01—Abstract
Summary
Summary of the 10-K filed February 16, 2023. 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 $1.44 billiona for 2022, compared with net income of $7.72 billion in 2021, with total revenues of $60.05 billion.
The filing attributes the decline mainly to a $6.88 billionb unfavorable variance in realized investment gains (losses), net, and related charges, a $2.65 billion unfavorable variance from lower adjusted operating income across business segments, and an $879 million unfavorable variance from Divested and Run-off Businesses. Management cites rapidly rising interest rates, equity market declines and geopolitical risk as adversely affecting liquidity, capital positions and results during 2022. Adjusted operating income before income taxes fell to $4.65 billion in 2022 from $7.30 billion in 2021.
Individual Life recorded a $1.4 billionc net charge from annual assumption reviews in 2022, and Assurance IQ incurred a $903 million pre-tax goodwill impairment. The PALAC sale generated a pre-tax gain of $852 million and the Full Service Retirement sale produced a net pre-tax gain of $620 million, both completed April 1, 2022. Assets under management were $1.377 trillion at year-end, down from $1.742 trillion in 2021.
On capital, the company held $50.1 billiond of total capital as of December 31, 2022, versus $53.2 billion a year earlier, and repurchased $1.5 billion of common stock in 2022. For 2023 the Board authorized up to $1.0 billion of repurchases and declared a $1.25 per share quarterly dividend.
Total borrowings were $20.7 billion. PICA's RBC ratio was 456% as of December 31, 2021, and the company expects its December 31, 2022 RBC ratios to exceed its AA targets.
02—Key points
Key Highlights
- Net loss attributable to Prudential Financial, Inc. of $(1,438) million in 2022, versus net income of $7,724 million in 2021.
- Total revenues of $60,050 million in 2022, down from $70,934 million in 2021.
- Adjusted operating income before income taxes of $4,650 million in 2022, down from $7,301 million in 2021; Individual Life recorded a $1,401 million net charge from annual assumption updates.
- Goodwill impairment of $903 million at Assurance IQ in 2022, following a $1,060 million impairment in 2021.
- Assets under management of $1,377.3 billion at December 31, 2022, down from $1,742.3 billion at December 31, 2021.
- Total capital of $50,148 million at December 31, 2022, and $1.5 billion of share repurchases in 2022, with a further $1.0 billion authorized for 2023.
- Sale of PALAC (pre-tax gain of $852 million) and Full Service Retirement business (net pre-tax gain of $620 million) both completed in April 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 16, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $56.88B$71.25B | −20.2% |
| Operating Expenses | $3.61B$21.23B | −83.0% |
| Operating Income | -$1.61B$8.84B | −118.2% |
| Interest Expense | $1.60B$1.48B | +8.1% |
| Net Income | -$1.65B$8.94B | −118.4% |
| EPS (Basic) | $-4.49$22.56 | −119.9% |
| EPS (Diluted) | $-4.49$22.40 | −120.0% |
| Shares Outstanding (Basic) | 372.30M387.20M | −3.8% |
| Shares Outstanding (Diluted) | 372.30M390.10M | −4.6% |
05—Questions
Frequently Asked Questions
Why did Prudential report a net loss in 2022?
The filing shows net loss attributable to Prudential Financial of $(1,438) million for 2022, driven primarily by a $6,878 million unfavorable variance in realized investment gains (losses), net, and related charges, largely from rising interest rates affecting derivatives and fixed maturity securities. Lower adjusted operating income of $2,651 million and an $879 million unfavorable variance from Divested and Run-off Businesses also contributed, partly offset by a $2,044 million favorable income tax variance.
What was the impact of the Assurance IQ goodwill impairment?
The company recorded a non-cash pre-tax goodwill impairment of $903 million ($713 million after-tax) for Assurance IQ in 2022, primarily driven by lower forecasted cash flows, higher discount rates, and decreased valuations of comparable companies. Assurance IQ goodwill declined to $177 million as of December 31, 2022.
How much capital does Prudential hold and what did it return to shareholders?
As of December 31, 2022, the company reported total capital of $50.1 billion, including equity (excluding AOCI) of $36.1 billion, junior subordinated debt of $9.1 billion and other capital debt of $5.0 billion. In 2022 it repurchased $1.5 billion of common stock and paid dividends of $4.80 per share totaling $1.8 billion. In February 2023 the Board authorized up to $1.0 billion of repurchases for 2023 and declared a $1.25 per share dividend payable March 16, 2023.
What are the key risks highlighted in the filing?
The filing identifies rapidly rising interest rates, equity market declines and geopolitical risk as adversely affecting liquidity, capital, cash flows and financial position. Other risks include derivative collateral needs, asset/liability mismatches, mortality and policyholder behavior experience, cybersecurity threats, ratings downgrades and regulatory changes such as ASU 2018-12, which the company expects to significantly affect its financial statements from January 1, 2023.
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