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What Helped Prudential’s Investment Management Division in 2017?


Mar. 5 2018, Updated 10:32 a.m. ET

YoY rise

Prudential Financial’s (PRU) Investment Management division posted adjusted operating income of $979 million in 2017 compared to $787 million in 2016. The rise was seen mainly due to favorable momentum in asset management fees (after deducting related expenses) since the average AUM (assets under management) rose.

The upward momentum in AUM came on the back of favorable markets and net inflows in the fixed income category. The adjustment made in the fee rate in regard to certain real estate funds in 3Q16 has positively impacted the average AUM. The YoY (year-over-year) increase in adjusted operating income was also helped by a rise in other related revenues (after deducting related expenses), thanks to performance-based incentive fees (net) and investment performance. Further contributing to the rise were commercial mortgage agency loans.

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The Investment Management division saw a rise in expenses of $202 million in 2017 compared to 2016, mainly due to a rise in compensation expenses, driven by a rise in earnings. Higher non-compensation expenses were also a major contributor.

The Investment Management division generated total asset management fees of $2.4 billion in 2017 compared to $2.2 billion in 2016. Its revenues were $3.3 billion in 2017 compared to $2.9 billion in 2016.

Prudential’s net income margin was 8% on an LTM (last-12-month) basis. The margins for MetLife (MET), CNO Financial Group (CNO), and Reinsurance Group of America (RGA) were 6.7%, 4.1%, and 6.5%, respectively, on an LTM basis.


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