Prudential Financial, Inc. Q4 FY2024 earnings call

• Leadership Changes: Board appointed Andy Sullivan as next CEO effective March 31st, Caroline Feeney expanded role overseeing global retirement and insurance businesses, and Jacques Chapuis as CEO of PGIM.
• Financial Progress: 2024 saw progress towards becoming a higher growth, more capital-efficient company, with $3 billion returned to shareholders in 2024 and board authorizing $1 billion share repurchases in 2025.
• Business Performance: PGIM had strong net flows and investment performance, U.S. businesses saw sales growth in retirement and individual life, and international businesses grew in Japan and emerging markets.
• Transactions: Completed two guaranteed universal life reinsurance transactions reducing exposure by 60%, and announced second Prismic transaction to insure $7 billion block of Japanese whole life policies.

PGIM: Pretax adjusted operating income for Q4 2024 was $1.4 billion ($2.96 per share) and full-year 2024 was $5.9 billion ($12.62 per share), up 6% from 2023. Assets under management increased 6% to $1.4 trillion from year-end 2023, driven by market appreciation, net flows, and strong investment performance. Total net flows in Q4 2024 were $8.6 billion, full-year 2024 were $38 billion.

U.S. Businesses: Fourth quarter GAAP net loss was $57 million primarily due to interest rate-driven realized losses on the investment portfolio. Full-year 2024 adjusted operating return on equity was 13.1%, up 70 basis points from 2023. Retirement strategies had $50 billion in sales in 2024, with individual retirement sales reaching $14 billion in 2024, up 84% from 2023. Group insurance sales totaled $550 million in 2024, up 4% from prior year. Individual life sales reached a quarterly record high of $326 million in Q4 2024 and increased 23% for the full year.

International Businesses: 2024 sales were up 6% compared to prior year. Sales in Japan benefited from recent retirement and savings product launches, up 14%, and emerging market sales increased 12% versus prior year, driven by growth in Brazil.

• Expected core earnings per share growth 5%-8% from 2024 core adjusted operating income.
• Adjusted return on equity targeted at 13%-15%.
• Operating expense ratio for global retirement and insurance businesses anticipated to be 8.5%-10.5% trending down.
• PGIM expected low double-digit earnings growth, U.S. businesses mid-single-digit, international low to mid-single-digit.

• Adverse underwriting experience due to elevated large individual life claims.
• Litigation threats to the pension risk transfer industry threatening the health of the industry.
• Impact of yen weakness on international businesses' underwriting results due to elevated U.S. dollar product surrenders.

Q: Suneet Kamath from Jefferies asked about annuity outlook and Prismic.

A: Caroline Feeney discussed annuity sales shifts and Rob Falzon spoke about Prismic's growth opportunities in Japan.

Q: Tom Gallagher from Evercore ISI asked about free cash flow.

A: Yanela Frias explained free cash flow conversion and near-term headwinds.

Q: Ryan Krueger from KBW asked about capital use and pension risk transfer lawsuit.

A: Yanela Frias and Caroline Feeney responded on capital use and industry impact of lawsuits.

Q: Elyse Greenspan from Wells Fargo asked about EPS growth outlook and Prismic in Japan.

A: Yanela Frias and Rob Falzon discussed EPS growth and Prismic's future transactions.

Q: Wes Carmichael from Autonomous Research asked about Japan's ESR implementation and Andy Sullivan's leadership.

A: Yanela Frias and Andy Sullivan answered on ESR and leadership transition.

Q: John Barnidge from Piper Sandler asked about M&A and Prismic.

A: Charlie Lowrey and Rob Falzon spoke about M&A plans and Prismic's role.

Q: Jack Madden from BMO asked about free cash flow and international growth.

A: Yanela Frias and Andy Sullivan addressed free cash flow impact and international growth drivers.

Q: Alex Scott from Barclays asked about PGIM margins and insurance expense ratio.

A: Andy Sullivan and Yanela Frias discussed PGIM margins and expense ratio trends.

Q: Mike Ward from UBS asked about life sales and volatility.

A: Caroline Feeney talked about life sales growth and product diversification.

Q: Wes Carmichael from Autonomous Research asked about yen assumptions and individual life underwriting.

A: Andy Sullivan and Caroline Feeney responded on yen assumptions and underwriting improvement.