Has a similar review for sales practice issues been conducted for Gibraltar Life, and does the POJ suspension impact Gibraltar or other Japan channels?

Yes, a similar review for Gibraltar Life is underway and will conclude in a few months. The only observed effect so far in Gibraltar is modest pressure on recruiting life consultants. The POJ suspension does not directly impact other channels. “Yes. So Suneet, yes, the answer is yes. We are conducting a similar review of Gibraltar. This is underway and in process and will conclude a few months from now.”

Will POJ suspend hiring new Life Planners, and what measures are being taken to retain the existing Life Planner force during the sales suspension?

Hiring of new Life Planners will continue. Decisive steps are being taken to preserve the distribution force, including enhanced training and development for Life Planners, and providing ongoing financial support to retain them. Management believes these actions, combined with fostering pride in the company, will help retain employees. “We are not stopping recruiting of new Life Planners in the channel that will continue. But we are taking decisive steps that is every bit intended to preserve the distribution force.”

What are the impacts of FX (yen weakening) and higher loan rates on surrender activity in Japan, and how does the POJ misconduct factor in?

Yen depreciation since 2022 has driven elevated U.S. dollar product surrenders, with a slight uptick in Q4 FY25 to 6.3% from 5.6% due to renewed yen weakening. However, customers with high FX sensitivity have largely already surrendered. Higher rates are viewed as positive for yen-denominated products. The financial estimates for POJ misconduct include anticipated impacts on sales and surrenders. “The surrender rates declined to mid-single digits through third quarter 2025, in line with the stabilization that we saw at that time. But we did see it pick up this quarter, fourth quarter '25 with the renewed yen weakening.”

PRU

Prudential Financial (PRU) Q4 FY25 earnings call: guidance and Q&A

Q: How was the 90-day sales suspension period for POJ determined, and was it done in conjunction with Japanese regulators?

The 90-day period was chosen to allow for meaningful progress on four key actions: customer reimbursement, Life Planner training, sales supervision, and compensation redesign. Management reiterated that sales will not resume until internal compliance and oversight are comfortable. The decision was voluntary, but the company consulted closely with the JFSA prior to the announcement. “We thought that 90 days was a reasonable time frame to make meaningful progress. But I would reiterate what we -- what I said in my opening comments and what Yanela said in hers as well that we're not going to resume distribution in the channel until we're comfortable that the internal compliance and oversight environment really supports us reopening it.”

Earnings call· Dec 2025 (Q4 FY25)· Financials· Feb 4, 2026

Source: earnings call transcript

Executive summary

Prudential Financial, Inc. Q4 FY25 — Japan Misconduct Impacts 2026 Outlook Amidst Strategic Repositioning

Prudential Financial's Q4 FY25 results were overshadowed by the voluntary 90-day sales suspension in its Japan business due to employee misconduct, which is projected to significantly impact 2026 earnings. Despite this headwind, the company reported solid full-year financial performance, driven by strategic repositioning and strong results in its U.S. businesses and PGIM's credit platforms. Management is focused on remediation in Japan while continuing to execute on its broader strategy to enhance long-term value and maintain robust capital levels.

Highlights

Full year 2025 pretax adjusted operating income was $6.6 billion, or $14.43 per share.
Adjusted operating return on equity for FY25 was approximately 15%, up nearly 200 basis points from the prior year.
Nearly $3 billion was returned to shareholders in FY25 through dividends and buybacks.
PGIM generated over $30 billion of total net inflows in FY25 from public fixed income, private credit, and real estate.
Emerging Markets reported record full year sales of $386 million on a constant currency basis, up 6% year-over-year.

Concerns

Voluntary 90-day sales halt at Prudential of Japan (POJ) due to employee misconduct, expected to impact 2026 pretax adjusted operating income by $300 million to $350 million.
PGIM experienced net outflows of approximately $10 billion in Q4 FY25 across third-party and affiliated channels, driven by active equity shifts and a single low-fee fixed income withdrawal.
Legacy variable annuity block runoff is expected to result in $3 billion to $4 billion of quarterly account value runoff, translating to $10 million to $15 million of pretax adjusted operating income runoff per quarter.
Excess surrenders in Japan during 2025 are estimated to impact 2026 earnings by roughly $50 million.

Guidance & targets

Category	Target	Timeline	Confidence
2026 Pretax Adjusted Operating Income Impact (POJ)	$300 million to $350 million high materiality	FY26	Medium
POJ Sales Suspension Duration	90-day period high materiality	Q1 · FY26	High
POJ Sales Suspension Impact (90-day suspension component)	$150 million to $180 million medium materiality	Q1 · FY26	Medium
POJ Sales Suspension Impact (One-time costs component)	$70 million medium materiality	FY26	Medium
POJ Sales Suspension Impact (Gradual ramp-up component)	$80 million medium materiality	FY26	Medium
Intermediate EPS Growth Target	5% to 8% high materiality	2024-2027 · FY27	Low
PGIM Margin Expansion	over 200 basis points medium materiality	FY26	Medium
Share Repurchases	up to $1 billion high materiality	FY26	High
Organizational Efficiency Benefits	$150 million medium materiality	FY27	High
Legacy Variable Annuity Block Account Value Runoff (Quarterly)	$3 billion to $4 billion medium materiality	Quarterly 2026 · FY26	High
Legacy Variable Annuity Block Pretax Adjusted Operating Income Runoff (Quarterly)	$10 million to $15 million medium materiality	Quarterly 2026 · FY26	High
Legacy Variable Annuity Block Pretax Adjusted Operating Income Runoff (Annual)	$100 million to $150 million medium materiality	FY26	High
2026 Earnings Impact from 2025 Japan Excess Surrenders	$50 million medium materiality	FY26	Medium
POJ Sales Levels (Post-suspension)	50% lower than normal levels medium materiality	FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
PGIM Pretax adjusted operating income was down slightly from the prior year quarter. Higher asset management fees from market appreciation were offset by higher expenses and weaker other related revenues due to lower seed and co-investment income. Net outflows were across third-party and affiliated channels, reflecting industry trends and a single low-fee fixed income withdrawal. Assets Under Management: $1.5 trillionAUM Growth YoY: 7%Net Outflows (Q4): $10 billion	—	—	—	$249 million
U.S. Businesses Pretax adjusted operating income increased 22% compared to the prior year quarter, driven by higher spread income in Retirement Strategies, more favorable underwriting results in Individual Life and Group Insurance, and lower expenses in Individual Life. Partially offset by lower fee income from legacy variable annuity block runoff.	—	22%	—	$1.1 billion
Institutional Retirement Reported strong sales, including pension risk transfers, positioning the company well in the large pension and longevity risk transfer markets in the U.S., U.K., and Netherlands. Sales (Q4): $4 billionSales (FY25): $26 billionPension Risk Transfers (Q4): $1 billion across 4 deals	—	—	—	—
Individual Retirement Delivered strong sales driven by fixed and registered index-linked annuities, supported by a broad product portfolio and strategic reinsurance partners. The legacy variable annuity block runoff remains a headwind. Sales (Q4): $3 billionSales (FY25): $14 billionConsecutive Quarters with >$3B Sales: 8	—	—	—	—
Group Insurance Sales increased 11% year-over-year for the full year, reflecting continued momentum in the Premier segment for Group Life and Disability. The Q4 benefit ratio was below the target range due to favorable life underwriting and less favorable disability experience. Sales (Q4): $56 millionSales (FY25): $600 millionBenefit Ratio (Q4): 82.5%	—	11%	—	—
Individual Life Full year sales increased 5% over the prior year, driven by a pivot towards less capital-intensive accumulation products like FlexGuard Life. Q4 sales were down from a prior year record quarter. Sales (Q4): $269 millionSales (FY25): $955 million	—	5%	—	—
International Businesses Pretax adjusted operating income was modestly higher than the prior year quarter. Sales were up 4% on a constant currency basis, driven by growing demand for retirement and savings products in Japan and record sales in Brazil.	$525 million	4% (constant currency)	—	$757 million
Japan Highly focused on the POJ issue. Retirement and savings products now account for a majority of sales. Surrender activity moderated in 2025 but remains a headwind, with the Q4 FY25 surrender rate increasing due to renewed yen weakening. Retirement & Savings Products (FY25 Sales Mix): ~25%Surrender Rate (Q4 FY25): 6.3%Surrender Rate (Q3 FY25): 5.6%	—	—	—	—
Emerging Markets Reported record full year sales, primarily driven by broader distribution in Brazil. The company continues to evaluate its global footprint to prioritize large and growing markets.	$386 million	6% (constant currency)	—	—

PRU operating KPIs by quarter

PRU operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Sep 2025 Q3 FY25	This call Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Net new assets PGIM	$8.6B Total net flows in the quarter of $8.6 billion included affiliated net flows of $8.9 billion, driven by a large annuities mandate, partially offset by $300 million of third-party net outflows. Source: earnings call transcript	$4.3B The net flows in the quarter of $4.3 billion included institutional third-party flows of $4.6 billion, driven by mandates across fixed income, private alternatives and equity, which are partially offset by modest retail third-party outflows. Source: earnings call transcript	$2.4B Total net inflows in the quarter of $2.4 billion included affiliated net inflows of $1.8 billion and third-party net inflows of $600 million. Source: earnings call transcript	~-$10B PGIM experienced net outflows of approximately $10 billion in the quarter across third-party and affiliated channels, reflecting the industry trend away from active equities as well as a single low fee fixed income withdrawal. Source: earnings call transcript	—	—	—
Net new assets PGIM Affiliated	$8.9B Total net flows in the quarter of $8.6 billion included affiliated net flows of $8.9 billion, driven by a large annuities mandate, partially offset by $300 million of third-party net outflows. Source: earnings call transcript	—	$1.8B Total net inflows in the quarter of $2.4 billion included affiliated net inflows of $1.8 billion and third-party net inflows of $600 million. Source: earnings call transcript	—	-$1.9B Net outflows in PGIM's affiliated channel totaled $1.9 billion, primarily driven by runoff in traditional variable annuities. Source: earnings call transcript	-$3B Affiliated net outflows were $3 billion, driven by our variable annuities runoff. Source: earnings call transcript	-57.9%
Net new assets PGIM Third-Party	-$300M Total net flows in the quarter of $8.6 billion included affiliated net flows of $8.9 billion, driven by a large annuities mandate, partially offset by $300 million of third-party net outflows. Source: earnings call transcript	—	$600M Total net inflows in the quarter of $2.4 billion included affiliated net inflows of $1.8 billion and third-party net inflows of $600 million. Source: earnings call transcript	—	$1.8B Importantly, third-party net inflows totaled $1.8 billion as strong fixed income inflows more than offset equity outflows and which, as Andy noted, remained pressured consistent with broader industry trends away from active equities. Source: earnings call transcript	$4.6B Institutional and retail third-party net flows totaled $4.6 billion, driven primarily by strong public credit inflows. Source: earnings call transcript	+155.6%
Assets under management (AUM) PGIM Private Alternatives	<$250B In addition, our diversified PGIM private alternatives platform, which has assets under management of nearly $250 billion, experienced 37% growth in private credit origination activity in 2024 compared to the prior year. Source: earnings call transcript	<$250B Our diversified PGIM Private Alternatives platform, which has assets under management of nearly $250 billion experienced over $10 billion in private capital deployment, up over 60% compared to the prior year quarter. Source: earnings call transcript	—	—	—	—	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Retirement and Savings Products (Japan)	expansion	Over the past 3 years
FlexGuard Life	launch	—

Deals & partnerships

PGIM Taiwan business divestiture

Decision to exit the PGIM Taiwan business as part of evaluating the global footprint to prioritize markets.

Insurance business in Kenya divestiture

Decision to exit the insurance business in Kenya as part of evaluating the global footprint to prioritize markets.

Risks & headwinds

Employee misconduct in Prudential of Japan (POJ) 2026, with potential extension of sales halt

Voluntary 90-day sales halt; expected $300 million to $350 million impact on 2026 pretax adjusted operating income.

Mitigation:Strengthening oversight of sales practices, governance, and risk management; restructuring employee compensation; enhancing education, compliance training, and recruiting standards; establishing a customer reimbursement program; not resuming distribution until internal compliance and oversight environment supports it.

PGIM net outflows Q4 FY25 (ongoing trend)

$10 billion in Q4 FY25

Mitigation:Diversified offerings across public fixed income, private credit, and real estate; realizing benefits of newly integrated distribution model; momentum building in asset-backed finance, direct lending, and ETFs.

Legacy variable annuity block runoff 2026 (ongoing)

$3 billion to $4 billion of quarterly account value runoff; $10 million to $15 million of pretax adjusted operating income runoff per quarter (compounding to $100 million to $150 million annually).

Excess surrenders in Japan 2026 (impact from 2025 activity)

Q4 FY25 surrender rate increased to 6.3% from 5.6% in Q3 FY25; estimated $50 million impact on 2026 earnings from 2025 activity.

Mitigation:All-weather product portfolio (blend of yen and U.S. dollar-denominated products); enhanced staffing across distribution and service teams to capture customer flows.

Competitive RILA market Ongoing

Increased from 5 to 25 competitors.

Mitigation:Innovating and broadening product portfolio; focusing on differentiation beyond price (service, brand); disciplined approach to ensure profitable sales rather than just driving sales volume.

Potential for FSA fines or other regulatory actions Ongoing

Not quantified, but acknowledged as a possibility.

Mitigation:Working in collaboration with regulators on a weekly basis; staying focused on the set of actions already shared to restore trust and confidence.

Q&A highlights

How was the 90-day sales suspension period for POJ determined, and was it done in conjunction with Japanese regulators?

The 90-day period was chosen to allow for meaningful progress on four key actions: customer reimbursement, Life Planner training, sales supervision, and compensation redesign. Management reiterated that sales will not resume until internal compliance and oversight are comfortable. The decision was voluntary, but the company consulted closely with the JFSA prior to the announcement.

“We thought that 90 days was a reasonable time frame to make meaningful progress. But I would reiterate what we -- what I said in my opening comments and what Yanela said in hers as well that we're not going to resume distribution in the channel until we're comfortable that the internal compliance and oversight environment really supports us reopening it.”

asked by Suneet Kamath · answered by Andrew Sullivan

2 min read 6 chapters

Detailed narrative

Japan Misconduct and Remediation Efforts

Prudential of Japan (POJ) announced findings of an internal investigation into employee misconduct, leading to a voluntary 90-day halt of new sales. The company is implementing a series of actions including strengthening oversight of sales practices, governance, and risk management, restructuring employee compensation, and enhancing training.

Management emphasized that sales will not resume until internal compliance and oversight are fully supportive, which could extend the 90-day period. A customer reimbursement program, administered by an independent oversight committee, is also being established to address the issue.

Strategic Repositioning and Global Footprint Optimization

The company is focused on evolving its strategy, improving execution, and fostering a high-performance culture. This includes prioritizing markets that are large and growing, where Prudential has differentiated capabilities and can deliver industry-leading returns. As part of this strategy, the company exited its PGIM Taiwan business last quarter and its insurance business in Kenya last month, demonstrating a commitment to driving stronger discipline and focusing capital on chosen markets.

PGIM Performance and Strategic Integration

PGIM delivered strong investment performance in 2025, with solid traction in public fixed income, securitized products, and asset-backed finance, contributing to over $30 billion in net inflows from these asset classes. The integration of asset management capabilities into a unified platform and the creation of a $1 trillion global credit platform are key strategic moves.

Despite these successes, PGIM experienced net outflows of $10 billion in Q4 FY25, impacted by industry trends away from active equities and a single low-fee fixed income client withdrawal.

U.S. Businesses Deliver Strong Results

U.S. businesses produced strong Q4 FY25 results, with pretax adjusted operating income increasing 22% year-over-year to $1.1 billion. This was driven by higher spread income in Retirement Strategies, favorable underwriting in Individual Life and Group Insurance, and lower expenses in Individual Life.

Institutional Retirement sales reached $26 billion for FY25, including $4 billion in Q4, while Individual Retirement delivered $14 billion in FY25 sales, with $3 billion in Q4, reflecting strong demand for RILA and fixed annuities.

Capital Position and Shareholder Returns

Prudential maintains a strong capital position with regulatory capital ratios supporting its AA financial strength. Cash and liquid assets stood at $3.8 billion, exceeding the minimum liquidity target of $3 billion. The Board authorized up to $1 billion in share repurchases for 2026 and increased the common stock dividend for the 18th consecutive year, demonstrating a continued commitment to shareholder distributions while maintaining financial flexibility.

Japan Market Dynamics and Product Strategy

In Japan, the company is capturing growing customer demand for retirement and savings products, which accounted for nearly a quarter of 2025 sales. While yen depreciation has led to elevated U.S. dollar product surrenders, the customer base is becoming less sensitive to FX movements.

The changing interest rate environment in Japan is gradually increasing demand for yen products, and Prudential's 'all-weather' product portfolio and distribution strength are positioned to adapt to these shifts.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.