Vice Chairman at Prudential Financial
Thank you, Charlie. I'll provide an overview of our financial results and business performance for our PGIM, U.S. and international businesses. I will also provide an overview of our investment portfolio and specifically our commercial real estate holdings, given the increased focus on the risks associated with a potential near-term credit cycle.
I'll begin on Slide 6 with our financial results for the first quarter of 2023. Our pretax adjusted operating income was $1.3 billion or $2.66 per share on an after-tax basis. These results reflect underlying business growth, including the benefits from a higher interest rate environment, offset by lower variable investment and fee income as well as elevated seasonal mortality experience. While elevated mortality improved compared to the year ago quarter as COVID has transitioned to an endemic phase.
Turning to the operating results from our businesses compared to the year ago quarter. PGIM, our global investment manager, had lower asset management fees due to lower assets under management resulting from the higher interest rates, equity market declines and net outflows. Other related revenues increased primarily from seed and co-investment earnings. Results of our U.S. businesses primarily reflected lower fee income, less favorable variable investment income, partially offset by the impact of higher rates on spread income and more favorable underwriting. The decrease in earnings in our international businesses primarily reflected lower spread income largely due to less favorable variable investment income.
Turning to Slide 7. PGIM, our global active investment manager, has diversified capabilities in both public and private asset classes across fixed income, equities and alternatives. PGIM's investment performance remains attractive with 80% or more of assets under management outperforming their benchmarks over the last 3-, 5- and 10-year periods. Visa experienced third-party institutional and retail net outflows of $14 billion in the quarter, primarily from fixed income strategies. Institutional outflows were mainly driven by client redemptions for liquidity needs, including derisking actions of defined benefit sponsors. Retail outflows were driven by investors rebalancing amidst higher interest rates and inflation consistent with the industry.
As the investment engine of Prudential, the success and growth of PGIM, end of our U.S. and international insurance and retirement businesses are mutually self-reinforcing. PGIM's asset origination capabilities, investment management expertise and access to institutional and other sources of private capital or a competitive advantage, helping our businesses bring enhanced solutions and create more value for our customers. Our insurance and retirement businesses, in turn, provide a source of growth for PC through affiliated net flows, which totaled $2 billion in the first quarter of 2020 30 as well as unique access to insurance liabilities.
In addition, we continue to grow our private alternatives and credit business, which has assets of approximately $235 billion across private, corporate and infrastructure credit, real estate equity and debt and secondary private equity and will be further enhanced through the acquisition of Deer Path Capital, as Charlie previously stated.
Turning to Slide 8. Our U.S. businesses produced diversified earnings from fees, net investment spread and underwriting income and benefit from our complementary mix of longevity and mortality businesses. We continue to shift towards higher growth and less market-sensitive products and markets, enhance our customer and adviser experiences and further expand our addressable market. Retirement strategies achieved strong sales of $5.5 billion in the first quarter across its institutional and individual lines of business.
Our Institutional Retirement business has market-leading capabilities with first quarter sales of $3.8 billion, including a jumbo pension risk transfer transaction, which contributed to record account ages at the end of the first quarter. In Individual Retirement, product pivots have resulted in continued strong sales of more simplified solutions like FlexGuard and FlexGuard income, representing over $13 billion of sales since inception as well as increased fixed annuity sales that comprised approximately 1/3 of our sales.
Our individual life sales reflect our earlier product pivot strategy with variable life products representing about 70% of sales for the quarter. And we continue to diversify group insurance sales with strong growth in supplemental health and disability products and driving 25% growth in the premier segment from the prior year quarter.
Turning to Slide 9. Our international businesses include our Japanese life insurance companies, where we have a differentiated multichannel distribution model as well as other businesses aimed at expanding our presence in high-growth emerging markets. In Japan, we are focused on providing high-quality service and expanding our geographic coverage and product offerings. Our needs-based approach and protection product focus continue to provide important value to our customers as we expand our product offerings to meet their evolving needs.
We continue to enhance customer experience and agent support, including through digital tools. Prudential of Japan ranked #1 in 2 out of the 3 categories in the 2023 J.D. Power Life Insurance customer satisfaction survey. We are proud to be recognized for the value we provide customers. In emerging markets, we are focused on creating a carefully selected portfolio of businesses in regions where customer needs are growing, where there are compelling opportunities to build market-leading businesses and where the Prudential enterprise can add value.
Our international businesses experienced their highest sales since the third quarter of 2020. Compared to the prior year quarter, Gibraltar sales were up 16%, mainly driven by the Life Consultant channel, primarily from higher U.S. dollar sales. Life Planner sales were up 13%, driven by the continued momentum in Brazil as well as higher sales in Japan.
Now, turning to our investment portfolio on Slide 10. We have a disciplined approach to our investment portfolio construction and management. It reflects our robust asset liability management practices, commitment to broad diversification and a rigorous underwriting security selection and credit management framework. We also leverage PGIM's expertise across multiple asset classes, including its deep and long-standing experience in private placements and real estate. With respect to our investment portfolio, here are a few key points. 30% of the portfolio is invested in government securities, primarily comprised of U.S. treasuries and Japanese government bonds. 43% of the portfolio is invested in corporate securities, of which over 93% are investment grade.
Private placements represent almost 40% of these corporate securities and over half of our BBB and below rated securities. These privates have financial covenants and structural protections that have consistently resulted in lower losses than comparable public securities. In past cycles, the loss experience on our BBB private placements have been comparable to single A public credits. Mortgage loans represent an area of interest; I'll provide more detail on Slide 11.
Our mortgage loans represent 13% of our portfolio and reflect our conservative underwriting with an average loan-to-value of 57% and debt service coverage of 2.4x. The portfolio is broadly diversified by property type, overweight in more defensive sectors such as multifamily and industrial and underweighted in both office and retail. Specifically, office properties represent only 2% of invested assets with loan to values and debt service coverage ratios that are in line with the overall portfolio. We have a disciplined portfolio monitoring process to review all investments at least annually and a robust risk management framework, which includes stress tests under cyclical and tail scenarios. Any potential credit losses in these scenarios are factored into our capital management framework and are expected to be manageable.
As we look ahead, we are well positioned across our businesses to be a leader in expanding access to investing, insurance and retirement security. We continue to be focused on investing in growth businesses and markets, delivering industry-leading customer experiences and creating the next generation of financial solutions to better serve the diverse needs of a broad range of customers.
And with that, I'll now hand it over to Ken.