Prudential Financial, Inc. Announces Second Quarter 2023 Results

Prudential Financial, Inc. reported second quarter results. Net income attributable to Prudential Financial, Inc. was $511 million ($1.38 per Common share) for the second quarter of 2023, compared to a net loss of $1.010 billion ($2.71 per Common share) for the second quarter of 2022. After-tax adjusted operating income was $1.087 billion ($2.94 per Common share) for the second quarter of 2023, compared to $895 million ($2.34 per Common share) for the second quarter of 2022.

Consolidated adjusted operating income and adjusted book value are non-GAAP measures. A discussion of these measures, including definitions thereof, how they are useful to investors, and certain limitations thereof, is included later in this press release under “Non-GAAP Measures” and reconciliations to the most comparable GAAP measures are provided in the tables that accompany this release.

RESULTS OF ONGOING OPERATIONS

The Company’s ongoing operations include PGIM, U.S. Businesses, International Businesses, and Corporate & Other. In the following business-level discussion, adjusted operating income refers to pre-tax results.

PGIM

PGIM, the Company’s global investment management business, reported adjusted operating income of $179 million for the second quarter of 2023, compared to $206 million in the year-ago quarter. This decrease primarily reflects lower asset management fees, driven by net outflows and rising rates, and higher expenses, partially offset by higher other related revenues, driven by higher seed and co-investment income.

PGIM assets under management of $1.266 trillion were up 1% from the year-ago quarter, primarily resulting from equity market appreciation, partially offset by higher interest rates and net outflows. Third-party net outflows of $5.2 billion in the current quarter were driven primarily by redemptions from public equity strategies and reflect institutional outflows of $3.0 billion and retail outflows of $2.2 billion.

U.S. Businesses

U.S. Businesses reported adjusted operating income of $956 million for the second quarter of 2023, compared to $573 million in the year-ago quarter. This increase includes a favorable comparative impact from our annual assumption update and other refinements of $1.606 billion, partially offset by the absence of a one-time gain on the sale of a block of legacy variable annuities of $1.448 billion. Excluding these items, current quarter results primarily reflect higher net investment spread results and more favorable underwriting results, partially offset by lower net fee income.

Retirement Strategies, consisting of Institutional Retirement Strategies and Individual Retirement Strategies, reported adjusted operating income of $876 million for the second quarter of 2023, compared to $2.181 billion in the year-ago quarter.

Institutional Retirement Strategies:

Reported adjusted operating income of $428 million in the current quarter, compared to $432 million in the year-ago quarter. This decrease includes a less favorable comparative impact from our annual assumption update and other refinements of $8 million. Excluding this item, current quarter results primarily reflect higher fee income from business growth. In addition, net investment spread results reflect business growth, offset by lower variable investment income.
Account values of $259 billion, a record high, increased 10% from the year-ago quarter and reflect business growth driven by significant pension risk transfer transactions. Sales in the current quarter of $5.7 billion included $3.6 billion of international reinsurance transactions.
Individual Retirement Strategies:

Reported adjusted operating income of $448 million in the current quarter, compared to $1.749 billion in the year-ago quarter. This decrease includes a less favorable comparative impact from our annual assumption update and other refinements of $7 million and the absence of a one-time gain on the sale of a block of legacy variable annuities of $1.448 billion. Excluding these items, current quarter results primarily reflect higher net investment spread results, partially offset by lower fee income, net of distribution expenses and other associated costs.
Account values of $115 billion were down 6% from the year-ago quarter, reflecting the reinsurance of a block of legacy variable annuities and net outflows, partially offset by market appreciation. Sales of $1.9 billion in the current quarter increased 19% from the year-ago quarter, reflecting continued momentum from our FlexGuard products and increased sales of fixed annuity products.
Group Insurance:

Reported adjusted operating income of $139 million in the current quarter, a record high, compared to $54 million in the year-ago quarter. This increase includes a favorable comparative impact from our annual assumption update and other refinements of $39 million. Excluding this item, current quarter results primarily reflect more favorable underwriting results in both group life and disability, partially offset by higher expenses driven by business growth.
Reported earned premiums, policy charges, and fees of $1.4 billion increased 7% from the year-ago quarter, reflecting growth in disability.
Individual Life:

Reported a loss, on an adjusted operating income basis, of $59 million in the current quarter, compared to a loss of $1.662 billion in the year-ago quarter. This lower loss includes a favorable comparative impact from our annual assumption update and other refinements of $1.582 billion. Excluding this item, current quarter results primarily reflect higher net investment spread results.
Sales of $197 million in the current quarter increased 27% from the year-ago quarter, driven by Variable Life, reflecting our pivot to less market sensitive products.
International Businesses

International Businesses, consisting of Life Planner and Gibraltar Life & Other, reported adjusted operating income of $784 million for the second quarter of 2023, compared to $692 million in the year-ago quarter. This increase includes a favorable comparative impact from our annual assumption update and other refinements of $32 million. Excluding this item, current quarter results primarily reflect higher emerging market earnings.

Life Planner:

Reported adjusted operating income of $487 million in the current quarter, compared to $443 million in the year-ago quarter. This increase reflects higher net investment spread results and business growth.
Constant dollar basis sales(4) of $250 million in the current quarter increased 12% from the year-ago quarter, primarily driven by record high sales in Brazil, as well as higher sales in Japan.
Gibraltar Life & Other:

Reported adjusted operating income of $297 million in the current quarter, compared to $249 million in the year-ago quarter. This increase includes a favorable comparative impact from our annual assumption update and other refinements of $32 million. Excluding this item, current quarter results primarily reflect higher emerging market earnings, partially offset by lower net investment spread results.
Constant dollar basis sales(4) of $251 million in the current quarter increased 6% from the year-ago quarter, primarily driven by the Bank channel.
Corporate & Other

Corporate & Other reported a loss, on an adjusted operating income basis, of $527 million for the second quarter of 2023, compared to a loss of $321 million in the year-ago quarter. This higher loss primarily reflects higher expenses, unfavorable foreign exchange rate impacts, lower net investment income, and lower income from pension and other employee benefit plans.

NET INCOME

Net Income in the current quarter included $765 million of pre-tax net realized investment losses and related charges and adjustments, including $51 million of pre-tax net impairment and credit-related losses, $3 million of pre-tax losses related to market experience updates, $16 million of pre-tax earnings from divested and run-off businesses, and $16 million of pre-tax gains related to net change in value of market risk benefits.

Net loss for the year-ago quarter included $2.438 billion of pre-tax net realized investment losses and related charges and adjustments, largely reflecting the impacts of rising interest rates, and also $104 million of pre-tax net impairment and credit-related losses, $710 million of pre-tax losses related to net change in value of market risk benefits, $515 million of pre-tax earnings from divested and run-off businesses, and $371 million of pre-tax gains related to market experience updates.

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