Prudential Financial Inc. is continuing to shift toward sales of variable life and variable annuity products that limit the amount of risk it assumes, and it hopes to use reinsurance arrangements or other transactions to shed more annuity risk.
The firm's executives talked about the company's pivot away from stock market and interest rate risk during a conference call they held to go over first-quarter earnings with securities analysts.
The Newark, New Jersey-based company announced a year ago that it would be responding to low interest rates, stock market volatility and other forces by reducing its appetite for annuity risk.
Charlie Lowrey, Prudential's chairman and CEO, said during the conference call that the company reduced costs by $110 million in the first quarter.
Prudential is reallocating more than $5 billion in capital to asset management and international emerging markets, and it is actively executing on efforts to reduce exposure to the risks associated with providing life and annuity guarantees, Lowrey added.
"We expect Prudential to emerge as a higher-growth, less market-sensitive and more nimble company, he said.
Robert Falzon, Prudential's vice chairman, said the company wants to reduce the contribution of annuities to about 10% of earnings.
Prudential hopes to get about 40% to 45% of that reduction in annuity risk exposure by running off its block of relatively high-risk annuities.
"Reinsurance and/or sales" will close the remainder of the gap, Falzon said. "We are actively executing on that, including through derisking transactions. While we're making progress, we're not yet in a position … where we're going to speak any more specifically."
Much of the $5 billion or more in capital flowing to the asset management and international emerging markets will come from the annuity derisking transactions, Falzon said.
One analyst asked whether the move to derisk could affect Prudential's retirement plan and employee benefits operations Prudential sells group life insurance and group disability insurance.
