Jimmy Bhullar: Okay. And then just in Latin America, can you share what your views are in terms of potential pension reform in the Chilean market, and what the reasonable case or sort of a worst-case impact would be on Prudential’s business there?
Andrew Sullivan: Yes. So Jimmy its Andy. Thank you for your question. As we’ve talked about before, our priority is always delivering for our customers’ day-in and day-out. We’re very leaned into what’s in their best interest. As you would expect, because of that, we believe in being very proactive on advocating on their behalf. We’re going to continue to advocate for reform and improve the pension outcomes in Latin America and specifically for the citizens of Chile. Just to give you an update, in Chile, the constitutional referendum was rejected on December 17, but after two failed attempts. So President Ports really has moved on and is now focused squarely on pension reform. And there is a proposal that’s advancing through Congress.
That bill proposes to eliminate AFPs and to increase employer contributions to 6%, and we’re closely monitoring that situation, as a package would impact our Habitat JV. But I would say just a couple of things. Our Habitat JV is a high-quality, very well-run business. It’s been working to actively diversify across countries and into voluntary savings offerings. And if you take a step back, just recognize that Joint Venture, while it’s obviously a larger component of our emerging markets. It’s not a material contributor to PFI earnings. So we’ll obviously stay very close to it, and we’ll let you know when we have any more clarity.
Jimmy Bhullar: Thank you.
Operator: Thank you. Your next question is coming from Joel Hurwitz from Dowling & Partners. Your line is now live.
Joel Hurwitz: Hey. Good morning. So, I know lapses have periodically been an issue in Japan just given exchange rates. It looks like there were a pretty sizable quarter-over-quarter reduction in the in-force of main both international businesses in the quarter. Can you just talk about what you saw in terms of [Indiscernible] there?
Andrew Sullivan: Yes. So thanks, Joel, its Andy. So let me just talk about the decline in the in-force. First, as I always start, we’re exceptionally proud of our Japanese businesses. They’ve been very consistent and stable contributors to Prudential for a very long time. With that, there are a few factors, though, that are impacting the life insurance in-force amounts. First, this is important to note, a significant portion of our recent sales are investment contracts, and that really reflects what customers are looking to buy. Those sales do not include a material life component, but are contributing to our earnings. Second, we are seeing natural runoff in the older life blocks, particularly in the legacy yen business in Gibraltar.
And then as we’ve talked about in previous quarters, with the recent yen depreciation, we’ve seen a modestly elevated level of surrenders. But all that said, we are confident in our ability to grow and diversify our Japanese businesses across insurance, investment and retirement security, and we’re continuing to invest in them.
Joel Hurwitz: Okay, helpful. And then switching gears to group. So you reduced the benefit ratio target there. Can you just talk about the overall drivers to the reduction there? And what’s the growth outlook for that business? It looks like top line for full year was roughly flat. Just any color on growth expectations there.
Caroline Feeney: Yes, absolutely, Joel. It’s Caroline. Thank you so much for your question. So first of all, I’ll start off by saying we had another very strong quarter for group insurance and we’re very pleased with the full year results of this business. And we believe we’re in that strong position in group given the progress we’ve made in executing on our strategy and our future earnings power will reflect the efforts we’ve made to grow in a disciplined and profitable manner. We continue to focus on diversifying our business by expanding in the under 5,000 live market and the association segment. We’re adding new products like supplemental health and continuing our growth and disability. And we made progress in that diversification effort, increasing our disability premiums and fees at a higher rate than before and our supplemental health premiums also grew at strong double-digit annual growth rates.
And this diversification is driving stronger core earnings with higher margins. So, as for our performance, our full year benefits ratio was just over 83 percentage points. It includes very strong performance in our Life block in the second and third quarters of last year and record disability results in the first half of the year. While we don’t expect that record performance to continue and definitely, there are certainly other factors to consider. So, overall, Joel, I’d say that our group business is growing. It’s doing so at attractive margins with COVID having transitioned to an endemic state combined with our diversification strategy I just walked you through as well as investments we’ve made in improving our claims management capabilities and strategic partnerships.
We believe we’ll see that underwriting performance and earnings power continue to improve. And that is why we are confident with our decision in lowering our benefit ratio guidance to be 83% to 87% for the year. And in terms of just future earnings power as well, I gave you some color there as well, Joel. We believe the future earnings power and group insurance will continue to be strong as we continue to grow and execute on our strategy.
Joel Hurwitz: Very helpful. Thank you.
Operator: Thank you. Our next question today is coming from Wilma Burdis from Raymond James. Your line is now live.
Wilma Burdis: Hey. Good morning. I’m just wondering if there’s been any activity with Prismic? Seeing that you guys have focused on the sales of [indiscernible] and also with this large PRT deals. So if you can give us an update there, please?
Robert Falzon: Hi, Wilma, it’s Rob. So as we’ve articulated before, we’re quite enthusiastic about Prisma and more broadly about what we see to be the opportunities that are coming out of the intersection between asset management and insurance and specifically the role that Prismic can play and helping us to execute against that opportunity. We believe it will create avenues of growth across our businesses, not specifically for the PRT transaction that we recently announced, but the opportunity to be a source of financing for sales growth, both in the retirement marketplace and our other businesses on a go-forward basis. Our investors, which are extremely large global institutional investors share our aspirations, both from a directional standpoint and from a quantum standpoint.
So our expectation is to go well beyond the initial $10 billion structured securities or structured settlements transaction that we completed. It’s going to include some level of ongoing balance sheet optimization. It’s going to include, as I noted, financing the growth across our businesses. I think what’s unique in a way about Prismic is the appetite by it and its investors for longer duration and more complex liabilities. And we’re also going to look to do third-party blocks as well in Prismic, all of which will in order the benefit of increasing the assets under management for our PGIM business.
Wilma Burdis: Thank you. Could you talk a little bit about the buyback? I think you guys talk with the $1 billion authorization for 2024. Certainly, when you guys sell blocks and run off earnings a little bit, it’s good to see more capital returns. So can you just talk about how you guys are thinking through that? Thank you.
Kenneth Tanji: Yes, it’s Ken. Yes, we’ve had a very consistent approach to shareholder distributions using both dividends and share repurchases as a way to return capital. It’s our share repurchases for this year was approved by the board, and they had considered our capital position, our outlook for free cash flow, but also opportunities to deploy that capital into organic growth, as Charlie discussed, in particular, the very robust PRT market. So, all those things factored into it. We increased our dividend again. That’s — now we’ve increased that 16 years in a row. So again, it all factors into what we think is a very consistent approach, balancing all our objectives as well. So I hope that color helps.
