01—Abstract
Summary
Summary of the 10-K filed February 16, 2018. Cited figures are marked; the original filing is the authoritative source.
Prudential Financial, Inc. (PRU) reported approximately $1.394 trilliona of assets under management as of December 31, 2017, with operations across the United States, Asia, Europe and Latin America.
Net income attributable to Prudential Financial, Inc. was $7,863 millionb in 2017, compared with $4,368 million in 2016 and $5,642 million in 2015. The 2017 result was boosted by a $2,880 million net tax benefit from the Tax Cuts and Jobs Act, and revenues rose to $59,689 million from $58,779 million. Total assets were $831,921 million and total equity was $54,344 million at year end.
The filing highlights a continued low interest rate environment that pressures net investment spreads, particularly in Japan and the U.S., alongside ongoing regulatory change including Dodd-Frank Designated Financial Company status, DOL fiduciary rules and evolving insurance capital standards. Management reported adjusted operating income before income taxes of $6,244 millionc for 2017, up from $5,399 million in 2016, with International Insurance ($3,198 million) and Retirement ($1,244 million) as the largest contributors, while Corporate and Other operations recorded a loss of $1,437 million. The company repurchased $1.25 billion of common stock and declared dividends of $3.00 per share for 2017, and authorized up to $1.5 billion of repurchases for 2018.
Additional risk items include variable annuity guarantee exposures, reliance on Japanese operations for a significant share of earnings, and pending litigation and regulatory matters, none of which the filing expects to have a material adverse effect on financial position. Credit ratings are maintained at stable or positive outlooks from the major agencies.
02—Key points
Key Highlights
- Net income attributable to Prudential Financial, Inc. rose to $7,863 million in 2017 from $4,368 million in 2016, helped by a $2,880 million net tax benefit tied to the Tax Act of 2017.
- Total assets reached $831,921 million and total equity reached $54,344 million as of December 31, 2017, with assets under management of approximately $1.394 trillion.
- Adjusted operating income before income taxes increased to $6,244 million in 2017 from $5,399 million in 2016, led by International Insurance at $3,198 million.
- Net investment income was $16,435 million in 2017, and management cited low U.S. and Japanese interest rates as a continuing pressure on portfolio yields and net investment spreads.
- Share repurchases totaled $1.25 billion in 2017, with dividends declared of $3.00 per share and a new $1.5 billion repurchase authorization for 2018.
- Prudential Financial remains a Designated Financial Company under Dodd-Frank, and the filing discusses pending DOL fiduciary rules and NAIC variable annuity reserve and capital changes as ongoing regulatory risks.
- Risk factors include variable annuity guarantee sensitivity, international currency exposure (notably the yen), and a range of pending litigation and regulatory matters.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 16, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $59.69B$58.78B | +1.5% |
| Operating Income | $7.92B$4.37B | +81.4% |
| Interest Expense | $1.33B$1.32B | +0.5% |
| Net Income | $7.86B$4.37B | +80.0% |
| EPS (Basic) | $18.19$9.85 | +84.7% |
| EPS (Diluted) | $17.86$9.71 | +83.9% |
| Shares Outstanding (Basic) | 427.00M438.20M | −2.6% |
| Shares Outstanding (Diluted) | 436.00M446.60M | −2.4% |
05—Questions
Frequently Asked Questions
How did Prudential's profitability change in 2017?
Net income attributable to Prudential Financial, Inc. was $7,863 million in 2017, compared with $4,368 million in 2016. The filing attributes a $2,773 million favorable impact to a tax benefit in 2017 versus tax expense in 2016, primarily from tax reform, along with higher segment operating results.
What drove the 2017 income tax benefit?
The Tax Cuts and Jobs Act of 2017 produced a total income tax benefit of $1,438 million for 2017. The filing states that the enactment resulted in a net tax benefit of $2,880 million, comprised of a $1,592 million benefit from lower U.S. tax rates and a $1,785 million benefit from the move to a modified territorial system, offset by $497 million of toll tax expense.
Which business segments contributed most to adjusted operating income?
International Insurance contributed $3,198 million and Retirement contributed $1,244 million in 2017. Individual Annuities contributed $2,198 million. Individual Life posted a loss of $191 million, and Corporate and Other operations recorded a loss of $1,437 million.
What capital return actions did Prudential take in 2017?
Prudential repurchased $1.25 billion of common stock in 2017 and declared Common Stock dividends of $1.3 billion. The Board authorized up to $1.5 billion of share repurchases for 2018, and a dividend of $0.90 per share was declared on February 7, 2018.
What are the main regulatory and market risks disclosed?
The filing cites a continued low interest rate environment, Dodd-Frank Designated Financial Company supervision by the Federal Reserve, the U.S. Department of Labor fiduciary rules, and NAIC proposals affecting variable annuity reserves and risk-based capital. It also notes exposure to yen exchange rate movements through its Japanese operations.
06—Continue