Prudential(PRU) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited interim consolidated financial statements for Prudential Financial, Inc. as of March 31, 2025, and for the three months then ended Consolidated Financial Position Summary | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Assets | $739,262 | $735,587 | | Total Liabilities | $707,040 | $705,461 | | Total Equity | $30,203 | $28,187 | Consolidated Operations Summary | Metric | Three Months Ended Mar 31, 2025 (in millions) | Three Months Ended Mar 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Revenues | $13,470 | $23,509 | | Net Income (Loss) Attributable to PFI | $707 | $1,138 | | Diluted EPS | $1.96 | $3.12 | Notes to Unaudited Interim Consolidated Financial Statements The notes detail the basis of presentation and significant accounting policies, including a change in International Businesses segment reporting and disclosures on investments, derivatives, and reinsurance activities - Effective in the first quarter of 2025, the Company's International Businesses are reflected as a single operating and reportable segment, a change from the previous structure of Life Planner and Gibraltar Life and Other segments, applied retrospectively[34][364] - In March 2025, the Company entered into a reinsurance agreement with Prismic Life Reinsurance International, Ltd. to reinsure approximately $7 billion of reserves for certain USD-denominated Japanese whole life policies[290][388] - Gross unrealized losses on available-for-sale fixed maturity securities totaled $33.6 billion as of March 31, 2025, primarily attributable to increases in interest rates, general credit spread widening, and foreign currency movements[50][53] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results of operations, highlighting the impact of market conditions, particularly interest rates, and segment performance - Net income attributable to Prudential Financial decreased by $431 million year-over-year, primarily due to a $474 million unfavorable variance in the change in value of market risk benefits and a $183 million unfavorable variance from realized investment gains, partially offset by an $85 million favorable variance from higher adjusted operating income[449][450] - The company highlights that for both its U.S. and Japanese operations, average reinvestment yields are now generally exceeding current average portfolio yields, a positive indicator for future net investment spread in a higher interest rate environment[431][443] Adjusted Operating Income by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | PGIM | $156 | $169 | | U.S. Businesses | $931 | $805 | | International Businesses | $848 | $896 | | Corporate and Other | $(415) | $(435) | | Total | $1,520 | $1,435 | Results of Operations by Segment This section provides a detailed breakdown of the operating results for each of Prudential's business segments, including PGIM, Retirement Strategies, Group Insurance, Individual Life, and International Businesses - PGIM: Adjusted Operating Income (AOI) decreased by $13 million, primarily due to lower other related revenues from seed/co-investments and incentive fees, while Assets Under Management (AUM) grew to $1.385 trillion[497][504] - Group Insurance: AOI increased by $44 million, driven by higher underwriting results in both group life and group disability businesses, reflecting favorable mortality and claims experience[557] - Individual Life: AOI loss narrowed by $87 million, mainly due to higher underwriting results reflecting the favorable impact of recent reinsurance transactions and lower expenses[566] - International Businesses: AOI decreased by $48 million ($38 million on a constant currency basis), primarily due to lower net investment spread results and lower earnings from joint ventures[573] General Account Investments The general account investment portfolio totaled $445.4 billion, primarily in fixed maturities, with analysis split by PFI, Closed Block, and Funds Withheld assets General Account Investments Composition (Mar 31, 2025) | Category | PFI (ex-CB/FW) (in billions) | Closed Block (in billions) | Funds Withheld (in billions) | Total (in billions) | | :--- | :--- | :--- | :--- | :--- | | Fixed maturities | $283.5 | $29.5 | $12.5 | $325.5 | | Commercial mortgage & other loans | $54.2 | $7.8 | $0.3 | $62.3 | | Other Investments | $31.9 | $8.5 | $1.9 | $42.3 | | Total | $380.8 | $47.2 | $17.4 | $445.4 | - As of March 31, 2025, 94% of the PFI (excluding Closed Block and Funds Withheld) fixed maturity portfolio was rated high or highest quality (NAIC 1 or 2)[635] - The investment income yield for the PFI (excluding Closed Block and Funds Withheld) portfolio increased to 4.19% in Q1 2025 from 4.04% in Q1 2024, driven by higher fixed income reinvestment rates[608][609][611] Liquidity and Capital Resources Management asserts that capital and liquidity resources are sufficient, detailing recent debt issuance, reinsurance transactions, and strong regulatory capital ratios - Prudential Financial (parent company) held highly liquid assets of $4.92 billion as of March 31, 2025 (excluding net borrowings from its intercompany liquidity account)[707][708] - Key capital actions in 2025 include issuing $750 million of senior notes, entering a $7 billion reinsurance deal with Prismic Re International, and announcing the redemption of $1.0 billion of junior subordinated notes[688] Regulatory Capital Ratios (as of Dec 31, 2024) | Entity/Metric | Ratio | | :--- | :--- | | PICA RBC Ratio | 409% | | Prudential of Japan Solvency Margin | 763% | | Gibraltar Life Solvency Margin | 973% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes in its economic exposure to market risk since its 2024 Annual Report on Form 10-K - As of March 31, 2025, there have been no material changes in the Company's economic exposure to market risk from December 31, 2024[755] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025 - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2025, the Company's disclosure controls and procedures were effective[756] - No change in internal control over financial reporting occurred during the quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting[756] PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 21 of the financial statements for details on pending litigation and regulatory matters - The company estimates that as of March 31, 2025, the aggregate range of reasonably possible losses in excess of accruals for litigation and regulatory matters is less than $250 million[412] Item 1A. Risk Factors This section directs readers to the 'Risk Factors' section of the company's Annual Report on Form 10-K for the year ended December 31, 2024, for a comprehensive description of risks - The report refers to the Risk Factors section in the 2024 Annual Report on Form 10-K for a detailed discussion of business risks[760] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2025, Prudential repurchased approximately 2.2 million shares of its common stock at a total cost of $250 million Share Repurchases - Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | Jan 2025 | 707,994 | $119.04 | ~$84 | | Feb 2025 | 1,517,761 | $113.47 | ~$172 | | Mar 2025 | 761,202 | $110.36 | ~$84 | | Total Q1 | 2,986,957 | - | ~$340 | | Portion under announced program | 2,195,805 | - | $250 | - As of March 31, 2025, approximately $750 million remained available for repurchase under the $1.0 billion authorization for 2025[761][762] Item 5. Other Information The company reports that no directors or officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025 - During the quarter ended March 31, 2025, no directors or officers adopted or terminated any Rule 10b5-1 trading plans or other similar arrangements[764] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the CEO and CFO certifications and the XBRL interactive data files