Prudential Financial, Inc. Q1 FY2026 earnings call

• Andy Sullivan mentioned the company has made meaningful progress against priorities, with stronger execution across the business. The issue in Japan was unexpected but they are navigating through it. They have sharpened focus, raised accountability, and made foundational changes to leadership and operating structure. • PGEM's PGM delivered strong investment performance, advanced organizational platform simplification and integration, with earnings growth and on track to deliver run rate savings and margin expansion. The private assets business has momentum. • U.S. businesses: Retirement retail annuities had strong sales, group insurance is being strengthened, individual life has a more resilient earnings profile. • International: Japan sales and earnings impacted by sales suspension, but has a sustainable and diversified platform; emerging markets like Brazil had record earnings quarter. • Janella Frias discussed first quarter results, operating expenses, detailed business performance highlights including PGM's assets under management, flows, U.S. businesses' pre-tax adjusted operating income, retirement's sales and account values, group insurance's benefit ratio and sales, individual lives' operating income and sales, international's operating income, and tax rate guidance revision.

PGM delivered strong investment performance, with assets under management totaling $1.4 trillion, increasing 3% from the prior year quarter. PGM is on track to deliver approximately $100 million of gross annual run rate savings and more than 200 basis points of margin expansion in 2026. U.S. businesses generated pre-tax adjusted operating income of approximately $1 billion, a 3% increase compared to the prior year quarter. Retirement delivered pre-tax adjusted operating income of over $570 million in the first quarter, 9% higher year over year. Group reported pre-tax adjusted operating income of $38 million compared to $89 million in the prior year quarter. Individual lives generated pre-tax adjusted operating income of $139 million in the quarter, more than doubling year over year. International businesses generated pre-tax adjusted operating income of $810 million in the first quarter, down 4% year over year.

• Management expects the benefits of cost reduction actions to be evident in 2027. • Voluntary sales suspension at Prudential of Japan is not expected to have material impact to capital, ESR, or cash flows over 2026 and 2027. • Lowered the range for full year 2026 tax rate from 23% to 24% to 21% to 22%.

• Issue in Japan was unexpected and could impact business. • Macroeconomic uncertainty impacted group insurance disability underwriting. • Competitive market conditions in some areas. • Impact of sales suspension in Japan on earnings and sales.

Q: A couple of questions about Japan, including Gibraltar and POJ sales and lapse expectations.

A: Andy Sullivan and Janella Frias discussed Gibraltar's components, sales, surrenders, and POJ sales suspension details on sales ramp-up, surrenders.

Q: On earnings power of international business.

A: Ryan Kruger was told about non-recurring impacts of POJ misconduct, resilience of Japan earnings, strength in Brazil, and prepays.

Q: On business exits and group disability business.

A: Andy Sullivan talked about business mix shift and group disability's benefit ratio, cycles, and returns.

Q: On retirement segment and GUL reserves.

A: Janella Frias and Andy Sullivan discussed retirement's run rate, prepay income, and GUL reserves' GAAP and statutory aspects.

Q: On expenses and Gibraltar sales.

A: Joel Hurwitz was told about expense benefits in 2027 and Gibraltar life consultant sales being subdued due to incentive program changes.

Q: On group disability and Japan free cash flow.

A: Andy Sullivan and Janella Frias discussed group disability's macro-driven uncertainty and Japan's free cash flow impact.

Q: On Ryla product and POJ life planner.

A: Andy Sullivan talked about Ryla product innovation and competitive environment, and Pablo Sanzon was told about life planner count and trends.

Q: On pension risk transfer and PGM private markets.

A: Jack Martin was told about pension risk transfer outlook and PGM private markets' differentiation and private credit impact.

Q: On GUL reserves and VM-22.

A: Tracy was told about GUL reserves adequacy and VM-22 vs BMA rules.

Q: On Japan reinsurance and POJ effect on capital return.

A: Chris was told about Japan reinsurance through Prismic and no material impact on capital return from POJ.