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 10% increase from the same period last year. Total revenue was $13.4 billion, driven by growth in its insurance and investment management businesses. The company’s operating return on equity (ROE) was 12.1%, up from 11.4% in the same period last year. Prudential’s assets under management (AUM) increased to $1.2 trillion, a 5% increase from the previous quarter. The company’s capital and liquidity positions remain strong, with a risk-based capital ratio of 455% and a liquidity ratio of 144%.
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 (its global investment management business), its U.S. Businesses (Retirement Strategies, Group Insurance, and Individual Life), its International Businesses, the Closed Block division, and its Corporate and Other operations. The company attributes financing costs to each segment and includes earnings on the capital it believes is necessary to support the risks of that segment.
Management expects Prudential’s results will continue to benefit from its mutually-reinforcing business system, which provides a mix of complementary businesses that offer diversification and capital benefits. The company is also working to become leaner and more agile by simplifying its management structure, empowering employees, and investing in technology and data platforms to create operating efficiencies.
Regulatory Developments
In April 2024, the U.S. Department of Labor adopted a final “Retirement Security Rule” that 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 market interest rates can have significant impacts on Prudential’s liquidity, capital positions, cash flows, results of operations, and financial position. The company employs asset/liability management programs to help mitigate these risks, including strategic asset allocation, hedging strategies, and product repricing or discontinuation.
In the U.S., interest rates have increased from historically low levels, allowing Prudential to generally reinvest at higher yields than its current portfolio. In Japan, the company has also seen interest rates rise after an extended period of low and even negative yields.
Consolidated Results of Operations
Prudential reported a $1,250 million increase in net income attributable to the company for the third quarter of 2024 compared to the prior year period. This was driven by favorable variances in realized investment gains/losses, Divested and Run-off Businesses, and market risk benefits, partially offset by 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 Prudential 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 market risk benefits.
Segment Results
PGIM’s adjusted operating income increased in both the third quarter and first nine months of 2024, primarily due to higher asset management fees and other related revenues, partially offset by higher expenses.
Retirement Strategies’ adjusted operating income increased, driven by higher net investment spread results and more favorable reserve experience, partially offset by higher expenses. Institutional Retirement Strategies saw a favorable comparative impact from annual assumption updates, while Individual Retirement Strategies benefited from growth in indexed variable annuities.
Group Insurance’s adjusted operating income decreased slightly, reflecting higher operating and variable expenses, partially offset by higher net investment spread results. Underwriting results were mixed, with more favorable mortality in group life but less favorable disability claims experience.
Individual Life’s adjusted operating income increased in the third quarter but decreased for the first nine months, including the impact of annual assumption updates. Underlying results improved due to favorable mortality and the impact of a reinsurance transaction, partially offset by lower net investment spread results.
International Businesses’ adjusted operating income decreased, impacted by unfavorable currency movements, annual assumption updates, and lower underwriting results, partially offset by higher earnings from joint ventures and investments.
Corporate and Other operations reported increased losses in the third quarter but decreased losses for the first nine months, primarily due to changes in net charges from other corporate activities.
Assets Under Management and Sales
PGIM’s assets under management increased to $1.400 trillion as of September 30, 2024, driven by equity market appreciation, the impact of lower interest rates, and strong investment performance. Private capital deployment also increased.
Retirement Strategies saw strong net additions in its Institutional business, primarily from pension risk transfer and international reinsurance sales. Individual Retirement Strategies experienced net outflows, though this was offset by market appreciation.
Group Insurance sales decreased in the third quarter but increased for the first nine months, with higher disability sales offsetting lower group life sales.
Individual Life sales increased, reflecting higher variable life and term life sales through both the Prudential Advisors and third-party channels.
International Businesses’ sales on a constant exchange rate basis increased, driven by higher investment contract and retirement product sales in Japan as well as growth in Brazil.
Risks and Risk Mitigants
Prudential employs various strategies to manage the risks associated with its products, including:
- Fixed Annuities: Credit rate resetting, surrender charges, 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 adjusts its product offerings and pricing to respond to changes in the interest rate environment, customer behavior, and market conditions.
Conclusion
Prudential Financial delivered strong financial results in the third quarter and first nine months of 2024, benefiting from its diversified business mix, proactive risk management, and strategic initiatives to enhance efficiency and competitiveness. The company continues to navigate a changing regulatory landscape and interest rate environment while investing in growth opportunities across its global operations. Prudential appears well-positioned to meet the evolving needs of its clients and capitalize on market trends in the insurance, retirement, and investment management sectors.
