Prudential reports Q2’24 earnings

Prudential Financial reported its Q2’24 earnings on August 2, 2024, led by CEO Charlie Lowrey. Key highlights:

• Prudential reported pretax adjusted operating income of $1.6 billion or $3.39 per share, a 10% increase from the previous year.
• This year, a record number of Americans will turn 65, while many 55-year-olds enter their final decade before retirement. This aging population is expected to create a $137 trillion retirement market in the US and $26 trillion in Japan by 2050.
• Prudential reported nearly $22 billion in retirement strategy sales in the first half of the year, a 67% increase from the prior year. This growth includes strong sales in pension and longevity risk transfer and nearly doubled individual annuity sales. Since launching the FlexGuard indexed variable annuity suite in 2020, sales have surpassed $21 billion.
• Group Insurance sales in the US are up 13% and Individual Life sales are up 7% compared to the first half of 2023.
• Group Insurance sales primarily occur in the first quarter of the year due to annual enrollments. Year-to-date, sales increased by 13% compared to the prior year, driven by growth in life, disability, and supplemental health. The company is executing a strategy of product and client segmentation diversification while leveraging technology to improve operating efficiency and enhance customer experience.
• In Individual Life, sales increased by 3% from the same quarter last year and 7% year-to-date. This growth includes the success of the FlexGuard Life product, which achieved its highest sales quarter since its 2022 launch, and a shift towards more capital-efficient products.
• The company’s cash and liquid assets totaled $4.4 billion, within the liquidity target range of $3 billion to $5 billion, with substantial off-balance sheet resources.
• One analyst (Suneet Laxman L. Kamath of Jefferies LLC, Research Division) asked if the recent rise in 10-year interest rates to around 3.8% might reduce demand for annuities and how Prudential plans to adjust pricing in this new rate environment. Caroline Feeney (Executive VP & Head of U.S. Businesses at Prudential) acknowledged the strong annuity market, noting that it is on track for a third consecutive record year, despite potential pullbacks in fixed annuity sales due to lower interest rates. She emphasized Prudential’s broad and diversified product portfolio, which mitigates the impact of rate changes. Feeney highlighted the growing demand for retirement income solutions, driven by the aging population, and assured that Prudential is well-positioned to adapt pricing quickly in response to market changes. “So we believe customer demand for protected income will continue to be the driving force behind growth over the long term.”
• All in all, Prudential enjoys favorable mortality rates and ongoing investments in effective claims management. Additionally, there has been strong double-digit growth in the supplemental health business, which is a key part of the company’s diversification strategy. Growth was also noted in the under 5,000 lives segment within association market segments, further broadening the portfolio.
• CEO Lowrey ended on with the following note – “This is Charlie. Let me make an observation, if I may, before the closing comments and that we are experiencing very turbulent times right now, obviously. And this is exactly when clients need us the most. And we’ve seen that in the past when clients turned to us during these kind of volatile times, such as the great financial crisis and others that we’ve all been through. And what we’ve observed is that we’ve been a net beneficiary in these turbulent times as there is a real flight to quality, which we define as having the financial strength, the strength of brand and the strength of distribution so that clients can meet us when, where and how they want. Now obviously, past is a prologue, but I’ll make the following observation. And that is that we have exactly the capabilities that clients need in terms of investing, insurance and retirement security and that we will be laser-focused during these times in helping them as they map through this volatility. So we’ll continue to focus on our clients, and we’ll continue to deliver sustainable value to all our stakeholders as we go forward. So thanks and have an enjoyable weekend.”