Prudential Financial, Inc. (PRU) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Robust Sales and Strong Investment Performance: Prudential experienced robust sales in U.S. and International Businesses, alongside strong investment performance across PGIM’s Private Alternatives platform.

• Capital Efficiency and Shareholder Returns: The company maintained a disciplined approach to capital deployment, investing in business growth and returning excess capital to shareholders.

• Growth in Retirement Strategies and Annuities: Nearly $22 billion in Retirement Strategies sales in the first half of the year, a 67% increase from the prior year, including significant sales in pension risk and longevity risk transfer.

• PGIM’s Positioning and Growth: PGIM is well-positioned to address the demand for retirement solutions globally, with assets under management supporting defined benefit and defined contribution plans.

• Expansion in Insurance Businesses: Prudential expanded its product suite and distribution channels in U.S. Insurance businesses, resulting in a shift to a more capital-efficient product mix and increased sales.

Pessimistic Highlights

• Underwriting and Investment Income Challenges: Results in the International Businesses included less favorable underwriting results and lower spread income due to less favorable variable investment income.

• Institutional Outflows in PGIM: Institutional outflows of $8.9 billion were primarily in fixed income, driven by two large clients.

Company Outlook

• Growth and Investment in Businesses: Prudential is focused on growing its market-leading businesses, investing in growth markets, and delivering industry-leading customer experiences.

• Capital Deployment and Financial Strength: The company plans to continue its disciplined approach to capital deployment, supported by a strong balance sheet and AA financial strength rating.

Q & A Highlights

• Q: Can you give an update on your progress towards additional transactions with Prismic? (Ryan Krueger, from KBW)

  A: We continue to work on a very active pipeline of multiple insurance transactions, including balance sheet optimization and third-party blocks. We would be disappointed if we've not entered into an additional transaction before year end. (Rob Falzon)

• Q: Given the moving rates, do you think that will dampen demand for annuity growth? How are you thinking about pricing? (Suneet Kamath, from Jefferies)

  A: The annuity market continues to be strong. It's possible that in a decreasing interest rate environment, we could see some pullback, especially in fixed annuities. However, we have a broad product portfolio and are well positioned to adapt pricing and remain nimble with changing markets. (Caroline Feeney)

• Q: Can you comment on the earnings sensitivity to short-term rates? (Ryan Krueger, from KBW)

  A: We do not expect much of an impact due to changes in short-term rates as our cash at the holding company and collateral in individual Retirement Strategies generally offset by interest rate derivatives. (Yanela Frias)

• Q: Can you provide more color on trends and flows in PGIM, both on the institutional and retail side? (Elyse Greenspan, from Wells Fargo)

  A: Our flows in PGIM have become more variable, mostly driven on the institutional side. We expect to remain a net winner over the long-term, but near-term variability will continue in this environment. (Andy Sullivan)

• Q: Can you talk about growth in the group channel and how much of that's coming from employee growth versus wage and adding more coverage? (John Barnidge, from Piper Sandler)

  A: The growth in our book is primarily driven by the execution of our diversification strategy, focusing on growing in the under 5,000 lives market and diversifying in disability and supplemental health products. Strong employment is driving overall employee and wage growth, but the primary driver is our strategy execution. (Caroline Feeney)

• Q: What does the opportunity set look like internationally, and is there an opportunity to accelerate that through M&A? (John Barnidge, from Piper Sandler)

  A: We are open to opportunistic, programmatic M&A to help us accelerate our growth in emerging markets, but organic growth is job one for us. We’re confident that over time, emerging markets will become a bigger part of the Prudential pie. (Andy Sullivan)