01—Abstract
Summary
Summary of the 10-K filed February 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Prudential Financial, Inc. (PRU) reported a net loss attributable to Prudential Financial, Inc. of $374 milliona for 2020, compared with net income of $4.186 billion in 2019.
The decline was driven primarily by $3.887 billionb in net realized investment losses in 2020 (largely $4.571 billion of losses on derivatives), a $1.444 billion unfavorable swing from Divested and Run-off Businesses, and lower adjusted operating income. Total revenues were $57.033 billion and total benefits and expenses were $57.356 billion. Adjusted operating income before income taxes for the segments totaled $5.144 billion in 2020 versus $5.851 billion in 2019, with PGIM ($1.262 billion) and Retirement ($1.436 billion) the largest contributors and Individual Annuities declining to $1.470 billion from $1.843 billion.
The company reports approximately $1.721 trillionc of assets under management, including $1.499 trillion at PGIM, and total PFI assets of $940.7 billion at year-end 2020. Management cites COVID-19 as a significant factor, with elevated mortality in Group Insurance and Individual Life, partially offset by favorable mortality in Retirement, and an estimated $85 million net underwriting impact for every additional 100,000 U.S. fatalities. Prudential sold its Korean life insurance business (POK) for about $1.9 billion in August 2020 and agreed to sell its Taiwanese business (POT) for about $195 million, expected to close in 2021.
Capital actions included suspending share repurchases after April 1, 2020 and authorizing up to $1.5 billiond of repurchases for 2021, along with a quarterly dividend of $1.10 per share for 2020 and a $1.15 per share dividend declared in February 2021. The filing also highlights a low interest rate environment, with the Company estimating $120 million to $160 million of unfavorable net investment income impact in 2021 from reinvestment at a hypothetical 10-year Treasury rate of 0.85%. Credit ratings were maintained at stable outlooks from all four agencies, and the company's year-end 2020 total equity was $68.210 billion.
02—Key points
Key Highlights
- Net loss attributable to Prudential Financial, Inc. of $374 million in 2020, versus net income of $4.186 billion in 2019
- Net realized investment losses of $3.887 billion in 2020, including $4.571 billion of losses on derivatives
- Total revenues of $57.033 billion in 2020 versus $64.807 billion in 2019
- Segment adjusted operating income before income taxes of $5.144 billion in 2020 versus $5.851 billion in 2019
- Sale of The Prudential Life Insurance Company of Korea completed in August 2020 for approximately $1.9 billion; sale of Taiwan business expected to close in 2021 for approximately $195 million in cash
- Board authorized up to $1.5 billion of common stock repurchases for January 1 through December 31, 2021, after suspending repurchases in April 2020
- Total assets of $940.722 billion and total equity of $68.210 billion as of December 31, 2020; PGIM assets under management of $1.499 trillion
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 19, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $57.03B$64.81B | −12.0% |
| Operating Expenses | $8.89B$5.80B | +53.2% |
| Operating Income | -$242.00M$4.14B | −105.8% |
| Interest Expense | $1.56B$1.55B | +0.6% |
| Net Income | -$374.00M$4.24B | −108.8% |
| EPS (Basic) | $-1.00$10.23 | −109.8% |
| EPS (Diluted) | $-1.00$10.11 | −109.9% |
| Shares Outstanding (Basic) | 395.80M404.80M | −2.2% |
| Shares Outstanding (Diluted) | 395.80M410.90M | −3.7% |
05—Questions
Frequently Asked Questions
Why did Prudential report a net loss in 2020?
The filing attributes the decline primarily to $3.887 billion of net realized investment losses, including $4.571 billion of losses on derivatives, a $1.444 billion unfavorable variance from Divested and Run-off Businesses, $707 million lower adjusted operating income from business segments, and $351 million from changes in embedded derivatives and related hedges on certain variable annuities. A $1.028 billion favorable variance from lower tax expense partially offset these items.
How did COVID-19 affect Prudential's results?
The filing estimates a net negative impact on underwriting results in 2020, with unfavorable mortality in Group Insurance and Individual Life and favorable mortality in Retirement. Management estimates net underwriting results will be adversely impacted by approximately $85 million for every incremental 100,000 fatalities in the United States. The company also reported higher expenses of approximately $150 million and cost savings of approximately $110 million related to COVID-19.
What is Prudential's capital return plan?
Prudential suspended common stock repurchases beginning April 1, 2020, after repurchasing $500 million in the first quarter of 2020, and did not resume in 2020. On February 4, 2021, the Board authorized up to $1.5 billion of repurchases during 2021. The company paid quarterly dividends of $1.10 per share in 2020 and declared a $1.15 per share dividend on February 4, 2021, payable March 11, 2021.
What dispositions did Prudential complete or announce?
In August 2020, Prudential completed the sale of The Prudential Life Insurance Company of Korea to KB Financial Group for approximately $1.9 billion, recognizing an approximate $800 million after-tax loss. It also agreed in August 2020 to sell Prudential Life Insurance Company of Taiwan to Taishin Financial Holding for approximately $195 million at closing plus contingent consideration, with closing expected in 2021 subject to regulatory approvals. The company recorded an estimated $350 million after-tax charge to adjust the Taiwan business to fair value.
06—Continue