Prudential Financial, Inc. (NYSE: PRU):
- Net income attributable to Prudential
Financial of $197 million or $0.46 per Common share versus $491
million or $1.12 per share for year-ago quarter.
- After-tax adjusted operating income of
$1.298 billion or $3.01 per Common share versus $919 million or
$2.09 per share for year-ago quarter.
- Notable items resulted in a net charge
to net income and after-tax adjusted operating income of $81
million or $0.19 per Common share, as discussed later in this
release. Net income also includes a net charge of $1.230 billion or
$2.87 per Common share in our divested businesses, primarily driven
by the impact of updated actuarial assumptions.
John Strangfeld, Chairman and CEO, commented on
results:
“We are pleased with performance for the first half of the
year with an annualized adjusted operating return on equity above
our 12-13% target and positive growth metrics across our
businesses. In the second quarter we significantly strengthened the
reserves of our divested businesses, while maintaining a strong
capital position. We returned approximately $760 million to
shareholders through dividends and share repurchases in the
quarter, and we expect to continue this robust level of capital
return through the year.
Looking ahead, we continue to invest in our businesses and
our people to broaden and deepen the value we bring to our retail
and institutional relationships. Our customer-centric business
model enables us to deliver innovative, integrated solutions,
including financial wellness, across individual and workplace
customer segments, partnering in a way that addresses the full
picture of needs. Our employees are at the heart of our
purpose-driven culture, which aspires to unlock financial
opportunities for more people.”
OTHER FINANCIAL
HIGHLIGHTS
($ millions, except per share)
2Q:18 2Q:17 Book value per share of
Common Stock $113.59 $111.73 Adjusted book value per
share of Common Stock $92.60 $81.00 Common Stock
share repurchases $375 $313 Common Stock dividends
$382 $328 Parent company highly liquid assets $4,697
$3,651
NOTABLE ITEMS ($ millions, pre-tax) 2Q:18
2Q:17 Notable Items included in Adjusted
Operating Income: Annual review and
update of actuarial assumptions and other refinements $(160)
$(622) Updated estimates of Individual Annuities
profitability driven by market performance versus assumptions $(2)
$54 Returns on non-coupon investments and prepayment
fees above / (below) average expectations $(10) $55
Underwriting experience above / (below) average expectations $85
$80 (Higher) / lower than typical expenses $(15)
$(25) Total Notable Adjusted Operating Income Items
$(102) $(458)
Prudential Financial, Inc. today reported second quarter
results. Net income attributable to Prudential Financial, Inc., was
$197 million ($0.46 per Common share) for the second quarter of
2018, compared to $491 million ($1.12 per Common share) for the
second quarter of 2017. After-tax adjusted operating income was
$1,298 million ($3.01 per Common share) for the second quarter of
2018, compared to $919 million ($2.09 per Common share) for the
second quarter of 2017.
Consolidated adjusted operating income, adjusted book value and
adjusted operating return on equity are non-GAAP measures. These
measures are discussed later in this press release under
“Forward-Looking Statements and 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. Workplace
Solutions, U.S. Individual Solutions, International Insurance, and
Corporate & Other Operations. In the following business-level
discussion, adjusted operating income refers to pre-tax
results.
PGIM
PGIM, the Company’s global investment management
businesses, reported adjusted operating income of $254 million for
the current quarter, compared to $218 million in the year-ago
quarter.
PGIM ($ millions) 2Q:18
2Q:17 Adjusted operating income
$254 $218
The increase of $36 million from the year-ago quarter was driven
by higher asset management fees, reflecting an increase in assets
under management primarily from fixed income net inflows and equity
market appreciation, partially offset by higher expenses.
PGIM assets under management of $1.156 trillion includes a
record-high $611 billion of unaffiliated third-party institutional
and retail assets under management. Unaffiliated third-party net
inflows, excluding money market, totaled $7.3 billion for the
current quarter driven by new and existing institutional client
mandates into fixed income and retail fixed income flows.
U.S. Workplace Solutions
U.S. Workplace Solutions, consisting of the Retirement
and Group Insurance segments, reported adjusted operating income of
$359 million for the second quarter of 2018, compared to $444
million in the year-ago quarter.
RETIREMENT SEGMENT ($
millions) 2Q:18 2Q:17 Adjusted
operating income $277 $308 Notable items included
above: Annual review and update of
actuarial assumptions and other refinements $(68)
$(20) Returns on non-coupon investments and prepayment fees above /
(below) average expectations $(5) $25 Underwriting
experience above / (below) average expectations $60
$30
The Retirement segment reported adjusted operating income
of $277 million for the current quarter, compared to $308 million
in the year-ago quarter. Excluding the notable items above, results
increased $17 million from the year-ago quarter reflecting a higher
contribution from net investment spread results and an increase in
underwriting income reflecting business growth, partially offset by
higher expenses.
Retirement account values were a record high $433 billion as of
June 30, 2018, up 8% from a year earlier, reflecting positive net
flows and market appreciation over the past four quarters. Net
flows in the current quarter totaled $2.8 billion with $1.2 billion
from Full Service and $1.6 billion from Institutional Investment
Products, driven largely by pension risk transfer flows.
GROUP INSURANCE
SEGMENT ($ millions) 2Q:18
2Q:17 Adjusted operating income $82
$136 Notable items included above:
Annual review and update of actuarial assumptions and other
refinements $31 $55 Underwriting experience
above / (below) average expectations $10 $30
(Higher) / lower than typical expenses $(15)
$0
The Group Insurance segment reported adjusted operating
income of $82 million in the current quarter, compared to $136
million in the year-ago quarter. Excluding the notable items above,
results increased $5 million from the year-ago quarter reflecting
an increase in underwriting results, including business growth,
partially offset by higher expenses.
Group Insurance earned premiums, policy charges and fees of $1.2
billion in the current quarter were up 5% from the year-ago
quarter.
U.S. Individual Solutions
U.S. Individual Solutions, consisting of the Individual
Annuities and Individual Life segments, reported adjusted operating
income of $550 million for the second quarter of 2018, compared to
$55 million in the year-ago quarter.
INDIVIDUAL ANNUITIES SEGMENT
($ millions) 2Q:18 2Q:17 Adjusted
operating income $507 $612 Notable items included
above: Annual review and update of
actuarial assumptions and other refinements $10 $46
Impact from updated estimates of profitability driven by market
performance versus assumptions $(2) $54 Returns on
non-coupon investments and prepayment fees above / (below) average
expectations $(5) $5
The Individual Annuities segment reported adjusted
operating income of $507 million in the current quarter, compared
to $612 million in the year-ago quarter. Excluding the notable
items above, results decreased $3 million from the year-ago
quarter.
Individual Annuities account values were $164 billion as of June
30, 2018, roughly flat from a year earlier, as market appreciation
offset net outflows over the past four quarters. Individual
Annuities gross sales were $2.1 billion in the current quarter, up
37% from the year-ago quarter, as customers have reacted favorably
to pricing actions.
INDIVIDUAL LIFE
SEGMENT ($ millions) 2Q:18
2Q:17 Adjusted operating income $43
$(557) Notable items included above:
Annual review and update of actuarial
assumptions and other refinements $(55)
$(653) Underwriting experience above / (below) average expectations
$(15) $(10)
The Individual Life segment reported adjusted operating
income of $43 million for the current quarter, compared to a loss
of $557 million in the year-ago quarter. Excluding the notable
items above, results increased $7 million from the year-ago quarter
reflecting lower expenses.
Individual Life sales of $142 million in the current quarter
were down 7% from the year-ago quarter, reflecting lower guaranteed
universal life sales from prior year pricing actions partially
offset by increases in variable life sales.
International Insurance
International Insurance, consisting of Life Planner
Operations and Gibraltar Life & Other Operations, reported
adjusted operating income of $784 million for the second quarter of
2018, compared to $823 million in the year-ago quarter.
LIFE PLANNER OPERATIONS ($
millions) 2Q:18 2Q:17 Adjusted
operating income $376 $329 Notable items included
above: Annual review and update of
actuarial assumptions and other refinements $(49)
$(67) Returns on non-coupon investments and prepayment fees above /
(below) average expectations $(5) $10 Underwriting
experience above / (below) average expectations $10
$20 (Higher) / lower than typical expenses $0 $(25)
The Life Planner Operations reported adjusted operating
income of $376 million for the current quarter, compared to $329
million in the year-ago quarter. Excluding the notable items above,
results increased $29 million from the year-ago quarter reflecting
business growth, partially offset by lower net investment spread
results driven by low interest rates in Japan.
Life Planner Operations constant dollar basis sales of $292
million in the current quarter were down 17% from the year-ago
quarter, primarily reflecting accelerated sales in the year-ago
quarter in advance of premium rate increases on yen-based products
partially offset by higher sales of U.S. dollar-denominated
products in our Japan operations.
GIBRALTAR LIFE & OTHER
OPERATIONS ($ millions) 2Q:18 2Q:17
Adjusted operating income $408 $494 Notable items
included above: Annual review and
update of actuarial assumptions and other refinements $(32)
$21 Returns on non-coupon investments and prepayment fees
above / (below) average expectations $5 $15
Underwriting experience above / (below) average expectations $20
$10
The Gibraltar Life & Other Operations reported
adjusted operating income of $408 million for the current quarter,
compared to $494 million in the year-ago quarter. Excluding the
notable items above, results decreased $33 million from the
year-ago quarter reflecting a shift in earnings seasonality
resulting from the elimination of the one-month reporting lag last
quarter partially offset by business growth.
Gibraltar Life & Other Operations sales of $399 million in
the current quarter were down 3% from the year-ago quarter.
Corporate & Other Operations
Corporate & Other Operations reported a loss, on an
adjusted operating income basis, of $286 million in the second
quarter of 2018, compared to a loss of $312 million in the year-ago
quarter.
CORPORATE &
OTHER OPERATIONS ($ millions) 2Q:18
2Q:17 Adjusted operating income $(286)
$(312) Notable items included above:
Annual review and update of actuarial
assumptions and other refinements $3
$(4)
Excluding the notable items above, the decreased loss of $19
million from the year-ago quarter reflects lower net expenses in
the current quarter, including lower costs for employee benefit and
compensation plans tied to equity market returns, and higher income
from the qualified pension plan, partially offset by lower
investment income net of interest expense.
ASSETS UNDER MANAGEMENT
Assets under management amounted to $1.388 trillion at
June 30, 2018, compared to $1.334 trillion a year earlier.
NET INCOME AND INVESTMENT PORTFOLIO
Net income attributable to Prudential Financial, Inc.
amounted to $197 million for the second quarter of 2018, compared
to $491 million for the year-ago quarter.
Current quarter net income includes $277 million of pre-tax net
realized investment gains and related charges and adjustments. The
foregoing net gains include pre-tax gains of $379 million primarily
related to derivatives used for risk management including foreign
currency and asset and liability duration management and other risk
mitigation activities, and net pre-tax gains of $90 million from
general portfolio and related activities. The foregoing gains were
partially offset by net pre-tax losses of $162 million from
products that contain embedded derivatives or guarantees and
associated hedging activities, and $30 million from impairments and
sales of credit-impaired investments.
Net income for the current quarter reflects a pre-tax decrease
of $193 million in recorded asset values and a pre-tax decrease of
$85 million in recorded liabilities representing changes in value
which are expected to ultimately accrue to contractholders. These
changes primarily represent mark-to-market adjustments.
Net income for the current quarter also reflects a pre-tax loss
of $1.6 billion from divested businesses, driven by the annual
review of actuarial assumptions in the Long-Term Care business,
which included the removal of the morbidity improvement
assumption.
Net income for the year-ago quarter included $679 million of
pre-tax net realized investment losses and related charges and
adjustments. The foregoing net losses include pre-tax losses of
$961 million from products that contain embedded derivatives or
guarantees and associated derivative portfolios that are part of a
hedging program related to the risks of these products, largely
driven by the impact of applying tighter credit spreads to a higher
gross GAAP liability for variable annuity living benefits. The
increase in the gross GAAP liability was primarily due to lower
interest rates. The year-ago quarter also included pre-tax losses
of $44 million from impairments and sales of credit-impaired
investments and $31 million primarily related to derivatives used
in risk management activities including foreign currency and asset
and liability duration management. The foregoing losses were
partially offset by pre-tax gains of $357 million from general
portfolio and related activities.
Excluding holdings of the Closed Block division, gross
unrealized losses on general account fixed maturity investments at
June 30, 2018 amounted to $4.5 billion, including $4.0 billion on
high and highest quality securities based on NAIC or equivalent
ratings, and amounted to $1.5 billion at December 31, 2017. Net
unrealized gains on these investments amounted to $22.9 billion at
June 30, 2018, compared to $32.0 billion at December 31, 2017.
FORWARD-LOOKING STATEMENTS AND NON-GAAP MEASURES
Certain of the statements included in this release constitute
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are made based on management’s current expectations and
beliefs concerning future developments and their potential effects
upon Prudential Financial, Inc. and its subsidiaries. Prudential
Financial, Inc.’s actual results may differ, possibly materially,
from expectations or estimates reflected in such forward-looking
statements. Certain important factors that could cause actual
results to differ, possibly materially, from expectations or
estimates reflected in such forward-looking statements can be found
in the “Risk Factors” and “Forward-Looking Statements” sections
included in Prudential Financial, Inc.’s Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q. Prudential Financial, Inc.
does not undertake to update any particular forward-looking
statement included in this document.
Consolidated adjusted operating income, adjusted book value and
adjusted operating return on equity are non-GAAP measures.
Reconciliations to the most directly comparable GAAP measures are
included in this release.
Adjusted operating income is the measure used by the Company to
evaluate segment performance and to allocate resources. Adjusted
operating income excludes “Realized investment gains (losses),
net,” as adjusted, and related charges and adjustments. A
significant element of realized investment gains and losses are
impairments and credit-related and interest rate-related gains and
losses. Impairments and losses from sales of credit-impaired
securities, the timing of which depends largely on market credit
cycles, can vary considerably across periods. The timing of other
sales that would result in gains or losses, such as interest
rate-related gains or losses, is largely subject to our discretion
and influenced by market opportunities as well as our tax and
capital profile.
Realized investment gains (losses) within certain of our
businesses for which such gains (losses) are a principal source of
earnings, and those associated with terminating hedges of foreign
currency earnings and current period yield adjustments are included
in adjusted operating income. Adjusted operating income generally
excludes realized investment gains and losses from products that
contain embedded derivatives, and from associated derivative
portfolios that are part of an asset-liability management program
related to the risk of those products. However, the effectiveness
of our hedging program will ultimately be reflected in adjusted
operating income over time. Adjusted operating income also excludes
gains and losses from changes in value of certain assets and
liabilities relating to foreign currency exchange movements that
have been economically hedged or considered part of our capital
funding strategies for our international subsidiaries, as well as
gains and losses on certain investments that are designated as
trading. Additionally, adjusted operating income excludes the
changes in fair value of equity securities that are recorded in net
income beginning on January 1, 2018 as a result of the adoption of
ASU 2016-01.
Adjusted operating income also excludes investment gains and
losses on assets supporting experience-rated contractholder
liabilities and changes in experience-rated contractholder
liabilities due to asset value changes, because these recorded
changes in asset and liability values are expected to ultimately
accrue to contractholders. In addition, adjusted operating income
excludes the results of divested businesses, which are not relevant
to our ongoing operations. Discontinued operations and earnings
attributable to noncontrolling interests, each of which is
presented as a separate component of net income under GAAP, are
also excluded from adjusted operating income. The tax effect
associated with pre-tax adjusted operating income is based on
applicable IRS and foreign tax regulations inclusive of pertinent
adjustments.
Adjusted book value is calculated as total equity (GAAP book
value) excluding accumulated other comprehensive income (loss), the
cumulative effect of foreign currency exchange rate remeasurements
and currency translation adjustments corresponding to realized
investment gains and losses, and as of December 31, 2017 certain
deferred taxes resulting from the change in the U.S. tax rate
enacted with the Tax Cuts and Jobs Act. These items are excluded in
order to highlight the book value attributable to our core business
operations separate from the portion attributable to external and
potentially volatile capital and currency market conditions.
Adjusted operating return on equity is equal to the annualized
year-to-date after-tax adjusted operating income divided by the
average adjusted book value. Return on equity based on GAAP
balances is calculated using after-tax net income and equity.
We believe that our use of these non-GAAP measures helps
investors understand and evaluate the Company’s performance and
financial position. The presentation of adjusted operating income
as we measure it for management purposes enhances the understanding
of the results of operations by highlighting the results from
ongoing operations and the underlying profitability of our
businesses. Trends in the underlying profitability of our
businesses can be more clearly identified without the fluctuating
effects of the items described above. Adjusted book value augments
the understanding of our financial position by providing a measure
of net worth that is primarily attributable to our business
operations separate from the portion that is affected by capital
and currency market conditions, and by isolating the accounting
impact associated with insurance liabilities that are generally not
marked to market and the supporting investments that are marked to
market through accumulated other comprehensive income under GAAP.
Adjusted return on equity is a useful measure of the operating
return the Company achieves in relation to the capital available to
our businesses. However, these non-GAAP measures are not
substitutes for income, equity and return on equity determined in
accordance with GAAP, and the adjustments made to derive these
measures are important to an understanding of our overall results
of operations and financial position. The schedules accompanying
this release provide reconciliations of non-GAAP measures with the
corresponding measures calculated using GAAP. The information
referred to above, as well as the risks of our businesses described
in our Annual Report on Form 10-K for the year ended December 31,
2017, and subsequent Quarterly Reports on Form 10-Q, should be
considered by readers when reviewing forward-looking statements
contained in this release. Additional historic information relating
to our financial performance is located on our website at
www.investor.prudential.com.
EARNINGS CONFERENCE CALL
Members of Prudential’s senior management will host a conference
call on Thursday, August 2, 2018, at 11 a.m. ET, to discuss with
the investment community the Company’s second quarter results. The
conference call and an accompanying slide presentation will be
broadcast live over the Company’s Investor Relations website at
www.investor.prudential.com. Please log on 15 minutes early in the
event necessary software needs to be downloaded. The call will
remain on the Investor Relations website for replay through August
17. Institutional investors, analysts, and other members of the
professional financial community are invited to listen to the call
and participate in Q&A by dialing (877) 777-1971 (domestic
callers) or (612) 332-0226 (international callers). All others are
encouraged to dial into the conference call in listen-only mode,
using the same numbers. To listen to a replay of the conference
call starting at 2 p.m. on August 2, through August 9, dial (800)
475-6701 (domestic callers) or (320) 365-3844 (international
callers). The access code for the replay is 439434.
Prudential Financial, Inc. (NYSE: PRU), a financial services
leader with more than $1 trillion of assets under management as of
June 30, 2018, has operations in the United States, Asia, Europe,
and Latin America. Prudential’s diverse and talented employees are
committed to helping individual and institutional customers grow
and protect their wealth through a variety of products and
services, including life insurance, annuities, retirement-related
services, mutual funds and investment management. In the U.S.,
Prudential’s iconic Rock symbol has stood for strength, stability,
expertise and innovation for more than a century. For more
information, please visit news.prudential.com.
Financial Highlights (in
millions, unaudited) Three Months Ended Six Months Ended
June 30 June 30 2018 2017 2018
2017
Income Statement Data:
Net income attributable to Prudential Financial, Inc. $ 197
$ 491 $ 1,560 $ 1,860 Income attributable to noncontrolling
interests 3 5 4 8
Net income 200 496
1,564 1,868 Less: Earnings attributable to
noncontrolling interests 3 5 4
8
Income attributable to Prudential
Financial, Inc. 197 491
1,560 1,860 Less: Equity in earnings of
operating joint ventures, net of taxes and earnings attributable to
noncontrolling interests 15 8 37
30
Income (after-tax) before equity in
earnings of operating joint ventures 182
483 1,523 1,830 Less:
Reconciling Items: Realized investment gains (losses), net, and
related charges and adjustments 277 (679 ) 341 (641 ) Investment
gains (losses) on assets supporting experience-rated contractholder
liabilities, net (193 ) 201 (596 ) 245 Change in experience-rated
contractholder liabilities due to asset value changes 85 (145 ) 503
(157 ) Divested businesses: Closed Block Division (31 ) (18 ) (40 )
16 Other divested businesses (1,526 ) 35 (1,598 ) 41 Equity in
earnings of operating joint ventures and earnings attributable to
noncontrolling interests (23 ) (14 ) (49 )
(42 ) Total reconciling items, before income taxes
(1,411 ) (620 ) (1,439 ) (538 ) Less: Income
taxes, not applicable to adjusted operating income (295 )
(184 ) (324 ) (212 ) Total reconciling items,
after income taxes (1,116 ) (436 ) (1,115 )
(326 )
After-tax adjusted operating income (1)
1,298 919 2,638 2,156
Income taxes, applicable to adjusted operating income
363 309 744 732
Adjusted operating income before income taxes (1) $ 1,661
$ 1,228 $ 3,382 $ 2,888
See footnotes on last page.
Financial Highlights
(in millions, except per share data, unaudited) Three
Months Ended Six Months Ended June 30 June 30 2018
2017 2018 2017
Earnings per share of Common Stock (diluted): Net
income attributable to Prudential Financial, Inc. $ 0.46 $ 1.12
$ 3.62 $ 4.21 Less: Reconciling Items: Realized investment gains
(losses), net, and related charges and adjustments 0.65 (1.55 )
0.79 (1.46 ) Investment gains (losses) on assets supporting
experience-rated contractholder liabilities, net (0.45 ) 0.46 (1.39
) 0.56 Change in experience-rated contractholder liabilities due to
asset value changes 0.20 (0.33 ) 1.17 (0.36 ) Divested businesses:
Closed Block Division (0.07 ) (0.04 ) (0.09 ) 0.04 Other divested
businesses (3.57 ) 0.08 (3.72 ) 0.09 Difference in earnings
allocated to participating unvested share-based payment awards
0.02 0.01 0.03
0.01 Total reconciling items, before income taxes (3.22 )
(1.37 ) (3.21 ) (1.12 ) Less: Income taxes, not applicable to
adjusted operating income (0.67 ) (0.40 )
(0.73 ) (0.45 ) Total reconciling items, after income taxes
(2.55 ) (0.97 ) (2.48 ) (0.67 )
After-tax adjusted operating income $ 3.01 $ 2.09
$ 6.10 $ 4.88 Weighted average number
of outstanding Common shares (basic) 419.5
428.3 420.8 429.1 Weighted
average number of outstanding Common shares (diluted) 428.0
437.2 429.5 438.1
Earnings calculation, per share of Common Stock:
Net income attributable to Prudential Financial, Inc.
$ 197 $ 491 $ 1,560 $ 1,860 Earnings related to interest, net of
tax, on exchangeable surplus notes 6 5 11 9 Less: Earnings
allocated to participating unvested share-based payment awards
4 7 18 23
Net income attributable to Prudential Financial, Inc. for
earnings per share of Common Stock calculation $ 199 $
489 $ 1,553 $ 1,846
After-tax
adjusted operating income (1) $ 1,298 $ 919 $ 2,638 $ 2,156
Earnings related to interest, net of tax, on exchangeable surplus
notes 6 5 11 9 Less: Earnings allocated to participating unvested
share-based payment awards 14 11
30 26
After-tax adjusted operating income
for earnings per share of Common Stock calculation (1) $ 1,290
$ 913 $ 2,619 $ 2,139
Prudential Financial, Inc. Equity (as of end of period):
GAAP book value (total PFI equity) at end of period (7) $
48,232 $ 48,611 Less: Accumulated other comprehensive income (AOCI)
11,655 16,362 GAAP book value excluding
AOCI (7) 36,577 32,249 Less: Cumulative effect of foreign exchange
rate remeasurement and currency translation adjustments
corresponding to realized gains/losses (2,650 )
(2,889 ) Adjusted book value (7) 39,227 35,138 Number of
diluted shares at end of period (2) 429.0
433.8 GAAP book value per Common share - diluted
(3)(7) 113.59 111.73 GAAP book value excluding AOCI per share -
diluted (4)(7) 86.43 74.34 Adjusted book value per Common share -
diluted (4)(7) 92.60 81.00
Adjusted operating income
before income taxes, by Segment (1): PGIM $ 254 $ 218
$ 486 $ 414 Total PGIM Division 254
218 486 414
Retirement 277 308 594 705 Group Insurance 82
136 137 170 Total U.S. Workplace
Solutions Division 359 444 731
875 Individual Annuities 507 612 1,026 1,080
Individual Life 43 (557 ) 79
(439 ) Total U.S. Individual Solutions Division 550
55 1,105 641
International Insurance 784 823
1,640 1,622 Total International Insurance
Division 784 823 1,640
1,622 Corporate and Other operations (286 )
(312 ) (580 ) (664 ) Adjusted operating income
before income taxes 1,661 1,228
3,382 2,888 Reconciling Items: Realized
investment gains (losses), net, and related charges and adjustments
277 (679 ) 341 (641 ) Investment gains (losses) on assets
supporting experience-rated contractholder liabilities, net (193 )
201 (596 ) 245 Change in experience-rated contractholder
liabilities due to asset value changes 85 (145 ) 503 (157 )
Divested businesses: Closed Block Division (31 ) (18 ) (40 ) 16
Other divested businesses (1,526 ) 35 (1,598 ) 41 Equity in
earnings of operating joint ventures and earnings attributable to
noncontrolling interests (23 ) (14 ) (49 )
(42 ) Total reconciling items, before income taxes
(1,411 ) (620 ) (1,439 ) (538 ) Income before
income taxes and equity in earnings of operating joint ventures for
Prudential Financial, Inc. $ 250 $ 608 $ 1,943
$ 2,350
See footnotes on last page.
Financial Highlights
(in millions, or as otherwise noted, unaudited)
Three Months Ended Six Months Ended June 30 June 30
2018 2017 2018 2017
PGIM Division: PGIM Segment: Assets
managed by PGIM (in billions, as of end of period): Institutional
customers $ 490.8 $ 461.2 Retail customers 252.0 231.2 General
account 413.3 412.3 Total PGIM $
1,156.1 $ 1,104.7 Institutional Customers -
Assets Under Management (in billions): Gross additions, other than
money market $ 17.8 $ 17.2 $ 37.2 $ 33.1
Net additions, other than money market $ 5.5 $
6.5 $ 5.3 $ 7.0 Retail Customers -
Assets Under Management (in billions): Gross additions, other than
money market $ 13.4 $ 10.8 $ 28.0 $ 23.8
Net additions, other than money market $ 1.8 $
1.2 $ 2.8 $ 1.3
U.S. Workplace
Solutions Division: Retirement Segment: Full
Service: Deposits and sales $ 7,712 $ 4,771 $
17,634 $ 11,507 Net additions (withdrawals) $
1,242 $ (1,015 ) $ 3,010 $ (969 ) Total
account value at end of period $ 240,922 $ 214,731
Institutional Investment Products: Gross additions $
5,461 $ 2,557 $ 6,149 $ 6,599
Net additions (withdrawals) $ 1,610 $ (1,614 ) $ (2,591 ) $
(1,813 ) Total account value at end of period $ 191,722
$ 186,610 Group Insurance Annualized New
Business Premiums (5): Group life $ 46 $ 56 $ 289 $ 242 Group
disability 14 14 154
129 Total $ 60 $ 70 $ 443 $ 371
U.S. Individual Solutions Division:
Fixed and Variable Annuity Sales and Account Values: Gross sales $
2,067 $ 1,507 $ 3,791 $ 2,947
Net redemptions $ (890 ) $ (900 ) $ (2,061 ) $ (1,813 )
Total account value at end of period $ 163,645 $ 162,694
Individual Life Insurance Annualized New Business
Premiums (5): Term life $ 54 $ 54 $ 103 $ 103 Guaranteed Universal
life 24 40 45 93 Other Universal life 29 33 55 54 Variable life
35 26 64 49
Total $ 142 $ 153 $ 267 $ 299
International Insurance Division: International
Insurance Annualized New Business Premiums (5)(6): Actual
exchange rate basis $ 695 $ 770 $ 1,453 $
1,661 Constant exchange rate basis $ 691 $ 766
$ 1,436 $ 1,660
See footnotes on last page.
Financial
Highlights (in billions, as of end of period, unaudited)
Three Months Ended June 30 2018 2017
Assets and
Asset Under Management Information: Total assets (7) $
819.9 $ 812.8 Assets under management (at fair market
value): PGIM Division 1,156.1 1,104.7 U.S. Workplace Solutions
Division 87.6 85.8 U.S. Individual Solutions Division 115.7 114.4
International Insurance Division 28.8 28.7 Total
assets under management 1,388.2 1,333.6 Client assets under
administration 228.7 188.3 Total assets under
management and administration $ 1,616.9 $ 1,521.9 See
footnotes on last page. (1) Adjusted operating income
is a non-GAAP measure of performance. See FORWARD-LOOKING
STATEMENTS AND NON-GAAP MEASURES within the earnings release for
additional information. Adjusted operating income, when presented
at the segment level, is also a segment performance measure. This
segment performance measure, while not a traditional U.S. GAAP
measure, is required to be disclosed by U.S. GAAP in accordance
with FASB Accounting Standard Codification (ASC) 280 – Segment
Reporting. When presented by segment, we have prepared the
reconciliation of adjusted operating income to the corresponding
consolidated U.S. GAAP total in accordance with the disclosure
requirements as articulated in ASC 280. (2) Diluted shares
as of June 30, 2018 include 5.88 million shares due to the dilutive
impact of conversion of exchangeable surplus notes (“ESNs”) when
book value per common share (i.e., book value per common share,
book value excluding AOCI per share and adjusted book value per
common share) is greater than $85.00. Diluted shares as of June 30,
2017 do not include shares related to ESNs due to the antidilutive
impact of conversion of ESNs when book value per common share
(i.e., book value excluding AOCI per share and adjusted book value
per common share) is less than $86.92. (3) Reflecting the
dilutive impact of ESNs when book value per common share is greater
than $85.00, to calculate book value per common share as of June
30, 2018, equity is increased by $500 million and diluted shares
include 5.88 million shares. As of June 30, 2017, book value per
common share includes a $500 million increase in equity and a 5.75
million increase in diluted shares, reflecting the dilutive impact
of ESNs when book value per common share is greater than $86.92.
(4) The exchangeable surplus notes are subject to customary
antidilution adjustments and the exchange rate is accordingly
revalued in the fourth quarter of each year. Reflecting the
dilutive impact of ESNs when book value per common share is greater
than $85.00, to calculate book value excluding AOCI per share and
adjusted book value per common share as of June 30, 2018, equity is
increased by $500 million and diluted shares include 5.88 million
shares. As of June 30, 2017, the conversion of ESNs is antidilutive
as book value excluding AOCI per share and adjusted book value per
common share is less than $86.92. (5) Premiums from new
sales are expected to be collected over a one-year period. Group
insurance annualized new business premiums exclude new premiums
resulting from rate changes on existing policies, from additional
coverage issued under our Servicemembers' Group Life Insurance
contract, and from excess premiums on group universal life
insurance that build cash value but do not purchase face amounts.
Group insurance annualized new business premiums include premiums
from the takeover of claim liabilities. Excess (unscheduled) and
single premium business for the company's domestic individual life
and international insurance operations are included in annualized
new business premiums based on a 10% credit. (6) Actual
amounts reflect the impact of currency fluctuations. Constant
amounts reflect foreign denominated activity translated to U.S.
dollars at uniform exchange rates for all periods presented,
including Japanese yen 111 per U.S. dollar and Korean won 1,150 per
U.S. dollar. U.S. dollar-denominated activity is included based on
the amounts as transacted in U.S. dollars. (7) In the first
quarter of 2018, the Company eliminated the one-month reporting lag
for balance sheet and results of operations of Gibraltar Life
Insurance Company, Ltd. (“Gibraltar Life”) consolidated operations.
As a result, prior period amounts include an increase resulting
from the elimination of Gibraltar Life's one-month reporting lag.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180801005865/en/
MEDIA:Prudential Financial, Inc.Laura Burke,
973-802-9489laura.burke@prudential.com
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