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5 Things Pru Said Today About Volatility

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Prudential Financial executives emphasized Wednesday that they want to continue to sell your clients individual life insurance and annuities — but in a way that limits the company’s own exposure to investment market risk.

Executives from the Newark, New Jersey-based life insurer and asset manager talked about the company’s efforts to increase sales of insurance and other financial services products, in spite of investment market volatility, during a conference call.

Charles Lowrey, Prudential’s chairman and CEO, emphasized that the company has been around for almost 150 years.

“We’re confident in our strategy and the strength of our company,” Lowrey said.

For five other things Lowrey and other Prudential executives told the analysts, see the gallery above.

What It Means

Life insurers that follow Prudential’s lead may still want you to sell their life and annuity products to your clients, but they will expect reinsurers, and your clients, to absorb more of the pain caused by gyrating interest rates and falling stock prices.

The Earnings

Prudential held the conference call to go over results for the first quarter with securities analysts.

The company is reporting $1.5 billion in net income for the quarter on $15 billion in revenue, compared with a net loss of $506 million on $13 billion in revenue for the first quarter of 2022, after adjusting both the old results for the effects of the new Long Duration Targeted Improvement accounting rules, which can amplify the impact of potential volatility on insurers’ net quarterly earnings, when the earnings are reported using the U.S. generally accepted accounting principles that apply to publicly traded companies.

Prudential and competitors already were incorporating the effects of estimated changes in the value of investment holdings in current results.

Now, under the new LDTI rules, they must also put the effects of estimated changes in the value of insurance and annuity benefits obligations in current results.

Life insurers emphasize that the LDTI changes do not affect their underlying cash flow or business economics, or the financial statements that insurance regulators use when they’re analyzing insurers’ finances. Many are emphasizing operating results, which leave out the effects of the “mark to market” accounting rules, and securities analysts and insurance financial strength rating analysts have focused mainly on the operating results.

Prudential’s U.S. businesses are reporting $760 million in adjusted operating income before income taxes on $9.1 billion in revenue, compared with $813 million in adjusted operating income on $6.9 billion in revenue for the year-earlier quarter.

Sales of:

  • All Prudential individual annuities that are still actively on the market increased to $1.7 billion, from $1.5 billion.
  • Fixed annuities, which offer firm guarantees against loss of protected account value, increased to $547 million, from $24 million.
  • FlexGuard registered index-linked annuities, which are variable annuities, and expose holders to the some risk of declining account value, fell to $1.1 billion, from $1.4 billion.
  • U.S. group life and group disability sales increased to $319 million, from $310 million.

Pictured: Prudential CEO Charles Lowrey. (Photo: Prudential)