Prudential calls 90-day sales pause to sort out Japan ‘misconduct’

Prudential Financial has a Japan problem that CEO Andy Sullivan is trying to clean up via a 90-day pause on sales activity.

Misconduct issues, including inappropriate investment solicitations, within the Prudential of Japan broke publicly in January. Prudential moved swiftly to install Hiromitsu Tokumaru as president and CEO of POJ, replacing Kan Mabara, who left the company on Feb. 1.

Tokumaru is the former president and CEO of Prudential Gibraltar Financial Life.

Sullivan led off Prudential's fourth-quarter and full-year earnings call on Wednesday by addressing at length the mushrooming Japan controversy.

"While we have set a 90-day suspension of sales, we will not resume distribution through the Life Planner channel until we are comfortable that our internal compliance and oversight environment supports doing so," Sullivan said. "This could result in an extension of the 90-day period, but these actions are essential to restoring trust in this important market."

POJ announced actions to address the misconduct, including measures to reimburse impacted customers, restructure employee incentive compensation, and strengthen oversight of sales practices, governance, and risk management. The plans also include enhanced education, training, and recruitment standards for POJ employees.

Wall Street analysts focused almost entirely on the Japan situation, which detracted from a successful fourth quarter that saw Prudential convert strong underwriting and gains from its investment portfolio into rising profits.

The company's troubled Japan operations were a topic during the third-quarter call as well.

In October, Prudential appointed Brad Hearn as president and CEO of Prudential Holdings of Japan. Previously, he served as chief operating officer for Prudential's Japan operations.

Hearn succeeded Motofusa Hamada, who served as an advisor through the end of 2025. In response to an analyst’s comment about “regulatory issues” during the third-quarter earnings call, Sullivan explained that Hearn was always going to succeed Hamada but “we did accelerate it ... given some operational and compliance considerations.”

In Other News

Japan impact. The 90-day sales suspension will have a bottom-line impact of $300 to $350 million, said Yanela C. Frias, chief financial officer.

There are three components to that estimate, she explained, beginning with the $150 to $180 million anticipated cost of "sustaining the business and compensating the distribution force during the suspension period, the impact of suspended new sales activity and anticipated higher surrenders," Frias said.

The second component is $70 million of estimated one-time costs, of which roughly 70% relates to customer reimbursement. The third is roughly $80 million in estimated lower earnings attributable to "the gradual ramp-up of new sales through the remainder of the year," Frias said.

Prudential is very conscientious about retaining its Life Planner producer force during the sales pause, Sullivan noted.

"We are taking decisive steps that are every bit intended to preserve the distribution force," Sullivan said, such as enhanced training and compensation. "We do have confidence that these actions are going to help us retain this special asset."

Quarterly Snapshot

• Institutional Retirement delivered nearly $26 billion of annual sales, including a second longevity risk transfer transaction in the Netherlands.
• Individual Retirement generated $14 billion of full-year sales, capping an eighth consecutive quarter of more than $3 billion in sales.
• Group Insurance posted over $600 million in sales for the year, up 11%, "underscoring the benefits of further product diversification and increasing our market presence in our Premier segment."
• Individual Life full-year sales of $955 million increased 5%, reflecting a focus on less capital-intensive accumulation products, including FlexGuard Life.
• Emerging Markets reported record full-year sales of $386 million, up 6% from the prior year, primarily driven by broader distribution in Brazil.

Management Perspective

"We have a great all-weather product portfolio. We have very strong service and our brand matters. So while our RILA sales were down somewhat, our fixed annuity sales were up. In essence, we've done a lot of work to innovate and broaden our product portfolio. That enables us to lean into the customer demand across a whole range of market environments."

CEO Andy Sullivan on annuity sales

By The Numbers

• Operating Income: $1.17 billion ($1.07 billion in Q4 2024)
• Net Income: $905 million (-$57 million in Q4 2024)
• Earnings Per Share: $3.30 per share ($2.96 in Q4 2024)
• Share Repurchases: $250 million in Q4 2025
• Dividend Declared: $480 million in Q4 2025
• Stock Price Movement: Shares dropped nearly 4% as of Wednesday afternoon to $103.01

Life Segment

- Adjusted Operating Income: $93 million (-$57 million in Q4 2024)

- Full-Year Sales: $955 million (up 5%)

Annuity Segment

- Adjusted Operating Income: $456 million ($424 million in Q4 2024)

- Full-Year Sales: $13.6 billion (down 3%)

© Entire contents copyright 2026 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.