Prudential Financial’s decision to pause new sales at a Japanese subsidiary is beginning to show up on the company’s balance sheet.
During a call with analysts Wednesday, Yanela Frias, Prudential’s finance chief, said that a sales pause first enacted at Prudential of Japan in February resulted in a $130 million financial impact during the first quarter, which she said was “in line with our expectations.” The company last month opted to extend the sales pause through November.
Frias said that the company’s overall international business revenue sunk 27% year over year to $424 million in the first quarter on a “constant currency basis.” The drop, she said, was “primarily driven by the sales suspension in Prudential of Japan.”
That decline came even amid a “record earnings quarter” for the New Jersey-based company’s business in Brazil. Any increases in the South American nation were “more than offset by expenses” related to the sales pause in Japan, Frias said.
The insurer hit pause on new sales at the Prudential of Japan unit in February following an internal investigation into alleged employee misconduct there. Notably, though, Prudential hasn’t stopped all sales in Japan, where it operates other subsidiaries, such as Gibraltar Life and Prudential Gibraltar Financial Life.
The pause at the Prudential of Japan subsidiary will last through Nov. 5, Frias said. After that, she expects a “gradual ramp up” of sales through 2027.
In announcing the extension of the sales pause last month, Frias maintained that Prudential is not “overly reliant on any single vehicle to deliver cash flow” to the parent company, “either in Japan or across the broader enterprise.”
Prudential reported total net income of $597 million for the first quarter, down from $707 million in the same quarter a year ago. Adjusted operating income after taxes came in at $1.278 billion, up slightly from $1.188 billion in 2025’s first quarter.
On the international side, Prudential saw its pre-tax adjusted operating income fall 4% year over year to $810 million in the first quarter of this year, Frias said. “This result was driven by higher spread income along with more favorable underwriting results primarily due to new business growth in Brazil, which had a record earnings quarter,” she told analysts.
In a video message posted Wednesday, Frias said that in Japan, Prudential has a “sustainable and increasingly diverse platform supported by new retirement and savings products, and broader third-party distribution.”
Prudential’s moves come at a challenging time for Japan’s economy. The nation’s debt-to-GDP ratio has been surpassing 200% for several years, The New York Times reported last year.
Meanwhile, on Monday, before the earnings call, Fitch Ratings said it put Prudential on “Rating Watch Negative,” indicating that it might downgrade the insurer’s credit rating. The credit agency said that Prudential’s sales pause in Japan and employee misconduct there may damage the Japanese subsidiary’s “franchise value and earnings profile in its key market of Japan, reducing rating headroom.”
“Successful execution of the remediation plan within the communicated timeframe, including a resumption of sales and minimal evidence of impact on franchise value and earnings, could lead to the removal of the (Rating Watch Negative) and a revision of the Outlook to Stable,” Fitch Ratings said in a news release.
