Prudential Financial, Inc. — 2023 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2023; it is not a standalone fourth-quarter filing. Prudential is a global insurer and investment manager operating through PGIM, U.S. Businesses, International Businesses, Corporate and Other, and the Closed Block division. It reported approximately $1.45 trillion of assets under management at year-end.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $53.979 billion | $56.881 billion |
| Income (loss) before tax and equity earnings | $3.072 billion | $(1.892) billion |
| Net income (loss) attributable to Prudential | $2.488 billion | $(1.647) billion |
| Diluted earnings per share | $6.74 | $(4.49) |
| Net investment income | $17.865 billion | $16.037 billion |
| Operating cash flow | $6.510 billion | $5.158 billion |
| Cash and cash equivalents, year-end | $19.419 billion | $17.251 billion |
| Total assets, year-end | $721.123 billion | $689.029 billion |
| Total equity, year-end | $29.263 billion | $31.548 billion |
| Consolidated short- and long-term debt, year-end | $19.5 billion | $20.683 billion |
Net margin was approximately 4.6% in 2023, compared with a net loss in 2022. Investing cash flow was a $12.122 billion outflow and financing cash flow was a $7.739 billion inflow in 2023. Parent-company highly liquid assets were $4.095 billion, excluding net borrowings from its intercompany liquidity account.
Fourth-quarter snapshot: 2023 Q4 revenue was $15.084 billion and net income attributable to Prudential was $1.317 billion, or $3.61 per diluted share. The comparable 2022 quarter recorded a $52 million net loss attributable to Prudential.
Adjusted operating income before tax by segment: total was $5.516 billion in 2023 versus $5.082 billion in 2022. PGIM reported $713 million ($843 million); Retirement Strategies, $3.568 billion ($4.529 billion); Group Insurance, $319 million (loss of $16 million); Individual Life, a $95 million loss (loss of $1.802 billion); International Businesses, $3.183 billion ($3.205 billion); and Corporate and Other, a $2.172 billion loss (loss of $1.677 billion). Adjusted operating income is a non-GAAP segment measure, not consolidated net income.
PGIM assets under management were $1.298 trillion, up from $1.228 trillion, primarily reflecting market appreciation, partly offset by outflows. Prudential’s total AUM was $1.450 trillion versus $1.377 trillion.
Material changes and notable items
- Revenue declined about 5% year over year. The return to GAAP profitability reflected, among other items, a $3.753 billion favorable year-over-year variance in realized investment gains and related adjustments and a $726 million lower Assurance IQ goodwill impairment charge. Realized investment losses remained substantial at $3.615 billion.
- U.S. Businesses adjusted operating income improved, helped by higher reinvestment and short-term rates, improved Group Insurance underwriting, and a less adverse comparison for Individual Life’s annual assumption updates. Retirement Strategies declined, partly because 2022 included the PALAC sale gain and 2023 had lower fee income.
- Prudential adopted the long-duration insurance accounting standard, ASU 2018-12, effective January 1, 2023, with retrospective adjustments to comparative periods. The adoption materially changed reported insurance liabilities, accumulated other comprehensive income, and some income-statement amounts.
- The company recorded a $200 million restructuring charge in Q4 2023 as it reorganizes to simplify management and invest in technology and data platforms. It also recorded a $177 million non-cash Assurance IQ goodwill impairment, eliminating the remaining goodwill assigned to that business.
- Prudential completed two significant risk-transfer transactions: approximately $10 billion of PDI variable-annuity account values reinsured with AuguStar, and approximately $9 billion of structured-settlement annuity reserves reinsured with Prismic Re. Prudential also invested about $200 million for a 20% interest in Prismic.
Outlook, risks and contingencies
Management describes a strategy to become less market-sensitive, pursue sustainable growth, further de-risk through measures including reinsurance, and reallocate capital toward higher-growth businesses. It expects sustained higher U.S. interest rates to benefit results over time, while noting that market conditions can affect asset values, fee income, spreads, customer behavior, and guarantees. The filing provides qualitative business outlook, but no clear consolidated earnings or revenue guidance.
- Major exposures include credit deterioration and defaults, interest-rate and equity-market changes, foreign exchange—particularly the yen—insurance experience differing from assumptions, annuity guarantees, policyholder withdrawals, derivative collateral demands, and reinsurance counterparty risk.
- Commercial mortgage and other loan credit-loss allowances increased to $460 million from $203 million. Management cited weaker market conditions and higher loan-specific reserves in the office sector. The commercial mortgage portfolio had a 58% weighted-average loan-to-value ratio and a 2.46-times weighted-average debt-service coverage ratio.
- Prudential reported total consolidated debt of $19.5 billion and stated it complied with debt covenants. PICA’s latest reported RBC ratio was 383% at year-end 2022; 2023 statutory ratios were not yet filed in the report, though management expected domestic ratios to remain above target levels. Japan solvency ratios shown were as of September 30, 2023.
- A cybersecurity incident was disclosed in February 2024. At the filing date, the investigation was ongoing; Prudential said it had not identified a material operational impact or determined the incident was reasonably likely to materially affect financial condition or results.
- Litigation and regulatory matters include ongoing cases involving alleged life-policy lapse notices, escheatment, securities and ERISA fiduciary issues, and Assurance IQ sales and marketing. The company estimated reasonably possible losses in excess of established accruals at less than $250 million for matters where an estimate could be made; outcomes remain uncertain.
- Other contingencies include a disputed tax position concerning the Section 952 election for Brazil operations. Unrecognized tax benefits were $133 million at year-end 2023, and the company said it could pay the related amount within the next 12 months while pursuing resolution.
Most important facts for investors to verify
- Reconcile GAAP net income with adjusted operating income and assess the influence of realized losses, market-sensitive guarantees, annual assumption updates, and the $200 million restructuring charge.
- Review the LDTI accounting transition and its effects on the 2022 and 2021 comparative results, reserves, retained earnings, and AOCI. The 10-K cover also indicates that the financial statements reflect a correction of an error; the provided filing text does not clearly identify its scope or financial effect.
- Track the Prismic and AuguStar reinsurance terms, related-party balances, funds-withheld derivative volatility, counterparty protections, and the impact on capital and liquidity.
- Confirm final 2023 statutory capital and solvency ratios and assess dividend availability at insurance subsidiaries, which is subject to regulatory restrictions.
- Monitor office-sector commercial mortgage performance, allowance adequacy, and any subsequent developments in the cybersecurity investigation, litigation, and Brazil tax dispute.
- Assess shareholder distributions against capital needs: Prudential repurchased $1.0 billion of shares and declared $5.00 per share in dividends in 2023; a further $1.0 billion repurchase authorization was approved for 2024.
PwC issued an unqualified opinion on the consolidated financial statements and concluded internal control over financial reporting was effective as of December 31, 2023.