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The call conveyed clear operational progress and several strong business-level performance metrics (10% AOI growth, PGIM margin and earnings expansion, Retirement and Individual Life momentum, AUM growth and private-assets deployment). These positives were balanced by a material but quantified and contained near-term headwind from the Prudential of Japan sales suspension (estimated $525M–$575M 2026 pretax impact), weaker Group disability underwriting, and runoff in legacy annuity blocks. Management emphasized capital strength, liquidity, active portfolio and portfolio exits, targeted expense actions, and confidence in executing a more focused strategy—indicating the positives slightly outweigh the near-term challenges.
Prudential revised full‑year 2026 tax guidance down to 21%–22% (from 23%–24%) and said it does not expect the Prudential of Japan (POJ) sales suspension to materially affect capital, ESR or cash flows in 2026–2027, while estimating an aggregate 2026 pretax adjusted operating income impact from POJ of ~$525–$575M (Q1 impact ~$130M), with POJ in‑force earnings assumed down ~10% in year one and ~15% in year two, no sales through Nov. 5 and a gradual ramp to ~50% Life Planner productivity on average in 2027 amid elevated surrenders; company ESR was estimated at ~170%–190% (vs. 150% target) and cash & liquid assets were $3.7B (above a $3.0B minimum). Management reiterated PGIM is on track to deliver ~ $100M of gross annual run‑rate savings and >200 bps of margin expansion in 2026 toward a 25%–30% margin target (Q1 PGIM margin 19.1%, +260 bps YoY; AUM $1.4T, +3%; third‑party net inflows ~ $1.8–2.0B; affiliated net outflows $1.9B), noted a prior $135M restructuring charge that will yield ~$150M of run‑rate savings in 2027, said expense actions will show benefits in 2027, and confirmed no update to corporate guidance at this time.
Reported adjusted operating income of $1.6 billion pretax (after-tax adjusted operating income ~ $1.3 billion), $3.61 per common share, up 10% year over year, with an adjusted operating return on equity of approximately 15%.
PGIM pretax adjusted operating income of $190 million, up 22% year over year; assets under management of $1.4 trillion, up 3% year over year; first-quarter margin 19.1%, up 260 basis points year over year. PGIM on track to deliver ~ $100 million of gross annual run-rate savings and >200 bps of margin expansion in 2026 toward a 25%–30% margin target.
PGIM deployed $13 billion in private assets this quarter, with approximately $5 billion from direct lending and asset-backed finance—areas that are higher fee and higher margin and supporting retirement competitiveness.
Retirement pretax adjusted operating income > $570 million, up 9% year over year. Total Retirement sales of $7.4 billion including $3.3 billion retail annuity sales; FlexGuard 2.0 delivered the highest quarterly RILA sales in over a year. Net account values $356 billion, up 8% year over year; retail annuities account values $58 billion, up 34% year over year.
Individual Life pretax adjusted operating income of $139 million, more than doubling year over year. Record first-quarter sales of $251 million, driven by strong variable accumulation product momentum and improved mortality/underwriting experience.
Strong performance in emerging markets led by a record earnings quarter in Brazil. Digital distribution milestone: more than 1.2 million policies issued through the MercadoLibre relationship.
Cash and liquid assets of $3.7 billion (above $3.0 billion target). Estimated ESR of 170%–190%, above 150% operating target. Lowered full-year 2026 tax rate guidance to 21%–22% (from 23%–24%).
Operating expenses were flat year over year excluding one-time items. Prior $135 million restructuring charge expected to produce $150 million of run-rate savings in 2027, and targeted cost actions to show benefits in 2027.
Ladies and gentlemen, thank you for standing by. Welcome to Prudential Financial, Inc.'s Quarterly Earnings Conference Call. At this time, participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Tina Madon. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us. Representing Prudential Financial, Inc. on today's call are Andrew Sullivan, Chairman and Chief Executive Officer, and Yanela del Frias, Chief Financial Officer. We will start with prepared remarks by Andrew Sullivan and Yanela del Frias, and then we will address your questions. Before we begin, I want to remind you that today's discussion may include forward-looking statements. It is possible that our actual results may differ materially from those statements. In addition, remarks made on today's call and in our quarterly earnings press release, earnings presentation, and quarterly financial supplement, which can be found on our website at investors.prudential.com, include references to non-GAAP measures.
For a reconciliation of such measures to the most comparable GAAP measures, and a discussion of the factors that could cause actual results to differ materially from those in these forward-looking statements, please see the slides titled Forward-Looking Statements and Non-GAAP Measures in the appendices to our earnings presentation and quarterly financial supplement. With that, I will now turn the call over to An...