Podcast Center
Video Center
Webcasts
Resource Center
Events
By 
May 02, 2024 at 01:30 PM
What You Need to Know
- Prudential made special arrangements for about $400 million of the $2 billion in 2023 maturities.
- RILA sales jumped.
- Universal life sales rose.
A top executive at Prudential Financial sees more pain coming for investments in office buildings.
Robert Falzon, the vice chairman of the Newark, New Jersey-based company, predicted Wednesday that the current commercial real estate slump will cause industrywide portfolio valuations to fall another 5% to 10%.
“Office is a subsector that will probably face more like around a 15% decline,” Falzon warned.
But Falzon predicted that Prudential’s office building-related investments will hold up well, because of the company’s focus on working with strong borrowers and high-quality buildings.
What it means: The commercial real estate slump could cause big problems for clients with big investments in that sector who want to sell now.
But it may still offer interesting opportunities for clients who can tolerate risk and like the idea of buying low and selling high.
Prudential’s Q1 earnings: Prudential is a giant life and annuity issuer and the parent of PGIM.
Falzon talked about the commercial real estate market during a conference call the company held to go over first-quarter earnings with securities analysts.
Prudential reported $1.2 billion in net income for the first quarter on $22 billion in revenue, compared with $1.5 billion in net income on $15 billion in revenue for the first quarter of 2023.
After-tax operating income, which excludes the effects of unusual items and changes in the estimated value of Prudential’s investments, risk-management arrangements and benefits promises, increased to $1.1 billion, from $1 billion.
Here’s what happened to sales of some of Prudential’s products between the first quarter of 2023 and the latest quarter:
- FlexGuard registered index-linked annuities: $1.7 billion (up from $1.1 billion).
- Fixed annuities: $1.6 billion (up from $547 million).
- Variable life: $116 million (up from $109 million).
The office buildings: Prudential and other U.S. life and annuity issuers tend to invest the bulk of their assets in bonds issued by companies with high credit ratings.
In an effort to increase earnings, they also invest some assets in real estate and mortgage-backed securities.
