Prudential extends Japan sales ban another 6 months at a total $1B loss

Prudential of Japan is not ready to resume sales after a 90-day ban following widespread misconduct, Prudential Financial CEO Andy Sullivan said Tuesday. The insurer is extending the sales moratorium for another 180 days, for a total financial impact of about $1 billion.

The extended sales ban "reflects Prudential’s conclusion that the scope and complexity of the required changes within POJ are greater than previously anticipated and will take additional time to design and implement," Prudential said in a news release.

These include the operational, governance, organizational, and related changes necessary to resume sales. Prudential also initiated an independent, third-party review of POJ’s management system earlier this year as part of its governance process, the release said. That review is ongoing and is expected to take several months to complete.

Sullivan held an impromptu conference call with Wall Street analysts to quell investor fears.

"It is clear to my leadership team and me that POJ requires meaningful transformation and further oversight through the reset now underway," Sullivan said. "We are addressing the issues we have identified so far and repositioning the business for the future."

Prudential expects a $525 to $575 million impact on 2026 pretax adjusted operating income, and another $400 to $450 million impact on pre tax adjusted operating income in 2027, Sullivan said.

The financial loss reflects the annualized impact of surrenders and the suspension of new sales activity for most of 2026, as well as the cost of restarting new sales in 2027.

"While we expect the recovery of sales to take time as we reset the operating model, POJ has strong capabilities, a well-established brand and a long-standing presence in the market," Sullivan said. "We believe the business will emerge better positioned to serve consumers over the long term."

POJ serves 2.2 million customers with life and annuity products, supported by roughly 4,200 life planners across Japan, Sullivan said.

CEO shuffle

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.

The 90-day sales suspension was expected to have an anticipated bottom-line impact of $300 to $350 million, said Yanela C. Frias, chief financial officer, during Prudential's February earnings call.

POJ expects to resume sales on Nov. 6, Frias said Tuesday. For every month that the restart date is delayed, the estimated cost to the insurer is $50 million to $60 million, she added.

"We are focused on restoring the trust of our consumers and society in Japan for sustained, measurable change," she said. "Japan is an important market for Prudential, and we are determined to regain the confidence built over decades."

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.

Prudential's new compensation framework for POJ has four components, Sullivan explained:

• Establishes a minimum base pay
• Extends commission payments over multiple years
• Adds a stronger component for the persistence of business
• Strengthens the compliance-related accountabilities

"We really think this is a winning structure for everybody," Sullivan said, "for our employees, for our company, for the customers. You shouldn't imply that it's a meaningful change necessarily, in the total level of compensation, but it certainly is a major change in the way that we incentivize our life planners."

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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.