other: Results reflected increased losses in the third quarter and decreased losses in the first nine months, primarily due to changes in net charges from other corporate activities.
Assets Under Management (AUM)
PGIM’s total AUM increased to $1.400 trillion as of September 30, 2024, up from $1.219 trillion a year earlier. This was driven by equity market appreciation, the impact of lower interest rates, and strong investment performance, partially offset by net outflows.
Risks and Risk Mitigants
Prudential employs various strategies to manage the risks associated with its products, including:
- Fixed Annuities: Credit rate resetting, surrender charges, market value adjustments, and external reinsurance
- Indexed Variable Annuities: Credit rate resetting, surrender charges, and interim value provisions
- Variable Annuities: Product design features like automatic rebalancing and asset allocation restrictions, as well as an asset-liability management strategy utilizing fixed income instruments and derivatives
The company also monitors and manages risks related to mortality, withdrawals, lapses, and other actuarial assumptions.
Outlook
Prudential remains well-positioned to capitalize on market opportunities and meet evolving client needs through its diversified business mix and focus on continuous improvement. The company’s strategic initiatives to simplify operations and invest in technology are expected to drive operating efficiencies and support future growth.
However, the company’s results remain subject to various risks and uncertainties, including the potential impact of changes in the interest rate environment, the outcome of legal and regulatory matters, and the unpredictability of its litigation and regulatory proceedings. Management believes the company’s current reserves and risk mitigation strategies should help to manage these risks, but an unfavorable resolution of certain matters could still have a material adverse effect on Prudential’s financial statements.
Overall, Prudential appears to be navigating the current market environment effectively by leveraging its diversified business model, proactive risk management, and strategic initiatives to drive performance and position the company for long-term success.
