Earnings

Prudential reports turnaround, $2.48B net income for 2023

By Doug Bailey

In announcing its 2023 financial results Wednesday, Prudential Financial Inc. showcased a significant turnaround from the previous year. The insurer’s net income reached $2.48 billion, or $6.74 per common share, compared to a net loss of $1.64 billion, or $4.49, per share in 2022.

Charles Lowrey, Prudential’s chairman and CEO, attributed the performance to strong sales across the company’s insurance and retirement businesses, and solid underlying earnings growth. He highlighted several 2023 accomplishments such as strategic transactions, increased capital flexibility, expanded distribution, and the $10 billion launch of Prismic Life Reinsurance Ltd., Prudential’s Bermuda-based life and annuity reinsurance company launched in September with Warburg Pincus.

After-tax adjusted operating income was $4.28 billion in 2023, or $11.62 per share, compared to $3.91 billion, or $10.31 per share, in 2022.

The fourth quarter of 2023 saw net income surge to $1.31 billion, or $3.61 per share, a stark contrast to the net loss of $52 million, or $0.16 per share, in the same quarter of 2022. Its fourth quarter non-GAAP EPS of $2.58 missed analyst expectations by $0.09. Non-GAAP results don’t include non-recurring or non-cash expenses.

Overall earnings were impacted a bit by declining operating income from its PGIM investment management business and international business dropped from a year ago. But those factors were more than offset an increase at its U.S. businesses.

A 'strong year in pension risk transfer'

“We did finish another strong year in pension risk transfer, “said Caroline Feeney, head of U.S. businesses for Prudential. “We closed 11 transactions worth almost $6 billion finishing as the No. 2 pension risk transfer writer.”

A pension risk transfer is when a pension provider seeks to remove some or all of its obligation to pay guaranteed retirement income or post-retirement benefits to plan participants. In these transactions, the pension providers generally transfer assets to a life insurer, for which the insurer assumes the annuity risk for plan participants.

Prudential now has completed seven of the top 10 U.S. pension risk transfer transactions on record.

“We also see that strong sales trend continuing,” Feeney said. “It's driven by healthy pipelines due to favorable funding positions of over 100%. And last year's market volume was roughly $45 billion, and we do expect to see that healthy pipeline continue this year. And although the market is highly competitive with more new entrants, very few competitors have executed transactions exceeding $1 billion.”

Prudential Financial returned $708 million to shareholders in the fourth quarter, including $250 million in share repurchases and $458 million in dividends. Dividends paid represented a 5% yield on adjusted book value.

Prudential AUM increases to $1.45 trillion

The company reported assets under management of $1.45 trillion, a notable increase from $1.377 trillion in the year-ago quarter.

“The fourth quarter capped a year of continued growth and evolution for Prudential,” said Lowrey in a conference call with analysts and investors. “Our strategy coupled with our mutually reinforcing businesses delivered long term sustainable growth to all our stakeholders. Our fundamentals are strong, and we are confident about our momentum going into 2024.”

Lowrey said Prudential will continue to lead the way in expanding access to investing insurance and retirement security across the globe as it seeks to help current and future generations build a secure financial future.

Prudential’s board authorized the repurchase of up to $1.0 billion of outstanding common stock in 2024. Additionally, a quarterly dividend of $1.30 per share of common stock was declared, representing a 4% increase over the prior year's dividend.

Commenting on Prudential’s strong capital position, Lowrey chalked it up to “consistent discipline and a balanced approach.”

“There are really three aspects to our approach on which we focus,” he said. “First is maintaining our rock-solid balance sheet and financial strength, which is critical to fulfilling the promises we make to our customers and clients. Second, is investing both organically and through programmatic acquisitions to support sustainable long-term growth of our businesses. And the third is returning excess capital to shareholders as we have in the past. And in this quarter, we've done all three.”

Prudential shares were up more than 5% Wednesday in late day trading, to 108.90 per share, up $5.51.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].