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    PRU
    Earnings call· Sep 2025(Q3 FY25)

    PRUDENTIAL FINANCIAL INC PRU

    Oct 30, 2025 Source

    Executive summary

    Prudential Q3 FY25 — Record Operating Income and Strong Business Momentum

    Prudential delivered a record-setting quarter, driven by broad-based earnings growth across all businesses, higher spread income, and favorable underwriting. Strategic actions, including the PGIM reorganization and product pivots, are yielding efficiencies and positioning the company for future growth, despite ongoing headwinds from legacy variable annuity runoff and competitive pressures in certain markets. Management remains focused on disciplined capital allocation and evolving its strategy to capitalize on high-growth opportunities.

    Highlights

    5

    • Pretax adjusted operating income reached a record high of $1.9 billion or $4.26 per share, up 28% from the prior year quarter.

    • Year-to-date adjusted operating return on equity was over 15%.

    • PGIM's assets under management increased 5% to $1.5 trillion, driven by market appreciation and positive net inflows of $2.4 billion.

    • Individual Retirement delivered over $3 billion in sales for the seventh consecutive quarter, and Individual Life sales were up 20% to $253 million.

    • The company expects to realize approximately $100 million in annual run rate savings by the end of 2026 from PGIM reorganization, leading to over 200 basis points of margin expansion in 2026.

    Concerns

    5

    • Jennison, an active equity manager within PGIM, continued to experience outflows, dampening organic growth and earnings momentum.

    • The runoff of the legacy Variable Annuity block continues to create a $10 million to $15 million quarterly AOI impact, compounding to $100 million to $150 million annually.

    • International businesses anticipate approximately $30 million of higher expenses in Q4 FY25 primarily due to timing.

    • Disability experience was less favorable due to an uptick in severity and lower claim resolutions, contributing to the 83% benefits ratio.

    • The RILA market has become more competitive, with 25 players now compared to 5 a few years ago, leading to aggressive pricing.

    Guidance & targets

    6
    CategoryTargetConfidence
    PGIM Margin Expansion
    over 200 basis points
    high materiality
    High
    PGIM Annual Run Rate Savings
    $100 million
    medium materiality
    High
    International Expenses
    approximately $30 million higher
    low materiality
    High
    3-Year EPS Growth
    between 5% to 8%
    high materiality
    Medium
    Free Cash Flow Ratio
    65%
    medium materiality
    High
    Group Benefits Ratio Range
    reevaluate at the end of the year
    low materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    PGIM
    Higher asset management fees driven by market appreciation, positive net flows, and strong investment performance. Included $40 million in reorganization charges, partially offset by $25 million gain from Taiwan business sale. Jennison experienced equity outflows.
    Assets Under Management (AUM): $1.5 trillionAUM growth YoY: 5%Total Net Inflows: $2.4 billionAffiliated Net Inflows: $1.8 billionThird-Party Net Inflows: $600 millionThird-Party Institutional Inflows: $300 millionThird-Party Retail Inflows: $300 million5-year investment performance outperforming benchmarks: >70% of AUM3-year investment performance outperforming benchmarks: 80% of AUMAdjusted Q3 Margin (ex-one-timers): 25.9%
    		———23.7%
    U.S. Businesses - Institutional Retirement
    Strong momentum, reinforcing market leadership. Sales contributed to highest earnings in the last 5 quarters for U.S. retirement strategies.
    Sales: >$6 billionJumbo Pension Risk Transfer (PRT) transaction: $2.3 billionLongevity Risk Transfer (LRT) transactions: $1.5 billion
    		————
    U.S. Businesses - Individual Retirement
    Driven by continued momentum in fixed annuities and solid sales of registered index-linked annuities. Benefited from higher net investment spread income and stronger alternative investment income.
    Sales: >$3 billionConsecutive quarters with >$3B sales: 7
    		————
    U.S. Businesses - Group Insurance
    Sales growth driven by Group Life and Disability. Benefits ratio at low end of target range, reflecting favorable life underwriting but less favorable disability experience (uptick in severity, lower claim resolutions, unfavorable NY Paid Family Leave).
    Q3 Sales: ~$80 millionYTD Sales: $555 millionYTD Sales growth YoY: 14%Benefits ratio: ~83%
    		————
    U.S. Businesses - Individual Life
    Growth driven by higher accumulation-focused variable life, including record sales in FlexGuard Life product suite. Benefited from more favorable underwriting results.
    Q3 Sales: $253 million
    		—20%——
    International Businesses
    Q3 sales down primarily due to strong U.S. dollar-denominated single-pay sales in Japan in prior year quarter. YTD sales solid, driven by Japan and Brazil. Experienced higher net investment spread results and more favorable underwriting, partially offset by higher expenses.
    YTD Sales growth YoY: 4%
    		—-6%——
    International Businesses - Japan
    Expanding retirement and savings solutions. Surrender activity showing signs of stabilization but remains a near-term headwind. Accelerated CEO succession with Brad Hearn.
    Sales growth over 3 years: ~35%Yen-denominated sales growth over 3 years: >50%New product sales (last 24 months) as % of total sales: ~20%
    		————
    International Businesses - Brazil
    Continuing to expand third-party distribution network and deepen strategic partnerships.
    Life Planner channel sales: new record
    		————

    Operational metrics

    17
    Adjusted Operating Income
    $1.9 billionup 28% from prior year quarter
    Q3 FY25

    Record high, reflecting earnings growth in every business, higher spread income, favorable underwriting, and higher fee income in PGIM. Benefited from above-expectation alternative investment income and other favorable one-time items.

    Adjusted Operating Return on Equity
    >15%
    YTD FY25
    Cash and Liquid Assets
    $3.9 billionabove minimum liquidity target
    Q3 FY25

    Strong capital position and regulatory capital ratios.

    Capital Deployed to Shareholders
    >$700 million
    Q3 FY25

    Maintained a balanced mix of dividends and share buybacks.

    Legacy Variable Annuity Runoff AOI Impact
    $10 million to $15 million
    per quarter

    Expected to continue, compounding quarterly, until new product account values grow to offset it.

    Annual AOI Impact from Long-Term Rate Decline
    $0.20
    annual

    Management's estimate of sensitivity to interest rate changes.

    PGIM Reorganization Charges
    $40 million
    Q3 FY25

    Charges from integrating PGIM's multi-manager model.

    PGIM Taiwan Sale Gain
    $25 million
    Q3 FY25

    Gain from the sale of PGIM Taiwan business, partially offsetting reorganization charges.

    PGIM Margin (Adjusted)
    25.9%
    Q3 FY25

    Reflects underlying margin performance before one-time items, within the 25-30% target range.

    Private Credit Portfolio Investment Grade
    90%
    current

    Portfolio largely consists of private placements with strong covenants, consistently outperforming equally rated publics during downturns.

    Dai-ichi Partnership Assets Under Management
    soon $1 billion
    current

    Assets managed for Dai-ichi, steadily growing as part of the strategic partnership.

    Direct Lending Assets Under Management
    >$14 billion
    current

    Expansion of capabilities in the credit space within PGIM.

    Securitized Products Business Assets Under Management
    $145 billion
    current

    PGIM is a leading player in public and private asset-backed finance.

    Legacy VA and GUL Exposure Reduction
    >60%
    since product pivots

    Progress made on product pivots and reinsurance transactions to optimize balance sheet.

    RILA Market Competitors
    25up from 5 a few years back
    current

    Increased competition leading to more aggressive pricing in the RILA market.

    Unprotected Retirement Assets
    $40 trillion
    current

    Significant market opportunity due to aging society and need for protected income.

    Money Market Assets
    $7 trillion
    current

    Significant pool of capital that could flow into protected income products.

    Industry KPIs

    5
    MetricValueDetails
    Capital returns>$700 millionUSD
    ROE operating ROE>15%%
    Net investment income—
    Life specific when present—
    Statutory regulatory capital150%%

    Product announcements

    4
    ProductTypeDetails
    FlexGuard Life product suitemilestone
    New products in Japanmilestone
    Dai-ichi's Neo First cancer productlaunch
    Forward flow transaction with Prismic (U.S. retail fixed annuities)launch

    Deals & partnerships

    3
    nullSale of PGIM Taiwan business to focus resources on higher growth opportunities.

    Completed in Q3 FY25 to reallocate resources towards more profitable growth areas.

    Partners GroupCollaboration to bring multi-asset solutions to Wealth, Retirement, and Insurance clients, particularly in the Retail space.

    Partners Group brings capabilities like primary private equity, while PGIM brings credit and real estate capabilities. Aims to grow asset management capabilities through partnerships.

    The Dai-ichiStrategic partnership with two main aspects: distributing Dai-ichi's Neo First cancer product through Prudential's Life Planner system and managing material assets for Dai-ichi.

    Phase 1 involves product distribution and asset management, with regular meetings between CEOs to explore expansion.

    Risks & headwinds

    7
    Jennison Equity Outflowscurrent quarter

    dampening our organic growth and earnings momentum in PGIM

    Mitigation: Working to lessen and overcome these equity outflows; optimistic on Institutional, cautious on Retail due to volatility.

    Legacy Variable Annuity (VA) Runoffongoing

    $10 million to $15 million AOI impact per quarter compounding, hence, the $100 million to $150 million that we've talked about before.

    Mitigation: Expects earnings power of new annuity sales to emerge as headwinds dissipate; exploring balance sheet optimization and risk transfer opportunities.

    Japan Surrender Headwindsnear-term

    partially offset new business growth

    Mitigation: Surrender activity showing signs of stabilization; expect more moderate impact beyond 2025. New product introductions and multichannel distribution are driving growth.

    Higher Expenses in International BusinessesQ4 FY25

    approximately $30 million of higher expenses

    Mitigation: Primarily due to timing, consistent with prior years.

    Less Favorable Disability ExperienceQ3 FY25

    uptick in severity and lower claim resolutions

    Mitigation: Favorable life underwriting offset some impact; New York Paid Family Leave pricing recently raised; close monitoring of book experience and renewal increases where warranted.

    Increased Competition in RILA Marketcurrent

    went from 5 competitors a few years back to 25 today; some aggressive pricing in the marketplace

    Mitigation: Focused on disciplined growth, leveraging brand strength, product portfolio, and wide distribution to achieve profitability.

    Potential Impact of Long-Term Interest Rate Declinesannual

    a onetime 50 basis point decline in long-term interest rates with no recovery after 12 months, we estimate an annual AOI impact of approximately $0.20 per share.

    Mitigation: Reinvestment yields continue to be higher than portfolio yields; no material impact from short-term rate changes.

    What to watch in Q4 FY25

    5

    PGIM Margin Expansion

    FY26
    Current23.7% (reported Q3 FY25), 25.9% (adjusted Q3 FY25)
    Targetover 200 bps expansion in 2026 vs 2025, towards 25-30% target

    Why it matters

    This indicates the effectiveness of PGIM's reorganization and its contribution to overall profitability.

    Compared to 2025, we now anticipate over 200 basis points of margin expansion in 2026 from these actions and are well positioned to reach our 25% to 30% margin target.

    Q&A highlights

    7

    Commentary on the large jumbo PRT deal this quarter and the outlook for the LRT market, especially with new entrants.

    Management expects the PRT market to be softer in FY25 vs FY24 but noted an uptick in the pipeline for H2 FY25, with $3 trillion in untransacted liabilities. In LRT, they focus on the UK ($50B-$55B/year, 80% seeking reinsurance) and Netherlands ($330B in DB pensions transitioning). Prudential remains a leader, with $1.5 billion in LRT deals this quarter and over $11 billion YTD.

    “this is going to be a big market for years to come with $3 trillion in untransacted liabilities, funding levels sitting at 105%.”

    asked by Wilma Jackson Burdis · answered by Andrew Sullivan

    2 min read6 chapters

    Detailed Narrative

    01

    Record Operating Performance and ROE

    Prudential achieved a record pretax adjusted operating income of $1.9 billion or $4.26 per share, marking a 28% increase year-over-year. The year-to-date adjusted operating return on equity exceeded 15%. This strong performance was attributed to higher spread income, favorable underwriting experience across global retirement and insurance, and increased fee income in PGIM, benefiting from above-expectation alternative investment income.

    02

    PGIM's Strategic Evolution and Margin Expansion

    PGIM, with $1.5 trillion in AUM (up 5% YoY), reported positive net inflows of $2.4 billion, including $600 million from third parties. The business is undergoing a reorganization to a unified asset manager model, which is expected to generate approximately $100 million in annual run rate savings by the end of 2026. These actions are projected to drive over 200 basis points of margin expansion in 2026 compared to 2025, positioning PGIM to achieve its 25% to 30% margin target.

    03

    Strong Retirement and Life Sales Momentum

    Individual Retirement recorded over $3 billion in sales for the seventh consecutive quarter, driven by fixed annuities and registered index-linked annuities. Institutional Retirement sales exceeded $6 billion, including a $2.3 billion jumbo pension risk transfer and $1.5 billion in longevity risk transfer transactions. Individual Life sales increased 20% year-over-year to $253 million, with strong performance from accumulation-focused variable life products, including FlexGuard Life.

    04

    International Business Growth and Leadership Transition

    International businesses saw year-to-date sales up 4%, with Japan's sales increasing 35% over three years, driven by new product introductions and a shift towards retirement and savings solutions. In Brazil, a new sales record was set in the Life Planner channel. The company accelerated its succession plan in Japan, appointing Brad Hearn as CEO to lead the growth strategy, leveraging his experience in financial planning.

    05

    Capital Management and Balance Sheet Strength

    Prudential maintains a strong capital position with $3.9 billion in cash and liquid assets, above its $3 billion minimum target. The Board approved an economic solvency ratio (ESR) operating target of 150% for its Japanese entities, which remain well above this level. The company deployed over $700 million in capital to shareholders during the quarter, balancing growth investments with healthy dividends and share buybacks.

    06

    Addressing Headwinds and Market Dynamics

    While overall performance was strong, PGIM's Jennison active equity manager continued to experience outflows, consistent with broader industry trends. The legacy Variable Annuity block runoff continues to be a headwind, impacting adjusted operating income by $10 million to $15 million quarterly. The RILA market has become significantly more competitive, with 25 players now compared to 5 previously, leading to aggressive pricing.

    AI-generated summary of the company’s earnings call. Not investment advice.