Prudential automates expense management to reduce costs

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In recent months, insurer Prudential Financial Inc. has overhauled the way it manages expenses in an effort to reduce costs and increase efficiency.

The Newark, NJ-based company, which provides insurance and financial services, launched a plan in late 2020 to cut total spending by $750 million by the end of 2023. Prudential said it made $635 million in dollars in savings by the end of 2021, largely due to new technologies. The company, which had nearly 41,000 employees as of Dec. 31, has about 900 people on its finance team, chief financial officer Ken Tanji said.

Ken Tanji, Chief Financial Officer at Prudential Financial.


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Prudential Financial

Mr. Tanji explains how Prudential is benefiting from a lean financial organization, partly spurred by the Covid-19 pandemic. This is the third part of a new series that focuses on how CFOs and other executives are digitizing their financial operations. Edited excerpts follow.

WSJ: How do you deploy new technologies in the finance function?

Mr Tanji: In multiple ways, from our financial reports to analytics to our financial forecasts. We are using more digital tools and cloud-based tools that are easier to use, more flexible and faster. We’ve been working on it for quite a while.

WSJ: What kind of changes have you made recently?

Mr Tanji: We revamped our expense management platform and built scenario planning tools [and] salary planning tools now deployed locally to allow managers to manage their expenses themselves.

WSJ: What did you spend on these changes?

Mr Tanji: The cost-benefit ratio is on two fronts. The smallest element would just be our expense teams and their ability to serve a much larger audience, but the biggest impact is putting that information in the hands of managers so they can make better decisions and manage their costs more effectively. This is in line with our approach, which consists of bringing the tools closer to the decision-makers to make better decisions and obtain better financial results. This is all part of our $750 million goal. Our expense management has been key.

WSJ: What will be your next steps?

Mr Tanji: We have a number of important initiatives underway. We redesign our entire book closing process every quarter. We do this by using agile teams. Rather than [taking] an approach where you try to do everything at once, we broke it down into several chunks and then dedicated resources to make continuous improvements. You get improvement along the way, as opposed to at the very end. The other thing we did was we centralized our controllers area and brought [it] into a common center of excellence. And we did the same with expense management.

WSJ: How does automation change the quarterly close process?

Mr Tanji: We centralized it and that allows us to first standardize it, then automate it and become more efficient with it. The overall closing time remains consistent. What has changed is less time [allocated for] manual preparation of data and transfers and more time allowing people to focus on real-time information for financial reporting and strategic business decisions.

WSJ: Do you have fewer people working on expense management and closing the books than a year ago?

Mr Tanji: Absoutely. We were able to reduce the number of resources deployed there. That said, we’re also redeploying people to do things like work on acquisitions or develop new product lines or new business lines. This has allowed us to focus our resources and people on higher value-added activities.

WSJ: How has the pandemic affected your automation strategy?

Mr Tanji: A few examples where the pandemic has really accelerated our automation beyond finance: one would be in our underwriting process. Before, maybe 20% of our [life-insurance] nominations would be [have been able] go through automated subscription. If a client is asked a few questions and we combine that with other sources of information, we can simply do an automated underwriting and issue a policy based on that. But now it represents more than 80% of life insurance applications, because customers know it much better. By necessity, this led us to a much more automated process. In addition, policy issuance through our distributors has reached a very high proportion [of automation] as well as. Previously, there was a paper-intensive process that we could not pass on to our distribution partners or other external agents.

WSJ: Does the company use machine learning?

Mr Tanji: Machine learning would be more prominent in our customer service platforms and in actuarial platforms, where we look at customer behavior, what kind of trends we see, and then use that to model the results and develop new other types of self-service capabilities.

WSJ: Do you use machine learning for financial forecasting?

Mr Tanji: Not yet. It’s yet to come. Our company is so complex financially that it is difficult to program. You kind of need human intelligence to handle some of that.

Write to Mark Maurer at [email protected]

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