Prudential Q3 Earnings Fall as Japan Suspension Offsets PGIM Strength

Prudential Financial reported lower third-quarter adjusted operating earnings as the sales suspension at Prudential of Japan outweighed stronger results at PGIM and several U.S. businesses. The insurer also announced the sale of its Brazil and Mexico operations to CNP Assurances for $4.025 billion, advancing its plan to narrow its geographic footprint.

Pre-tax adjusted operating income fell by $183 million from a year earlier to $1.646 billion. After-tax adjusted operating income was $3.77 per share, down $0.28 from $4.05. GAAP net income attributable to Prudential Financial was $1.388 billion, compared with $1.431 billion in the prior-year quarter.

Year-to-date adjusted operating return on equity was unchanged at 14.5%. Prudential estimated its full-year 2026 effective tax rate at 20% to 21%.

Japan suspension weighs on results

Adjusted operating income from the Japan Businesses declined to $559 million from $750 million. Prudential attributed the decrease primarily to higher expenses and less favorable underwriting associated with the Prudential of Japan sales suspension, as well as lower spread income caused by reduced alternative investment income.

The company estimated the suspension’s total third-quarter impact at about $140 million. That included approximately $80 million of one-time expenses, mainly Life Planner compensation payments during the suspension; about $40 million primarily related to lower sales and surrenders; and roughly $20 million of regulatory and business-response costs.

Japan sales for the trailing 12 months declined to $1.305 billion from $1.794 billion on a constant-exchange-rate basis. Prudential said third-party distribution remained strong, with Independent Agency sales rising 53% year over year, and that Prudential of Japan continued work on reforms required by Japan’s Financial Services Agency.

PGIM and U.S. businesses provide support

PGIM’s adjusted operating income increased 8% to $263 million. Lower expenses and higher asset-management fees more than offset reduced seed and co-investment earnings and lower agency earnings. Assets under management were $1.465 trillion, broadly stable from $1.470 trillion a year earlier, while total net inflows reached $7.4 billion, the strongest third-party flow performance in 10 quarters. PGIM’s adjusted operating margin was 26.5%, compared with 23.7% in the prior-year period.

The Retirement business generated $620 million of adjusted operating income, down from $637 million. Higher spread income from business growth was offset by increased sales-related expenses, lower earnings from the Habitat joint venture and less favorable underwriting in the pension risk transfer block. Quarterly sales totaled $8.2 billion. Prudential recorded its highest retail annuity sales quarter since 2013 and a record quarter for registered index-linked annuity sales. It also closed three mid-sized pension risk transfer transactions totaling about $1.6 billion in October and expects several more transactions to close by year-end.

Group Insurance earnings rose 12% to $101 million, supported by more favorable life underwriting and continued growth in supplemental health products. Year-to-date sales increased 23%, led by the Premier middle-market segment. The total benefits ratio was 81.0%, below the company’s 83% to 87% target range.

Individual Life adjusted operating income increased to $199 million from $153 million, reflecting more favorable underwriting, including a reserve refinement, and higher spread income. Prudential also reported record sales of its Custom Premier II variable universal life product as it shifted toward accumulation-focused offerings. Trailing-12-month total Individual Life sales were $976 million, compared with $988 million a year earlier.

U.S. Legacy Products earned $253 million, down from $308 million. The decline reflected lower net fee income as the traditional variable annuity block continued to run off, along with less favorable underwriting in guaranteed universal life. Account values for discontinued annuities and guaranteed living benefits decreased to $71.8 billion from $81.7 billion.

Capital and investment position

Prudential held $4.0 billion of highly liquid assets at September 30, above its target of more than $3.0 billion. The company distributed $741 million to shareholders during the quarter, including $491 million of common-stock dividends and $250 million of share repurchases.

Its $397 billion General Account was diversified across government, public and private corporate securities, structured products, mortgage loans and other assets. Private fixed income represented $83 billion, or 21% of invested assets, with 85% rated investment grade. The company estimated that artificial-intelligence-related exposure accounted for about 2% of invested assets, primarily through secured investment-grade holdings.

Prudential cautioned that remediation in Japan could take longer than expected or prove unsuccessful, additional misconduct could be identified, and the sales suspensions at Prudential of Japan and Gibraltar Life could continue longer than anticipated. Other risks cited included credit deterioration, counterparty defaults and insurance experience that differs from assumptions for mortality, morbidity or policyholder behavior.