Prudential Financial (NYSE:PRU) said Japan’s Financial Services Agency has extended a business suspension order for Prudential of Japan, or POJ, through Jan. 31, 2027, while also issuing business improvement orders for POJ and Prudential Holdings of Japan.
The company also disclosed that Gibraltar Life Insurance received a business improvement order and a partial business suspension order running through the same date. Gibraltar’s suspension applies to its life consultant sales force, while its independent agency channel may continue operating.
POJ Suspension Carries About $1 Billion Estimated Impact
Prudential said its estimated aggregate impact from the POJ sales suspension remains approximately $1 billion of pre-tax adjusted operating income across 2026 and 2027. While the total estimate is unchanged from its prior outlook, the timing and composition have shifted as the company incorporates a longer suspension period and a phased return to the market.
For 2026, Prudential expects a pre-tax adjusted operating income impact of about $500 million, compared with its prior estimate of $525 million to $575 million. The company said lower-than-expected surrender activity has partly offset costs from the extended sales suspension.
For 2027, the company now expects an impact of approximately $500 million to $550 million, up from its prior range of $400 million to $450 million. Chief Financial Officer Yanela Frias said the increase is primarily tied to POJ’s more gradual reopening plan.
Prudential expects POJ sales in 2027 to be roughly 25% of 2025 levels, compared with its previous expectation of 50%. The company plans to reopen POJ over roughly 12 to 18 months, beginning with selected branches and expanding as revised controls are tested and demonstrated to be effective.
Frias said Prudential expects POJ sales to reach roughly 50% of 2025 levels in 2028 and anticipates 100% productivity by 2029, though total sales will also depend on the size of the life planner force.
Remediation Focuses on Governance, Sales Practices
Sullivan said the findings of an independent third-party investigation and the FSA inspection were largely consistent with issues Prudential had identified when it voluntarily suspended POJ sales earlier in the year. The reviews examined misconduct tied to the interaction of the business model, management framework and organizational culture, he said.
Prudential’s transformation plan for POJ centers on four areas:
- Strengthening governance, accountability and PHJ’s oversight of POJ.
- Redesigning the sales model, including compensation, performance management, recruiting, training and monitoring.
- Simplifying the organization and consolidating the field structure into a branch network.
- Reinforcing a culture focused on accountability and customer outcomes.
The business improvement orders require POJ, PHJ and Gibraltar to submit plans to the FSA by the end of November and provide regular progress reports. Sullivan said the business improvement process will continue beyond the end date of the sales suspension orders.
Prudential said POJ’s in-force business has remained resilient during the disruption. The unit serves approximately 2.2 million customers with roughly 4.5 million policies. Frias said surrender activity spiked after the initial announcement in January but moderated in May and has remained stable since then. She said the company assumes some additional surrenders following the FSA announcement, but does not expect them to have a material effect on its overall estimate.
Gibraltar Suspension Expected to Cost $275 Million
Prudential estimates that Gibraltar’s partial sales suspension will reduce pre-tax adjusted operating income by about $275 million across 2026 and 2027: approximately $100 million in 2026 and $175 million in 2027.
Of the projected 2026 impact, Frias said $75 million is expected to relate to life consultant compensation support, with the remaining amount tied to lost sales and surrenders. For 2027, about half of a $150 million impact from compensation, lost sales and surrenders is expected to come from life consultant compensation, with an additional $25 million related to the sales ramp-up.
Gibraltar plans to reopen all agencies on Feb. 1, rather than using POJ’s phased approach. However, Prudential expects Gibraltar sales in 2027 to be about 50% of 2025 levels because life consultants will need time to rebuild prospecting activity. Frias said the company expects the Gibraltar sales force to return to full productivity by the end of 2027, with 2028 returning to 2025 sales levels.
During an internal review, Gibraltar contacted more than 2 million customers. As of mid-September, Prudential identified 57 customers eligible for reimbursement totaling approximately $2.6 million. Sullivan said the company does not believe Gibraltar has systemic issues, though it agrees further improvements are needed in areas including compensation, separation of sales and control functions, governance and oversight.
Prudential said 70% of Gibraltar sales come from life consultants and 30% from independent agents. Frias also said more than 90% of Gibraltar’s pre-tax adjusted operating income is generated by its in-force retirement, savings and protection business, which the company expects to help stabilize earnings during the transition.
About Prudential Financial (NYSE:PRU)
Prudential Financial, Inc (NYSE: PRU) is a global financial services company that provides insurance, retirement, investment management and related financial products. Founded in 1875 and headquartered in Newark, New Jersey, the company serves individual, institutional and workplace customers through businesses in the United States and selected international markets.
In the United States, Prudential offers life insurance, annuities, retirement plans and group insurance products, including coverage for employees and their families.
