Prudential: big Q4 sales, record PRT deals and an executive shakeup

From a sales standpoint, a lot went right for Prudential Financial in Q4, and the year as a whole.

Individual life insurance sales hit a quarterly record high of $326 million in the fourth quarter and increased 23% for the full year. The insurer set an industry full-year record with $16 billion worth of pension risk transfer deals.

PGIM, the company’s global investment management business, reported operating income of $259 million, up more than 50% over the year-ago quarter.

But Prudential still reported a $57 million net loss for Q4 due largely to unfavorable underwriting. The executive blamed a few large outlier policies during a conference call with Wall Street analysts Wednesday.

“We had several large case claims from permanent policies from our legacy Hartford block,” said Caroline Feeney, executive vice president and head of U.S. businesses. “This resulted in the adverse mortality [and] negative underwriting, which can happen episodically. … We do continue to see encouraging signs that COVID 19 has transitioned to an endemic state with more predictable seasonal fluctuations in mortality, such as what we typically see during the flu season.”

Prudential is projecting strong annuity sales growth at the same time LIMRA projects a softening due mainly to interest rate changes. Feeney explained why Prudential, which reported nearly $3.5 billion in Q4 sales, is more bullish.

“We continue to see those compelling tailwinds in the marketplace driven by aging demographics, plus a high volume of money in motion,” she said. “That includes an estimated $70 billion in fixed annuities that's coming due, as well as over $7 trillion in money market fund balances.”

In Other News

Executive shakeup. It marked the first quarterly meeting since the Prudential board appointed Andrew Sullivan as its next CEO, effective March 31, 2025. Sullivan, currently executive vice president and head of International Businesses and Global Investment Management, will succeed Charles F. Lowrey. Lowrey will remain as executive chairman of the board for 18 months

In related moves, Feeney becomes global head of insurance and retirement, a newly created position, also effective March 31. Feeney and incoming head of PGIM Jacques Chappuis will both report to Sullivan.

Rob Falzon, vice chairman, is retiring in July after 42 years with Prudential, Lowrey announced Wednesday.

Sullivan "is an exceptional leader, and the board and I have every confidence he is the right person to take Prudential into the future," Lowrey said. "This is an exciting and significant time for Prudential and the right time to elevate the next generation of leadership as we mark our 150th anniversary."

PRT lawsuits. Feeney had sharp words for the growing trend of litigation from plaintiffs challenging pension risk transfer deals.

In one recent lawsuit, filed in the Southern District of New York, Verizon pensioners claim that a PRT deal agreed to in March threatens their retirement funds. Verizon inked the $5.9 billion PRT deal for Prudential Financial and Reinsurance Group of America to manage the pensions of 56,000 Verizon retirees and their beneficiaries.

Neither Prudential or RGA is named as a defendant in the new lawsuit. Instead, plaintiffs are suing Verizon and State Street Global Advisors Trust Co. State Street served as “the independent fiduciary” in putting the deal together, the lawsuit says.

“State Street directly profited from the annuitization transactions through its common stock holdings in Verizon, Prudential Financial … and RGA,” the lawsuit states. “State Street’s own financial interests were improperly served by off-loading Verizon liabilities to PICA and RGA, and by helping Verizon obtain the cheapest available annuity provider, as opposed to the ‘safest available’ annuity provider as required by ERISA.”

Prudential “pioneered this business” in a transaction with the Cleveland Public Library over 100 years ago, Feeney said. The industry has “an extensive history” of fulfilling the promises made to pensioners when taking over those financial obligations, she added.

“Litigation like this threatens the ongoing health of the pension risk transfer industry,” she said. “It's particularly harmful for plan sponsors who are looking to de-risk their pension obligations, and for the retirees whose pensions are protected through these transactions.”

Prudential signed more than $16 billion worth of PRT transactions in 2024, the highest annual level for any single carrier since the insurer set the record in 2012, Falzon noted.

Quarterly Snapshot

• U.S. Businesses reported adjusted operating income of $860 million for the fourth quarter of 2024, compared to $964 million in the year-ago quarter.
• Parent company highly liquid assets of $4.6 billion versus $4.1 billion for the year-ago quarter.
• Assets under management of $1.512 trillion versus $1.450 trillion for the year-ago quarter.
• PGIM reported adjusted operating income of $259 million for the fourth quarter, compared to $172 million in the year-ago quarter. This increase primarily reflects higher asset management fees and other related revenues, which were driven by higher incentive fees, partially offset by higher expenses.
• Net account values in the individual retirement segment of $127 billion increased 8% from the year-ago quarter, driven by market appreciation. Sales of $3.6 billion in the current quarter increased 73% from the year-ago quarter, reflecting strong sales of registered index-linked and fixed annuity products.

Management Perspective

"We always have a lot of work to get done in front of us. We absolutely intend to continue to raise the performance of the company over time given the strong opportunities that we see in the marketplace."

Andy Sullivan, incoming Prudential CEO

By The Numbers

• Total Revenue : Adjusted pre-tax income $1.07 billion ($926 million in Q4 2023)
• Net Income: Net loss of $57 million in Q4 2024 ($1.3 billion in Q4 2023)
• Earnings Per Share (EPS): Adjusted after-tax income per share was $2.96 ($2.54 in Q4 2023)
• Share Repurchases: $250 million in Q4 2024
• Dividend Declared: $470 million in Q4 2024
• Stock Price Movement: Down 3.6% to $113.69 per share

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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.