filings.toolsItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Management’s Annual Report on Internal Control Over Financial Reporting
Management of Prudential Financial, Inc. (together with its consolidated subsidiaries, the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. Management conducted an assessment of the effectiveness, as of December 31, 2024, of the Company’s internal control over financial reporting, based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment under that framework, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2024.
Our internal control over financial reporting is a process designed by or under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing herein.
February 13, 2025
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Prudential Financial, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Prudential Financial, Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2024, including the related notes and financial statement schedules listed in the index appearing under Item 15.2 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Guaranteed Benefit Features Associated with Certain Annuity and Life Products Included in the Market Risk Benefits and the Liability for Future Policy Benefits
As described in Notes 2, 6, 12 and 14 to the consolidated financial statements, the Company issues certain annuity and life contracts which contain guaranteed benefit features. Certain of the guarantees associated with variable annuity contracts are accounted for as market risk benefits. The market risk benefits represent contracts or contract features that expose the Company to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits. The benefits are accounted for using a fair value measurement methodology. The fair value of market risk benefits is calculated as the present value of expected future benefit payments to contractholders less the present value of expected future fees attributable to the market risk benefits, based on assumptions a market participant would use in valuing the market risk benefits. On a quarterly basis, changes in the fair value of market risk benefits are recorded in net income, net of related hedges, except for the portion of the change attributable to changes in the Company’s non-performance risk which is recorded in other comprehensive income. This methodology could result in either a liability or asset balance, given changing capital market conditions and various actuarial assumptions. As of December 31, 2024, the fair value of the obligations associated with these guarantees accounted for as market risk benefit assets was $2.3 billion and for market risk benefit liabilities was $4.5 billion. As there is no observable active market for the transfer of these obligations, the valuations are calculated using internally-developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The significant inputs to the valuation models for these market risk benefits include capital market assumptions, such as interest rate levels and volatility assumptions, the Company’s market-perceived non-performance risk under the contract, as well as actuarially determined assumptions, including contractholder behavior, such as lapse rates, benefit utilization rates, withdrawal rates and mortality rates (collectively, the significant market risk benefit assumptions). For certain life insurance products that include certain other contract features, including no-lapse guarantees, additional insurance reserves are established when associated assessments are recognized. The liability for no-lapse guarantee features is included within the additional insurance reserves balance in Note 12. As of December 31, 2024, the additional insurance reserve was $16.4 billion, recorded within the liability for future policy benefits. As disclosed by management, this liability is established using current best estimate assumptions, including mortality rates, lapse rates, and premium pattern rates, as well as interest rate and equity market return assumptions (collectively, the significant additional insurance reserve assumptions), and is based on the ratio of the present value of total expected excess payments (i.e., payments in excess of account value) over the life of the contract divided by the present value of total expected assessments (i.e., benefit ratio). The liability equals the current benefit ratio multiplied by cumulative assessments recognized to date, plus interest, less cumulative excess payments to date.
The principal considerations for our determination that performing procedures relating to the valuation of guaranteed benefit features associated with certain annuity and life products that are accounted for as market risk benefits and those that are included in the liability for future policy benefits is a critical audit matter are (i) the significant judgment by management when determining the valuation model for the benefit features accounted for as market risk benefits due to the lack of an observable market for these guarantees and when developing the aforementioned significant assumptions for the guaranteed benefit features accounted for as market risk benefits and additional insurance reserves, (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s model for market risk benefits recorded at fair value and the aforementioned assumptions used by management in the valuation of the liabilities for the guaranteed benefit features accounted for as market risk benefits and additional insurance reserves, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of guaranteed benefit features associated with certain annuity and life products included in market risk benefits
and the liability for future policy benefits, including controls over the model for the benefit features accounted for as market risk benefits and development of the assumptions used in the valuation of the liabilities for the guaranteed benefit features accounted for as market risk benefits and additional insurance reserves. These procedures also included, among others, (i) testing management’s process for determining the valuation of guaranteed benefit features associated with certain annuity and life products included in market risk benefits and the liability for future policy benefits, (ii) the use of professionals with specialized skill and knowledge to assist in evaluating (a) the appropriateness of management’s model for market risk benefits recorded at fair value and (b) the reasonableness of the aforementioned assumptions used in the valuation based on industry knowledge and data as well as historical Company data and experience. The procedures also included testing the completeness and accuracy of data used to develop the aforementioned assumptions and testing that the aforementioned assumptions are accurately reflected in the models.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 13, 2025
We have served as the Company’s auditor since 1996, which includes periods before the Company became subject to SEC reporting requirements.
PRUDENTIAL FINANCIAL, INC.
Consolidated Statements of Financial Position
December 31, 2024 and 2023 (in millions, except share amounts)
| 2024 | 2023 | ||||||||||
| ASSETS | |||||||||||
| Fixed maturities, available-for-sale, at fair value (allowance for credit losses: 2024-$331; 2023-$160) (amortized cost: 2024-$341,004; 2023-$334,598)(1) | $ | 311,570 | $ | 316,321 | |||||||
| Fixed maturities, trading, at fair value (amortized cost: 2024-$13,631; 2023-$10,624)(1) | 12,530 | 9,790 | |||||||||
| Assets supporting experience-rated contractholder liabilities, at fair value | 3,707 | 3,168 | |||||||||
| Equity securities, at fair value (cost: 2024-$7,043; 2023-$5,786)(1) | 9,417 | 8,242 | |||||||||
| Commercial mortgage and other loans (net of $574 and $460 allowance for credit losses; includes $702 and $519 of loans measured at fair value under the fair value option at December 31, 2024 and 2023, respectively)(1) | 62,341 | 59,305 | |||||||||
| Policy loans | 9,795 | 10,047 | |||||||||
| Other invested assets (net of $2 and $1 allowance for credit losses; includes $7,574 and $6,074 of assets measured at fair value at December 31, 2024 and 2023, respectively)(1) | 26,351 | 22,855 | |||||||||
| Short-term investments (net of allowance for credit losses: 2024-$0; 2023-$0) | 9,069 | 5,005 | |||||||||
| Total investments | 444,780 | 434,733 | |||||||||
| Cash and cash equivalents(1) | 18,497 | 19,419 | |||||||||
| Accrued investment income(1) | 3,441 | 3,287 | |||||||||
| Deferred policy acquisition costs | 20,448 | 20,856 | |||||||||
| Value of business acquired | 435 | 530 | |||||||||
| Market risk benefit assets | 2,331 | 1,981 | |||||||||
| Reinsurance recoverables and deposit receivables (net of $12 and $12 allowance for credit losses; includes $849 and $149 of embedded derivatives at fair value at December 31, 2024 and 2023, respectively)(2) | 37,680 | 27,311 | |||||||||
| Income tax assets | 866 | 939 | |||||||||
| Other assets (net of $2 and $3 allowance for credit losses; includes $0 and $11 of assets at fair value at December 31, 2024 and 2023, respectively)(1)(2)(3) | 13,737 | 13,268 | |||||||||
| Separate account assets | 193,372 | 198,888 | |||||||||
| TOTAL ASSETS | $ | 735,587 | $ | 721,212 | |||||||
| LIABILITIES, MEZZANINE EQUITY AND EQUITY | |||||||||||
| LIABILITIES | |||||||||||
| Future policy benefits | $ | 268,912 | $ | 273,281 | |||||||
| Policyholders' account balances | 166,254 | 147,018 | |||||||||
| Market risk benefit liabilities | 4,455 | 5,467 | |||||||||
| Policyholders’ dividends | 718 | 1,475 | |||||||||
| Securities sold under agreements to repurchase | 6,796 | 6,056 | |||||||||
| Cash collateral for loaned securities | 9,621 | 6,477 | |||||||||
| Reinsurance and funds withheld payables (includes $(118) and $490 of embedded derivatives at fair value at December 31, 2024 and 2023, respectively)(2) | 17,084 | 15,729 | |||||||||
| Short-term debt | 953 | 618 | |||||||||
| Long-term debt | 19,187 | 18,882 | |||||||||
| Other liabilities (includes $14 and $15 allowance for credit losses and $4,751 and $4,175 of derivatives at fair value at December 31, 2024 and 2023, respectively)(1) | 16,679 | 16,071 | |||||||||
| Notes issued by consolidated variable interest entities (includes $60 and $778 measured at fair value under the fair value option at December 31, 2024 and 2023, respectively) (1) | 1,430 | 1,374 | |||||||||
| Separate account liabilities | 193,372 | 198,888 | |||||||||
| Total liabilities | 705,461 | 691,336 | |||||||||
| COMMITMENTS AND CONTINGENT LIABILITIES (See Note 25) | |||||||||||
| MEZZANINE EQUITY | |||||||||||
| Redeemable noncontrolling interests(3) | 1,939 | 1,766 | |||||||||
| Total mezzanine equity | 1,939 | 1,766 | |||||||||
| EQUITY | |||||||||||
| Preferred Stock ($0.01 par value; 10,000,000 shares authorized; none issued) | 0 | 0 | |||||||||
| Common Stock ($0.01 par value; 1,500,000,000 shares authorized; 666,305,189 shares issued as of both December 31, 2024 and 2023) | 6 | 6 | |||||||||
| Additional paid-in capital | 25,901 | 25,746 | |||||||||
| Common Stock held in treasury, at cost (311,738,187 and 307,089,216 shares at December 31, 2024 and 2023, respectively) | (24,511) | (23,780) | |||||||||
| Accumulated other comprehensive income (loss)(2) | (6,711) | (6,504) | |||||||||
| Retained earnings | 33,187 | 32,352 | |||||||||
| Total Prudential Financial, Inc. equity | 27,872 | 27,820 | |||||||||
| Noncontrolling interests(3) | 315 | 290 | |||||||||
| Total equity | 28,187 | 28,110 | |||||||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY | $ | 735,587 | $ | 721,212 |
(1)See Note 4 for details of balances associated with variable interest entities.
(2)See Note 24 for additional information regarding related party transactions.
(3)Prior period amounts have been revised to conform to current period presentation.
See Notes to Consolidated Financial Statements
PRUDENTIAL FINANCIAL, INC.
Consolidated Statements of Operations
Years Ended December 31, 2024, 2023 and 2022 (in millions, except per share amounts)
| 2024 | 2023 | 2022 | |||||||||||||||
| REVENUES | |||||||||||||||||
| Premiums (includes $73, $323 and $(377) of gains (losses) from changes in estimates on deferred profit liability amortization for the year ended December 31, 2024, 2023 and 2022, respectively)(1) | $ | 42,897 | $ | 27,364 | $ | 36,475 | |||||||||||
| Policy charges and fee income | 4,298 | 4,527 | 4,615 | ||||||||||||||
| Net investment income | 19,909 | 17,865 | 16,037 | ||||||||||||||
| Asset management and service fees(1) | 4,090 | 3,717 | 4,062 | ||||||||||||||
| Other income (loss)(1) | 3,037 | 4,065 | 608 | ||||||||||||||
| Realized investment gains (losses), net(1) | (3,429) | (3,615) | (4,507) | ||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | (397) | 56 | (409) | ||||||||||||||
| Total revenues | 70,405 | 53,979 | 56,881 | ||||||||||||||
| BENEFITS AND EXPENSES | |||||||||||||||||
| Policyholders’ benefits(1) | 47,119 | 30,931 | 40,816 | ||||||||||||||
| Change in estimates of liability for future policy benefits(1) | (37) | 337 | 654 | ||||||||||||||
| Interest credited to policyholders’ account balances | 4,582 | 3,983 | 2,193 | ||||||||||||||
| Dividends to policyholders | 698 | 1,069 | 198 | ||||||||||||||
| Amortization of deferred policy acquisition costs | 1,492 | 1,459 | 1,433 | ||||||||||||||
| Goodwill impairment | 0 | 177 | 903 | ||||||||||||||
| General and administrative expenses(1) | 13,342 | 12,951 | 12,576 | ||||||||||||||
| Total benefits and expenses | 67,196 | 50,907 | 58,773 | ||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF JOINT VENTURES AND OTHER OPERATING ENTITIES | 3,209 | 3,072 | (1,892) | ||||||||||||||
| Total income tax expense (benefit) | 507 | 613 | (279) | ||||||||||||||
| INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF JOINT VENTURES AND OTHER OPERATING ENTITIES | 2,702 | 2,459 | (1,613) | ||||||||||||||
| Equity in earnings of joint ventures and other operating entities, net of taxes | 144 | 49 | (62) | ||||||||||||||
| NET INCOME (LOSS) | 2,846 | 2,508 | (1,675) | ||||||||||||||
| Less: Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 119 | 20 | (28) | ||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC. | $ | 2,727 | $ | 2,488 | $ | (1,647) | |||||||||||
| EARNINGS PER SHARE | |||||||||||||||||
| Basic earnings per share-Common Stock: | |||||||||||||||||
| Net income (loss) attributable to Prudential Financial, Inc. | $ | 7.54 | $ | 6.76 | $ | (4.49) | |||||||||||
| Diluted earnings per share-Common Stock: | |||||||||||||||||
| Net income (loss) attributable to Prudential Financial, Inc. | $ | 7.50 | $ | 6.74 | $ | (4.49) |
(1)See Note 24 for additional information regarding related party transactions.
See Notes to Consolidated Financial Statements
PRUDENTIAL FINANCIAL, INC.
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2024, 2023 and 2022 (in millions)
| 2024 | 2023 | 2022 | |||||||||||||||
| NET INCOME (LOSS) | $ | 2,846 | $ | 2,508 | $ | (1,675) | |||||||||||
| Other comprehensive income (loss), before tax: | |||||||||||||||||
| Foreign currency translation adjustments for the period | (852) | (264) | (1,131) | ||||||||||||||
| Net unrealized investment gains (losses) | (10,125) | 6,219 | (55,845) | ||||||||||||||
| Interest rate remeasurement of future policy benefits(1) | 11,804 | (8,770) | 63,643 | ||||||||||||||
| Gain (loss) from changes in non-performance risk on market risk benefits | (466) | (693) | 938 | ||||||||||||||
| Defined benefit pension and postretirement unrecognized periodic benefit (cost) | (204) | (27) | 636 | ||||||||||||||
| Total | 157 | (3,535) | 8,241 | ||||||||||||||
| Less: Income tax expense (benefit) related to other comprehensive income (loss) | 364 | (837) | 2,555 | ||||||||||||||
| Other comprehensive income (loss), net of taxes | (207) | (2,698) | 5,686 | ||||||||||||||
| Comprehensive income (loss) | 2,639 | (190) | 4,011 | ||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 119 | 20 | (29) | ||||||||||||||
| Comprehensive income (loss) attributable to Prudential Financial, Inc. | $ | 2,520 | $ | (210) | $ | 4,040 |
(1)See Note 24 for additional information regarding related party transactions.
See Notes to Consolidated Financial Statements
PRUDENTIAL FINANCIAL, INC.
Consolidated Statements of Equity
Years Ended December 31, 2024, 2023 and 2022 (in millions)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Common Stock Held In Treasury | Accumulated Other Comprehensive Income (Loss) | Total Prudential Financial, Inc. Equity | Noncontrolling Interests(1) | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | 6 | $ | 25,732 | $ | 35,183 | $ | (21,838) | $ | (9,493) | $ | 29,590 | $ | 393 | $ | 29,983 | |||||||||||||||||||||||||||||||||||||
| Common Stock acquired | (1,500) | (1,500) | (1,500) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | 10 | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (76) | (76) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidations/(deconsolidations) of noncontrolling interests | (20) | (20) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation programs | 15 | 270 | 285 | 285 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared on Common Stock | (1,822) | (1,822) | (1,822) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | (1,647) | (1,647) | 35 | (1,612) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | 5,687 | 5,687 | (1) | 5,686 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | (1,647) | 5,687 | 4,040 | 34 | 4,074 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 6 | 25,747 | 31,714 | (23,068) | (3,806) | 30,593 | 341 | 30,934 | |||||||||||||||||||||||||||||||||||||||||||||
| Common Stock acquired | (1,006) | (1,006) | (1,006) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | 19 | 19 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (40) | (40) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidations/(deconsolidations) of noncontrolling interests | (36) | (36) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation programs | (1) | 294 | 293 | 293 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared on Common Stock | (1,850) | (1,850) | (1,850) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 2,488 | 2,488 | 6 | 2,494 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | (2,698) | (2,698) | 0 | (2,698) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | 2,488 | (2,698) | (210) | 6 | (204) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 6 | 25,746 | 32,352 | (23,780) | (6,504) | 27,820 | 290 | 28,110 | |||||||||||||||||||||||||||||||||||||||||||||
| Common Stock acquired | (1,006) | (1,006) | (1,006) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | 15 | 15 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (63) | (63) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidations/(deconsolidations) of noncontrolling interests | (3) | (3) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation programs | 155 | 275 | 430 | 430 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared on Common Stock | (1,892) | (1,892) | (1,892) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 2,727 | 2,727 | 76 | 2,803 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | (207) | (207) | 0 | (207) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | 2,727 | (207) | 2,520 | 76 | 2,596 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | 6 | $ | 25,901 | $ | 33,187 | $ | (24,511) | $ | (6,711) | $ | 27,872 | $ | 315 | $ | 28,187 |
(1)Prior period amounts have been revised to conform to current period presentation.
See Notes to Consolidated Financial Statements
PRUDENTIAL FINANCIAL, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 2024, 2023 and 2022 (in millions)
| 2024 | 2023 | 2022 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||
| Net income (loss) | $ | 2,846 | $ | 2,508 | $ | (1,675) | |||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||
| Realized investment (gains) losses, net(1) | 3,429 | 3,615 | 4,507 | ||||||||||||||
| Change in value of market risk benefits, net of related hedging (gains) losses | 397 | (56) | 409 | ||||||||||||||
| Policy charges and fee income | (2,128) | (2,186) | (2,230) | ||||||||||||||
| Interest credited to policyholders’ account balances | 4,582 | 3,983 | 2,193 | ||||||||||||||
| Goodwill impairment | 0 | 177 | 903 | ||||||||||||||
| Depreciation and amortization | 383 | (70) | 117 | ||||||||||||||
| (Gains) losses on assets supporting experience-rated contractholder liabilities, net | (595) | (503) | 1,128 | ||||||||||||||
| Change in: | |||||||||||||||||
| Deferred policy acquisition costs | (1,111) | (869) | (722) | ||||||||||||||
| Future policy benefits and other insurance liabilities | 4,803 | 5,489 | 6,132 | ||||||||||||||
| Reinsurance related-balances(1)(2) | (2,731) | (683) | (868) | ||||||||||||||
| Income taxes | (146) | (442) | (1,594) | ||||||||||||||
| Derivatives, net | 897 | (746) | (2,533) | ||||||||||||||
| Other, net(1)(2)(3) | (2,124) | (3,707) | (609) | ||||||||||||||
| Cash flows from (used in) operating activities | 8,502 | 6,510 | 5,158 | ||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||
| Proceeds from the sale/maturity/prepayment of: | |||||||||||||||||
| Fixed maturities, available-for-sale | 59,059 | 44,097 | 50,823 | ||||||||||||||
| Fixed maturities, held-to-maturity | 0 | 22 | 38 | ||||||||||||||
| Fixed maturities, trading | 3,398 | 1,559 | 1,641 | ||||||||||||||
| Assets supporting experience-rated contractholder liabilities | 1,474 | 2,286 | 11,410 | ||||||||||||||
| Equity securities | 5,790 | 4,348 | 3,697 | ||||||||||||||
| Commercial mortgage and other loans | 5,466 | 3,985 | 5,580 | ||||||||||||||
| Policy loans | 1,972 | 1,806 | 1,738 | ||||||||||||||
| Other invested assets | 1,936 | 1,260 | 1,789 | ||||||||||||||
| Short-term investments | 33,316 | 32,684 | 40,653 | ||||||||||||||
| Payments for the purchase/origination of: | |||||||||||||||||
| Fixed maturities, available-for-sale | (72,997) | (47,580) | (60,070) | ||||||||||||||
| Fixed maturities, trading | (7,041) | (4,174) | (659) | ||||||||||||||
| Assets supporting experience-rated contractholder liabilities | (1,773) | (2,290) | (11,799) | ||||||||||||||
| Equity securities | (6,576) | (4,296) | (3,451) | ||||||||||||||
| Commercial mortgage and other loans | (9,134) | (6,359) | (5,497) | ||||||||||||||
| Policy loans | (1,601) | (1,544) | (1,248) | ||||||||||||||
| Other invested assets | (3,884) | (3,049) | (2,832) | ||||||||||||||
| Short-term investments | (37,244) | (32,872) | (37,894) | ||||||||||||||
| Dispositions, net of cash disposed(4) | 0 | 0 | 422 | ||||||||||||||
| Derivatives, net | (696) | (1,329) | (1,881) | ||||||||||||||
| Other, net | (50) | (676) | (98) | ||||||||||||||
| Cash flows from (used in) investing activities | (28,585) | (12,122) | (7,638) | ||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
| Policyholders’ account deposits | 35,913 | 28,521 | 30,094 | ||||||||||||||
| Policyholders’ account withdrawals | (19,388) | (18,307) | (24,149) | ||||||||||||||
| Net change in securities sold under agreements to repurchase and cash collateral for loaned securities | 3,884 | (156) | (1,541) | ||||||||||||||
| Cash dividends paid on Common Stock | (1,891) | (1,846) | (1,817) | ||||||||||||||
| Net change in financing arrangements (maturities 90 days or less) | (583) | 10 | (214) | ||||||||||||||
| Common Stock acquired | (1,000) | (1,012) | (1,488) | ||||||||||||||
| Common Stock reissued for exercise of stock options | 201 | 126 | 163 | ||||||||||||||
| Proceeds from the issuance of debt (maturities longer than 90 days) | 1,423 | 716 | 2,706 | ||||||||||||||
| Repayments of debt (maturities longer than 90 days) | (814) | (1,982) | (1,184) | ||||||||||||||
| Proceeds from notes issued by consolidated VIEs | 1,436 | 1,360 | 137 | ||||||||||||||
| Repayments of notes issued by consolidated VIEs | (617) | (336) | 0 | ||||||||||||||
| Other, net(1)(5) | 830 | 645 | 2,226 | ||||||||||||||
| Cash flows from (used in) financing activities | 19,394 | 7,739 | 4,933 | ||||||||||||||
| Effect of foreign exchange rate changes on cash balances | (254) | 37 | (159) | ||||||||||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS INCLUDING BALANCES CLASSIFIED AS HELD-FOR-SALE | (943) | 2,164 | 2,294 | ||||||||||||||
| NET CHANGE IN CASH BALANCES CLASSIFIED AS HELD-FOR-SALE(4) | 0 | 0 | (2,071) | ||||||||||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS | (943) | 2,164 | 4,365 | ||||||||||||||
| CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR | 19,463 | 17,299 | 12,934 | ||||||||||||||
| CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF YEAR | $ | 18,520 | $ | 19,463 | $ | 17,299 | |||||||||||
PRUDENTIAL FINANCIAL, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 2024, 2023 and 2022 (in millions)
| 2024 | 2023 | 2022 | |||||||||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||||||||
| Income taxes paid, net of refunds | $ | 756 | $ | 895 | $ | 1,090 | |||||||||||
| Interest paid | $ | 1,995 | $ | 1,555 | $ | 1,452 | |||||||||||
| HELD-FOR-SALE CLASSIFICATION(4) | |||||||||||||||||
| Assets classified as held-for-sale | $ | 0 | $ | 0 | $ | (153,935) | |||||||||||
| Liabilities classified as held-for-sale | 0 | 0 | (151,508) | ||||||||||||||
| Net assets classified as held-for-sale | $ | 0 | $ | 0 | $ | (2,427) | |||||||||||
| NON-CASH TRANSACTIONS DURING THE YEAR | |||||||||||||||||
| Treasury Stock shares issued for stock-based compensation programs | $ | 217 | $ | 282 | $ | 236 | |||||||||||
| Novation of annuity contracts(6) | $ | 0 | $ | 491 | $ | 3,129 | |||||||||||
| Assets transferred upon surrender of IRA contracts(7) | $ | 0 | $ | 2,019 | $ | 0 | |||||||||||
| Significant pension risk transfer transactions: | |||||||||||||||||
| Assets received, excluding Cash and cash equivalents | $ | 11,693 | $ | 2,264 | $ | 8,246 | |||||||||||
| Liabilities assumed | 16,020 | 3,257 | 8,764 | ||||||||||||||
| Net cash received | $ | 4,327 | $ | 993 | $ | 518 | |||||||||||
| Prismic Re reinsurance transaction(8): | |||||||||||||||||
| Net assets transferred, excluding Cash and cash equivalents | $ | 0 | $ | 1,351 | $ | 0 | |||||||||||
| Payables established under coinsurance with funds withheld | 102 | 8,185 | 0 | ||||||||||||||
| Reinsurance recoverables established for Future policy benefits ceded | 0 | (5,584) | 0 | ||||||||||||||
| Deposit assets established for Policyholders' account balances ceded | 0 | (3,723) | 0 | ||||||||||||||
| Unwind of Deferred policy acquisition costs ceded | 0 | 23 | 0 | ||||||||||||||
| Deferred reinsurance loss | (102) | (240) | 0 | ||||||||||||||
| Net cash received | $ | 0 | $ | 12 | $ | 0 | |||||||||||
| Somerset Re reinsurance transaction(8): | |||||||||||||||||
| Reinsurance recoverables under modified coinsurance, net | $ | (578) | $ | 0 | $ | 0 | |||||||||||
| Unwind of Deferred policy acquisition costs ceded | 284 | 0 | 0 | ||||||||||||||
| Deferred reinsurance gain | 363 | 0 | 0 | ||||||||||||||
| Net cash received | $ | 69 | $ | 0 | $ | 0 | |||||||||||
| Wilton Re reinsurance transaction(8): | |||||||||||||||||
| Net assets transferred, excluding Cash and cash equivalents | $ | 6,679 | $ | 0 | $ | 0 | |||||||||||
| Policy loans ceded | 44 | 0 | 0 | ||||||||||||||
| Reinsurance recoverables under coinsurance | (7,362) | 0 | 0 | ||||||||||||||
| Unwind of Deferred policy acquisition costs ceded | 699 | 0 | 0 | ||||||||||||||
| Deferred reinsurance loss | (980) | 0 | 0 | ||||||||||||||
| Reinsurance payables | 175 | 0 | 0 | ||||||||||||||
| Net cash paid | $ | (745) | $ | 0 | $ | 0 | |||||||||||
| RECONCILIATION TO STATEMENTS OF FINANCIAL POSITION | |||||||||||||||||
| Cash and cash equivalents | $ | 18,497 | $ | 19,419 | $ | 17,251 | |||||||||||
| Restricted cash and restricted cash equivalents (included in “Other assets”) | 23 | 44 | 48 | ||||||||||||||
| Total cash, cash equivalents, restricted cash and restricted cash equivalents | $ | 18,520 | $ | 19,463 | $ | 17,299 |
(1)See Note 24 for additional information regarding related party transactions.
(2)Prior period amounts have been updated to conform to current period presentation.
(3)The amount for the year ended December 31, 2022 includes the recognized gains on the sales of Prudential Annuities Life Assurance Corporation (“PALAC”) and the Full Service Retirement business, which were completed on April 1, 2022. See Note 1 for additional information regarding these dispositions.
(4)See Note 1 for additional information regarding the dispositions.
(5)The amount for the year ended December 31, 2022 includes approximately $1.6 billion cash receipt from a secured borrowing related to the PALAC disposition, which was subsequently derecognized as part of a non-cash transaction during 2022 related to the novation of certain previously reinsured annuity products. See Note 1 for additional information.
(6)“Cash flows from (used in) operating activities” and “Cash flows from (used in) investing activities” exclude non-cash activities related to the novation of certain, previously reinsured, annuity products, from Fortitude Group Holdings, LLC to the Company. See Note 1 for additional information.
(7)“Cash flows from (used in) operating activities” exclude certain non-cash activities related to the sale of the Full Service Retirement business as a result of the surrender of certain Stable Value Individual Retirement Account (“IRA”) contracts from the Company to Great-West Life & Annuity Insurance Company. See Note 1 for additional information regarding this sale.
(8)See Note 15 for additional information regarding the reinsurance agreements with Prismic Life Reinsurance, Ltd (“Prismic Re”), Somerset Reinsurance Ltd. (“Somerset Re”) and Wilton Reassurance Company and Wilton Reinsurance Bermuda Limited (collectively, “Wilton Re”).
See Notes to Consolidated Financial Statements
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
**1.**BUSINESS AND BASIS OF PRESENTATION
Prudential Financial, Inc. (“Prudential Financial”) and its subsidiaries (collectively, “Prudential” or the “Company”) provide a wide range of insurance, investment management, and other financial products and services to both individual and institutional customers throughout the United States and in many other countries. Principal products and services provided include life insurance, annuities, retirement solutions, mutual funds and investment management.
The Company’s principal operations consist of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the Retirement Strategies, Group Insurance and Individual Life businesses), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included within Corporate and Other operations. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under U.S. GAAP. The Company’s Corporate and Other operations include corporate items and initiatives that are not allocated to business segments as well as the Divested and Run-off Businesses described above.
In September 2023, the Company, through its Corporate and Other operations, invested approximately $200 million, and acquired a 20% equity interest as a limited partner, in Prismic Life Holding Company LP (“Prismic”), a Bermuda-exempted limited partnership that owns all of the outstanding capital stock of Prismic Life Reinsurance, Ltd. (“Prismic Re”), a licensed Bermuda-based life and annuity reinsurance company. As this investment is accounted for under the equity method, both Prismic and Prismic Re are considered related parties. For additional information regarding related party transactions, see Note 24. Beginning with the fourth quarter of 2023, the operating results of Corporate and Other reflect the Company’s share of earnings in Prismic on a quarter lag. For information regarding the Company’s initial reinsurance transaction with Prismic Re, effective September 2023, see Note 15.
As part of its continuous improvement process, the Company is working to become a leaner and more agile company by simplifying its management structure, empowering its employees with faster decision-making processes and investing in technology and data platforms. As part of this, the Company implemented changes to its organizational structure and recorded a restructuring charge of $200 million to “General and administrative expenses” in the fourth quarter of 2023 within its Corporate and Other operations. The Company expects these continued actions will create operating efficiencies, and provide reinvestment capacity to build capabilities, realize additional efficiencies, strengthen its competitiveness and fuel future growth.
Basis of Presentation
The Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Consolidated Financial Statements include the accounts of Prudential Financial, entities over which the Company exercises control, including majority-owned subsidiaries and minority-owned entities such as limited partnerships in which the Company is the general partner and variable interest entities (“VIEs”) in which the Company is considered the primary beneficiary. See Note 4 for additional information regarding the Company’s consolidated variable interest entities. Intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The most significant estimates include those used in determining future policy benefits; policyholders’ account balances related to the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products; market risk benefits; the measurement of goodwill and any related impairment; the valuation of investments including derivatives, the measurement of allowance for credit losses, and the recognition of other-than-temporary impairments (“OTTI”); pension and other postretirement benefits; any provision for income taxes and valuation of deferred tax assets; and accruals for contingent liabilities, including estimates for losses in connection with unresolved legal and regulatory matters.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Revision of Previously Issued Financial Statements
The Company reclassified certain amounts in prior periods to conform to the current period presentation and recorded other adjustments, including the following:
During the fourth quarter of 2024, the Company identified an immaterial error in the application of adjusted operating income, its segment measure of performance, which resulted in an overstatement thereof for indexed variable and fixed annuity products within the Retirement Strategies segment in the first three quarters of 2024 and each of the four quarters of 2023. As a result, the Company has voluntarily revised its historical adjusted operating income for the relevant periods, resulting in decreases in pre-tax adjusted operating income of $149 million (unaudited) for the nine months ended September 30, 2024, and $55 million for the year ended December 31, 2023. These revisions had no impact to “Net income (loss)” for any period as determined in accordance with GAAP. See Note 23 for additional information regarding adjusted operating income.
The Company corrected the prior period presentation for certain noncontrolling interests, primarily related to consolidated PGIM-managed funds, that contain redemption features that are at the option of the holder and outside of the Company’s control. These noncontrolling interests were previously reported within “Noncontrolling interests” and are now correctly presented as “Mezzanine equity” and totaled $1,153 million, $614 million and $339 million as of December 31, 2023, 2022 and 2021, respectively. The revised mezzanine equity balance of $1,766 million as of December 31, 2023 also reflected other immaterial adjustments.
Business Dispositions
Prudential Annuities Life Assurance Corporation, Representing a Portion of Individual Annuities’ Traditional Variable Annuity Block of Business
On April 1, 2022, the Company completed the sale of Prudential Annuities Life Assurance Corporation (“PALAC”), a wholly owned subsidiary, representing a portion of its in-force traditional variable annuity block of business, to Fortitude Group Holdings, LLC (“Fortitude”). The PALAC block primarily consisted of non-New York traditional variable annuities with guaranteed living benefits that were issued prior to 2011, which constituted approximately $30 billion of Prudential’s total in-force individual annuity account values at the closing of the transaction. The Company, through coinsurance and modified coinsurance agreements, has retained the economics of certain variable annuities, indexed annuities, and fixed annuities with a guaranteed lifetime withdrawal income feature issued by PALAC.
The Company recognized a pre-tax gain on sale of $1,448 million in 2022 within “Other income,” which is included in adjusted operating income within the Retirement Strategies segment.
Full Service Retirement Business
On April 1, 2022, the Company completed the sale of its Full Service Retirement business to Great-West Life & Annuity Insurance Company (“Great-West”), primarily through a combination of (i) the sale of all of the outstanding equity interests of certain legal entities, including Prudential Retirement Insurance and Annuity Company (“PRIAC”); (ii) the ceding of certain insurance policies through reinsurance; and (iii) the sale, transfer and/or novation of certain in-scope contracts and brokerage accounts.
The Company recognized a net pre-tax gain on sale of $650 million in 2022, composed of (i) an $850 million gain recorded in “Other income”; (ii) $150 million of realized losses recorded in “Realized investment gains (losses), net,” related to assets transferred as part of the reinsurance of certain retained policies to Great-West; and (iii) $50 million of indirect expenses and charges recorded in “General and administrative expenses” on the Consolidated Statements of Operations. These amounts reflect certain post-closing adjustments in accordance with the terms of the transaction agreement. The net gain is excluded from adjusted operating income and reported within Divested Businesses as part of Corporate and Other operations. In addition, the Company recognized a deferred gain of approximately $400 million in 2022, including a post-closing true-up, for the ceding of certain insurance policies through reinsurance to Great-West. This deferred reinsurance gain will be recognized in income over the term of the ceded policies.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Excluding the gain on sale recognized in 2022, the Full Service Retirement business generated pre-tax income/(loss) of approximately $(220) million for the year ended December 31, 2022. This amount excludes the impact of overhead costs retained in the Company’s Corporate and Other operations and not transferred to Great-West.
**2.**SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS
ASSETS
Fixed maturities, available-for-sale, at fair value (“AFS debt securities”) includes bonds, notes and redeemable preferred stock that are carried at fair value. See Note 6 for additional information regarding the determination of fair value. The purchased cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity or, if applicable, call date.
AFS debt securities, where fair value is below amortized cost, are reviewed quarterly to determine whether the amortized cost basis of the security is recoverable. For mortgage-backed and asset-backed AFS debt securities, a credit impairment will be recognized in earnings as an allowance for credit losses and reported in “Realized investment gains (losses), net,” to the extent the amortized cost exceeds the net present value of projected future cash flows (the “net present value”) for the security.
For all other AFS debt securities, qualitative factors are first considered including, but not limited to, the extent of the decline and the reasons for the decline in value (e.g., credit events, currency or interest-rate related, including general credit spread widening), and the financial condition of the issuer. If analysis of these qualitative factors results in the security needing to be impaired, a credit impairment will be recognized in earnings as an allowance for credit losses and reported in “Realized investment gains (losses), net,” to the extent the amortized cost exceeds the net present value of projected future cash flows (the “net present value”) for the security.
A credit impairment recorded cannot exceed the difference between the amortized cost and fair value of the respective security. The net present value used to measure a credit impairment is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the AFS debt security at the date of acquisition. Once the Company has deemed all or a portion of the amortized cost uncollectible, the allowance is removed from the balance sheet by writing down the amortized cost basis of the AFS debt security. Any amount of an AFS debt security’s change in fair value not recorded as an allowance for credit losses will be recorded in Other Comprehensive Income (loss) (“OCI”).
When an AFS debt security’s fair value is below amortized cost and the Company has the intent to sell the AFS debt security, or it is more likely than not the Company will be required to sell the AFS debt security before its anticipated recovery, the amortized cost basis of the AFS debt security is written down to fair value and any previously recognized allowance is reversed. The write-down is reported in “Realized investment gains (losses), net.”
Interest income, including amortization of premium and accretion of discount, are included in “Net investment income” under the effective yield method. Prepayment premiums are also included in “Net investment income.”
For high credit quality mortgage-backed and asset-backed AFS debt securities (those rated AA or above), the amortized cost and effective yield of the securities are adjusted as necessary to reflect historical prepayment experience and changes in estimated future prepayments. The adjustments to amortized cost are recorded as a charge or credit to “Net investment income” in accordance with the retrospective method.
For mortgage-backed and asset-backed AFS debt securities rated below AA, the effective yield is adjusted prospectively for any changes in the estimated timing and amount of cash flows unless the investment is purchased with credit deterioration or an allowance is currently recorded for the respective security. If an investment is impaired, any changes in the estimated timing and amount of cash flows will be recorded as the credit impairment, as opposed to a yield adjustment. If the asset is purchased with credit deterioration (or previously impaired), the effective yield will be adjusted if there are favorable changes in cash flows subsequent to the allowance being reduced to zero.
For mortgage-backed and asset-backed AFS debt securities, cash flow estimates consider the payment terms of the underlying assets backing a particular security, including interest rate and prepayment assumptions based on data from widely accepted third-party data sources or internal estimates. In addition to interest rate and prepayment assumptions, cash flow estimates also include other assumptions regarding the underlying collateral including default rates and recoveries, which vary
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
based on the asset type and geographic location, as well as the vintage year of the security. These assumptions can significantly impact income recognition, unrealized gains and loss recorded in OCI, and the amount of impairment recognized in earnings. The payment priority of the respective security is also considered. For all other AFS debt securities, cash flow estimates are driven by assumptions regarding probability of default and estimates regarding timing and amount of recoveries associated with a default. The Company has developed these estimates using information based on its historical experience as well as using market observable data, such as industry analyst reports and forecasts, sector credit ratings and other data relevant to the collectability of a security, such as the general payment terms of the security and the security’s position within the capital structure of the issuer.
“Fixed maturities, held-to-maturity, at amortized cost” (“HTM debt securities”) includes bonds that the Company has both the positive intent and ability to hold to maturity, and are carried at amortized cost, net of the current expected credit loss (“CECL”) allowance. Interest income for HTM debt securities is computed in the same manner as interest income for AFS debt securities. In the third quarter of 2023, the Company changed its intent to hold a portion of its HTM debt securities portfolio, which it would redeem as part of a reinsurance transaction. As a result, beginning September 30, 2023, the entire HTM debt securities portfolio was reclassified to AFS debt securities and recorded at fair value.
Prior to the reclassification, credit impairment for HTM debt securities was recorded through a CECL allowance. The CECL allowance was generally determined based on probability of default and loss given default assumptions according to sector, credit quality and remaining time to maturity. Changes in the allowance were reported in “Realized investment gains (losses), net.” Once the Company deemed all or a portion of the amortized cost uncollectible, the uncollectible portion of the allowance was removed from the balance sheet by writing down the amortized cost basis of the security.
The CECL allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts. The allowance was calculated separately for each HTM debt security.
Key inputs to the CECL model include unpaid principal balances, credit ratings, annual expected loss factors, average life adjusted for prepayment considerations, current and historical interest rate assumptions, and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate.
Fixed maturities, trading, at fair value (“Trading debt securities”) includes debt securities that are carried at fair value, such as fixed maturities with embedded features that are considered derivatives and assets contained within consolidated variable interest entities. See Note 6 for additional information regarding the determination of fair value. Realized and unrealized gains and losses for these investments are reported in “Other income (loss),” and interest income from these investments is reported in “Net investment income.”
Assets supporting experience-rated contractholder liabilities, at fair value includes invested assets that consist of fixed maturities, equity securities, short-term investments and cash equivalents, that support certain products which are experience-rated, meaning that the investment results associated with these products are expected to ultimately accrue to contractholders. Realized and unrealized gains and losses for these investments are reported in “Other income (loss).” Interest and dividend income from these investments is reported in “Net investment income.”
Equity securities, at fair value consists of common stock, mutual fund shares and non-redeemable preferred stock carried at fair value. Realized and unrealized gains and losses on these investments are reported in “Other income (loss),” and dividend income is reported in “Net investment income” on the ex-dividend date.
Commercial mortgage and other loans consists of commercial mortgage loans, agricultural property loans, as well as certain other collateralized and uncollateralized loans. Uncollateralized loans primarily represent reverse dual currency loans and corporate loans held by the Company’s international insurance operations.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Commercial mortgage and other loans originated and held for investment are generally carried at unpaid principal balance, net of unamortized deferred loan origination fees and expenses, and net of any CECL allowance. Certain off-balance sheet credit exposures (e.g., indemnification of serviced mortgage loans, and certain unfunded mortgage loan commitments where the Company cannot unconditionally cancel the commitment) are also subject to a CECL allowance. See Note 25 for additional information. The Company carries certain commercial mortgage loans originated within the Company’s commercial mortgage operations at fair value where the fair value option has been elected. Loans held for sale where the Company has not elected the fair value option are carried at the lower of cost or fair value. Commercial mortgage and other loans acquired, including those related to the acquisition of a business, are recorded at fair value when purchased, reflecting any premiums or discounts to unpaid principal balances. Interest income, and the amortization of the related premiums or discounts, are included in “Net investment income” under the effective yield method. Prepayment fees are also included in “Net investment income.”
The CECL allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets or off-balance sheet credit exposures. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts. The allowance is calculated separately for commercial mortgage loans, agricultural mortgage loans, and other collateralized and uncollateralized loans. For commercial mortgage and agricultural mortgage loans, the allowance is calculated using an internally developed CECL model that pools together loans that share similar risk characteristics. Similar risk characteristics used to create the pools include, but are not limited to, vintage, maturity, credit rating, and collateral type.
Key inputs to the CECL model include unpaid principal balances, internal credit ratings, annual expected loss factors, average lives of the loans adjusted for prepayment considerations, current and historical interest rate assumptions, and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate. Information about certain key inputs is detailed below.
Key factors in determining the internal credit ratings for commercial mortgage and agricultural mortgage loans include loan-to-value and debt-service-coverage ratios. Other factors include amortization, loan term, and estimated market value growth rate and volatility for the property type and region. The loan-to-value ratio compares the carrying amount of the loan to the fair value of the underlying property or properties collateralizing the loan, and is commonly expressed as a percentage. Loan-to-value ratios greater than 100% indicate that the carrying amount of the loan exceeds the collateral value. A loan-to-value ratio less than 100% indicates an excess of collateral value over the carrying amount of the loan. The debt service coverage ratio is a property’s net operating income as a percentage of its debt service payments. Debt service coverage ratios less than 1.0 indicates that property operations do not generate enough income to cover the loan’s current debt payments. A debt service coverage ratio greater than 1.0 indicates an excess of net operating income over the debt service payments. The values utilized in calculating these ratios are developed as part of the Company’s periodic review of the commercial mortgage loan and agricultural property loan portfolios, which includes an internal appraisal of the underlying collateral value. The Company’s periodic review also includes a quality re-rating process, whereby the internal quality rating originally assigned at underwriting is updated based on current loan, property and market information using a proprietary quality rating system. See Note 3 for additional information related to the loan-to-value ratios and debt service coverage ratios related to the Company’s commercial mortgage and agricultural loan portfolios.
Annual expected loss rates are based on historical default and loss experience factors. Using average lives, the annual expected loss rates are converted into life-of-loan loss expectations.
When individual loans no longer have the credit risk characteristics of the commercial or agricultural mortgage loan pools, they are removed from the pools and are evaluated individually for an allowance. The allowance is determined based on the outstanding loan balance less the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.
The CECL allowance on commercial mortgage and other loans can increase or decrease from period to period based on the factors noted above. The change in allowance is reported in “Realized investment gains (losses), net.” As it relates to unfunded commitments that are in scope of this guidance, the CECL allowance is reported in “Other liabilities,” and the change in the allowance is reported in “Realized investment gains (losses), net.”
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The CECL allowance for other collateralized and uncollateralized loans (e.g., corporate loans) carried at amortized cost is determined based on probability of default and loss given default assumptions by sector, credit quality and average lives of the loans. Additions to, or releases of, the allowance are reported in “Realized investment gains (losses), net.”
Once the Company has deemed a portion of the amortized cost to be uncollectible, the uncollectible portion of allowance is removed from the balance sheet by writing down the amortized cost basis of the loan. The carrying amount of the loan is not adjusted for subsequent recoveries in value.
Interest received on loans that are past due is either applied against the principal or reported as net investment income based on the Company’s assessment as to the collectability of the principal. The Company defines “past due” as principal or interest not collected at least 30 days past the scheduled contractual due date. See Note 3 for additional information about the Company’s past due loans.
The Company discontinues accruing interest on loans after the loans become 90 days delinquent as to principal or interest payments, or earlier when the Company has doubts about collectability. When the Company discontinues accruing interest on a loan, any accrued but uncollectible interest on the loan and other loans backed by the same collateral, if any, is charged against interest income in the same period. Generally, a loan is restored to accrual status only after all delinquent interest and principal are brought current and, in the case of loans where the payment of interest has been interrupted for a substantial period, or the loan has been modified, a regular payment performance has been established.
Commercial mortgage and other loans are occasionally restructured. These restructurings generally include one or more of the following: full or partial payoffs outside of the original contract terms; changes to interest rates; extensions of maturity; or additions or modifications to covenants. Additionally, the Company may accept assets in full or partial satisfaction of the debt. Effective January 1, 2023, the Company adopted Accounting Standard Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure, on a prospective basis. This ASU eliminates the accounting guidance for Troubled Debt Restructurings (“TDR”) for creditors and requires all loan restructurings to follow the modification guidance in ASC 310-20.
Prior to the adoption of ASU 2022-02, when restructurings occurred, they were evaluated individually to determine whether the restructuring or modification constituted a TDR as defined by authoritative accounting guidance. If the borrower was experiencing financial difficulty and the Company granted a concession, the restructuring, including those that involved a partial payoff or the receipt of assets in full satisfaction of the debt was deemed to be a TDR. If a loan modification was a TDR, the CECL allowance of the loan was remeasured using the modified terms and the loan’s original effective yield.
Post adoption of ASU 2022-02, all restructurings are evaluated under the modification guidance in ASC 310-20. When a loan is modified, the Company evaluates whether the restructuring results in a continuation of the existing loan or a new loan. For modifications that result in a continuation of the existing loan, the CECL allowance of the loan is remeasured using the modified terms, including the loan’s post-modification effective yield, and the allowance is adjusted accordingly.
For modifications that result in a new loan, any CECL allowance is reversed and a direct write-down of the loan is recorded for the amount of the allowance, and any additional loss, net of recoveries, or any gain is recorded for the difference between the fair value of the new loan and the recorded investment in the loan. The new loan is evaluated prospectively for credit impairment based on the CECL allowance process noted above.
The Company’s PGIM business provides commercial mortgage origination, underwriting and servicing for certain government sponsored entities (“GSEs”). The Company has agreed to indemnify the GSEs for a portion of the credit risk associated with certain of the mortgages it services. Management has established a CECL allowance that factors in historical loss information, current conditions and reasonable and supportable forecasts. The allowance also considers the remaining lives of the loans subject to the indemnification. The CECL allowance is included in “Other liabilities” and changes in the CECL allowance are reported in “Realized investment gains (losses), net.” See Note 25 for additional information.
Policy loans represents funds loaned to policyholders up to the cash surrender value of the associated insurance policies and are carried at the unpaid principal balances due to the Company from the policyholders. Interest income on policy loans is recognized in “Net investment income” at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Other invested assets consists of the Company’s non-coupon investments in limited partnerships and limited liability companies (“LPs/LLCs”), other than joint ventures and other operating entities, as well as wholly-owned investment real estate, derivative assets and other investments. LPs/LLCs interests are accounted for using either the equity method of accounting, or at fair value with changes in fair value reported in “Other income (loss).” The Company’s income from investments in LPs/LLCs accounted for using the equity method, other than the Company’s investments in joint ventures and other operating entities, is included in “Net investment income.” The carrying value of these investments is written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. In applying the equity method (including assessment for OTTI), the Company uses financial information provided by the investee, generally on a one to three-month lag. The Company consolidates LPs/LLCs in certain other instances where it is deemed to exercise control, or is considered the primary beneficiary of a variable interest entity. See Note 4 for additional information about VIEs.
The Company’s wholly-owned investment real estate consists of real estate which the Company has the intent to hold for the production of income as well as real estate held for sale. Real estate which the Company has the intent to hold for the production of income is carried at depreciated cost less any write-downs to fair value for impairment losses and is reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Real estate held for sale is carried at the lower of depreciated cost or fair value less estimated selling costs and is not further depreciated once classified as such. An impairment loss is recognized when the carrying value of the investment real estate exceeds the estimated undiscounted future cash flows (excluding interest charges) from the investment. At that time, the carrying value of the investment real estate is written down to fair value. Decreases in the carrying value of investment real estate held for the production of income due to OTTI are recorded in “Realized investment gains (losses), net.” Depreciation on real estate held for the production of income is computed using the straight-line method over the estimated useful lives of the properties and is included in “Net investment income.”
Short-term investments primarily consists of highly liquid debt instruments with a maturity of twelve months or less and greater than three months when purchased, other than those debt instruments meeting this definition that are included in “Assets supporting experience-rated contractholder liabilities, at fair value.” These investments are generally carried at fair value or amortized cost that approximates fair value and include certain money market investments, funds managed similar to regulated money market funds, short-term debt securities issued by government-sponsored entities and other highly liquid debt instruments.
Cash and cash equivalents includes cash on hand, amounts due from banks, certain money market investments, funds managed similar to regulated money market funds, other debt instruments with maturities of three months or less when purchased, other than cash equivalents that are included in “Assets supporting experience-rated contractholder liabilities, at fair value,” and receivables related to securities purchased under agreements to resell (see also “Securities sold under agreements to repurchase” below). These assets are generally carried at fair value or amortized cost which approximates fair value.
Accrued investment income primarily includes accruals of interest and dividend income from investments that have been earned but not yet received.
Deferred policy acquisition costs (“DAC”) represents costs directly related to the successful acquisition of new and renewal insurance and annuity business. Such DAC primarily includes commissions, costs of policy issuance and underwriting, and certain other expenses that are directly related to successfully acquired contracts. In each reporting period, previously capitalized DAC is amortized and included in “Amortization of deferred policy acquisition costs.” Upon the adoption of ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, the carrying amount of DAC for long-duration contracts is no longer subject to recoverability testing.
DAC for most long-duration contracts is amortized on a constant-level basis at a grouped contract level over the expected life of the underlying insurance contracts. Contracts are grouped consistent with the groupings used to estimate the liability for future policy benefits (or other related balances) for the corresponding contracts. Since contracts within a grouping may be of different sizes, contracts within a group are weighted to achieve appropriate amortization and to ensure that DAC is derecognized when a policy is no longer in force. The constant-level basis used to weight contracts within a grouping and amortize DAC is generally defined as follows:
- Life insurance contracts – DAC associated with life insurance contracts is generally amortized in proportion to the initial face amount of life insurance in force. This is applicable to traditional and universal life insurance products in the Individual Life and International Businesses segments and Closed Block division, and group corporate- and bank-owned life insurance contracts in the Group Insurance segment.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
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Payout annuity contracts – DAC associated with payout annuity contracts in the Retirement Strategies segment is amortized in proportion to annual benefit payments.
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Deferred annuity contracts – DAC associated with fixed and variable deferred annuity contracts in the Retirement Strategies and International Businesses segments is amortized in proportion to deposits.
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Health contracts – DAC associated with health contracts in the International Businesses segment is generally amortized in proportion to maximum lifetime benefits.
For funding agreement note contracts, single premium structured settlement contracts without life contingencies, and single premium immediate annuities without life contingencies, acquisition expenses are deferred and amortized over the expected life of the contracts using the interest method. For other group life and disability insurance contracts and guaranteed investment contracts (“GICs”), acquisition costs are expensed as incurred.
Current period DAC amortization reflects the impact of changes in actual insurance in force during the period and changes in future assumptions effected as of the end of the quarter, where applicable. The Company typically updates actuarial assumptions annually in the second quarter (see “Annual Assumptions Review” below), unless a material change is observed in an interim period that is indicative of a long-term trend. Generally, the Company does not expect trends to change significantly in the short-term and, to the extent these trends may change, the Company expects such changes to be gradual over the long-term.
Assumptions used for DAC are consistent with those used in estimating the liability for future policy benefits (or any other related balance) for the corresponding contract. Determining the level of aggregation and actuarial assumptions used in projecting in-force terminations requires judgment. Internal criteria are developed to determine the level of aggregation by considering both qualitative and quantitative materiality thresholds.
The assumptions used in projecting in-force terminations are mortality, mortality improvement, and lapse assumptions. These assumptions are generally based on the Company’s experience, industry experience and/or other factors, as applicable. For variable deferred annuity contracts, lapse rates are adjusted at the contract level based on the in-the-moneyness of the living benefits and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates are also generally assumed to be lower for the period where surrender charges apply.
For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. If policyholders surrender traditional life insurance policies in exchange for life insurance policies that do not have fixed and guaranteed terms, the Company immediately charges to expense the remaining unamortized DAC on the surrendered policies. For other internal replacement transactions, except those that involve the addition of a non-integrated contract feature that does not change the existing base contract, the unamortized DAC is immediately charged to expense if the terms of the new policies are not substantially similar to those of the former policies. If the new terms are substantially similar to those of the earlier policies, the DAC is retained with respect to the new policies and amortized over the expected life of the new policies. See Note 7 for additional information regarding DAC.
Value of business acquired (“VOBA”) represents identifiable intangible assets to which a portion of the purchase price in a business acquisition is attributed under the application of purchase accounting. VOBA represents an adjustment to the stated value of in-force insurance contract liabilities to present them at fair value, determined as of the acquisition date. VOBA balances are subject to recoverability testing in the manner in which they were acquired. The Company has established a VOBA asset primarily for its acquired life insurance products and accident and health products with fixed benefits. As of December 31, 2024, the majority of the VOBA balance relates to the 2011 acquisition of AIG Star Life Insurance Co., Ltd, AIG Edison Life Insurance Company, AIG Financial Assurance Japan K.K. and AIG Edison Service Co., Ltd. (collectively, the “Star and Edison Businesses”). The Company records amortization of VOBA in “General and administrative expenses” and amortizes it over the anticipated life of the acquired contracts using the same methodology, factors, and assumptions used to amortize DAC and deferred sales inducements (“DSI”). See Note 7 for additional information regarding VOBA.
Market risk benefit assets represents market risk benefits (“MRBs”) in an asset position and are presented separately from MRBs in a liability position. See “Market risk benefit liabilities” below. MRB assets also reflect ceded MRBs resulting from reinsurance of the Company’s Prudential Defined Income (“PDI”) traditional variable annuity contracts. See Note 15 for additional information regarding the reinsurance of PDI.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Reinsurance recoverables and deposit receivables includes amounts recoverable under reinsurance agreements and receivables that follow the deposit method of accounting (see “Reinsurance” below).
Other assets consists primarily of prepaid pension benefit costs (see Note 19), certain restricted assets (e.g., cash and cash equivalents), trade receivables, goodwill and other intangible assets, “right-of-use” lease assets (see “Other liabilities” below), DSI, the Company’s investments in joint ventures and other operating entities, property and equipment, deferred reinsurance losses (see “Reinsurance” below) and receivables resulting from sales of securities that had not yet settled at the balance sheet date.
Trade receivables primarily relate to Assurance IQ (“AIQ”) and are reported net of the CECL allowance. The CECL allowance considers the credit quality of the counterparties and is generally determined based on probability of default and loss given default assumptions. Additions to or releases of the allowance are reported in “General and administrative expenses.” In March 2024, the Company committed to a plan to exit the operations of AIQ.
Property and equipment are carried at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of the related assets, which generally range from 3 to 40 years.
As a result of certain acquisitions, the Company recognizes an asset for goodwill representing the excess of cost over the net fair value of the assets acquired and liabilities assumed. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. A reporting unit is an operating segment, or a unit one level below the operating segment if discrete financial information is prepared and regularly reviewed by management at that level. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.
The Company tests goodwill for impairment annually as of December 31 and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Accounting guidance provides for an optional qualitative assessment for testing goodwill impairment that may allow companies to skip the quantitative test. As part of the annual goodwill impairment test, the Company estimates the fair value of the reporting units by applying the quantitative test, which involves comparing each reporting unit’s fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, the applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, goodwill is reduced and an impairment charge to income is recognized for the excess. The measurement of a goodwill impairment loss includes the related income tax effect from any tax deductible goodwill. The impairment loss cannot exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted. Management is required to make significant estimates in determining the fair value of a reporting unit including, but not limited to: projected revenues and operating margins, applicable discount and growth rates, and comparative market multiples. See Note 10 for additional information regarding goodwill.
Deferred Sales Inducements are amounts that are credited to a policyholders’ account balance primarily as an inducement to purchase fixed and/or variable deferred annuity contracts. The Company defers sales inducements and amortizes them over the expected life of the policy using the same methodology, factors and assumptions used to amortize DAC. The Company records amortization of DSI in “Interest credited to policyholders’ account balances.” Unlike DAC, DSI are considered contractual cash flows and, as a result, are subject to periodic recoverability testing. See Note 7 for additional information regarding DSI.
Identifiable intangible assets primarily include customer relationships and mortgage servicing rights and are recorded net of accumulated amortization. The Company tests identifiable intangible assets for impairment on an annual basis as of December 31 of each year or whenever events or circumstances suggest that the carrying value of an identifiable intangible asset may exceed the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If this condition exists and the carrying value of an identifiable intangible asset exceeds its fair value, the excess is recognized as an impairment and is recorded as a charge against net income. Measuring intangible assets requires the use of estimates. Significant estimates include the projected net cash flow attributable to the intangible asset and the rate at which future net cash flows are discounted for purposes of estimating fair value, as applicable. See Note 10 for additional information regarding identifiable intangible assets.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Investments in joint ventures and other operating entities are generally accounted for under the equity method. The carrying value of these investments is written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. See Note 9 for additional information regarding investments in joint ventures and other operating entities.
Leases are recorded on the balance sheet as “right-of-use” assets and lease liabilities within “Other assets” and “Other liabilities” respectively. Leases are classified as either operating or finance leases and lease expense is recognized within “General and administrative expenses.” As a lessee, for operating leases, total lease expense is recognized using a straight-line method. Finance leases are treated as the purchase of an asset on a financing basis. Additionally, as a lessor, for sales-type and direct financing leases, the Company derecognizes the carrying value of the leased asset that is considered to have been transferred to a lessee and records a lease receivable and residual asset (“receivable and residual” approach). See Note 11 for additional information regarding leases.
Separate account assets represents segregated funds that are invested for certain policyholders, pension funds and other customers. The assets consist primarily of equity securities, fixed maturities, real estate-related investments, real estate mortgage loans, short-term investments and derivative instruments and are reported at fair value. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. The investment income and realized investment gains or losses from separate account assets generally accrue to the policyholders and are not included in the Company’s results of operations. Mortality, policy administration and surrender charges assessed against the accounts are included in “Policy charges and fee income.” Asset management fees charged to the accounts are included in “Asset management and service fees.” Seed money that the Company invests in separate accounts is reported in the appropriate general account asset line. Investment income and realized investment gains or losses from seed money invested in separate accounts accrue to the Company and are included in the Company’s results of operations. See Note 8 for additional information regarding separate account arrangements with contractual guarantees. See also “Separate account liabilities” below.
LIABILITIES
Future policy benefits primarily consists of the present value of expected future payments to or on behalf of policyholders, where the timing and amount of such payments depend on policyholder mortality or morbidity, less the present value of expected future net premiums (where net premiums are gross premiums multiplied by the Net-To-Gross (“NTG”) ratio discussed below). The liability for future policy benefits is accrued over time as premium revenue is recognized. See Note 12 for additional information regarding future policy benefits.
The reserving methodology used for non-participating traditional and limited-payment contracts include the following:
- Cash Flow Assumptions. In measuring the liability for future policy benefits, the net premium valuation methodology is utilized. Under this methodology, a liability for future policy benefits is established using current best estimate insurance assumptions and interest rate assumptions locked-in at contract issuance date. The NTG ratio is calculated as the ratio of the present value of expected policy benefits and non-level claim settlement expenses divided by the present value of expected gross premiums. The NTG ratio is applied to gross premiums, as premium revenue is recognized, to determine net premiums. The liability is then determined as the present value of expected future policy benefits and non-level claim settlement expenses less the present value of expected future net premiums. For purposes of liability measurement, contracts are grouped into cohorts based primarily on issue year, reportable segment and major product line.
The NTG ratio is generally updated quarterly for actual experience and annually in the second quarter of each year for future cash flow assumption updates during the Company’s annual assumptions review process unless a material change is observed in an interim period that is indicative of a long-term trend (see “Annual Assumptions Review” below), with the exception of claim settlement expense assumptions which the Company has made an entity-wide election to lock-in as of contract issuance. The NTG ratio is subject to a retrospective unlocking method whereby the Company updates its best estimate of cash flows expected over the life of the cohort using actual historical experience and updated future cash flow assumptions. These updated cash flows are used to calculate the revised NTG ratio, which is used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted at the original contract issuance discount rate. The updated liability for future policy benefit amount as of the beginning of the quarter is then compared to the carrying amount of the liability as of that same date, before the updates for actual experience or future cash flow assumptions, to determine the current period change in liability estimate. This current period change in the liability is the liability remeasurement gain or loss that is recorded through current period earnings in “Change in
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
estimates of liability for future policy benefits.” In subsequent periods, the revised NTG ratio is used to measure the liability for future policy benefits, subject to future revisions.
If a cohort is in a loss position where the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for expected future policy benefits and non-level claim settlement expenses, the NTG ratio is capped at 100%. In these instances, all changes in expected benefits resulting from both actual experience deviations and changes in future assumptions are recognized immediately. While the liability for future policy benefits cannot be less than zero (i.e., a contra-liability) at the cohort level and thus the balance is floored at zero (i.e., “flooring”), the NTG ratio may be negative. This would be the case whereby conditions have improved such that the present value of future net premiums plus the existing liability for future policy benefits as of the valuation date exceed the present value of expected future policy benefits and non-level claim settlement expenses. In this case, the negative NTG ratio would be applied going forward to gross premiums received, effectively amortizing the gain into income and reducing the liability over time.
In addition, for limited-payment contracts, the liability for future policy benefits also includes a Deferred Profit Liability (“DPL”) representing gross premiums received in excess of net premiums and is generally recognized in revenue in a constant relationship with insurance in force for life contracts or with the amount of expected future benefit payments for annuity contracts. The DPL is subject to a retrospective unlocking adjustment consistent with the liability for future policy benefits discussed above. The DPL cannot be less than zero (i.e., a contra-liability) at the cohort level and thus the balance is floored at zero (i.e., “flooring”).
For contracts issued prior to January 1, 2021, the modified retrospective transition method was used to transition to ASU 2018-12. Under this method, the transition date of January 1, 2021 serves as the new issue date of the contracts in force for purposes of retrospectively unlocking the NTG ratio and DPL, as described above.
- Discount Rate Assumption. The locked-in discount rate is generally based on expected investment returns at contract inception for contracts issued prior to January 1, 2021 and the upper-medium grade fixed income corporate instrument yield (i.e., global single A) at contract inception for contracts issued on or after January 1, 2021. The discount rate in effect at contract inception is locked-in for the calculation of the NTG ratio and accretion of interest cost on the liability through net income. However, for balance sheet remeasurement purposes, the discount rate is updated using the current single A rate at each reporting period, with the effect on the liability resulting from such update recorded in “Interest rate remeasurement of future policy benefits” in OCI.
The methodology used in constructing the single A discount rate curve for discounting cash flows used to calculate the liability for future policy benefits is intended to be reflective of the characteristics of the applicable insurance liabilities. The single A discount rate curve is developed by reference to upper-medium grade (low credit risk) fixed- income instrument yields that reflect the duration characteristics of the applicable insurance liabilities. The single A discount curve for the United States and foreign economies, such as Japan, with observable corporate A spreads, is developed using government bond rates, plus globally equivalent public corporate A spreads in the observable periods. The definition of upper medium grade is based on Moody’s definition which includes the spectrum of A (i.e., A- to A+). The rate used in foreign operations (with the exception of certain emerging markets, as discussed below) is based on the equivalent of a single A rate from a global rating agency for corporate bonds issued in the same currency and country in which the insurance contract is written. Liquidity is considered in defining the observable period and linear extrapolation is performed to the Company’s ultimate long-term economic assumptions. See “Annual Assumptions Review” below for further discussion regarding the Company’s long-term economic assumption setting process.
The Company has foreign currency denominated insurance obligations to policyholders in certain emerging markets where there is limited or no observable market data on upper-medium grade (low credit risk) fixed-income instrument yields. As a proxy for the upper-medium grade fixed-income instrument yield, the Company estimates an equivalent global single A yield in the currency of the emerging economy by converting a global single A U.S. dollar bond yield curve based on the relationship between market observable U.S. Treasury and foreign sovereign yield curves of similar duration as the insurance liability cash flows. The derived global single A curves in the foreign currency are evaluated against available evidence of observable global single A corporate bond rates in similar emerging economies. The Company uses interpolation and extrapolation techniques to complete the discount rate construction for the duration of the insurance liabilities to calculate the liability for future policy benefits denominated in the local currencies.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The Company’s liability for future policy benefits also includes net liabilities for guaranteed benefits related to certain long-duration life contracts, such as no-lapse guarantee contract features (Additional Insurance Reserves or “AIR” liability), for which a liability is established when associated assessments are recognized (which include investment margin on policyholders’ account balances deposited to fixed and indexed funds and all policy charges including charges for administration, mortality, expense, surrender and other charges). This liability is established using current best estimate assumptions and is based on the ratio of the present value of total expected excess payments (i.e., payments in excess of account value) over the life of the contract divided by the present value of total expected assessments (i.e., benefit ratio). Any adjustments to this liability related to net unrealized gains (losses) on securities classified as available-for-sale are included in AOCI.
For universal life type contracts and participating contracts, the Company performs premium deficiency tests using best estimate assumptions as of the testing date. If the liabilities determined based on these best estimate assumptions are greater than the net reserves (i.e., GAAP reserves including unearned revenue reserves (“URR”), net of reinsurance, and any DSI or VOBA asset), the existing net reserves are adjusted by first reducing assets such as DSI, VOBA or deferred reinsurance loss by the amount of the deficiency or to zero through a charge to current period earnings. If the deficiency is more than these asset balances for insurance contracts, the net reserves are increased by the excess through a charge to current period earnings included in “Policyholders’ benefits.” Since investment yields are used as the discount rate, the premium deficiency test is also performed using a discount rate based on the market yield (i.e., assuming what would be the impact if any unrealized gains (losses) were realized as of the testing date). In the event that by using the market yield a deficiency occurs, an adjustment is established for the deficiency and is included in AOCI.
The Company’s liability for future policy benefits also includes a liability for unpaid claims and claim adjustment expenses. The Company does not establish claim liabilities until a loss has been incurred. However, unpaid claims and claim adjustment expenses include estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date.
Policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is primarily associated with the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance, as applicable. These policyholders’ account balances also include provision for benefits under non-life contingent payout annuities and certain unearned revenues. The unearned revenue liability represents policy charges for services to be provided in future periods. The charges are deferred as incurred and are generally amortized over the expected life of the contract using the same methodology, factors, and assumption used to amortize DAC. See Note 13 for additional information regarding policyholders’ account balances. Policyholders’ account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. For additional information regarding the valuation of these embedded derivatives, see Note 6.
Market risk benefit liabilities represents contracts or contract features that provide protection to the contractholder and exposes the Company to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits in the Retirement Strategies segment including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”). The benefits are accounted for using a fair value measurement framework. If a contract contains multiple market risk benefits, the benefits are bundled together and accounted for as a single compound market risk benefit. Market risk benefits in an asset position are presented separately from those in a liability position as there is no legal right of offset between contracts. The fair value of market risk benefits is calculated as the present value of expected future benefit payments to contractholders less the present value of expected future rider fees attributable to the market risk benefits. The fair value of market risk benefits is based on assumptions a market participant would use in valuing market risk benefits. For additional information regarding the valuation of market risk benefits, see Note 6. On a quarterly basis, changes in the fair value of market risk benefits are recorded in net income, net of related hedges, in “Change in value of market risk benefits, net of related hedging gains (losses),” except for the portion of the change attributable to changes in the Company’s non-performance risk (“NPR”) which is recorded in OCI. See Note 14 for additional information regarding market risk benefits. See “Reinsurance” below for information regarding the reinsurance of MRBs.
Policyholders’ dividends includes dividends payable to policyholders and the policyholder dividend obligation associated with the participating policies included in the Closed Block. The dividends payable for participating policies included in the Closed Block are determined at the end of each year for the following year by the Board of Directors of The Prudential
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Insurance Company of America (“PICA”) based on its statutory results, capital position, ratings, and the emerging experience of the Closed Block. The policyholder dividend obligation represents amounts expected to be paid to Closed Block policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance. Any adjustments to the policyholder dividend obligation related to net unrealized gains (losses) on securities classified as available-for-sale are included in AOCI. For additional information regarding the policyholder dividend obligation, see Note 16. The dividends payable for policies other than the participating policies included in the Closed Block include dividends payable in accordance with certain group and individual insurance policies.
Securities sold under agreements to repurchase represents liabilities associated with securities repurchase agreements that are used primarily to earn spread income. As part of securities repurchase agreements, the Company transfers U.S. government and government agency securities to a third party and receives cash as collateral. For securities repurchase agreements, the cash received is typically invested in cash equivalents, short-term investments or fixed maturities. Receivables associated with securities purchased under agreements to resell are generally reflected as cash equivalents. As part of securities resale agreements, the Company invests cash and receives as collateral U.S. government securities or other debt securities.
Securities repurchase and resale agreements that satisfy certain criteria are treated as secured borrowing or secured lending arrangements. These agreements are carried at the amounts at which the securities will be subsequently resold or reacquired, as specified in the respective transactions. For securities purchased under agreements to resell, the Company’s policy is to take possession or control of the securities either directly or through a third-party custodian. These securities are valued daily, and additional securities or cash collateral is received, or returned, when appropriate to protect against credit exposure. Securities to be resold are the same, or substantially the same, as the securities received. The majority of these transactions are with large brokerage firms and large banks. For securities sold under agreements to repurchase, the market value of the securities to be repurchased is monitored, and additional collateral is obtained where appropriate, to protect against credit exposure. The Company obtains collateral in an amount at least equal to 95% of the fair value of the securities sold. Securities to be repurchased are the same, or substantially the same, as those sold. The majority of these transactions are with highly rated money market funds. Income and expenses related to these transactions executed within the insurance companies used to earn spread income are reported as “Net investment income.”
Cash collateral for loaned securities represents liabilities to return cash proceeds from security lending transactions. Securities lending transactions are used primarily to earn spread income. As part of securities lending transactions, the Company transfers U.S. and foreign debt and equity securities, as well as U.S. government and government agency securities, and receives cash as collateral. Cash proceeds from securities lending transactions are primarily used to earn spread income, and are typically invested in cash equivalents, short-term investments or fixed maturities. Securities lending transactions are treated as financing arrangements and are recorded at the amount of cash received. The Company obtains collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of the Company’s securities lending transactions are with large brokerage firms and large banks. Income and expenses associated with securities lending transactions used to earn spread income are reported as “Net investment income.”
The Company also enters into securities lending transactions where non-cash collateral, typically U.S. government, Japanese government, or other sovereign bonds are received. The collateral received is not reported on the Company’s Consolidated Statements of Financial Position. In these transactions, the Company receives a fee and obtains collateral in an amount equal to 102% to 105% of the fair value of the loaned securities. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of these transactions are with large brokerage firms and large banks. Income is reported as “Net investment income.”
Reinsurance and funds withheld payables represents amounts payable under reinsurance agreements (see “Reinsurance” below).
Short-term and long-term debt liabilities are primarily carried at an amount equal to unpaid principal balance, net of unamortized discount or premium and debt issuance costs. Original-issue discount or premium and debt-issue costs are recognized as a component of interest expense over the period the debt is expected to be outstanding, using the interest method of amortization. Interest expense is generally presented within “General and administrative expenses” in the Company’s Consolidated Statements of Operations. Interest expense may also be reported within “Net investment income” for certain activity, as prescribed by specialized industry guidance. Short-term debt is debt coming due in the next twelve months, including that portion of debt otherwise classified as long-term. The short-term debt caption may exclude short-term debt items
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
for which the Company has the intent and ability to refinance on a long-term basis in the near-term. See Note 18 for additional information regarding short-term and long-term debt.
Other liabilities consists primarily of trade payables, lease liabilities (see “Other assets” above), pension and other employee benefit liabilities (see Note 19), derivative liabilities (see “Derivative Financial Instruments” below), deferred reinsurance gains (see “Reinsurance” below) and payables resulting from purchases of securities that had not yet settled at the balance sheet date.
Notes issued by consolidated variable interest entities represents notes issued by certain asset-backed investment vehicles, primarily collateralized loan obligations (“CLOs”), which the Company is required to consolidate. The creditors of these VIEs do not have recourse to the Company in excess of the assets contained within the VIEs. The Company has elected the fair value option for the majority of these notes, and has based the fair value on the corresponding bank loan collateral. Changes in fair value are reported in “Other income (loss).”
Separate account liabilities primarily represents the contractholders’ account balances in separate account assets and to a lesser extent borrowings of the separate account, and will be equal and offsetting to total separate account assets. See also “Separate account assets” above.
Commitments and contingent liabilities are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, they are included in the accrual. These accruals are generally reported in “Other liabilities.”
MEZZANINE EQUITY
Redeemable noncontrolling interests includes redeemable noncontrolling interests associated with certain consolidated PGIM-managed entities. These redeemable noncontrolling interests are classified as “Mezzanine equity” because their redemption is at the option of the holder and not within the control of the Company. Income (loss) attributable to redeemable noncontrolling interests is reported in “Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests.”
REVENUES, BENEFITS AND EXPENSES
Insurance Revenue and Expense Recognition
Premiums from individual life products, other than universal and variable life contracts, and health insurance and long-term care products are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium (i.e., the portion of the gross premium required to provide for all expected future policy benefits and non-level claim settlement expenses) is generally deferred and recognized into revenue in a constant relationship to insurance in force. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized as described in “Future policy benefits” above.
Premiums from non-participating group annuities with life contingencies, single premium structured settlements with life contingencies and single premium immediate annuities with life contingencies are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium is generally deferred and recognized into revenue based on expected future benefit payments. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized as described in “Future policy benefits” above.
Certain individual annuity contracts provide the contractholder a guarantee that the benefit received upon death or annuitization will be no less than a minimum prescribed amount. These benefits are generally accounted for as market risk benefits (see “Market risk benefits” above).
Amounts received from policyholders as payment for universal or variable group and individual life contracts, deferred fixed or variable annuities, structured settlements and other contracts without life contingencies, and participating group annuities are reported as deposits to “Policyholders’ account balances” and/or “Separate account liabilities.” Revenues from these contracts are reflected in “Policy charges and fee income” consisting primarily of fees assessed during the period against
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
the policyholders’ account balances for mortality and other benefit charges, policy administration charges and surrender charges. In addition to fees, the Company earns investment income from the investment of deposits in the Company’s general account portfolio. Fees assessed that represent compensation to the Company for services to be provided in future periods and certain other fees are generally deferred and amortized into revenue over the life of the related contracts using the same methodology, factors, and assumption used to amortize DAC as described above. Benefits and expenses for these products include claims in excess of related account balances, expenses of contract administration, interest credited to policyholders’ account balances and amortization of DAC, DSI and VOBA.
Policyholders’ account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products where changes in the value of the embedded derivatives are recorded through “Realized investment gains (losses), net.” For additional information regarding the valuation of these embedded derivatives, see Note 6.
For group life, other than universal and variable group life contracts, and disability insurance, premiums are generally recognized over the period to which the premiums relate in proportion to the amount of insurance protection provided. Claim and claim adjustment expenses are recognized when incurred.
Asset management and service fees principally includes asset-based asset management fees, which are recognized in the period in which the services are performed. In certain asset management fee arrangements, the Company is entitled to receive performance-based incentive fees when the return on assets under management exceeds certain benchmark returns or other performance targets. The Company may be required to return all, or part, of such performance-based incentive fees depending on future performance of these assets relative to performance benchmarks. The Company records performance-based incentive fee revenue when the contractual terms of the asset management fee arrangement have been satisfied and it is probable that a significant reversal in the amount of the fee will not occur. Under this principle, the Company records a deferred performance-based incentive fee liability to the extent it receives cash related to the performance-based incentive fee prior to meeting the revenue recognition criteria delineated above.
Other income (loss) includes realized and unrealized gains or losses from investments classified “Fixed maturities, trading, at fair value,” “Assets supporting experience-rated contractholder liabilities, at fair value,” “Equity securities, at fair value,” and “Other invested assets” that are measured at fair value and consolidated entities that follow specialized investment company fair value accounting. “Other income (loss)” also includes gains and losses primarily related to the remeasurement of foreign currency denominated assets and liabilities, as discussed in more detail under “Foreign Currency” below, as well as gains and losses related to business dispositions. See Note 1 for additional information regarding these dispositions.
Additionally, for digital insurance brokerage placement services provided by AIQ, the Company earns both initial and renewal commissions as compensation for the placement of insurance policies with insurance carriers. At the effective date of the policy, the Company records within “Other income (loss)” the expected lifetime revenue for the initial and renewal commissions considering estimates of the timing of future policy cancellations. These estimates are reassessed each reporting period and any changes in estimates are reflected in the current period. In March 2024, the Company committed to a plan to exit the operations of AIQ.
Realized investment gains (losses), net includes realized gains or losses from sales and maturities of investments, changes to the allowance for credit losses, other impairments, fair value changes on mortgage loans where the fair value option has been elected, and derivative gains or losses. The derivative gains or losses include the impact of maturities, terminations and changes in fair value of the derivative instruments, including embedded derivatives, and other hedging instruments. Realized investment gains (losses) from the sales of securities are generally calculated using the specific identification method, with the exception of some of the Company’s International Businesses portfolios where the average cost method is used.
OTHER ACCOUNTING POLICIES
Income taxes receivable (payable) primarily represents the net deferred tax asset or liability and the Company’s estimated taxes receivable or payable for the current year and open audit years.
The Company and its includable domestic subsidiaries file a consolidated federal income tax return that includes both life insurance companies and non-life insurance companies. Subsidiaries operating outside the U.S. are taxed, and income tax expense is recorded, based on applicable foreign statutes. See Note 17 for a discussion of certain non-U.S. jurisdictions for which the Company assumes repatriation of earnings.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Items required by tax regulations to be included in the tax return may differ from the items reflected in the financial statements. As a result, the effective tax rate reflected in the financial statements may be different than the actual rate applied on the tax return. Some of these differences are permanent such as expenses that are not deductible in the Company’s tax return, and some differences are temporary, reversing over time, such as valuation of insurance reserves. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years for which the Company has already recorded the tax benefit in the Company’s Consolidated Statements of Operations. Deferred tax liabilities generally represent tax expense recognized in the Company’s financial statements for which payment has been deferred, or expenditures for which the Company has already taken a deduction in the Company’s tax return but have not yet been recognized in the Company’s financial statements. Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes.
The application of U.S. GAAP requires the Company to evaluate the recoverability of the Company’s deferred tax assets and establish a valuation allowance if necessary to reduce the Company’s deferred tax assets to an amount that is more likely than not expected to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. See Note 17 for a discussion of factors considered when evaluating the need for a valuation allowance.
The U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act of 2017”) included two new tax provisions that could impact the Company’s effective tax rate and cash tax payments. The Base Erosion and Anti-Abuse Tax (“BEAT”) taxes modified taxable income, starting at a rate of 10% in 2019 and increasing to 12.5% in 2026, and is due if the calculated BEAT amount that is determined without the benefit of foreign and certain tax credits is greater than the regular corporate tax in any given year. In general, modified taxable income is calculated by adding back to a taxpayer’s regular taxable income the amount of certain “base erosion tax benefits” with respect to payments to foreign affiliates, as well as the “base erosion percentage” of any net operating loss deductions. Final Regulations confirmed that benefit and claim payments made by the Company’s U.S. insurance business to foreign affiliates on reinsurance assumed by the U.S. affiliates are not base erosion payments. The Global Intangible Low-Taxed Income (“GILTI”) provision applies a minimum U.S. tax to earnings of consolidated foreign subsidiaries in excess of a 10% deemed return on tangible assets of foreign subsidiaries by imposing the U.S. tax rate to 50% of earnings of such foreign affiliates and provides for a partial foreign tax credit for foreign income taxes. Beginning in 2026, the GILTI provisions will operate to impose the U.S. tax to 62.5% of such earnings. The amount of tax in any period on GILTI can depend on annual differences between U.S. taxable income recognition rules and taxable income recognition rules in the country of operations and the overall taxable income of U.S. operations, as well as U.S. expense allocation rules which limit the amount of foreign tax credits that can be applied to reduce the U.S. tax on the GILTI provision. Under certain circumstances, the taxable income of U.S. operations may cause more than 50% of earnings of foreign affiliates to be subject to the GILTI provision. In years that the PFI consolidated federal income tax return reports a net operating loss or has a loss attributable to U.S. sources of operations, including as a result of loss carrybacks, the GILTI provision would cause a loss of U.S. tax benefits for some or all of those losses, effectively increasing the tax on foreign earnings. The Company accounts for the effects of the BEAT and GILTI provisions as a period cost if and when incurred.
U.S. GAAP prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on tax returns. The application of this guidance is a two-step process. First, the Company determines whether it is more likely than not, based on the technical merits, that the tax position will be sustained upon examination. If a tax position does not meet the more likely than not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step is measurement. The Company measures the tax position as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate resolution with a taxing authority that has full knowledge of all relevant information. This measurement considers the amounts and probabilities of the outcomes that could be realized upon ultimate settlement using the facts, circumstances, and information available at the reporting date.
The Company accrues a liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by the Internal Revenue Service (“IRS”) or other taxing jurisdictions. Audit periods remain open for review until the statute of limitations has passed. Generally, for tax years which produce net operating losses, capital losses or tax credit carryforwards (“tax attributes”), the statute of limitations does not close, to the extent of these tax attributes, until the expiration of the statute of limitations for the tax year in which they are fully utilized. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The Company classifies all interest and penalties related to tax uncertainties as income tax expense. See Note 17 for additional information regarding income taxes.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Share-Based Payments
The Company applies the fair value-based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. Excess tax benefits (deficits) are recorded in earnings and represent the cumulative difference between the actual tax benefit realized and the amount of deferred tax assets recorded attributable to shared-based payment transactions.
The Company accounts for non-employee stock options using the fair value method in accordance with authoritative guidance and related interpretations on accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services.
Earnings Per Share
Earnings per share of Common Stock reflects the consolidated earnings of Prudential Financial. Basic earnings per share is computed by dividing available income attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share includes the effect of all dilutive potential common shares that were outstanding during the period. See Note 21 for additional information.
Foreign Currency
The currency in which the Company prepares its financial statements (the “reporting currency”) is the U.S. dollar. Assets, liabilities and results of foreign operations are recorded based on the functional currency of each foreign operation. The determination of the functional currency is based on economic facts and circumstances pertaining to each foreign operation. The local currencies of the Company’s foreign operations are typically their functional currencies with the most significant exception being the Company’s Japanese operations where multiple functional currencies exist.
There are two distinct processes for expressing these foreign transactions and balances in the Company’s financial statements: foreign currency measurement and foreign currency translation. Foreign currency measurement is the process by which transactions in foreign currencies are expressed in the functional currency. Gains and losses resulting from foreign currency measurement are reported in current earnings in “Other income (loss).” Foreign currency translation is the process of expressing a foreign entity’s functional currency financial statements in the reporting currency. Assets and liabilities of foreign operations and subsidiaries reported in currencies other than U.S. dollars are translated at the exchange rate in effect at the end of the period. Revenues, benefits and other expenses are translated at the average rate prevailing during the period. The effects of translating the statements of operations and financial position of non-U.S. entities with functional currencies other than the U.S. dollar are included, net of related qualifying hedge gains and losses and income taxes, in “Foreign currency translation adjustment,” a component of AOCI.
Derivative Financial Instruments
Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, values of securities or commodities, credit spreads, market volatility, expected returns, and liquidity. Values can also be affected by changes in estimates and assumptions, including those related to counterparty behavior and NPR used in valuation models. Derivative financial instruments generally used by the Company include swaps, futures, forwards and options and may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (OTC-cleared), while others are bilateral contracts between two counterparties (OTC-bilateral). Derivative positions are carried at fair value, generally by obtaining quoted market prices or through the use of valuation models.
Derivatives are used to manage the interest rate and currency characteristics of assets or liabilities and to mitigate volatility of expected non-functional currency earnings and net investments in foreign operations resulting from changes in currency exchange rates. Additionally, derivatives may be used to reduce exposure to risks such as interest rate, credit, foreign currency and equity associated with assets held or expected to be purchased or sold, and liabilities incurred or expected to be incurred. As discussed in detail below, and in Note 5, all realized and unrealized changes in fair value of derivatives are recorded in current earnings, with the exception of cash flow hedges and hedges of net investments in foreign operations. The Company may also enter into intercompany derivatives, the results of which ultimately eliminate in consolidation over the term
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
of the instrument. Cash flows from derivatives are reported in the operating, investing, or financing activities sections in the Consolidated Statements of Cash Flows based on the nature and purpose of the derivative.
Derivatives are recorded either as assets, within “Other invested assets,” or as liabilities, within “Other liabilities,” except for embedded derivatives which are recorded with the associated host contract. The Company nets the fair value of all derivative financial instruments with counterparties for which a master netting arrangement has been executed.
The Company designates derivatives as either (1) a hedge of the fair value of a recognized asset or liability or unrecognized firm commitment (“fair value” hedge); (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge); (3) a foreign currency fair value or cash flow hedge (“foreign currency” hedge); (4) a hedge of a net investment in a foreign operation; or (5) a derivative that does not qualify for hedge accounting.
To qualify for hedge accounting treatment, a derivative must be highly effective in mitigating the designated risk of the hedged item. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship.
The Company formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Hedges of a net investment in a foreign operation are linked to the specific foreign operation.
When a derivative is designated as a fair value hedge and is determined to be highly effective, changes in its fair value, along with changes in the fair value of the hedged asset or liability (including losses or gains on firm commitments), are reported on a net basis in the Consolidated Statements of Operations, generally in “Realized investment gains (losses), net.” When swaps are used in hedge accounting relationships, periodic settlements are recorded in the same Consolidated Statements of Operations line as the related settlements of the hedged items.
When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in its fair value are recorded in AOCI until earnings are affected by the variability of cash flows being hedged (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). At that time, the related portion of deferred gains or losses on the derivative instrument is reclassified and reported in the Consolidated Statements of Operations line item associated with the hedged item.
When a derivative is designated as a foreign currency hedge and is determined to be highly effective, changes in its fair value are recorded either in current period earnings if the hedge transaction is a fair value hedge (e.g., a hedge of a recognized foreign currency asset or liability) or in AOCI if the hedge transaction is a cash flow hedge (e.g., a foreign currency denominated forecasted transaction). When a derivative is used as a hedge of a net investment in a foreign operation, its change in fair value is accounted for in the same manner as a translation adjustment (i.e., reported in the cumulative translation adjustment account within AOCI).
If it is determined that a derivative no longer qualifies as an effective fair value or cash flow hedge or management removes the hedge designation, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net.” In this scenario, the hedged asset or liability under a fair value hedge will no longer be adjusted for changes in fair value associated with the hedged risk and the existing basis adjustment is amortized to the Consolidated Statements of Operations line associated with the asset or liability. The component of AOCI related to discontinued cash flow hedges is reclassified to the Consolidated Statements of Operations line associated with the hedged cash flows consistent with the earnings impact of the original hedged cash flows.
When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, or because it is probable that the forecasted transaction will not occur by the end of the specified time period, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net.” Any asset or liability that was recorded pursuant to recognition of the firm commitment is removed from the balance sheet and recognized currently in “Realized investment gains (losses), net.” Gains and losses that were in AOCI pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in “Realized investment gains (losses), net.”
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
If a derivative does not qualify for hedge accounting, all changes in its fair value, including net receipts and payments, are included in “Realized investment gains (losses), net” without considering changes in the fair value of the economically associated assets or liabilities.
The Company is a party to financial instruments that contain derivative instruments that are “embedded” in the financial instruments. At inception, the Company assesses whether the economic characteristics of the embedded instrument are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded instrument possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded instrument qualifies as an embedded derivative that is separated from the host contract, carried at fair value, and changes in its fair value are included in “Realized investment gains (losses), net.” For certain financial instruments that contain an embedded derivative that otherwise would need to be bifurcated and reported at fair value, the Company may elect to carry the entire instrument at fair value and report it within “Other invested assets” or “Other liabilities.”
Reinsurance
For each of its reinsurance contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject, or features that delay the timely reimbursement of claims.
The Company participates in reinsurance arrangements in various capacities as either the ceding entity or as the reinsurer (i.e., assuming entity). See Note 15 for additional information regarding the Company’s reinsurance arrangements. Reinsurance assumed business is generally accounted for consistent with direct business. Amounts currently recoverable under reinsurance agreements are included in “Reinsurance recoverables and deposit receivables” and amounts payable are included in “Reinsurance and funds withheld payables.” “Reinsurance recoverables and deposit receivables” also includes (1) an embedded derivative on deposit receivables where the Company has ceded fixed indexed annuities; and (2) embedded derivatives associated with receivables from modified coinsurance arrangements where the Company is the reinsurer, and net receivables from modified coinsurance arrangements where the Company is the cedant, and generally reflect the fair value of the invested assets retained by the cedant. “Reinsurance and funds withheld payables” also includes amounts payable to the reinsurer under coinsurance with funds withheld or net payables from modified coinsurance arrangements where the Company is the cedant, and generally reflect the fair value of the invested assets retained by the Company and contain an embedded derivative that is bifurcated and accounted for at fair value separately from the host contract, with changes in fair value recorded through “Realized investment gains (losses), net.” Revenues and benefits and expenses include amounts assumed under reinsurance agreements and are reflected net of reinsurance ceded.
Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. Reinsurance recoverables are reported net of the CECL allowance. The CECL allowance considers the credit quality of the reinsurance counterparty and is generally determined based on the probability of default and loss given default assumptions, after considering any applicable collateral arrangements. Additions to or releases of the allowance are reported in “Policyholders’ benefits.” Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured long-duration contracts under coinsurance arrangements are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. For reinsurance of in- force blocks of non-participating traditional and limited-payment contracts, the current value of the direct liability as of inception of the reinsurance agreement is used to calculate the reinsurance recoverable and cost of reinsurance such that there is no immediate other comprehensive income or loss from recognition of the reinsurance recoverable at inception. Consistent with the direct liability, the reinsurance recoverable for non-participating traditional and limited-payment contracts is remeasured each period using current single A rates with the effect on the reinsurance recoverable resulting from such updates recorded in “Interest rate remeasurement of future policy benefits” in OCI. For reinsurance of limited-payment contracts, the Company establishes a cost of reinsurance asset relating to the direct DPL and amortizes this balance through “Premiums” using the same methodology and assumptions used to amortize the direct DPL.
For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference between the fair value of the net consideration exchanged and the net liabilities ceded related to the underlying reinsured
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
contracts is considered the net cost of reinsurance at the inception of the reinsurance agreement. This initial net cost of reinsurance is deferred and amortized into income over the remaining life of the reinsured policies on a basis consistent with the methodologies and assumptions used for amortizing DAC. This initial net cost of reinsurance may result in a deferred reinsurance gain which is recorded in “Other liabilities” and amortized through “Other income (loss),” or a deferred reinsurance loss which is recorded in “Other assets” and amortized through “General and administrative expenses.”
Consistent with direct contracts, reinsurance arrangements may also include features that meet the definition of MRBs and, if so, are accounted for at fair value. The fair value of direct or assumed MRBs reflects the Company’s NPR, while the fair value of ceded MRBs reflects the counterparty credit risk of the reinsurer. Changes in the fair value of ceded MRBs, including the impact of changes in counterparty credit risk, are recorded in net income in “Change in value of market risk benefits, net of related hedging gains (losses).”
Coinsurance arrangements contrast with the Company’s yearly renewable term arrangements, where only mortality risk is transferred to the reinsurer and premiums are paid to the reinsurer to reinsure that risk. The mortality risk that is reinsured under yearly renewable term arrangements represents the difference between the stated death benefits in the underlying reinsured contracts and the corresponding reserves or account value carried by the Company on those same contracts. The premiums paid to the reinsurer are based upon negotiated amounts, not on the actual premiums paid by the underlying contractholders to the Company. As yearly renewable term arrangements are usually entered into by the Company with the expectation that the contracts will be in force for the lives of the underlying policies, they are considered to be long-duration reinsurance contracts. The cost of reinsurance for universal life products is generally recognized based on the gross assessments of the underlying direct policies. The cost of reinsurance for term insurance products is generally recognized in proportion to direct premiums over the life of the underlying policies. The cost of reinsurance related to short-duration reinsurance contracts is accounted for over the reinsurance contract period.
If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Deposits received are included in “Reinsurance and funds withheld payables” and deposits made are included in “Reinsurance recoverables and deposit receivables.” As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as “Other income (loss)” or “General and administrative expenses,” as appropriate.
Annual Assumptions Review
Annually, the Company performs a comprehensive review of the assumptions set for purposes of estimating future premiums, benefits, and other cash flows. Assumptions include those that are economic and those that are insurance related. Insurance related assumptions are based on the Company’s best estimates of future rates of mortality, morbidity, lapse, surrender, annuitization, expenses and other items. The Company generally looks to relevant Company experience as the primary basis for these assumptions. If relevant Company experience is not available or does not have sufficient credibility, the Company may look to experience of similar blocks of business, either in the Company or the industry. Mortality rate assumptions are generally based on Company experience, sometimes blending Company experience with an industry table where the Company experience alone is not sufficiently credible. The Company sets mortality and morbidity assumptions that vary by major type of business. Within type of business, rates vary by age and gender. The Company applies an adjustment for future mortality improvement, consistent with observed long-term trends of population mortality over time. Lapse and surrender assumptions are based on Company and industry experience, where available. The Company sets rates that vary by product type, taking into account features specific to the product.
As part of this review, the Company may update these assumptions and make refinements to its models based upon emerging experience, future expectations and other data, including any observable market data it feels is indicative of a long-term trend. These assumptions are generally updated annually, unless a material change is observed in an interim period that the Company feels is also indicative of a long-term trend. Generally, the Company does not expect trends to change significantly in the short-term and, to the extent these trends may change, it expects such changes to be gradual over the long-term.
The Company also performs a comprehensive review of the economic assumptions, including long-term interest rate assumptions and equity return assumptions, that impact reserve calculations. The Company generally utilizes relevant economic outlook information and industry surveys as the primary basis for these assumptions, which may be used to project future rates of return on investments.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
RECENT ACCOUNTING PRONOUNCEMENTS
Changes to U.S. GAAP are established by the FASB in the form of Accounting Standards Updates (“ASUs”) to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. ASUs listed below include those that have been adopted during the current fiscal year and/or those that have been issued but not yet adopted as of December 31, 2024, and as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material.
ASUs adopted during the year ended December 31, 2024
| Standard | Description | Effective date and method of adoption | Effect on the financial statements or other significant matters | |||||||||||||||||
| ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures | This ASU requires entities to provide more detailed information about significant segment expenses that are regularly provided to the chief operating decision maker. | Effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, using the retrospective method. | Adoption of the ASU did not have an impact on the Company’s Consolidated Financial Statements but resulted in expanded disclosures in the Notes to the Consolidated Financial Statements. |
ASUs issued but not yet adopted as of December 31, 2024
| Standard | Description | Effective date and method of adoption | Effect on the financial statements or other significant matters | |||||||||||||||||
| ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (DISE) | This ASU requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements. | Effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted and applied either prospectively or retrospectively. | The Company is currently assessing the impact of the ASU on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements. | |||||||||||||||||
| ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures | This ASU requires entities to provide additional information primarily related to the effective tax rate reconciliation and income taxes paid. | Effective for fiscal years beginning after December 15, 2024, and permits early adoption. The Company plans to adopt the ASU for the annual reporting period beginning on January 1, 2025. | The Company is currently assessing the impact of the ASU on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements. |
**3.**INVESTMENTS
Fixed Maturity Securities
The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2024 | |||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 24,869 | $ | 584 | $ | 5,105 | $ | 0 | $ | 20,348 | |||||||||||||||||||
| Obligations of U.S. states and their political subdivisions | 6,590 | 132 | 618 | 0 | 6,104 | ||||||||||||||||||||||||
| Foreign government securities | 63,523 | 1,837 | 7,881 | 0 | 57,479 | ||||||||||||||||||||||||
| U.S. public corporate securities | 108,883 | 1,226 | 11,529 | 72 | 98,508 | ||||||||||||||||||||||||
| U.S. private corporate securities(1) | 45,854 | 918 | 2,926 | 57 | 43,789 | ||||||||||||||||||||||||
| Foreign public corporate securities | 23,165 | 248 | 1,421 | 10 | 21,982 | ||||||||||||||||||||||||
| Foreign private corporate securities | 38,652 | 314 | 4,311 | 192 | 34,463 | ||||||||||||||||||||||||
| Asset-backed securities(2) | 16,979 | 214 | 59 | 0 | 17,134 | ||||||||||||||||||||||||
| Commercial mortgage-backed securities | 9,791 | 29 | 547 | 0 | 9,273 | ||||||||||||||||||||||||
| Residential mortgage-backed securities(3) | 2,698 | 15 | 223 | 0 | 2,490 | ||||||||||||||||||||||||
| Total fixed maturities, available-for-sale(1) | $ | 341,004 | $ | 5,517 | $ | 34,620 | $ | 331 | $ | 311,570 |
(1)Excludes notes with amortized cost of $14,748 million (fair value, $14,748 million), which have been offset with the associated debt under a netting agreement.
(2)Includes credit-tranched securities collateralized by loan obligations, home equity loans, auto loans, education loans and other asset types.
(3)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
| December 31, 2023 | |||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 24,874 | $ | 1,091 | $ | 4,169 | $ | 0 | $ | 21,796 | |||||||||||||||||||
| Obligations of U.S. states and their political subdivisions | 8,650 | 267 | 459 | 0 | 8,458 | ||||||||||||||||||||||||
| Foreign government securities | 71,556 | 3,895 | 5,208 | 53 | 70,190 | ||||||||||||||||||||||||
| U.S. public corporate securities | 105,593 | 2,357 | 9,711 | 67 | 98,172 | ||||||||||||||||||||||||
| U.S. private corporate securities(1) | 42,801 | 807 | 2,574 | 14 | 41,020 | ||||||||||||||||||||||||
| Foreign public corporate securities | 20,473 | 487 | 1,298 | 19 | 19,643 | ||||||||||||||||||||||||
| Foreign private corporate securities | 35,128 | 613 | 3,446 | 5 | 32,290 | ||||||||||||||||||||||||
| Asset-backed securities(2) | 12,514 | 202 | 119 | 2 | 12,595 | ||||||||||||||||||||||||
| Commercial mortgage-backed securities | 10,571 | 34 | 713 | 0 | 9,892 | ||||||||||||||||||||||||
| Residential mortgage-backed securities(3) | 2,438 | 24 | 197 | 0 | 2,265 | ||||||||||||||||||||||||
| Total fixed maturities, available-for-sale(1) | $ | 334,598 | $ | 9,777 | $ | 27,894 | $ | 160 | $ | 316,321 |
(1)Excludes notes with amortized cost of $12,370 million (fair value, $12,370 million), which have been offset with the associated debt under a netting agreement.
(2)Includes credit-tranched securities collateralized by loan obligations, education loans, auto loans, home equity loans and other asset types.
(3)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following tables set forth the fair value and gross unrealized losses on available-for-sale fixed maturity securities without an allowance for credit losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the dates indicated:
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Less Than Twelve Months | Twelve Months or More | Total | ||||||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | ||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 6,667 | $ | 334 | $ | 10,161 | $ | 4,771 | $ | 16,828 | $ | 5,105 | ||||||||||||||||||||||||||
| Obligations of U.S. states and their political subdivisions | 1,592 | 53 | 3,288 | 565 | 4,880 | 618 | ||||||||||||||||||||||||||||||||
| Foreign government securities | 8,280 | 349 | 20,780 | 7,532 | 29,060 | 7,881 | ||||||||||||||||||||||||||||||||
| U.S. public corporate securities | 25,420 | 1,036 | 48,152 | 10,485 | 73,572 | 11,521 | ||||||||||||||||||||||||||||||||
| U.S. private corporate securities | 7,581 | 183 | 24,846 | 2,743 | 32,427 | 2,926 | ||||||||||||||||||||||||||||||||
| Foreign public corporate securities | 5,751 | 170 | 8,084 | 1,246 | 13,835 | 1,416 | ||||||||||||||||||||||||||||||||
| Foreign private corporate securities | 8,702 | 282 | 18,862 | 4,010 | 27,564 | 4,292 | ||||||||||||||||||||||||||||||||
| Asset-backed securities | 1,488 | 11 | 1,015 | 48 | 2,503 | 59 | ||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | 1,092 | 8 | 6,432 | 539 | 7,524 | 547 | ||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | 361 | 4 | 1,377 | 219 | 1,738 | 223 | ||||||||||||||||||||||||||||||||
| Total fixed maturities, available-for-sale | $ | 66,934 | $ | 2,430 | $ | 142,997 | $ | 32,158 | $ | 209,931 | $ | 34,588 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| Less Than Twelve Months | Twelve Months or More | Total | ||||||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | ||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 2,718 | $ | 95 | $ | 12,642 | $ | 4,074 | $ | 15,360 | $ | 4,169 | ||||||||||||||||||||||||||
| Obligations of U.S. states and their political subdivisions | 862 | 14 | 3,816 | 445 | 4,678 | 459 | ||||||||||||||||||||||||||||||||
| Foreign government securities | 9,098 | 542 | 19,589 | 4,664 | 28,687 | 5,206 | ||||||||||||||||||||||||||||||||
| U.S. public corporate securities | 4,881 | 103 | 61,204 | 9,604 | 66,085 | 9,707 | ||||||||||||||||||||||||||||||||
| U.S. private corporate securities | 3,026 | 69 | 27,062 | 2,504 | 30,088 | 2,573 | ||||||||||||||||||||||||||||||||
| Foreign public corporate securities | 1,766 | 37 | 10,812 | 1,246 | 12,578 | 1,283 | ||||||||||||||||||||||||||||||||
| Foreign private corporate securities | 1,578 | 120 | 22,145 | 3,324 | 23,723 | 3,444 | ||||||||||||||||||||||||||||||||
| Asset-backed securities | 846 | 30 | 5,886 | 89 | 6,732 | 119 | ||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | 287 | 3 | 8,251 | 710 | 8,538 | 713 | ||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | 92 | 2 | 1,599 | 195 | 1,691 | 197 | ||||||||||||||||||||||||||||||||
| Total fixed maturities, available-for-sale | $ | 25,154 | $ | 1,015 | $ | 173,006 | $ | 26,855 | $ | 198,160 | $ | 27,870 |
As of December 31, 2024 and 2023, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance of $33,437 million and $26,879 million, respectively, related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $1,151 million and $991 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of December 31, 2024, the $32,158 million of gross unrealized losses of twelve months or more were concentrated in the finance, consumer non-cyclical and utility sectors within corporate securities as well as in foreign government securities. As of December 31, 2023, the $26,855 million of gross unrealized losses of twelve months or more were concentrated in the finance, consumer non-cyclical and utility sectors within corporate securities as well as in foreign government securities.
In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at December 31, 2024. This conclusion was based on detailed analysis of the underlying credit and cash flows for each security. Gross unrealized losses are primarily attributable to increases in interest rates, general credit spread widening and foreign currency exchange rate movements. As of December 31, 2024, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the amortized cost basis.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following table sets forth the amortized cost and fair value of fixed maturities by contractual maturities, as of the date indicated:
| December 31, 2024 | ||||||||||||||
| Available-for-sale | ||||||||||||||
| Amortized Cost | Fair Value | |||||||||||||
| (in millions) | ||||||||||||||
| Fixed maturities: | ||||||||||||||
| Due in one year or less | $ | 9,963 | $ | 9,930 | ||||||||||
| Due after one year through five years | 58,822 | 57,973 | ||||||||||||
| Due after five years through ten years(1) | 63,001 | 61,513 | ||||||||||||
| Due after ten years(1) | 179,750 | 153,257 | ||||||||||||
| Asset-backed securities | 16,979 | 17,134 | ||||||||||||
| Commercial mortgage-backed securities | 9,791 | 9,273 | ||||||||||||
| Residential mortgage-backed securities | 2,698 | 2,490 | ||||||||||||
| Total | $ | 341,004 | $ | 311,570 |
(1)Excludes notes with amortized cost of $14,748 million (fair value, $14,748 million), which have been offset with the associated debt under a netting agreement.
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.
The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on write-downs and the allowance for credit losses of fixed maturities, for the periods indicated:
| Years Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Fixed maturities, available-for-sale: | ||||||||||||||||||||
| Proceeds from sales(1) | $ | 36,727 | $ | 27,161 | $ | 33,010 | ||||||||||||||
| Proceeds from maturities/prepayments | 22,432 | 17,010 | 17,957 | |||||||||||||||||
| Gross investment gains from sales and maturities | 1,400 | 973 | 1,240 | |||||||||||||||||
| Gross investment losses from sales and maturities | (3,553) | (2,183) | (2,589) | |||||||||||||||||
| Write-downs recognized in earnings(2) | (924) | (81) | (116) | |||||||||||||||||
| (Addition to) release of allowance for credit losses | (195) | (22) | (24) | |||||||||||||||||
| Fixed maturities, held-to-maturity: | ||||||||||||||||||||
| Proceeds from maturities/prepayments(3) | $ | 0 | $ | 21 | $ | 37 | ||||||||||||||
| (Addition to) release of allowance for credit losses | 0 | 2 | 2 |
(1)Excludes activity from non-cash related proceeds due to the timing of trade settlements of $(100) million, $(74) million and $(144) million for the years ended December 31, 2024, 2023 and 2022, respectively.
(2)Amounts represent securities actively marketed for sale, securities where it is more likely than not the Company will be required to sell prior to the recovery of the amortized cost basis and write-downs on credit adverse securities.
(3)Excludes activity from non-cash related proceeds due to the timing of trade settlements of $1 million and less than $1 million for the years ended December 31, 2023 and 2022, respectively. There were no fixed maturities, held-to-maturity assets during 2024.
The following tables set forth the balance of and changes in the allowance for credit losses for fixed maturity securities, as of and for the periods indicated:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury Securities and Obligations of U.S. States | Foreign Government Securities | U.S. and Foreign Corporate Securities | Asset-Backed Securities | Commercial Mortgage-Backed Securities | Residential Mortgage-Backed Securities | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 0 | $ | 53 | $ | 105 | $ | 2 | $ | 0 | $ | 0 | $ | 160 | |||||||||||||||||||||||||||
| Additions to allowance for credit losses not previously recorded | 0 | 0 | 235 | 0 | 0 | 0 | 235 | ||||||||||||||||||||||||||||||||||
| Reductions for securities sold during the period | 0 | (30) | (55) | 0 | 0 | 0 | (85) | ||||||||||||||||||||||||||||||||||
| Reductions for securities with intent to sell | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||
| Additions (reductions) on securities with previous allowance | 0 | (23) | 46 | (2) | 0 | 0 | 21 | ||||||||||||||||||||||||||||||||||
| Write-downs charged against the allowance | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 0 | $ | 0 | $ | 331 | $ | 0 | $ | 0 | $ | 0 | $ | 331 |
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury Securities and Obligations of U.S. States | Foreign Government Securities | U.S. and Foreign Corporate Securities | Asset-Backed Securities | Commercial Mortgage-Backed Securities | Residential Mortgage-Backed Securities | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 0 | $ | 1 | $ | 136 | $ | 1 | $ | 0 | $ | 0 | $ | 138 | |||||||||||||||||||||||||||
| Additions to allowance for credit losses not previously recorded | 0 | 62 | 99 | 0 | 0 | 0 | 161 | ||||||||||||||||||||||||||||||||||
| Reductions for securities sold during the period | 0 | 0 | (162) | 0 | 0 | 0 | (162) | ||||||||||||||||||||||||||||||||||
| Additions (reductions) on securities with previous allowance | 0 | (10) | 49 | 1 | 0 | 0 | 40 | ||||||||||||||||||||||||||||||||||
| Write-downs charged against the allowance | 0 | 0 | (17) | 0 | 0 | 0 | (17) | ||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 0 | $ | 53 | $ | 105 | $ | 2 | $ | 0 | $ | 0 | $ | 160 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury Securities and Obligations of U.S. States | Foreign Government Securities | U.S. and Foreign Corporate Securities | Asset-Backed Securities | Commercial Mortgage-Backed Securities | Residential Mortgage-Backed Securities | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Fixed maturities, held-to-maturity: | |||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 0 | $ | 0 | $ | 2 | $ | 0 | $ | 0 | $ | 0 | $ | 2 | |||||||||||||||||||||||||||
| Current period provision for expected losses(1) | 0 | 0 | (2) | 0 | 0 | 0 | (2) | ||||||||||||||||||||||||||||||||||
| Change in foreign exchange | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
(1) In the third quarter of 2023, the Company changed its intent to hold a portion of its held-to-maturity portfolio, which was redeemed as part of a recently announced reinsurance transaction. As a result, the entire held-to-maturity portfolio was reclassified to available-for-sale and recorded at fair value.
See Note 2 for additional information about the Company’s methodology for developing its allowance and expected losses.
For the year ended December 31, 2024, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the consumer cyclical, capital goods and energy sectors within corporate securities, due to adverse projected cash flows. For the year ended December 31, 2023, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the communication sector within corporate securities, as well as foreign government securities due to adverse projected cash flows, partially offset by a net release on restructured securities within the utility and capital goods sectors.
The Company did not have any fixed maturity securities purchased with credit deterioration as of both December 31, 2024 and 2023.
Assets Supporting Experience-Rated Contractholder Liabilities
The following table sets forth the composition of “Assets supporting experience-rated contractholder liabilities,” as of the dates indicated:
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Amortized Cost or Cost | Fair Value | Amortized Cost or Cost | Fair Value | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Fixed maturities: | ||||||||||||||||||||||||||
| Corporate securities | $ | 68 | $ | 67 | $ | 81 | $ | 79 | ||||||||||||||||||
| Foreign government securities | 544 | 539 | 606 | 604 | ||||||||||||||||||||||
| Obligations of U.S. government authorities and agencies and obligations of U.S. states | 207 | 220 | 202 | 206 | ||||||||||||||||||||||
| Total fixed maturities(1) | 819 | 826 | 889 | 889 | ||||||||||||||||||||||
| Equity securities | 1,763 | 2,881 | 1,607 | 2,279 | ||||||||||||||||||||||
| Total assets supporting experience-rated contractholder liabilities(2) | $ | 2,582 | $ | 3,707 | $ | 2,496 | $ | 3,168 |
(1)As a percentage of amortized cost, 99% of the portfolio was considered high or highest quality based on NAIC or equivalent ratings, as of both December 31, 2024 and 2023.
(2)As a percentage of amortized cost, 100% of the portfolio consisted of public securities as of both December 31, 2024 and 2023.
The net change in unrealized gains (losses) from assets supporting experience-rated contractholder liabilities still held at period end, recorded within “Other income (loss),” was $495 million, $440 million and $(737) million during the years ended December 31, 2024, 2023 and 2022, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Fixed Maturities, Trading
The net change in unrealized gains (losses) from fixed maturities, trading still held at period end, recorded within “Other income (loss),” was $(551) million, $518 million and $(1,427) million during the years ended December 31, 2024, 2023 and 2022, respectively.
Equity Securities
The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $735 million, $612 million and $(914) million during the years ended December 31, 2024, 2023 and 2022, respectively.
Concentrations of Financial Instruments
The Company monitors its concentrations of financial instruments and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any single issuer.
As of the dates indicated, the Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s equity included securities of the U.S. government and certain U.S. government agencies and securities guaranteed by the U.S. government, as well as the securities disclosed below:
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Investments in Japanese government and government agency securities: | ||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | 56,457 | $ | 51,177 | $ | 62,591 | $ | 61,484 | ||||||||||||||||||
| Fixed maturities, trading | 18 | 18 | 19 | 19 | ||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities | 472 | 462 | 522 | 514 | ||||||||||||||||||||||
| Total | $ | 56,947 | $ | 51,657 | $ | 63,132 | $ | 62,017 | ||||||||||||||||||
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Investments in Brazil government and government agency securities: | ||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | 2,753 | $ | 2,251 | $ | 3,028 | $ | 2,992 | ||||||||||||||||||
| Fixed maturities, trading | 44 | 40 | 0 | 0 | ||||||||||||||||||||||
| Short-term investments | 2 | 2 | 0 | 0 | ||||||||||||||||||||||
| Cash equivalents | 228 | 228 | 427 | 427 | ||||||||||||||||||||||
| Total | $ | 3,027 | $ | 2,521 | $ | 3,455 | $ | 3,419 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Commercial Mortgage and Other Loans
The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Amount | % of Total | Amount | % of Total | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Commercial mortgage and agricultural property loans by property type: | ||||||||||||||||||||||||||
| Office | $ | 7,867 | 12.7 | % | $ | 8,402 | 14.2 | % | ||||||||||||||||||
| Retail | 5,552 | 9.0 | 5,384 | 9.1 | ||||||||||||||||||||||
| Apartments/Multi-Family | 17,522 | 28.3 | 16,555 | 28.0 | ||||||||||||||||||||||
| Industrial | 16,900 | 27.3 | 15,263 | 25.8 | ||||||||||||||||||||||
| Hospitality | 1,831 | 3.0 | 2,086 | 3.5 | ||||||||||||||||||||||
| Other | 4,386 | 7.1 | 4,069 | 6.9 | ||||||||||||||||||||||
| Total commercial mortgage loans | 54,058 | 87.4 | 51,759 | 87.5 | ||||||||||||||||||||||
| Agricultural property loans | 7,775 | 12.6 | 7,426 | 12.5 | ||||||||||||||||||||||
| Total commercial mortgage and agricultural property loans | 61,833 | 100.0 | % | 59,185 | 100.0 | % | ||||||||||||||||||||
| Allowance for credit losses | (528) | (459) | ||||||||||||||||||||||||
| Total net commercial mortgage and agricultural property loans | 61,305 | 58,726 | ||||||||||||||||||||||||
| Other loans: | ||||||||||||||||||||||||||
| Uncollateralized loans | 595 | 425 | ||||||||||||||||||||||||
| Residential property loans | 19 | 30 | ||||||||||||||||||||||||
| Other collateralized loans | 468 | 125 | ||||||||||||||||||||||||
| Total other loans | 1,082 | 580 | ||||||||||||||||||||||||
| Allowance for credit losses | (46) | (1) | ||||||||||||||||||||||||
| Total net other loans | 1,036 | 579 | ||||||||||||||||||||||||
| Total net commercial mortgage and other loans(1) | $ | 62,341 | $ | 59,305 |
(1)Includes loans which are carried at fair value under the fair value option and are collateralized primarily by apartment complexes. As of December 31, 2024 and 2023, the net carrying value of these loans was $702 million and $519 million, respectively.
As of December 31, 2024, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States with the largest concentrations in California (28%), Texas (7%) and Florida (6%) and included loans secured by properties in Europe (6%), Mexico (2%), Asia (1%) and Australia (1%).
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following table sets forth the balance of and changes in the allowance for credit losses for commercial mortgage and other loans, as of and for the periods ended:
| Commercial Mortgage Loans | Agricultural Property Loans | Residential Property Loans | Other Collateralized Loans | Uncollateralized Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | 111 | $ | 4 | $ | 0 | $ | 0 | $ | 4 | $ | 119 | ||||||||||||||||||||||||||||||||||||||
| Addition to (release of) allowance for expected losses | 72 | 9 | 0 | 0 | (1) | 80 | ||||||||||||||||||||||||||||||||||||||||||||
| Other | 5 | 0 | 0 | 0 | (1) | 4 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 188 | 13 | 0 | 0 | 2 | 203 | ||||||||||||||||||||||||||||||||||||||||||||
| Addition to (release of) allowance for expected losses | 282 | 3 | 0 | 0 | (1) | 284 | ||||||||||||||||||||||||||||||||||||||||||||
| Write-downs charged against the allowance | (29) | 0 | 0 | 0 | 0 | (29) | ||||||||||||||||||||||||||||||||||||||||||||
| Other | 2 | 0 | 0 | 0 | 0 | 2 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 443 | 16 | 0 | 0 | 1 | 460 | ||||||||||||||||||||||||||||||||||||||||||||
| Addition to (release of) allowance for expected losses | 100 | 110 | 0 | 32 | 13 | 255 | ||||||||||||||||||||||||||||||||||||||||||||
| Write-downs charged against the allowance | (132) | (5) | 0 | 0 | 0 | (137) | ||||||||||||||||||||||||||||||||||||||||||||
| Other | (4) | 0 | 0 | 0 | 0 | (4) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 407 | $ | 121 | $ | 0 | $ | 32 | $ | 14 | $ | 574 |
See Note 2 for additional information about the Company’s methodology for developing the allowance and expected losses.
For the year ended December 31, 2024, net additions to the allowance for credit losses on commercial mortgage and other loans were primarily related to increases in loan-specific reserves within agricultural property loans and commercial mortgage loans within the retail and office sectors along with the establishment of general reserves for both the collateralized and uncollateralized loan portfolios. For the year ended December 31, 2023, net additions to the allowance for credit losses on commercial mortgage and other loans were primarily related to increases to the portfolio reserve to reflect declining market conditions and increases in loan-specific reserves within the office sector.
For the year ended December 31, 2024, there were $137 million of write-downs charged against the allowance of which $132 million was related to a loan originated in 2016 and $5 million related to a loan originated in 2015. For the year ended December 31, 2023, there were $29 million of write-downs charged against the allowance for credit losses related to a loan originated in 2018.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following tables set forth key credit quality indicators based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:
| December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Loan-to-Value Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| 0%-59.99% | $ | 2,122 | $ | 1,492 | $ | 1,183 | $ | 2,295 | $ | 1,378 | $ | 16,652 | $ | 36 | $ | 25,158 | |||||||||||||||||||||||||||||||
| 60%-69.99% | 4,726 | 2,287 | 1,013 | 2,192 | 846 | 5,113 | 0 | 16,177 | |||||||||||||||||||||||||||||||||||||||
| 70%-79.99% | 809 | 1,326 | 953 | 1,327 | 446 | 2,293 | 0 | 7,154 | |||||||||||||||||||||||||||||||||||||||
| 80% or greater | 48 | 135 | 482 | 216 | 281 | 4,407 | 0 | 5,569 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 7,705 | $ | 5,240 | $ | 3,631 | $ | 6,030 | $ | 2,951 | $ | 28,465 | $ | 36 | $ | 54,058 | |||||||||||||||||||||||||||||||
| Debt Service Coverage Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 1.2x | $ | 6,771 | $ | 4,563 | $ | 3,283 | $ | 5,929 | $ | 2,795 | $ | 25,790 | $ | 0 | $ | 49,131 | |||||||||||||||||||||||||||||||
| 1.0 - 1.2x | 745 | 527 | 313 | 43 | 102 | 1,279 | 36 | 3,045 | |||||||||||||||||||||||||||||||||||||||
| Less than 1.0x | 189 | 150 | 35 | 58 | 54 | 1,396 | 0 | 1,882 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 7,705 | $ | 5,240 | $ | 3,631 | $ | 6,030 | $ | 2,951 | $ | 28,465 | $ | 36 | $ | 54,058 | |||||||||||||||||||||||||||||||
| Agricultural property loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Loan-to-Value Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| 0%-59.99% | $ | 657 | $ | 371 | $ | 877 | $ | 2,004 | $ | 679 | $ | 1,491 | $ | 122 | $ | 6,201 | |||||||||||||||||||||||||||||||
| 60%-69.99% | 87 | 555 | 125 | 10 | 53 | 43 | 0 | 873 | |||||||||||||||||||||||||||||||||||||||
| 70%-79.99% | 0 | 0 | 0 | 6 | 0 | 3 | 0 | 9 | |||||||||||||||||||||||||||||||||||||||
| 80% or greater | 0 | 6 | 521 | 0 | 71 | 42 | 52 | 692 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 744 | $ | 932 | $ | 1,523 | $ | 2,020 | $ | 803 | $ | 1,579 | $ | 174 | $ | 7,775 | |||||||||||||||||||||||||||||||
| Debt Service Coverage Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 1.2x | $ | 688 | $ | 864 | $ | 932 | $ | 1,967 | $ | 739 | $ | 1,384 | $ | 122 | $ | 6,696 | |||||||||||||||||||||||||||||||
| 1.0 - 1.2x | 56 | 63 | 530 | 45 | 23 | 98 | 52 | 867 | |||||||||||||||||||||||||||||||||||||||
| Less than 1.0x | 0 | 5 | 61 | 8 | 41 | 97 | 0 | 212 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 744 | $ | 932 | $ | 1,523 | $ | 2,020 | $ | 803 | $ | 1,579 | $ | 174 | $ | 7,775 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Loan-to-Value Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| 0%-59.99% | $ | 1,822 | $ | 911 | $ | 2,264 | $ | 1,437 | $ | 3,205 | $ | 16,569 | $ | 0 | $ | 26,208 | |||||||||||||||||||||||||||||||
| 60%-69.99% | 2,765 | 1,440 | 2,541 | 1,107 | 2,146 | 4,530 | 0 | 14,529 | |||||||||||||||||||||||||||||||||||||||
| 70%-79.99% | 1,001 | 1,004 | 1,278 | 401 | 1,013 | 2,277 | 0 | 6,974 | |||||||||||||||||||||||||||||||||||||||
| 80% or greater | 145 | 357 | 203 | 330 | 209 | 2,804 | 0 | 4,048 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 5,733 | $ | 3,712 | $ | 6,286 | $ | 3,275 | $ | 6,573 | $ | 26,180 | $ | 0 | $ | 51,759 | |||||||||||||||||||||||||||||||
| Debt Service Coverage Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 1.2x | $ | 5,237 | $ | 3,194 | $ | 6,122 | $ | 3,182 | $ | 5,988 | $ | 23,196 | $ | 0 | $ | 46,919 | |||||||||||||||||||||||||||||||
| 1.0 - 1.2x | 346 | 366 | 82 | 38 | 265 | 1,713 | 0 | 2,810 | |||||||||||||||||||||||||||||||||||||||
| Less than 1.0x | 150 | 152 | 82 | 55 | 320 | 1,271 | 0 | 2,030 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 5,733 | $ | 3,712 | $ | 6,286 | $ | 3,275 | $ | 6,573 | $ | 26,180 | $ | 0 | $ | 51,759 | |||||||||||||||||||||||||||||||
| Agricultural property loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Loan-to-Value Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| 0%-59.99% | $ | 360 | $ | 880 | $ | 2,027 | $ | 774 | $ | 455 | $ | 1,481 | $ | 74 | $ | 6,051 | |||||||||||||||||||||||||||||||
| 60%-69.99% | 586 | 668 | 25 | 50 | 20 | 4 | 0 | 1,353 | |||||||||||||||||||||||||||||||||||||||
| 70%-79.99% | 7 | 0 | 0 | 0 | 0 | 0 | 0 | 7 | |||||||||||||||||||||||||||||||||||||||
| 80% or greater | 0 | 0 | 0 | 0 | 15 | 0 | 0 | 15 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 953 | $ | 1,548 | $ | 2,052 | $ | 824 | $ | 490 | $ | 1,485 | $ | 74 | $ | 7,426 | |||||||||||||||||||||||||||||||
| Debt Service Coverage Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 1.2x | $ | 948 | $ | 1,535 | $ | 2,040 | $ | 750 | $ | 489 | $ | 1,290 | $ | 74 | $ | 7,126 | |||||||||||||||||||||||||||||||
| 1.0 - 1.2x | 0 | 5 | 4 | 58 | 0 | 151 | 0 | 218 | |||||||||||||||||||||||||||||||||||||||
| Less than 1.0x | 5 | 8 | 8 | 16 | 1 | 44 | 0 | 82 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 953 | $ | 1,548 | $ | 2,052 | $ | 824 | $ | 490 | $ | 1,485 | $ | 74 | $ | 7,426 |
See Note 2 for additional information about the Company’s commercial mortgage and other loans credit quality monitoring process.
The Company may grant loan modifications in its commercial mortgage and other loan portfolios to borrowers experiencing financial difficulties. These loan modifications may be in the form of principal forgiveness, interest rate reduction, other-than-insignificant payment delay, term extension or some combination thereof. The amount, timing and extent of modifications granted and subsequent performance are considered in determining any allowance for credit losses.
The following tables set forth the amortized cost basis of loan modifications made to borrowers experiencing financial difficulties as of the dates indicated:
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||
| Term Extension | % of Amortized Cost | Other Than Insignificant Delay in Payment | % of Amortized Cost | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Commercial mortgage loans | $ | 337 | 0.6 | % | $ | 63 | 0.1 | % | ||||||||||||||||||
| Agricultural property loans | $ | 3 | 0.0 | % | $ | 0 | 0.0 | % |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The modifications added less than one year to the weighted average life in both the commercial mortgage and agricultural property loan portfolios.
During the year ended December 31, 2023, the Company did not modify any loans to borrowers experiencing financial difficulties.
The Company did not have any commitments to lend additional funds to borrowers experiencing financial difficulties on modified loans as of December 31, 2024.
The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due(1)(2) | Total Past Due | Total Loans | Non-Accrual Status(3) | ||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage loans | $ | 53,873 | $ | 0 | $ | 3 | $ | 182 | $ | 185 | $ | 54,058 | $ | 220 | ||||||||||||||||||||||||||||||
| Agricultural property loans | 7,012 | 0 | 21 | 742 | 763 | 7,775 | 767 | |||||||||||||||||||||||||||||||||||||
| Residential property loans | 19 | 0 | 0 | 0 | 0 | 19 | 0 | |||||||||||||||||||||||||||||||||||||
| Other collateralized loans | 468 | 0 | 0 | 0 | 0 | 468 | 0 | |||||||||||||||||||||||||||||||||||||
| Uncollateralized loans | 595 | 0 | 0 | 0 | 0 | 595 | 25 | |||||||||||||||||||||||||||||||||||||
| Total | $ | 61,967 | $ | 0 | $ | 24 | $ | 924 | $ | 948 | $ | 62,915 | $ | 1,012 |
(1)As of December 31, 2024, there were no loans in this category accruing interest.
(2)Includes loans for which no credit losses are expected due to U.S. agency guarantees.
(3)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2.
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due(1)(2) | Total Past Due | Total Loans | Non-Accrual Status(3) | ||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage loans | $ | 51,665 | $ | 34 | $ | 0 | $ | 60 | $ | 94 | $ | 51,759 | $ | 94 | ||||||||||||||||||||||||||||||
| Agricultural property loans | 7,392 | 15 | 15 | 4 | 34 | 7,426 | 38 | |||||||||||||||||||||||||||||||||||||
| Residential property loans | 30 | 0 | 0 | 0 | 0 | 30 | 0 | |||||||||||||||||||||||||||||||||||||
| Other collateralized loans | 125 | 0 | 0 | 0 | 0 | 125 | 0 | |||||||||||||||||||||||||||||||||||||
| Uncollateralized loans | 425 | 0 | 0 | 0 | 0 | 425 | 25 | |||||||||||||||||||||||||||||||||||||
| Total | $ | 59,637 | $ | 49 | $ | 15 | $ | 64 | $ | 128 | $ | 59,765 | $ | 157 |
(1)As of December 31, 2023, there were no loans in this category accruing interest.
(2)Primarily includes loans for which no credit losses are expected due to U.S. agency guarantees.
(3)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2.
Loans on non-accrual status recognized interest of $16 million and $3 million for the years ended December 31, 2024 and 2023, respectively. Loans on non-accrual status that did not have a related allowance for credit losses were $207 million and $126 million as of December 31, 2024 and 2023, respectively.
The Company did not have any losses on commercial mortgage and other loans purchased with credit deterioration as of both December 31, 2024 and 2023.
Other Invested Assets
The following table sets forth the composition of “Other invested assets,” as of the dates indicated:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| LPs/LLCs: | ||||||||||||||
| Equity method: | ||||||||||||||
| Private equity | $ | 10,615 | $ | 8,929 | ||||||||||
| Hedge funds | 3,143 | 3,164 | ||||||||||||
| Real estate-related(1) | 2,661 | 2,256 | ||||||||||||
| Subtotal equity method | 16,419 | 14,349 | ||||||||||||
| Fair value: | ||||||||||||||
| Private equity | 1,076 | 1,247 | ||||||||||||
| Hedge funds | 2,080 | 2,078 | ||||||||||||
| Real estate-related | 951 | 800 | ||||||||||||
| Subtotal fair value | 4,107 | 4,125 | ||||||||||||
| Total LPs/LLCs | 20,526 | 18,474 | ||||||||||||
| Real estate held through direct ownership(2) | 1,743 | 1,794 | ||||||||||||
| Total alternative assets | 22,269 | 20,268 | ||||||||||||
| Credit-like instruments(3) | 933 | 0 | ||||||||||||
| Derivative instruments | 1,597 | 1,100 | ||||||||||||
| Other(1)(4) | 1,552 | 1,487 | ||||||||||||
| Total other invested assets | $ | 26,351 | $ | 22,855 |
(1)Prior period amounts have been updated to conform to current period presentation.
(2)As of December 31, 2024 and 2023, real estate held through direct ownership had mortgage debt of $185 million and $158 million, respectively.
(3)Includes structured debt investments in feeder funds that are consolidated, resulting in the Company reporting the consolidated feeder funds’ proportionate share of the net assets of the master fund within Other invested assets.
(4)Primarily includes equity investments accounted for under the measurement alternative, tax advantaged investments, strategic investments made by investment management operations, leveraged leases and member and activity stock held in the Federal Home Loan Bank of New York. For additional information regarding the Company’s holdings in the Federal Home Loan Bank of New York, see Note 18.
In certain investment structures, the Company’s investment management business invests with other co-investors in an investment fund referred to as a feeder fund. In these structures, the invested capital of several feeder funds is pooled together and used to purchase ownership interests in another fund, referred to as a master fund. The master fund utilizes this invested capital and, in certain cases, other debt financing, to purchase various classes of assets on behalf of its investors. Specialized industry accounting for investment companies calls for the feeder fund to reflect its investment in the master fund as a single net asset equal to its proportionate share of the net assets of the master fund, regardless of its level of interest in the master fund. In cases where the Company consolidates the feeder fund, it retains the feeder fund’s net asset presentation and reports the consolidated feeder fund’s proportionate share of the net assets of the master fund in “Other invested assets,” with any unaffiliated investors’ noncontrolling interest in the feeder fund reported in “Redeemable noncontrolling interests” or “Noncontrolling interests.” The consolidated feeder funds’ investments in these master funds, reflected on this net asset basis, totaled $788 million and $712 million as of December 31, 2024 and 2023, respectively. There were $450 million and $404 million of unaffiliated interest in the consolidated feeder funds as of December 31, 2024 and 2023, respectively, and the master funds had gross assets of $43,004 million and $37,046 million, respectively, and gross liabilities of $41,370 million and $35,344 million, respectively, which are not included on the Company’s Consolidated Statements of Financial Position.
Equity Method Investments
The following tables set forth summarized combined financial information for significant LP/LLC interests accounted for under the equity method, including the Company’s investments in joint ventures and other operating entities that are described in more detail in Note 9. Changes between periods in the tables below reflect changes in the activities within the joint ventures and other operating entities and LPs/LLCs, as well as changes in the Company’s level of investment in such entities:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| STATEMENTS OF FINANCIAL POSITION | ||||||||||||||
| Total assets(1) | $ | 803,096 | $ | 681,739 | ||||||||||
| Total liabilities(2) | $ | 59,358 | $ | 61,785 | ||||||||||
| Partners’ capital | 743,738 | 619,954 | ||||||||||||
| Total liabilities and partners’ capital | $ | 803,096 | $ | 681,739 | ||||||||||
| Equity in LP/LLC interests included above | $ | 16,586 | $ | 14,895 | ||||||||||
| Equity in LP/LLC interests not included above | 1,003 | 968 | ||||||||||||
| Carrying value | $ | 17,589 | $ | 15,863 |
(1)Amount represents gross assets of each fund where the Company has a significant investment. These assets consist primarily of investments in real estate, investments in securities and other miscellaneous assets.
(2)Amount represents gross liabilities of each fund where the Company has a significant investment. These liabilities consist primarily of third-party borrowed funds, securities repurchase agreements and other miscellaneous liabilities.
| Years Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| Total revenue(1) | $ | 86,249 | $ | 43,325 | $ | 28,299 | ||||||||||||||
| Total expenses(2) | (22,327) | (14,551) | (3,608) | |||||||||||||||||
| Net earnings (losses) | $ | 63,922 | $ | 28,774 | $ | 24,691 | ||||||||||||||
| Equity in net earnings (losses) included above | $ | 1,112 | $ | 620 | $ | 641 | ||||||||||||||
| Equity in net earnings (losses) of LP/LLC interests not included above | (245) | 22 | 16 | |||||||||||||||||
| Total equity in net earnings (losses) | $ | 867 | $ | 642 | $ | 657 |
(1)Amount represents gross revenue of each fund where the Company has a significant investment. This revenue consists of income from investments in real estate, investments in securities and other income.
(2)Amount represents gross expenses of each fund where the Company has a significant investment. These expenses consist primarily of interest expense, investment management fees, salary expenses and other expenses.
Accrued Investment Income
The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Fixed maturities | $ | 2,892 | $ | 2,727 | |||||||
| Equity securities | 8 | 6 | |||||||||
| Commercial mortgage and other loans | 228 | 224 | |||||||||
| Policy loans | 236 | 259 | |||||||||
| Other invested assets | 12 | 23 | |||||||||
| Short-term investments and cash equivalents | 65 | 48 | |||||||||
| Total accrued investment income | $ | 3,441 | $ | 3,287 |
Write-downs on accrued investment income were $2 million and less than $1 million for the years ended December 31, 2024 and 2023, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Net Investment Income
The following table sets forth “Net investment income” by investment type, for the periods indicated:
| Years Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Fixed maturities, available-for-sale(1) | $ | 14,948 | $ | 13,305 | $ | 11,773 | ||||||||||||||
| Fixed maturities, held-to-maturity(1) | 0 | 148 | 213 | |||||||||||||||||
| Fixed maturities, trading | 555 | 292 | 233 | |||||||||||||||||
| Assets supporting experience-rated contractholder liabilities | 56 | 45 | 167 | |||||||||||||||||
| Equity securities | 206 | 197 | 160 | |||||||||||||||||
| Commercial mortgage and other loans | 2,591 | 2,279 | 2,196 | |||||||||||||||||
| Policy loans | 492 | 499 | 499 | |||||||||||||||||
| Other invested assets | 1,326 | 1,347 | 1,240 | |||||||||||||||||
| Short-term investments and cash equivalents | 1,171 | 954 | 406 | |||||||||||||||||
| Gross investment income | 21,345 | 19,066 | 16,887 | |||||||||||||||||
| Less: investment expenses | (1,436) | (1,201) | (850) | |||||||||||||||||
| Net investment income | $ | 19,909 | $ | 17,865 | $ | 16,037 |
(1)Includes income on credit-linked notes which are reported on the same financial statement line as related surplus notes, as conditions are met for right to offset.
The carrying value of non-income producing assets included $21 million in commercial mortgage and other loans as of December 31, 2024. Non-income producing assets represent investments that had not produced income for the twelve months preceding December 31, 2024.
Realized Investment Gains (Losses), Net
The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:
| Years Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Fixed maturities(1) | $ | (3,272) | $ | (1,311) | $ | (1,487) | ||||||||||||||
| Commercial mortgage and other loans | (236) | (255) | (133) | |||||||||||||||||
| Investment real estate | 0 | 45 | 83 | |||||||||||||||||
| LPs/LLCs | 57 | 72 | (120) | |||||||||||||||||
| Derivatives | 678 | (2,234) | (2,851) | |||||||||||||||||
| Other(2) | (656) | 68 | 1 | |||||||||||||||||
| Realized investment gains (losses), net | $ | (3,429) | $ | (3,615) | $ | (4,507) |
(1)Excludes fixed maturity securities classified as trading.
(2)Includes changes in the value of reinsurance payables and funds withheld payables, primarily reflecting the impact of net investment income on withheld assets that are ceded to certain reinsurance counterparties.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Net Unrealized Gains (Losses) on Investments within AOCI
The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:
| December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Fixed maturity securities, available-for-sale with an allowance | $ | 6 | $ | (72) | $ | (45) | ||||||||||||||
| Fixed maturity securities, available-for-sale without an allowance | (29,109) | (18,045) | (27,545) | |||||||||||||||||
| Derivatives designated as cash flow hedges(1) | 1,780 | 869 | 2,616 | |||||||||||||||||
| Derivatives designated as fair value hedges(1) | (64) | (60) | (54) | |||||||||||||||||
| Other investments(2) | 106 | 57 | 24 | |||||||||||||||||
| Net unrealized gains (losses) on investments | $ | (27,281) | $ | (17,251) | $ | (25,004) |
(1)For additional information regarding cash flow and fair value hedges, see Note 5.
(2)Includes net unrealized gains (losses) on certain joint ventures that are strategic in nature and are included in “Other assets.”
Repurchase Agreements and Securities Lending
In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. The following table sets forth the composition of “Securities sold under agreements to repurchase,” as of the dates indicated:
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Remaining Contractual Maturities of the Agreements | Remaining Contractual Maturities of the Agreements | ||||||||||||||||||||||||||||||||||||||||||||||
| Overnight & Continuous | Up to 30 Days | 30 to 90 Days | Total | Overnight & Continuous | Up to 30 Days | 30 to 90 Days | Total | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 6,450 | $ | 0 | $ | 0 | $ | 6,450 | $ | 5,693 | $ | 0 | $ | 0 | $ | 5,693 | |||||||||||||||||||||||||||||||
| U.S. public corporate securities | 0 | 327 | 0 | 327 | 0 | 118 | 0 | 118 | |||||||||||||||||||||||||||||||||||||||
| Foreign public corporate securities | 0 | 19 | 0 | 19 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | 0 | 0 | 0 | 0 | 245 | 0 | 0 | 245 | |||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total securities sold under agreements to repurchase | $ | 6,450 | $ | 346 | $ | 0 | $ | 6,796 | $ | 5,938 | $ | 118 | $ | 0 | $ | 6,056 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following table sets forth the composition of “Cash collateral for loaned securities” which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Remaining Contractual Maturities of the Agreements | Remaining Contractual Maturities of the Agreements | ||||||||||||||||||||||||||||||||||
| Overnight & Continuous | Up to 30 Days | Total | Overnight & Continuous | Up to 30 Days | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 1 | $ | 0 | $ | 1 | $ | 1 | $ | 0 | $ | 1 | |||||||||||||||||||||||
| Obligations of U.S. states and their political subdivisions | 46 | 0 | 46 | 67 | 0 | 67 | |||||||||||||||||||||||||||||
| Foreign government securities | 122 | 6 | 128 | 242 | 0 | 242 | |||||||||||||||||||||||||||||
| U.S. public corporate securities | 7,506 | 403 | 7,909 | 4,399 | 420 | 4,819 | |||||||||||||||||||||||||||||
| Foreign public corporate securities | 1,181 | 118 | 1,299 | 649 | 76 | 725 | |||||||||||||||||||||||||||||
| Equity securities | 238 | 0 | 238 | 623 | 0 | 623 | |||||||||||||||||||||||||||||
| Total cash collateral for loaned securities(1) | $ | 9,094 | $ | 527 | $ | 9,621 | $ | 5,981 | $ | 496 | $ | 6,477 |
(1)The Company did not have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.
Securities Pledged
The Company pledges as collateral investment securities it owns to unaffiliated parties through certain transactions, including securities lending, securities sold under agreements to repurchase, collateralized borrowings and postings of collateral with derivative counterparties. The following table sets forth the carrying value of investments pledged to third parties, as of the dates indicated:
| December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Fixed maturities, available for sale | $ | 22,891 | $ | 21,187 | ||||||||||
| Fixed maturities, trading | 201 | 50 | ||||||||||||
| Separate account assets | 442 | 1,468 | ||||||||||||
| Equity securities | 476 | 827 | ||||||||||||
| Short-term investments | 351 | 0 | ||||||||||||
| Other | 357 | 336 | ||||||||||||
| Total securities pledged(1) | $ | 24,718 | $ | 23,868 |
(1)These assets are reported on the Company's Consolidated Statements of Financial Position.
The following table sets forth the carrying amount of the associated liabilities supported by the pledged collateral, as of the dates indicated:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Securities sold under agreements to repurchase | $ | 6,796 | $ | 6,056 | ||||||||||
| Cash collateral for loaned securities | 9,621 | 6,477 | ||||||||||||
| Policyholders’ account balances(1) | 2,501 | 2,501 | ||||||||||||
| Separate account liabilities | 454 | 1,507 | ||||||||||||
| Short-term debt | 1 | 0 | ||||||||||||
| Long-term debt | 99 | 27 | ||||||||||||
| Other liabilities(2) | 4,762 | 4,181 | ||||||||||||
| Total liabilities supported by the pledged collateral | $ | 24,234 | $ | 20,749 |
(1)Includes funding agreements issued to the Federal Home Loan Bank of New York.
(2)Primarily includes liabilities associated with derivative counterparties.
In the normal course of its business activities, the Company accepts collateral that can be sold or repledged. The primary sources of this collateral are securities in customer accounts, securities purchased under agreements to resell and postings of collateral from OTC derivative counterparties. The fair value of this collateral was $1,920 million as of December 31, 2024 (the largest components of which included $265 million of securities and $1,655 million of cash from OTC derivative counterparties) and $717 million as of December 31, 2023 (the largest components of which included $388 million of securities and $329 million of cash from OTC derivative counterparties). A portion of the aforementioned securities, for both periods, had either been sold or repledged.
Assets on Deposit, Held in Trust, and Restricted as to Sale
The following table provides assets on deposit, assets held in trust, and securities restricted as to sale, as of the dates indicated:
| December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Assets on deposit with governmental authorities or trustees | $ | 10 | $ | 8 | ||||||||||
| Assets held in voluntary trusts(1) | 533 | 510 | ||||||||||||
| Assets held in trust related to reinsurance and other agreements(2) | 13,236 | 13,214 | ||||||||||||
| Securities restricted as to sale(3) | 142 | 144 | ||||||||||||
| Total assets on deposit, assets held in trust and securities restricted as to sale | $ | 13,921 | $ | 13,876 |
(1)Represents assets held in voluntary trusts established primarily to fund guaranteed dividends to certain policyholders and to fund certain employee benefits.
(2)Represents assets held in trust related to reinsurance agreements excluding reinsurance agreements between wholly-owned subsidiaries. Assets valued at $16.0 billion and $25.7 billion were held in trust related to reinsurance agreements between wholly-owned subsidiaries as of December 31, 2024 and 2023, respectively.
(3)Includes member and activity stock associated with memberships in the Federal Home Loan Bank of New York.
**4.**VARIABLE INTEREST ENTITIES
In the normal course of its activities, the Company enters into relationships with various special-purpose entities and other entities that are deemed to be VIEs. A VIE is an entity that either (1) has equity investors that lack certain essential characteristics of a controlling financial interest (including the ability to control activities of the entity, the obligation to absorb the entity’s expected losses and the right to receive the entity’s expected residual returns) or (2) lacks sufficient equity to finance its own activities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the VIE.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The Company is the primary beneficiary if the Company has (1) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (2) the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. If the Company determines that it is the VIE’s primary beneficiary, it consolidates the VIE.
Consolidated Variable Interest Entities
The Company is the investment manager of certain asset-backed investment vehicles, commonly referred to as CLOs, and certain other vehicles for which the Company earns fee income for investment management services. The Company may sell or syndicate investments through these vehicles, principally as part of the strategic investing activity of the Company’s investment management businesses. Additionally, the Company may invest in securities issued by these vehicles. The Company is also the investment manager of certain investment structures whose beneficial interests are wholly-owned by consolidated subsidiaries.
The Company has analyzed these relationships and determined that for certain CLOs and other investment structures it is the primary beneficiary and consolidates these entities. This analysis includes a review of (1) the Company’s rights and responsibilities as investment manager and (2) variable interests (if any) held by the Company. The assets of these VIEs are restricted and must be used first to settle liabilities of the VIE. The Company is not required to provide, and has not provided, material financial or other support to any of these VIEs.
Additionally, the Company is the primary beneficiary of certain VIEs in which the Company has invested, as part of its investment activities, but for which it is not the investment manager. These include structured investments issued by a VIE that manages yen-denominated investments coupled with cross-currency coupon swap agreements thereby creating synthetic dual currency investments. The Company’s involvement in the structuring of these investments combined with its economic interest indicates that the Company is the primary beneficiary. The Company has not provided material financial support or other support that was not contractually required to these VIEs.
The table below reflects the carrying amount and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported. The liabilities primarily comprise obligations under debt instruments issued by the VIEs. The creditors of these VIEs do not have recourse to the Company in excess of the assets contained within the VIEs.
| Consolidated VIEs for which the Company is the Investment Manager(1) | Other Consolidated VIEs | |||||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | 1,250 | $ | 539 | $ | 716 | $ | 836 | ||||||||||||||||||
| Fixed maturities, trading | 166 | 943 | 0 | 0 | ||||||||||||||||||||||
| Equity securities | 80 | 106 | 0 | 0 | ||||||||||||||||||||||
| Commercial mortgage and other loans | 681 | 764 | 490 | 0 | ||||||||||||||||||||||
| Other invested assets | 6,379 | 4,319 | 500 | 485 | ||||||||||||||||||||||
| Cash and cash equivalents | 308 | 302 | 0 | 0 | ||||||||||||||||||||||
| Accrued investment income | 6 | 7 | 3 | 3 | ||||||||||||||||||||||
| Other assets | 644 | 1,023 | 613 | 636 | ||||||||||||||||||||||
| Total assets of consolidated VIEs | $ | 9,514 | $ | 8,003 | $ | 2,322 | $ | 1,960 | ||||||||||||||||||
| Other liabilities | $ | 218 | $ | 588 | $ | 1 | $ | 0 | ||||||||||||||||||
| Notes issued by consolidated VIEs(2) | 1,392 | 1,374 | 38 | 0 | ||||||||||||||||||||||
| Total liabilities of consolidated VIEs | $ | 1,610 | $ | 1,962 | $ | 39 | $ | 0 |
(1)Total assets of consolidated VIEs reflect $3,835 million and $4,003 million as of December 31, 2024 and 2023, respectively, related to VIEs whose beneficial interests are wholly-owned by consolidated subsidiaries.
(2)Recourse is limited to the assets of the respective VIE and does not extend to the general credit of the Company. As of December 31, 2024, the maturities of these obligations were between 5 and 14 years.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Unconsolidated Variable Interest Entities
The Company has determined that it is not the primary beneficiary of certain VIEs for which it may or may not be the investment manager. These VIEs consist primarily of CLOs and investment funds for which the Company has determined that it is not the primary beneficiary as it does not have both (1) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (2) the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. The Company’s maximum exposure to loss resulting from its relationship with unconsolidated VIEs is limited to its investment in the VIEs, which was $1,529 million and $1,165 million at December 31, 2024 and 2023, respectively. These investments are reflected in “Fixed maturities, available-for-sale,” “Fixed maturities, trading,” “Equity securities” and “Other invested assets.” There are no liabilities associated with these unconsolidated VIEs on the Company’s Consolidated Statements of Financial Position.
In addition, in the normal course of its activities, the Company will invest in structured investments including VIEs for which it is not the investment manager. These structured investments typically invest in fixed income investments and are managed by third parties and include asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Company’s maximum exposure to loss on these structured investments, both VIEs and non-VIEs, is limited to the amount of its investment. See Note 3 for details regarding the carrying amounts and classification of these assets. The Company has not provided material financial or other support that was not contractually required to these structures. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not control these entities.
Limited Partnerships and Limited Liability Companies
In the normal course of its activities, the Company will invest in LPs/LLCs which include hedge funds, private equity funds and real estate-related funds and may or may not be VIEs. The Company classifies these investments as “Other invested assets” and its maximum exposure to loss associated with these VIE and non-VIE entities is limited to the amount of its investment, which was $21,847 million and $18,796 million as of December 31, 2024 and 2023, respectively. The Company has determined that it is not required to consolidate these entities because either (1) it does not control them or (2) it does not have the obligation to absorb losses of these entities that could be potentially significant to the entities or the right to receive benefits from the entities that could be potentially significant.
**5.**DERIVATIVES AND HEDGING
Types of Derivative and Hedging Instruments
Interest Rate Contracts
Interest rate swaps, interest rate total return swaps, options and futures are used by the Company to reduce risks from changes in interest rates, manage interest rate exposures arising from mismatches between assets and liabilities and to hedge against changes in their values it owns or anticipates acquiring or selling.
Swaps may be attributed to specific assets or liabilities or to a portfolio of assets or liabilities. Under interest rate swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed upon notional principal amount. Under interest rate total return swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between the return on a fixed income market index and Secured Overnight Financing Rate (“SOFR”) plus an associated funding spread based on a notional amount.
The Company also uses interest rate swaptions, caps, and floors to manage interest rate risk. A swaption is an option to enter into a swap with a forward starting effective date. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. In an interest rate cap, the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. Similarly, in an interest rate floor, the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price. Swaptions, caps and floors are included in interest rate options.
In standardized exchange-traded interest rate futures transactions, the Company purchases or sells a specified number of contracts, the values of which are determined by the daily market values of underlying referenced investments. The Company enters into exchange-traded futures with regulated futures commission’s merchants who are members of a trading exchange.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Equity Contracts
Equity options, equity total return swaps, and futures are used by the Company to manage its exposure to the equity markets which impacts the value of assets and liabilities it owns or anticipates acquiring or selling.
Equity index options are contracts which will settle in cash based on differentials in the underlying indices at the time of exercise and the strike price. The Company uses combinations of purchases and sales of equity index options to hedge the effects of adverse changes in equity indices within a predetermined range.
Equity total return swaps are contracts whereby the Company agrees with counterparties to exchange, at specified intervals, the difference between the return on an equity asset (or equity market index) and SOFR plus an associated funding spread based on a notional amount. The Company generally uses equity total return swaps to hedge the effect of adverse changes in equity indices.
In standardized exchange-traded equity futures transactions, the Company purchases or sells a specified number of contracts, the values of which are determined by the daily market values of underlying referenced equity indices. The Company enters into exchange-traded futures with regulated futures commission’s merchants who are members of a trading exchange.
Foreign Exchange Contracts
Currency derivatives, including currency futures, options, forwards and swaps, and foreign currency denominated debts are used by the Company to reduce risks from changes in currency exchange rates with respect to investments denominated in foreign currencies that the Company either holds or intends to acquire or sell, and to hedge the currency risk associated with net investments in foreign operations and anticipated earnings of its foreign operations.
Under currency forwards, the Company agrees with counterparties to deliver a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. As noted above, the Company uses currency forwards to mitigate the impact of changes in currency exchange rates on U.S. dollar-equivalent earnings generated by certain of its non-U.S. businesses, primarily its international insurance and investment operations. The Company executes forward sales of the hedged currency in exchange for U.S. dollars at a specified exchange rate. The maturities of these currency forwards correspond with the future periods in which the non-U.S. dollar-denominated earnings are expected to be generated.
Under currency swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between one currency and another at an exchange rate and calculated by reference to an agreed principal amount. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party.
Under foreign currency denominated debts, the Company uses a portion of its foreign currency denominated debt (same functional currency of its foreign subsidiaries) to hedge the risk of change in the net investment in a foreign subsidiary due to changes in exchange rates. These debt obligations reduce the Company’s foreign currency exposure from equity investment and act as hedge of the investment.
Credit Contracts
The Company writes credit default swaps to gain exposure similar to investment in public fixed maturity cash instruments. With these derivatives the Company sells credit protection on a single name reference, or certain index reference, and in return receives a quarterly premium. This premium or credit spread generally corresponds to the difference between the yield on the referenced name (or an index’s referenced names) public fixed maturity cash instruments and swap rates, at the time the agreement is executed. If there is an event of default by the referenced name or one of the referenced names in the index, as defined by the agreement, then the Company is obligated to pay the referenced amount of the contract to the counterparty and receive in return the referenced defaulted security or similar security (in the case of a credit default index) or pay the referenced amount less the auction recovery rate. See credit derivatives section for further discussion of guarantees. In addition to selling credit protection, the Company purchases credit protection using credit derivatives to hedge specific credit exposures in the Company’s investment portfolio.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Other Contracts
“To Be Announced” (“TBA”) Forward Contracts. The Company uses TBA forward contracts to gain exposure to the investment risk and return of mortgage-backed securities. TBA transactions can help the Company enhance the return on its investment portfolio, and can provide a more liquid and cost-effective method of achieving these goals than purchasing or selling individual mortgage-backed pools. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. Additionally, pursuant to the Company’s mortgage dollar roll program, TBAs or mortgage-backed securities are transferred to counterparties with a corresponding agreement to repurchase them at a future date. These transactions do not qualify as secured borrowings and are accounted for as derivatives.
Loan Commitments. In its mortgage operations, the Company enters into commitments to fund commercial mortgage loans at specified interest rates and other applicable terms within specified periods of time. These commitments are legally binding agreements to extend credit to a counterparty. Loan commitments for loans that will be held for sale are recognized as derivatives and recorded at fair value. The determination of the fair value of loan commitments accounted for as derivatives considers various factors including, among others, terms of the related loan, the intended exit strategy for the loans based upon either securitization valuation models or investor purchase commitments, prevailing interest rates, origination income or expense, and the value of service rights. Loan commitments that relate to the origination of mortgage loans that will be held for investment are not accounted for as derivatives and accordingly are not recognized in the Company’s financial statements. See Note 25 for additional information.
Embedded Derivatives. The Company offers certain products (for example, indexed universal life) which may include features that are accounted for as embedded derivatives. These embedded derivatives are carried at fair value through “Realized investment gains (losses), net” based on the change in value of the underlying contractual features, which are determined using valuation models. As part of certain funds withheld reinsurance and modified coinsurance arrangements that are described in Note 15, the reinsurance arrangements may contain embedded derivatives, which would also be carried at fair value through “Realized investment gains (losses), net” based on the total return of the underlying asset portfolio.
Synthetic Guarantees. The Company sells synthetic GICs, through investment-only sales channels, to investment vehicles primarily used by qualified defined contribution pension plans. The synthetic GICs are issued in respect of assets that are owned by the trustees of such plans, who invest the assets according to the contract terms agreed to with the Company. The contracts establish participant balances and credit interest thereon. The participant balances are supported by the underlying assets. In connection with certain participant-initiated withdrawals, the contract guarantees that after all underlying assets are liquidated, any remaining participant balances will be paid by the Company. These contracts are accounted for as derivatives and recorded at fair value.
Primary Risks Managed by Derivatives
The table below provides a summary of the gross notional amount and fair value of derivative contracts by the primary underlying risks they are utilized to manage, excluding embedded derivatives. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account the netting effects of master netting agreements and cash collateral. These netting impacts resulted in total derivative assets of $1,601 million and $1,103 million as of December 31, 2024 and 2023, respectively, and total derivative liabilities of $4,751 million and $4,181 million as of December 31, 2024 and 2023, respectively, reflected in the Consolidated Statements of Financial Position.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Primary Underlying Risk / Instrument Type | Fair Value | Fair Value | |||||||||||||||||||||||||||||||||
| Gross Notional | Assets | Liabilities | Gross Notional | Assets | Liabilities | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Derivatives Designated as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||
| Interest Rate | |||||||||||||||||||||||||||||||||||
| Interest Rate Swaps | $ | 4,260 | $ | 11 | $ | (404) | $ | 3,582 | $ | 55 | $ | (252) | |||||||||||||||||||||||
| Interest Rate Forwards | 10 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Foreign Currency | |||||||||||||||||||||||||||||||||||
| Foreign Currency Forwards | 4,771 | 92 | (197) | 4,748 | 43 | (195) | |||||||||||||||||||||||||||||
| Currency/Interest Rate | |||||||||||||||||||||||||||||||||||
| Foreign Currency Swaps | 31,301 | 2,652 | (368) | 27,933 | 1,952 | (676) | |||||||||||||||||||||||||||||
| Total Derivatives Designated as Hedge Accounting Instruments | $ | 40,342 | $ | 2,755 | $ | (969) | $ | 36,263 | $ | 2,050 | $ | (1,123) | |||||||||||||||||||||||
| Derivatives Not Qualifying as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||
| Interest Rate | |||||||||||||||||||||||||||||||||||
| Interest Rate Swaps | $ | 228,392 | $ | 11,272 | $ | (24,802) | $ | 224,445 | $ | 8,604 | $ | (21,599) | |||||||||||||||||||||||
| Interest Rate Futures | 9,773 | 6 | (21) | 10,448 | 7 | (26) | |||||||||||||||||||||||||||||
| Interest Rate Options | 34,005 | 430 | (1,583) | 32,718 | 292 | (1,095) | |||||||||||||||||||||||||||||
| Interest Rate Forwards | 2,544 | 9 | (80) | 3,678 | 39 | (14) | |||||||||||||||||||||||||||||
| Interest Rate Total Return Swaps | 485 | 4 | (2) | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Foreign Currency | |||||||||||||||||||||||||||||||||||
| Foreign Currency Forwards | 27,819 | 1,625 | (1,181) | 27,686 | 965 | (954) | |||||||||||||||||||||||||||||
| Currency/Interest Rate | |||||||||||||||||||||||||||||||||||
| Foreign Currency Swaps | 7,525 | 658 | (129) | 7,771 | 502 | (164) | |||||||||||||||||||||||||||||
| Credit | |||||||||||||||||||||||||||||||||||
| Credit Default Swaps | 4,027 | 90 | 0 | 3,446 | 64 | 0 | |||||||||||||||||||||||||||||
| Equity | |||||||||||||||||||||||||||||||||||
| Equity Futures | 2,019 | 6 | (7) | 672 | 1 | (2) | |||||||||||||||||||||||||||||
| Equity Options | 104,438 | 4,507 | (3,790) | 51,792 | 1,688 | (1,662) | |||||||||||||||||||||||||||||
| Equity Total Return Swaps | 9,796 | 331 | (327) | 9,237 | 48 | (514) | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Other(1) | 1,250 | 0 | 0 | 1,250 | 0 | 0 | |||||||||||||||||||||||||||||
| Synthetic GICs | 76,416 | 1 | (1) | 78,009 | 1 | (1) | |||||||||||||||||||||||||||||
| Total Derivatives Not Qualifying as Hedge Accounting Instruments | $ | 508,489 | $ | 18,939 | $ | (31,923) | $ | 451,152 | $ | 12,211 | $ | (26,031) | |||||||||||||||||||||||
| Total Derivatives(2)(3) | $ | 548,831 | $ | 21,694 | $ | (32,892) | $ | 487,415 | $ | 14,261 | $ | (27,154) |
(1)“Other” primarily includes derivative contracts used to improve the balance of the Company’s tail longevity and mortality risk. Under these contracts, the Company’s gains (losses) are capped at the notional amount.
(2)Excludes embedded derivatives which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $11,783 million (including the Prismic funds withheld-related embedded derivative net liability of $(91) million) and $8,096 million (including the Prismic funds withheld-related embedded derivative net liability of $508 million) as of December 31, 2024, and 2023, respectively, primarily included in “Policyholders’ account balances” and “Reinsurance and funds withheld payables.”
(3)Recorded in “Other invested assets” and “Other liabilities” on the Consolidated Statements of Financial Position.
As of December 31, 2024, the following amounts were recorded on the Consolidated Statements of Financial Position related to the carrying amount of the hedged assets (liabilities) and cumulative basis adjustments included in the carrying amount for fair value hedges:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Balance Sheet Line Item in which Hedged Item is Recorded | Carrying Amount of the Hedged Assets (Liabilities) | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1) | Carrying Amount of the Hedged Assets (Liabilities) | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1) | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Fixed maturities, available-for-sale, at fair value | $ | 216 | $ | 11 | $ | 224 | $ | 19 | ||||||||||||||||||
| Policyholders’ account balances | $ | (1,510) | $ | 327 | $ | (810) | $ | 219 | ||||||||||||||||||
| Future policy benefits | $ | (2,280) | $ | 423 | $ | (2,441) | $ | 298 |
(1)There were no material fair value hedging adjustments for hedged assets and liabilities for which hedge accounting has been discontinued.
Most of the Company’s derivatives do not qualify for hedge accounting for various reasons. For example: (i) derivatives that economically hedge embedded derivatives do not qualify for hedge accounting because changes in the fair value of the embedded derivatives are already recorded in net income; (ii) derivatives that are utilized as macro hedges of the Company’s exposure to various risks typically do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedge accounting rules; and (iii) synthetic GICs, which are product standalone derivatives, do not qualify as hedging instruments under hedge accounting rules.
Offsetting Assets and Liabilities
The following tables present recognized derivative instruments (excluding embedded derivatives), and repurchase and reverse repurchase agreements that are offset in the Consolidated Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Consolidated Statements of Financial Position:
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Gross Amounts of Recognized Financial Instruments | Gross Amounts Offset in the Statements of Financial Position | Net Amounts Presented in the Statements of Financial Position | Financial Instruments/ Collateral(1) | Net Amount | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Offsetting of Financial Assets: | ||||||||||||||||||||||||||||||||
| Derivatives | $ | 21,574 | $ | (20,093) | $ | 1,481 | $ | (696) | $ | 785 | ||||||||||||||||||||||
| Securities purchased under agreement to resell | 277 | 0 | 277 | (277) | 0 | |||||||||||||||||||||||||||
| Total Assets | $ | 21,851 | $ | (20,093) | $ | 1,758 | $ | (973) | $ | 785 | ||||||||||||||||||||||
| Offsetting of Financial Liabilities: | ||||||||||||||||||||||||||||||||
| Derivatives | $ | 32,891 | $ | (28,141) | $ | 4,750 | $ | (4,403) | $ | 347 | ||||||||||||||||||||||
| Securities sold under agreement to repurchase | 6,796 | 0 | 6,796 | (6,796) | 0 | |||||||||||||||||||||||||||
| Total Liabilities | $ | 39,687 | $ | (28,141) | $ | 11,546 | $ | (11,199) | $ | 347 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| Gross Amounts of Recognized Financial Instruments | Gross Amounts Offset in the Statements of Financial Position | Net Amounts Presented in the Statements of Financial Position | Financial Instruments/ Collateral(1) | Net Amount | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Offsetting of Financial Assets: | ||||||||||||||||||||||||||||||||
| Derivatives | $ | 14,169 | $ | (13,158) | $ | 1,011 | $ | (240) | $ | 771 | ||||||||||||||||||||||
| Securities purchased under agreement to resell | 388 | 0 | 388 | (363) | 25 | |||||||||||||||||||||||||||
| Total Assets | $ | 14,557 | $ | (13,158) | $ | 1,399 | $ | (603) | $ | 796 | ||||||||||||||||||||||
| Offsetting of Financial Liabilities: | ||||||||||||||||||||||||||||||||
| Derivatives | $ | 27,154 | $ | (22,973) | $ | 4,181 | $ | (3,775) | $ | 406 | ||||||||||||||||||||||
| Securities sold under agreement to repurchase | 6,056 | 0 | 6,056 | (5,811) | 245 | |||||||||||||||||||||||||||
| Total Liabilities | $ | 33,210 | $ | (22,973) | $ | 10,237 | $ | (9,586) | $ | 651 |
(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.
For information regarding the rights of offset associated with the derivative assets and liabilities in the table above, see “**—**Counterparty Credit Risk” below. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information regarding the Company’s accounting policy for securities repurchase and resale agreements, see Note 2.
Cash Flow, Fair Value and Net Investment Hedges
The primary derivative and non-derivative instruments used by the Company in its fair value, cash flow and net investment hedge accounting relationships are interest rate swaps, currency swaps, currency forwards, and foreign currency denominated debts. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit, or equity derivatives in any of its fair value, cash flow or net investment hedge accounting relationships.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following tables provide the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, including the offset of the hedged item in fair value hedge relationships.
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Realized Investment Gains (Losses) | Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss) | Net Investment Income | Other Income (Loss) | Interest Expense | Interest Credited to Policyholders’ Account Balances | Policyholders’ Benefits | Change in AOCI(1) | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives Designated as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Gains (losses) on derivatives designated as hedge instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | $ | 8 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | (119) | $ | (125) | $ | 0 | |||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | (31) | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on derivatives designated as hedge instruments | 8 | 0 | 0 | 0 | 0 | (119) | (156) | 0 | |||||||||||||||||||||||||||||||||||||||
| Gains (losses) on the hedged item: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (8) | 0 | 12 | 0 | 0 | 109 | 95 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | 31 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on hedged item | (8) | 0 | 12 | 0 | 0 | 109 | 126 | 0 | |||||||||||||||||||||||||||||||||||||||
| Amortization for gains (losses) excluded from assessment of the effectiveness | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | (10) | (4) | |||||||||||||||||||||||||||||||||||||||
| Total amortization for gains (losses) excluded from assessment of the effectiveness | 0 | 0 | 0 | 0 | 0 | 0 | (10) | (4) | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on fair value hedges net of hedged item | 0 | 0 | 12 | 0 | 0 | (10) | (40) | (4) | |||||||||||||||||||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (15) | 0 | (16) | 0 | 0 | 0 | 0 | 2 | |||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 52 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 78 | 0 | 328 | 207 | 0 | 0 | 0 | 857 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on cash flow hedges | 63 | 0 | 312 | 207 | 0 | 0 | 0 | 911 | |||||||||||||||||||||||||||||||||||||||
| Net investment hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 27 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on net investment hedges | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 27 | |||||||||||||||||||||||||||||||||||||||
| Derivatives Not Qualifying as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (1,554) | (2,313) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency | 263 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 292 | 0 | 0 | 2 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Credit | 109 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Equity | 3,257 | (852) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Embedded Derivatives (2) | (1,752) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on derivatives not qualifying as hedge accounting instruments | 615 | (3,165) | 0 | 2 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 678 | $ | (3,165) | $ | 324 | $ | 209 | $ | 0 | $ | (10) | $ | (40) | $ | 934 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Realized Investment Gains (Losses) | Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss) | Net Investment Income | Other Income (Loss) | Interest Expense | Interest Credited to Policyholders’ Account Balances | Policyholders’ Benefits | Change in AOCI(1) | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives Designated as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Gains (losses) on derivatives designated as hedge instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | $ | 2 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | (31) | $ | (39) | $ | 0 | |||||||||||||||||||||||||||||||
| Currency | (1) | 0 | (1) | 0 | 0 | 0 | 104 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on derivatives designated as hedge instruments | 1 | 0 | (1) | 0 | 0 | (31) | 65 | 0 | |||||||||||||||||||||||||||||||||||||||
| Gains (losses) on the hedged item: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (2) | 0 | 13 | 0 | 0 | 2 | 10 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency | 1 | 0 | 1 | 0 | 0 | 0 | (102) | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on hedged item | (1) | 0 | 14 | 0 | 0 | 2 | (92) | 0 | |||||||||||||||||||||||||||||||||||||||
| Amortization for gains (losses) excluded from assessment of the effectiveness | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | (8) | (6) | |||||||||||||||||||||||||||||||||||||||
| Total amortization for gains (losses) excluded from assessment of the effectiveness | 0 | 0 | 0 | 0 | 0 | 0 | (8) | (6) | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on fair value hedges net of hedged item | 0 | 0 | 13 | 0 | 0 | (29) | (35) | (6) | |||||||||||||||||||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (21) | 0 | (16) | 0 | 0 | 0 | 0 | 23 | |||||||||||||||||||||||||||||||||||||||
| Currency | 8 | 0 | 0 | 0 | 0 | 0 | 0 | (122) | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 74 | 0 | 315 | (189) | 0 | 0 | 0 | (1,648) | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on cash flow hedges | 61 | 0 | 299 | (189) | 0 | 0 | 0 | (1,747) | |||||||||||||||||||||||||||||||||||||||
| Net investment hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 12 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on net investment hedges | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 12 | |||||||||||||||||||||||||||||||||||||||
| Derivatives Not Qualifying as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (285) | (1,657) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency | (567) | 0 | 0 | 3 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | (211) | 0 | 0 | (3) | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Credit | 164 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Equity | 1,751 | (929) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Embedded Derivatives (2) | (3,133) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on derivatives not qualifying as hedge accounting instruments | (2,281) | (2,586) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | (2,220) | $ | (2,586) | $ | 312 | $ | (189) | $ | 0 | $ | (29) | $ | (35) | $ | (1,741) |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
| Realized Investment Gains (Losses) | Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss) | Net Investment Income | Other Income (Loss) | Interest Expense | Interest Credited to Policyholders’ Account Balances | Policyholders’ Benefits | Change in AOCI(1) | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives Designated as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Gains (losses) on derivatives designated as hedge instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | $ | 39 | $ | 0 | $ | (5) | $ | 0 | $ | 0 | $ | (375) | $ | (438) | $ | 0 | |||||||||||||||||||||||||||||||
| Currency | (28) | 0 | (2) | 0 | 0 | 0 | (224) | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on derivatives designated as hedge instruments | 11 | 0 | (7) | 0 | 0 | (375) | (662) | 0 | |||||||||||||||||||||||||||||||||||||||
| Gains (losses) on the hedged item: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (39) | 0 | 14 | 0 | 0 | 387 | 448 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency | 31 | 0 | 9 | 0 | 0 | 0 | 225 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on hedged item | (8) | 0 | 23 | 0 | 0 | 387 | 673 | 0 | |||||||||||||||||||||||||||||||||||||||
| Amortization for gains (losses) excluded from assessment of the effectiveness | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | (4) | (19) | |||||||||||||||||||||||||||||||||||||||
| Total amortization for gains (losses) excluded from assessment of the effectiveness | 0 | 0 | 0 | 0 | 0 | 0 | (4) | (19) | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on fair value hedges net of hedged item | 3 | 0 | 16 | 0 | 0 | 12 | 7 | (19) | |||||||||||||||||||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (4) | 0 | (3) | 0 | 0 | 0 | 0 | (217) | |||||||||||||||||||||||||||||||||||||||
| Currency | 15 | 0 | 0 | 0 | 0 | 0 | 0 | 191 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 121 | 0 | 299 | 477 | 0 | 0 | 0 | 1,623 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on cash flow hedges | 132 | 0 | 296 | 477 | 0 | 0 | 0 | 1,597 | |||||||||||||||||||||||||||||||||||||||
| Net investment hedges | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on net investment hedges | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2 | |||||||||||||||||||||||||||||||||||||||
| Derivatives Not Qualifying as Hedge Accounting Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate | (3,410) | (6,483) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency | (400) | 0 | 0 | (3) | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Currency/Interest Rate | 854 | 0 | 0 | 6 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Credit | 5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Equity | 6 | 1,403 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Other | 2 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Embedded Derivatives (2) | (26) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total gains (losses) on derivatives not qualifying as hedge accounting instruments | (2,969) | (5,080) | 0 | 3 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | (2,834) | $ | (5,080) | $ | 312 | $ | 480 | $ | 0 | $ | 12 | $ | 7 | $ | 1,580 |
(1)Excludes changes related to net investment hedges using non-derivative instruments of $78 million, $28 million, and $134 million for the years ended December 31, 2024, 2023, and 2022, respectively.
(2)Includes the Prismic funds withheld-related embedded derivative realized gain (loss) of $598 million and $(508) million for the years ended December 31, 2024 and 2023, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Presented below is a rollforward of current period cash flow hedges in AOCI before taxes:
| (in millions) | |||||
| Balance, December 31, 2021 | $ | 1,019 | |||
| Amount recorded in AOCI | |||||
| Interest Rate | (224) | ||||
| Currency | 206 | ||||
| Currency/Interest Rate | 2,520 | ||||
| Total amount recorded in AOCI | 2,502 | ||||
| Amount reclassified from AOCI to income | |||||
| Interest Rate | 7 | ||||
| Currency | (15) | ||||
| Currency/Interest Rate | (897) | ||||
| Total amount reclassified from AOCI to income | (905) | ||||
| Balance, December 31, 2022 | $ | 2,616 | |||
| Amount recorded in AOCI | |||||
| Interest Rate | (15) | ||||
| Currency | (108) | ||||
| Currency/Interest Rate | (1,448) | ||||
| Total amount recorded in AOCI | (1,571) | ||||
| Amount reclassified from AOCI to income | |||||
| Interest Rate | 38 | ||||
| Currency | (14) | ||||
| Currency/Interest Rate | (200) | ||||
| Total amount reclassified from AOCI to income | (176) | ||||
| Balance, December 31, 2023 | $ | 869 | |||
| Amount recorded in AOCI | |||||
| Interest Rate | (28) | ||||
| Currency | 55 | ||||
| Currency/Interest Rate | 1,469 | ||||
| Total amount recorded in AOCI | 1,496 | ||||
| Amount reclassified from AOCI to income | |||||
| Interest Rate | 30 | ||||
| Currency | (3) | ||||
| Currency/Interest Rate | (612) | ||||
| Total amount reclassified from AOCI to income | (585) | ||||
| Balance, December 31, 2024 | $ | 1,780 |
The changes in fair value of cash flow hedges are deferred in AOCI and are included in “Net unrealized investment gains (losses)” in the Consolidated Statements of Comprehensive Income; these amounts are then reclassified to earnings when the hedged item affects earnings. Using December 31, 2024 values, it is estimated that a pre-tax gain of approximately $405 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending December 31, 2025.
The exposures the Company is hedging with these qualifying cash flow hedges include the variability of future cash flows from forecasted transactions denominated in foreign currencies, the purchases of invested assets, and the receipt or payment of variable interest on existing financial instruments. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is 27 years.
There were no material amounts reclassified from AOCI into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging. In addition, there were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.
For net investment hedges, in addition to derivatives, the Company uses foreign currency denominated debt to hedge the risk of change in the net investment in a foreign subsidiary due to changes in exchange rates. For effective net investment hedges, the amounts, before applicable taxes, recorded in the cumulative translation adjustment within AOCI were $104 million for the year ended December 31, 2024, $39 million for the year ended December 31, 2023, and $134 million for the year ended December 31, 2022.
Credit Derivatives
The following tables provide a summary of the notional and fair value of written credit protection, presented as assets (liabilities). The Company’s maximum amount at risk under these credit derivatives, assuming the value of the underlying referenced securities become worthless, is equal to the notional amounts. These credit derivatives have maturities of less than 10 years for index reference.
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| NAIC Rating Designation of Underlying Credit Obligation(1) | ||||||||||||||||||||||||||||||||||||||||||||
| NAIC 1 | NAIC 2 | NAIC 3 | NAIC 4 | NAIC 5 | NAIC 6(2) | Total | ||||||||||||||||||||||||||||||||||||||
| Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | |||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||
| Single name reference(3) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
| Index reference(3) | 0 | 0 | 0 | 0 | 3,365 | 40 | 0 | 0 | 0 | 0 | 662 | 50 | 4,027 | 90 | ||||||||||||||||||||||||||||||
| Total | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 3,365 | $ | 40 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 662 | $ | 50 | $ | 4,027 | $ | 90 |
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| NAIC Rating Designation of Underlying Credit Obligation(1) | ||||||||||||||||||||||||||||||||||||||||||||
| NAIC 1 | NAIC 2 | NAIC 3 | NAIC 4 | NAIC 5 | NAIC 6(2) | Total | ||||||||||||||||||||||||||||||||||||||
| Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | |||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||
| Single name reference(3) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
| Index reference(3) | 0 | 0 | 0 | 0 | 2,723 | 19 | 0 | 0 | 89 | 5 | 634 | 40 | 3,446 | 64 | ||||||||||||||||||||||||||||||
| Total | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,723 | $ | 19 | $ | 0 | $ | 0 | $ | 89 | $ | 5 | $ | 634 | $ | 40 | $ | 3,446 | $ | 64 |
(1)The NAIC rating designations are based on availability and the lowest ratings among Moody's Investors Service, Inc. (“Moody's”), Standard & Poor’s Rating Services (“S&P”) and Fitch Ratings Inc. (“Fitch”). If no rating is available from a rating agency, a NAIC 6 rating is used.
(2)The NAIC rating designation is due to approximately 4% and 3% of the index reference name rated as NAIC 6 as of December 31, 2024, and 2023, respectively.
(3)Single name credit default swaps may make reference to the credit of corporate debt, sovereign debt, and structured finance. Index reference NAIC designations are based on the lowest rated single name reference included in the index.
The Company has no exposure on purchased credit protection as of December 31, 2024, and 2023.
Counterparty Credit Risk
The Company is exposed to losses in the event of non-performance by counterparties to financial derivative transactions with a positive fair value. The Company manages credit risk by: (i) entering into derivative transactions with highly rated major financial institutions and other creditworthy counterparties governed by master netting agreements, as applicable; (ii) trading through central clearing and over-the-counter (“OTC”) parties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Substantially all of the Company’s derivative agreements have zero thresholds which require daily full collateralization by the party in a liability position. In addition, certain of the Company’s derivative agreements contain credit-risk related contingent features; if the credit rating of one of the parties to the derivative agreement is to fall below a certain level, the party with positive fair value could request termination at the then fair value or demand immediate full collateralization from the party whose credit rating fell and is in a net liability position.
As of December 31, 2024, there were no net liability derivative positions with counterparties with credit risk-related contingent features. All derivatives have been appropriately collateralized by the Company or the counterparty in accordance with the terms of the derivative agreements.
**6.**FAIR VALUE OF ASSETS AND LIABILITIES
Fair Value Measurement—Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
Level 1—Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. The Company’s Level 1 assets and liabilities primarily include certain cash equivalents and short-term investments, equity securities and derivative contracts that trade on an active exchange market.
Level 2—Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs. The Company’s Level 2 assets and liabilities include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed securities, etc.), certain equity securities (mutual funds, which do not trade in active markets because they are not publicly available), certain commercial mortgage loans, short-term investments, certain cash equivalents (primarily commercial paper), and certain OTC derivatives.
Level 3—Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value. The Company’s Level 3 assets and liabilities primarily include: certain private fixed maturities and equity securities, certain manually priced public equity securities and fixed maturities, certain highly structured OTC derivative contracts, certain consolidated real estate funds for which the Company is the general partner, contracts or contract features pertaining to living benefit features (market risk benefits) of the Company’s variable annuity contracts and embedded derivatives associated with the index-linked features of certain universal life and annuity products.
Assets and Liabilities by Hierarchy Level—The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2024 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting(1) | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 0 | $ | 20,348 | $ | 0 | $ | $ | 20,348 | ||||||||||||||||||||
| Obligations of U.S. states and their political subdivisions | 0 | 6,098 | 6 | 6,104 | |||||||||||||||||||||||||
| Foreign government securities | 0 | 57,472 | 7 | 57,479 | |||||||||||||||||||||||||
| U.S. corporate public securities | 0 | 98,442 | 66 | 98,508 | |||||||||||||||||||||||||
| U.S. corporate private securities(2) | 0 | 39,848 | 3,941 | 43,789 | |||||||||||||||||||||||||
| Foreign corporate public securities | 0 | 21,946 | 36 | 21,982 | |||||||||||||||||||||||||
| Foreign corporate private securities | 0 | 32,675 | 1,788 | 34,463 | |||||||||||||||||||||||||
| Asset-backed securities(3) | 0 | 15,654 | 1,480 | 17,134 | |||||||||||||||||||||||||
| Commercial mortgage-backed securities | 0 | 8,420 | 853 | 9,273 | |||||||||||||||||||||||||
| Residential mortgage-backed securities | 0 | 2,490 | 0 | 2,490 | |||||||||||||||||||||||||
| Subtotal | 0 | 303,393 | 8,177 | 311,570 | |||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities: | |||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | 0 | 220 | 0 | 220 | |||||||||||||||||||||||||
| Foreign government securities | 0 | 539 | 0 | 539 | |||||||||||||||||||||||||
| Corporate securities | 0 | 67 | 0 | 67 | |||||||||||||||||||||||||
| Equity securities | 1,522 | 1,359 | 0 | 2,881 | |||||||||||||||||||||||||
| Subtotal | 1,522 | 2,185 | 0 | 3,707 | |||||||||||||||||||||||||
| Market risk benefit assets | 0 | 0 | 2,331 | 2,331 | |||||||||||||||||||||||||
| Fixed maturities, trading | 0 | 10,544 | 1,986 | 12,530 | |||||||||||||||||||||||||
| Equity securities | 7,154 | 1,745 | 518 | 9,417 | |||||||||||||||||||||||||
| Commercial mortgage and other loans | 0 | 469 | 233 | 702 | |||||||||||||||||||||||||
| Other invested assets(5) | 10 | 21,683 | 953 | (20,093) | 2,553 | ||||||||||||||||||||||||
| Short-term investments | 1,896 | 6,238 | 461 | 8,595 | |||||||||||||||||||||||||
| Cash equivalents | 326 | 10,365 | 0 | 10,691 | |||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 0 | 236 | 613 | 849 | |||||||||||||||||||||||||
| Other assets | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| Separate account assets(6)(7) | 8,441 | 157,999 | 232 | 166,672 | |||||||||||||||||||||||||
| Total assets | $ | 19,349 | $ | 514,857 | $ | 15,504 | $ | (20,093) | $ | 529,617 | |||||||||||||||||||
| Market risk benefit liabilities | $ | 0 | $ | 0 | $ | 4,455 | $ | $ | 4,455 | ||||||||||||||||||||
| Policyholders’ account balances | 0 | 0 | 12,746 | 12,746 | |||||||||||||||||||||||||
| Reinsurance and funds withheld payables | 0 | (118) | 0 | (118) | |||||||||||||||||||||||||
| Other liabilities | 28 | 32,863 | 1 | (28,141) | 4,751 | ||||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | 0 | 60 | 60 | |||||||||||||||||||||||||
| Total liabilities | $ | 28 | $ | 32,745 | $ | 17,262 | $ | (28,141) | $ | 21,894 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2023 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting(1) | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 0 | $ | 21,796 | $ | 0 | $ | $ | 21,796 | ||||||||||||||||||||
| Obligations of U.S. states and their political subdivisions | 0 | 8,451 | 7 | 8,458 | |||||||||||||||||||||||||
| Foreign government securities | 0 | 70,182 | 8 | 70,190 | |||||||||||||||||||||||||
| U.S. corporate public securities | 0 | 98,097 | 75 | 98,172 | |||||||||||||||||||||||||
| U.S. corporate private securities(2) | 0 | 38,199 | 2,821 | 41,020 | |||||||||||||||||||||||||
| Foreign corporate public securities | 0 | 19,576 | 67 | 19,643 | |||||||||||||||||||||||||
| Foreign corporate private securities | 0 | 30,447 | 1,843 | 32,290 | |||||||||||||||||||||||||
| Asset-backed securities(3) | 0 | 12,236 | 359 | 12,595 | |||||||||||||||||||||||||
| Commercial mortgage-backed securities | 0 | 8,954 | 938 | 9,892 | |||||||||||||||||||||||||
| Residential mortgage-backed securities | 0 | 2,265 | 0 | 2,265 | |||||||||||||||||||||||||
| Subtotal | 0 | 310,203 | 6,118 | 316,321 | |||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities: | |||||||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | 0 | 206 | 0 | 206 | |||||||||||||||||||||||||
| Foreign government securities | 0 | 604 | 0 | 604 | |||||||||||||||||||||||||
| Corporate securities | 0 | 79 | 0 | 79 | |||||||||||||||||||||||||
| Equity securities | 1,004 | 1,275 | 0 | 2,279 | |||||||||||||||||||||||||
| Subtotal | 1,004 | 2,164 | 0 | 3,168 | |||||||||||||||||||||||||
| Market risk benefit assets | 0 | 0 | 1,981 | 1,981 | |||||||||||||||||||||||||
| Fixed maturities, trading | 0 | 9,361 | 429 | 9,790 | |||||||||||||||||||||||||
| Equity securities(4) | 5,953 | 1,538 | 512 | 8,003 | |||||||||||||||||||||||||
| Commercial mortgage and other loans | 0 | 519 | 0 | 519 | |||||||||||||||||||||||||
| Other invested assets(5) | 27 | 14,234 | 846 | (13,158) | 1,949 | ||||||||||||||||||||||||
| Short-term investments | 125 | 3,746 | 29 | 3,900 | |||||||||||||||||||||||||
| Cash equivalents | 2,240 | 8,058 | 4 | 10,302 | |||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 0 | (75) | 224 | 149 | |||||||||||||||||||||||||
| Other assets | 0 | 0 | 11 | 11 | |||||||||||||||||||||||||
| Separate account assets(6)(7) | 8,925 | 161,793 | 1,094 | 171,812 | |||||||||||||||||||||||||
| Total assets | $ | 18,274 | $ | 511,541 | $ | 11,248 | $ | (13,158) | $ | 527,905 | |||||||||||||||||||
| Market risk benefit liabilities | $ | 0 | $ | 0 | $ | 5,467 | $ | $ | 5,467 | ||||||||||||||||||||
| Policyholders’ account balances | 0 | 0 | 7,752 | 7,752 | |||||||||||||||||||||||||
| Reinsurance and funds withheld payables | 0 | 490 | 0 | 490 | |||||||||||||||||||||||||
| Other liabilities | 35 | 27,112 | 1 | (22,973) | 4,175 | ||||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | 0 | 778 | 778 | |||||||||||||||||||||||||
| Total liabilities | $ | 35 | $ | 27,602 | $ | 13,998 | $ | (22,973) | $ | 18,662 |
(1)“Netting” amounts represent cash collateral of $(8,049) million and $(9,815) million as of December 31, 2024 and 2023, respectively, and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting agreements.
(2)Excludes notes with fair value of $14,748 million (carrying amount of $14,748 million) and $12,370 million (carrying amount of $12,370 million) as of December 31, 2024 and 2023, respectively, which have been offset with the associated debt under a netting agreement.
(3)Includes credit-tranched securities collateralized by loan obligations, home equity loans, auto loans, education loans and other asset types.
(4)Equity securities excluded from the fair value hierarchy include a fund for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. As of December 31, 2023, the fair value of this investment was $239 million.
(5)Other invested assets excluded from the fair value hierarchy include certain hedge funds, private equity funds and other funds for which fair value is measured at NAV per share (or its equivalent) as a practical expedient. As of December 31, 2024 and 2023, the fair value of such investments was $5,021 million and $4,125 million, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
(6)Separate account assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate, hedge funds and other invested assets. As of December 31, 2024 and 2023, the fair value of such investments was $26,700 million and $27,076 million, respectively.
(7)Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Consolidated Statements of Financial Position.
The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below.
Fixed Maturity Securities—The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Prices for each security are generally sourced from multiple pricing vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company ultimately uses the price from the pricing service highest in the vendor hierarchy based on the respective asset type. The pricing hierarchy is updated for new financial products and recent pricing experience with various vendors. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. Typical inputs used by these pricing services include but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, and/or estimated cash flow, prepayment speeds and default rates. If the pricing information received from third-party pricing services is deemed not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service or classify the securities as Level 3. If the pricing service updates the price to be more consistent with the presented market observations, the security remains within Level 2.
Internally-developed valuations or indicative broker quotes are also used to determine fair value in circumstances where vendor pricing is not available, or where the Company ultimately concludes that pricing information received from the independent pricing services is not reflective of market activity. If the Company concludes the values from both pricing services and brokers are not reflective of market activity, it may override the information with an internally-developed valuation. As of December 31, 2024 and 2023, overrides on a net basis were not material. Pricing service overrides, internally-developed valuations and indicative broker quotes are generally included in Level 3 in the fair value hierarchy.
The Company conducts several specific price monitoring activities. Daily analyses identify price changes over predetermined thresholds defined at the financial instrument level. Various pricing integrity reports are reviewed on a daily and monthly basis to determine if pricing is reflective of market activity or if it would warrant any adjustments. Other procedures performed include, but are not limited to, reviews of third-party pricing services methodologies, reviews of pricing trends and back testing.
The fair values of private fixed maturities, which are originated by internal private asset managers, are primarily determined using discounted cash flow models. These models primarily use observable inputs that include Treasury or similar base rates plus estimated credit spreads to value each security. The credit spreads are obtained through a survey of private market intermediaries who are active in both primary and secondary transactions, and consider, among other factors, the credit quality and the reduced liquidity associated with private placements. Internal adjustments are made to reflect variation in observed sector spreads. Since most private placements are valued using standard market observable inputs and inputs derived from, or corroborated by, market observable data including, but not limited to observed prices and spreads for similar publicly-traded issues, they have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model may incorporate significant unobservable inputs, which reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the price of a security, a Level 3 classification is made.
Assets Supporting Experience-Rated Contractholder Liabilities—Assets supporting experience-rated contractholder liabilities consist primarily of fixed maturity securities, equity securities and derivatives whose fair values are determined consistent with similar instruments described above under “Fixed Maturity Securities” and below under “Equity Securities” and “Derivative Instruments.”
Equity Securities—Equity securities consist principally of investments in common and preferred stock of publicly-traded companies, perpetual preferred stock, privately-traded securities, as well as mutual fund shares. The fair values of most publicly-traded equity securities are based on quoted prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for most privately traded equity securities are determined using discounted
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
cash flow, earnings multiple and other valuation models that require a substantial level of judgment around inputs and therefore are classified within Level 3. The fair values of mutual fund shares that transact regularly (but do not trade in active markets because they are not publicly available) are based on transaction prices of identical fund shares and are classified within Level 2 in the fair value hierarchy. The fair values of perpetual preferred stock are based on inputs obtained from independent pricing services that are primarily based on indicative broker quotes. As a result, the fair values of perpetual preferred stock are classified as Level 3.
Commercial Mortgage and Other Loans—The fair value of loans held and accounted for using the fair value option is determined utilizing pricing indicators from the whole loan market, where investors are committed to purchase these loans at a predetermined price, which is considered the principal exit market for these loans. The Company evaluates the valuation inputs used for these assets, including the existence of predetermined exit prices, the terms of the loans, prevailing interest rates and credit risk, and deems the primary pricing inputs are Level 2 inputs in the fair value hierarchy.
Other Invested Assets—Other invested assets primarily include investments in LPs/LLCs, derivatives and certain limited partnerships which are consolidated because the Company is either deemed to exercise control or considered the primary beneficiary of a variable interest entity. These entities are primarily investment companies and follow specialized industry accounting whereby their assets are carried at fair value. The investments held by these entities include various feeder fund investments in underlying master funds (whose underlying holdings generally include public fixed maturities, equity securities and mutual funds), as well as wholly-owned real estate held within other investment funds. For the unconsolidated fund investments, the fair value is primarily determined by the fund managers and is measured at NAV as a practical expedient.
Reinsurance Recoverables and Deposit Receivables—Reinsurance recoverables and deposit receivables primarily include (1) an embedded derivative on deposit receivables where the Company has ceded fixed indexed annuities; and (2) embedded derivatives associated with receivables from modified coinsurance arrangements where the Company is the reinsurer, and net receivables from modified coinsurance arrangements where the Company is the cedant, and generally reflect the fair value of the invested assets retained by the cedant.
Other Assets—Other assets reflected in Level 3 includes the fair value of strategic investments held and accounted for using the fair value option.
Derivative Instruments—Derivatives are recorded at fair value either as assets, within “Other invested assets” or as liabilities, within “Other liabilities,” except for embedded derivatives which are recorded with the associated host contract. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, commodity prices, credit spreads, market volatility, expected returns, NPR, liquidity and other factors. For derivative positions included within Level 3 of the fair value hierarchy, liquidity valuation adjustments are made to reflect the cost of exiting significant risk positions, and consider the bid-ask spread, maturity, complexity and other specific attributes of the underlying derivative position.
The Company’s exchange-traded futures and options include Treasury futures, Eurodollar futures, commodity futures, Eurodollar options and commodity options. Exchange-traded futures and options are valued using quoted prices in active markets and are classified within Level 1 in the fair value hierarchy.
The majority of the Company’s derivative positions are traded in the OTC derivative market and are classified within Level 2 in the fair value hierarchy. OTC derivatives classified within Level 2 are valued using models that utilize actively quoted or observable market inputs from external market data providers, third-party pricing vendors and/or recent trading activity. The Company’s policy is to use mid-market pricing in determining its best estimate of fair value. The fair values of most OTC derivatives, including interest rate and cross-currency swaps, currency forward contracts, commodity forward contracts, credit default swaps, loan commitments held for sale and TBA forward contracts on highly rated mortgage-backed securities issued by U.S. government sponsored entities are determined using discounted cash flow models. The fair values of European style option contracts are determined using Black-Scholes option pricing models. These models’ key inputs include the contractual terms of the respective contract, along with significant observable inputs, including interest rates, currency rates, credit spreads, equity prices, index dividend yields, NPR, volatility and other factors.
The Company’s cleared interest rate swaps and credit derivatives linked to an index are valued using models that utilize actively quoted or observable market inputs, including SOFR, obtained from external market data providers, third-party pricing vendors and/or recent trading activity. These derivatives are classified as Level 2 in the fair value hierarchy.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The majority of the Company’s derivative agreements are with highly rated major international financial institutions. To reflect the market’s perception of its own and the counterparty’s NPR, the Company incorporates additional spreads over SOFR into the discount rate used in determining the fair value of OTC derivative liabilities after netting of collateral. Rates used to discount expected cash flows to value OTC derivative assets reflect the terms of the Credit Support Annex (“CSA”).
Derivatives classified as Level 3 include look-back equity options and other structured products. These derivatives are valued based upon models, such as Monte Carlo simulation models and other techniques that utilize significant unobservable inputs. Level 3 methodologies are validated through periodic comparison of the Company’s fair values to external broker-dealer values.
Cash Equivalents and Short-Term Investments—Cash equivalents and short-term investments include money market instruments, commercial paper and other highly liquid debt instruments. Certain money market instruments are valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The remaining instruments in this category are generally fair valued based on market observable inputs and these investments have primarily been classified within Level 2.
Separate Account Assets—Separate account assets include mutual funds, fixed maturity securities, treasuries, equity securities, real estate and commercial mortgage loans for which values are determined consistent with similar instruments described above under “Fixed Maturity Securities,” “Equity Securities” and “Commercial Mortgage and Other Loans.”
Market Risk Benefits—As a result of the adoption of ASU 2018-12 in the first quarter of 2023, the Company is required to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value. Market risk benefit liabilities (or assets) represent contracts or contract features that provide protection to the contractholder and expose the insurance entity to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits in the Retirement Strategies segment including GMDB, GMIB, GMAB, GMWB and GMIWB. The benefits are bundled together and accounted for as single compound market risk benefits using a fair value measurement framework.
The fair value of these market risk benefits is calculated as the present value of expected future benefit payments to contract holders less the present value of expected future rider fees attributable to the market risk benefits. The fair value of these benefit features is based on assumptions a market participant would use in valuing market risk benefits. This methodology could result in either a liability or asset balance, given changing capital market conditions and various actuarial assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally-developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The determination of these risk premiums requires the use of management’s judgment.
The significant inputs to the valuation models for these market risk benefits include capital market assumptions, such as interest rate levels and volatility assumptions, the Company’s market-perceived NPR, as well as actuarially determined assumptions, including contractholder behavior, such as lapse rates, benefit utilization rates, withdrawal rates, and mortality rates. Since many of these assumptions are unobservable and are considered to be significant inputs to the valuations, the assets and liabilities included in market risk benefits have been reflected within Level 3 in the fair value hierarchy.
Capital market inputs and actual policyholders’ account values are updated each quarter based on capital market conditions as of the end of the quarter, including interest rates, equity markets and volatility. In the risk neutral valuation, the initial swap curve drives the total return used to grow the policyholders’ account values. The Company’s discount rate assumption is based on the SOFR swap curve adjusted for an additional spread relative to SOFR to reflect the Company’s market-perceived NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with the Company issued funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt.
Actuarial assumptions, including contractholder behavior and mortality, are reviewed at least annually, and updated based upon company emerging experience and industry studies, future expectations and other data, including any observable market data. These assumptions are generally updated annually unless a material change that the Company feels is indicative of a long-term trend is observed in an interim period.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Policyholders’ Account Balances—The liability for policyholders’ account balances is related to certain embedded derivative instruments associated with certain universal life and annuity products that provide policyholders with index-linked interest credited over contract specified term periods. The fair values of these liabilities are determined using discounted cash flow models which include capital market assumptions such as interest rates and equity index volatility assumptions, the Company’s market-perceived NPR and actuarially determined assumptions for mortality, lapses and projected hedge costs.
As there is no observable active market for these liabilities, the fair value is determined as the present value of account balances paid to policyholders in excess of contractually guaranteed minimums using option pricing techniques for index term periods that contain deposits as of the valuation date, and the expected option cost for future index term periods, where the terms of index crediting rates have not yet been declared by the Company. Premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows are also incorporated in the fair value of these liabilities. Since the valuation of these liabilities require the use of management’s judgement to determine these risk premiums and the use of unobservable inputs, these liabilities are reflected within Level 3 in the fair value hierarchy.
Capital market inputs, including interest rates and equity markets volatility, and actual policyholders’ account values are updated each quarter. Actuarial assumptions are reviewed at least annually and updated based upon emerging experience, future expectations and other data, including any observable market data. Aside from these annual updates, assumptions are generally updated only if a material change is observed in an interim period that the Company believes is indicative of a long-term trend.
Reinsurance and Funds Withheld Payables—Reinsurance and funds withheld payables primarily includes an embedded derivative associated with certain funds withheld reinsurance arrangements that are described in Note 15 which represents a total return swap associated with the assets supporting the liability to the reinsurer. The fair value is determined based on the valuation of the underlying funds withheld assets identified to support the payable due to the applicable reinsurance counterparties.
Other Liabilities—Other liabilities include certain derivative instruments. The fair values of derivative instruments are primarily determined consistent with those described above under “Derivative Instruments.”
Notes issued by Consolidated VIEs—These notes are based on the fair values of corresponding bank loan collateral. Since the notes are valued based on reference collateral, they are classified as Level 3. See Note 4 and “Fair Value Option” below for additional information.
Quantitative Information Regarding Internally-Priced Level 3 Assets and Liabilities—The tables below present quantitative information regarding significant internally-priced Level 3 assets and liabilities:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Fair Value | Valuation Techniques | Unobservable Inputs | Minimum | Maximum | Weighted Average | Impact of Increase in Input on Fair Value(1) | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||
| Corporate securities(2)(3) | $ | 6,763 | Discounted cash flow | Discount rate | 0.95% | 20.00% | 10.36% | Decrease | |||||||||||||||||||||||||||||||||
| Market comparables | EBITDA multiples(4) | 3.0X | 8.8X | 7.6X | Increase | ||||||||||||||||||||||||||||||||||||
| Liquidation | Liquidation value | 75.00% | 75.00% | 75.00% | Increase | ||||||||||||||||||||||||||||||||||||
| Asset backed securities | $ | 529 | Discounted cash flow | Discount rate | 2.30% | 10.70% | 6.08% | Decrease | |||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | $ | 853 | Discounted cash flow | Liquidity premium | 1.00% | 1.00% | 1.00% | Decrease | |||||||||||||||||||||||||||||||||
| Market risk benefit assets(6) | $ | 2,331 | Discounted cash flow | Lapse rate(8) | 1% | 20% | Increase | ||||||||||||||||||||||||||||||||||
| Spread over SOFR(9) | 0.29% | 1.71% | Increase | ||||||||||||||||||||||||||||||||||||||
| Utilization rate(10) | 37% | 94% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Withdrawal rate | See table footnote (11) below. | ||||||||||||||||||||||||||||||||||||||||
| Mortality rate(12) | 0% | 16% | Increase | ||||||||||||||||||||||||||||||||||||||
| Equity volatility curve | 16% | 25% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Equity securities | $ | 209 | Discounted cash flow(5) | Discount rate(5) | 0.16% | 40% | Decrease | ||||||||||||||||||||||||||||||||||
| Market comparables | EBITDA multiples(4) | 5.5X | 12.2X | 6.0X | Increase | ||||||||||||||||||||||||||||||||||||
| Net Asset Value | Share price | $3 | $1,810 | $779 | Increase | ||||||||||||||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | $ | 613 | Discounted cash flow | Lapse rate(8) | 1% | 50% | Increase | ||||||||||||||||||||||||||||||||||
| Spread over SOFR(9) | 0.29% | 1.71% | Increase | ||||||||||||||||||||||||||||||||||||||
| Option Budget(13) | 0% | 6% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||
| Market risk benefit liabilities(6) | $ | 4,455 | Discounted cash flow | Lapse rate(8) | 1% | 20% | Decrease | ||||||||||||||||||||||||||||||||||
| Spread over SOFR(9) | 0.29% | 1.71% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Utilization rate(10) | 37% | 94% | Increase | ||||||||||||||||||||||||||||||||||||||
| Withdrawal rate | See table footnote (11) below. | ||||||||||||||||||||||||||||||||||||||||
| Mortality rate(12) | 0% | 16% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Equity volatility curve | 16% | 25% | Increase | ||||||||||||||||||||||||||||||||||||||
| Policyholders’ account balances(7) | $ | 12,741 | Discounted cash flow | Lapse rate(8) | 0% | 80% | Decrease | ||||||||||||||||||||||||||||||||||
| Spread over SOFR(9) | 0.29% | 1.73% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Mortality rate(12) | 0% | 23% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Option Budget(13) | (1)% | 7% | Increase |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Fair Value | Valuation Techniques | Unobservable Inputs | Minimum | Maximum | Weighted Average | Impact of Increase in Input on Fair Value(1) | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||
| Corporate securities(2)(3) | $ | 1,311 | Discounted cash flow | Discount rate | 0.57% | 20.00% | 8.65% | Decrease | |||||||||||||||||||||||||||||||||
| Market comparables | EBITDA multiples(4) | 5.5X | 8.8X | 7.4X | Increase | ||||||||||||||||||||||||||||||||||||
| Liquidation | Liquidation value | 3.55% | 68.00% | 57.63% | Increase | ||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | $ | 938 | Discounted cash flow | Liquidity premium | 0.60% | 0.75% | 0.70% | Decrease | |||||||||||||||||||||||||||||||||
| Market risk benefit assets(6) | $ | 1,981 | Discounted cash flow | Lapse rate(8) | 1% | 20% | Increase | ||||||||||||||||||||||||||||||||||
| Spread over SOFR(9) | 0.41% | 1.82% | Increase | ||||||||||||||||||||||||||||||||||||||
| Utilization rate(10) | 38% | 95% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Withdrawal rate | See table footnote (11) below. | ||||||||||||||||||||||||||||||||||||||||
| Mortality rate(12) | 0% | 15% | Increase | ||||||||||||||||||||||||||||||||||||||
| Equity volatility curve | 15% | 25% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Equity securities | $ | 246 | Discounted cash flow | Discount rate(5) | 0.16% | 20% | Decrease | ||||||||||||||||||||||||||||||||||
| Market comparables | EBITDA multiples(4) | 1.0X | 10.0X | 6.3X | Increase | ||||||||||||||||||||||||||||||||||||
| Net Asset Value | Share price | $3 | $1,714 | $733 | Increase | ||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||
| Market risk benefit liabilities(6) | $ | 5,467 | Discounted cash flow | Lapse rate(8) | 1% | 20% | Decrease | ||||||||||||||||||||||||||||||||||
| Spread over SOFR(9) | 0.41% | 1.82% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Utilization rate(10) | 38% | 95% | Increase | ||||||||||||||||||||||||||||||||||||||
| Withdrawal rate | See table footnote (11) below. | ||||||||||||||||||||||||||||||||||||||||
| Mortality rate(12) | 0% | 15% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Equity volatility curve | 15% | 25% | Increase | ||||||||||||||||||||||||||||||||||||||
| Policyholders’ account balances(7) | $ | 7,752 | Discounted cash flow | Lapse rate(8) | 1% | 80% | Decrease | ||||||||||||||||||||||||||||||||||
| Spread over SOFR(9) | 0.41% | 1.85% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Mortality rate(12) | 0% | 23% | Decrease | ||||||||||||||||||||||||||||||||||||||
| Option Budget(13) | (1)% | 7% | Increase |
(1)Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table.
(2)Includes assets classified as fixed maturities available-for-sale, assets supporting experience-rated contractholder liabilities and fixed maturities, trading.
(3)Excludes notes which have been offset with the associated debt under a netting agreement.
(4)Represents multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”), and are amounts used when the Company has determined that market participants would use such multiples when valuing the investments.
(5)For these investments, a range of discount rates is typically used (10% to 20%) and is therefore a more meaningful representation of the unobservable inputs used in the valuation rather than weighted average.
(6)Market risk benefits primarily represent fair value for all living benefit guarantees including accumulation, withdrawal and income benefits. Since the valuation methodology for these assets and liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
(7)Policyholders’ account balances primarily represent general account liabilities for the index-linked interest credited on certain of the Company’s life and annuity products that are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than a weighted average, is a more meaningful representation of the unobservable inputs used in the Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. For any given contract, lapse rates vary throughout the period over which cash flows are projected for the purposes of valuing these balances.
(8)Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. For any given contract, lapse rates vary throughout the period over which cash flows are projected for the purposes of valuing these balances.
(9)The spread over the SOFR swap curve represents the premium added to the proxy for the risk-free rate (SOFR) to reflect the Company’s estimates of rates that a market participant would use to value the living benefits in both the accumulation and payout phases and index-linked interest crediting guarantees as of December 31, 2024 and 2023, respectively. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements are insurance liabilities and are therefore senior to debt. Effective April 2023, the Company entered into an agreement with The Ohio National Life Insurance Company, now known as AuguStar Life Insurance Company (“AuguStar”), an affiliate of Constellation Insurance Holdings, Inc., to reinsure approximately $10 billion of account values of PDI traditional variable annuity contracts with guaranteed living benefits. See Note 15 for additional information regarding this transaction. As a result of this transaction, a ceded MRB asset balance was established to fair value the reinsurance reimbursements to the Company. The establishment of the fair value also required an estimate of NPR for AuguStar, which may differ from the Company’s; however, the NPR spreads for AuguStar were developed using a methodology similar to that of the Company.
(10)The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration, and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.
(11)The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of December 31, 2024 and 2023, the minimum withdrawal rate assumption is 78% and 81%, respectively. As of December 31, 2024 and 2023, the maximum withdrawal rate assumption may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.
(12)The range reflects the mortality rates for the vast majority of business with living benefits and other contracts, with policyholders ranging from 50 to 90 years old. While the majority of living benefits have a minimum age requirement, certain other contracts do not have an age restriction. This results in contractholders with mortality rates approaching 0% for certain benefits. Mortality rates may vary by product, age and duration. A mortality improvement assumption is also incorporated into the overall mortality table.
(13)Option budget estimates the expected long-term cost of options used to hedge exposures associated with equity price and interest rate changes. The level of option budget determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives.
Interrelationships Between Unobservable Inputs*—*In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another or multiple inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows:
Corporate Securities—The rate used to discount future cash flows reflects current risk-free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors. During weaker economic cycles, as the expectations of default increase, credit spreads widen, which results in a decrease in fair value.
*Commercial Mortgage-backed Securities—*Interrelationships may exist between the prepayment rate, the default rate and/or loss severity, depending on specific market conditions. In stronger economic cycles, prepayment rates are generally driven by underlying property appreciation and subsequent cash-out refinances, while default rates and loss severity may be lower. During weaker economic cycles, prepayment rates may decline, while default rates and loss severity increase. Generally, a change in the assumption used for the probability of default would be accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates. The impact of these factors on average life and economics varies with the deal structure and tranche subordination.
Market Risk Benefits—The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is generally highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
contractholder behavior assumptions. To the extent more efficient contractholder behavior results in greater in-the-moneyness at the contract level, lapse rates may decline for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, lapse rates may decline as contracts become more in-the-money.
Changes in Level 3 Assets and Liabilities––The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods (excluding MRBs disclosed in Note 14). When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate.
| Year Ended December 31, 2024(6) | |||||||||||||||||||||||||||||||||||
| Fair Value, beginning of period | Total realized and unrealized gains (losses) | Purchases | Sales | Issuances | Settlements | Other(1) | Transfers into Level 3(8) | Transfers out of Level 3(8) | Fair Value, end of period | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||||||||
| U.S. states | $ | 7 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | (1) | $ | 0 | $ | 0 | $ | 6 | $ | (1) | |||||||||||||
| Foreign government | 8 | 0 | 0 | 0 | 0 | (1) | 0 | 0 | 0 | 7 | 0 | ||||||||||||||||||||||||
| Corporate securities(3) | 4,806 | (253) | 2,181 | (145) | 0 | (806) | (144) | 250 | (58) | 5,831 | (227) | ||||||||||||||||||||||||
| Structured securities(4) | 1,297 | 5 | 2,764 | (244) | 0 | (125) | (494) | 67 | (937) | 2,333 | (2) | ||||||||||||||||||||||||
| Other assets: | |||||||||||||||||||||||||||||||||||
| Fixed maturities, trading | 429 | (67) | 1,826 | (56) | 0 | (218) | 1 | 466 | (395) | 1,986 | (64) | ||||||||||||||||||||||||
| Equity securities | 512 | (22) | 153 | (55) | 0 | (67) | 5 | 2 | (10) | 518 | (6) | ||||||||||||||||||||||||
| Commercial mortgages and other loans | 0 | 0 | 0 | 0 | 210 | 0 | 23 | 0 | 0 | 233 | 0 | ||||||||||||||||||||||||
| Other invested assets | 846 | (85) | 175 | (2) | 0 | 0 | 19 | 0 | 0 | 953 | (85) | ||||||||||||||||||||||||
| Short-term investments | 29 | 0 | 488 | (25) | 0 | (6) | (25) | 0 | 0 | 461 | 1 | ||||||||||||||||||||||||
| Cash equivalents | 4 | 0 | 5 | 0 | 0 | 0 | (9) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 224 | 144 | 223 | 0 | 0 | (66) | 88 | 0 | 0 | 613 | 78 | ||||||||||||||||||||||||
| Other assets | 11 | 0 | 8 | 0 | 0 | 0 | (19) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Separate account assets | 1,094 | (61) | 322 | (1,061) | 0 | (14) | 0 | 12 | (60) | 232 | (24) | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Policyholders’ account balances(5) | (7,752) | (2,785) | 0 | 0 | (2,254) | 0 | 45 | 0 | 0 | (12,746) | 1,165 | ||||||||||||||||||||||||
| Other liabilities | (1) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (1) | 0 | ||||||||||||||||||||||||
| Notes issued by consolidated VIEs | (778) | (5) | 0 | 0 | (60) | 0 | 783 | 0 | 0 | (60) | 0 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||||||||
| Total realized and unrealized gains (losses) | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||||||||
| Realized investment gains (losses), net | Other income (loss) | Interest credited to policyholders’ account balances | Included in other comprehensive income (losses) | Net investment income | Realized investment gains (losses), net | Other income (loss) | Interest credited to policyholders’ account balances | Included in other comprehensive income (losses) | ||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | (269) | $ | 0 | $ | 0 | $ | 22 | $ | (1) | $ | (240) | $ | 0 | $ | 0 | $ | 10 | ||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||
| Fixed maturities, trading | 0 | (69) | 0 | 0 | 2 | 0 | (64) | 0 | 0 | |||||||||||||||||||||||
| Equity securities | 0 | (22) | 0 | 0 | 0 | 0 | (6) | 0 | 0 | |||||||||||||||||||||||
| Commercial mortgages and other loans | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Other invested assets | (1) | (84) | 0 | 0 | 0 | (1) | (84) | 0 | 0 | |||||||||||||||||||||||
| Short-term investments | (1) | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 1 | |||||||||||||||||||||||
| Cash equivalents | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 144 | 0 | 0 | 0 | 0 | 78 | 0 | 0 | 0 | |||||||||||||||||||||||
| Other assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Separate account assets | 0 | 0 | (61) | 0 | 0 | 0 | 0 | (24) | 0 | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Policyholders’ account balances | (2,785) | 0 | 0 | 0 | 0 | 1,165 | 0 | 0 | 0 | |||||||||||||||||||||||
| Other liabilities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | (5) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Year Ended December 31, 2023(6) | |||||||||||||||||||||||||||||||||||
| Fair Value, beginning of period | Total realized and unrealized gains (losses) | Purchases | Sales | Issuances | Settlements | Other(1) | Transfers into Level 3(8) | Transfers out of Level 3(8) | Fair Value, end of period | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||||||||
| U.S. states | $ | 7 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 7 | $ | 0 | |||||||||||||
| Foreign government | 8 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 8 | 0 | ||||||||||||||||||||||||
| Corporate securities(3) | 3,858 | 26 | 1,864 | (211) | 0 | (988) | 26 | 418 | (187) | 4,806 | 19 | ||||||||||||||||||||||||
| Structured securities(4) | 1,289 | (47) | 587 | (6) | 0 | (38) | (81) | 113 | (520) | 1,297 | (56) | ||||||||||||||||||||||||
| Other assets: | |||||||||||||||||||||||||||||||||||
| Fixed maturities, trading | 304 | 11 | 129 | (39) | 0 | (23) | 88 | 17 | (58) | 429 | 5 | ||||||||||||||||||||||||
| Equity securities | 627 | 26 | 45 | (75) | 0 | (36) | (41) | 3 | (37) | 512 | 12 | ||||||||||||||||||||||||
| Commercial mortgages and other loans | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Other invested assets | 539 | (38) | 361 | (16) | 0 | 0 | 0 | 0 | 0 | 846 | (38) | ||||||||||||||||||||||||
| Short-term investments | 18 | 5 | 49 | 0 | 0 | (43) | 0 | 0 | 0 | 29 | 0 | ||||||||||||||||||||||||
| Cash equivalents | 0 | 0 | 4 | 0 | 0 | 0 | 0 | 0 | 0 | 4 | 0 | ||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 141 | (40) | 146 | 0 | 0 | (23) | 0 | 0 | 0 | 224 | (63) | ||||||||||||||||||||||||
| Other assets(7) | 11 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 11 | 0 | ||||||||||||||||||||||||
| Separate account assets | 1,081 | 55 | 450 | (368) | 0 | (68) | 0 | 50 | (106) | 1,094 | 42 | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Policyholders’ account balances(5) | (3,492) | (2,601) | 0 | 0 | (1,664) | 0 | 5 | 0 | 0 | (7,752) | (322) | ||||||||||||||||||||||||
| Other liabilities | (1) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (1) | 0 | ||||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | 9 | 0 | 0 | 0 | 0 | (787) | 0 | 0 | (778) | 9 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2023 | ||||||||||||||||||||||||||||||||
| Total realized and unrealized gains (losses) | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||||||||
| Realized investment gains (losses), net | Other income (loss) | Interest credited to policyholders’ account balances | Included in other comprehensive income (losses) | Net investment income | Realized investment gains (losses), net | Other income (loss) | Interest credited to policyholders’ account balances | Included in other comprehensive income (losses) | ||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | (25) | $ | 0 | $ | 0 | $ | (5) | $ | 9 | $ | (7) | $ | 0 | $ | 0 | $ | (30) | ||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||
| Fixed maturities, trading | 0 | 9 | 0 | 0 | 2 | 0 | 5 | 0 | 0 | |||||||||||||||||||||||
| Equity securities | (1) | 27 | 0 | 0 | 0 | 0 | 12 | 0 | 0 | |||||||||||||||||||||||
| Commercial mortgages and other loans | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Other invested assets | (4) | (34) | 0 | 0 | 0 | (4) | (34) | 0 | 0 | |||||||||||||||||||||||
| Short-term investments | 3 | 0 | 0 | 0 | 2 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Cash equivalents | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | (40) | 0 | 0 | 0 | 0 | (63) | 0 | 0 | 0 | |||||||||||||||||||||||
| Other assets(7) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Separate account assets | 0 | 0 | 55 | 0 | 0 | 0 | 0 | 42 | 0 | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Policyholders’ account balances | (2,601) | 0 | 0 | 0 | 0 | (322) | 0 | 0 | 0 | |||||||||||||||||||||||
| Other liabilities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | 9 | 0 | 0 | 0 | 0 | 9 | 0 | 0 |
| Year Ended December 31, 2022 | ||||||||||||||||||||||||||||||||
| Total realized and unrealized gains (losses) | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||||||||
| Realized investment gains (losses), net | Other income (loss) | Interest credited to policyholders’ account balances | Included in other comprehensive income (losses) | Net investment income | Realized investment gains (losses), net | Other income (loss) | Interest credited to policyholders’ account balances | Included in other comprehensive income (losses) | ||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | (89) | $ | 0 | $ | 0 | $ | (783) | $ | 8 | $ | (101) | $ | 0 | $ | 0 | $ | (782) | ||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||
| Fixed maturities, trading | 0 | (16) | 0 | 0 | 0 | 0 | (17) | 0 | 0 | |||||||||||||||||||||||
| Equity securities | 0 | (18) | 0 | 0 | 0 | 0 | (39) | 0 | 0 | |||||||||||||||||||||||
| Commercial mortgages and other loans | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Other invested assets | (12) | 24 | 0 | 0 | 0 | (12) | 24 | 0 | 0 | |||||||||||||||||||||||
| Short-term investments | (5) | 0 | 0 | 0 | 0 | (6) | 0 | 0 | 0 | |||||||||||||||||||||||
| Cash equivalents | (1) | 0 | 0 | 0 | 0 | (2) | 0 | 0 | 0 | |||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 44 | 0 | 0 | 0 | 0 | 48 | 0 | 0 | 0 | |||||||||||||||||||||||
| Other assets(7) | 0 | 0 | 0 | 67 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Separate account assets | 0 | 0 | (215) | 0 | 0 | 0 | 0 | (211) | 0 | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Policyholders’ account balances | (66) | 0 | 0 | 0 | 0 | 67 | 0 | 0 | 0 | |||||||||||||||||||||||
| Other liabilities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
(1)“Other” includes additional activity not allocated to the specific categories within the rollforward of Level 3 Assets and Liabilities.
(2)Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.
(3)Includes U.S. corporate public, U.S. corporate private, foreign corporate public and foreign corporate private securities.
(4)Includes asset-backed, commercial mortgage-backed and residential mortgage-backed securities.
(5)Issuances and settlements for Policyholders’ account balances are presented net in the rollforward.
(6)Excludes MRB assets of $2,331 million and $1,981 million and MRB liabilities of $4,455 million and $5,467 million as of December 31, 2024 and 2023, respectively. See Note 14 for additional information.
(7)Prior period amounts have been updated to conform to current period presentation.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
(8)Transfers into or out of Level 3 are generally reported at the value as of the beginning of the quarter in which the transfers occur for any such positions still held at the end of the quarter.
Derivative Fair Value Information
The following tables present the balances of certain derivative assets and liabilities measured at fair value on a recurring basis, as of the dates indicated, by the primary underlying risks they are used to manage. These tables include NPR and exclude embedded derivatives. The derivative assets and liabilities shown below are included in “Other invested assets” or “Other liabilities” in the tables contained within the sections “—Assets and Liabilities by Hierarchy Level” and “—Changes in Level 3 Assets and Liabilities,” above.
| As of December 31, 2024 | ||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting(1) | Total | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Derivative Assets: | ||||||||||||||||||||||||||||||||
| Interest Rate | $ | 7 | $ | 11,725 | $ | 1 | $ | $ | 11,733 | |||||||||||||||||||||||
| Currency | 0 | 1,717 | 0 | 1,717 | ||||||||||||||||||||||||||||
| Credit | 0 | 90 | 0 | 90 | ||||||||||||||||||||||||||||
| Currency/Interest Rate | 0 | 3,310 | 0 | 3,310 | ||||||||||||||||||||||||||||
| Equity | 3 | 4,841 | 0 | 4,844 | ||||||||||||||||||||||||||||
| Netting(1) | (20,093) | (20,093) | ||||||||||||||||||||||||||||||
| Total derivative assets | $ | 10 | $ | 21,683 | $ | 1 | $ | (20,093) | $ | 1,601 | ||||||||||||||||||||||
| Derivative Liabilities: | ||||||||||||||||||||||||||||||||
| Interest Rate | $ | 21 | $ | 26,871 | $ | 1 | $ | $ | 26,893 | |||||||||||||||||||||||
| Currency | 0 | 1,378 | 0 | 1,378 | ||||||||||||||||||||||||||||
| Credit | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Currency/Interest Rate | 0 | 497 | 0 | 497 | ||||||||||||||||||||||||||||
| Equity | 7 | 4,117 | 0 | 4,124 | ||||||||||||||||||||||||||||
| Netting(1) | (28,141) | (28,141) | ||||||||||||||||||||||||||||||
| Total derivative liabilities | $ | 28 | $ | 32,863 | $ | 1 | $ | (28,141) | $ | 4,751 |
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting(1) | Total | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Derivative Assets: | ||||||||||||||||||||||||||||||||
| Interest Rate | $ | 7 | $ | 8,990 | $ | 1 | $ | $ | 8,998 | |||||||||||||||||||||||
| Currency | 0 | 1,008 | 0 | 1,008 | ||||||||||||||||||||||||||||
| Credit | 0 | 64 | 0 | 64 | ||||||||||||||||||||||||||||
| Currency/Interest Rate | 0 | 2,454 | 0 | 2,454 | ||||||||||||||||||||||||||||
| Equity | 19 | 1,718 | 0 | 1,737 | ||||||||||||||||||||||||||||
| Netting(1) | (13,158) | (13,158) | ||||||||||||||||||||||||||||||
| Total derivative assets | $ | 26 | $ | 14,234 | $ | 1 | $ | (13,158) | $ | 1,103 | ||||||||||||||||||||||
| Derivative Liabilities: | ||||||||||||||||||||||||||||||||
| Interest Rate | $ | 26 | $ | 22,960 | $ | 1 | $ | $ | 22,987 | |||||||||||||||||||||||
| Currency | 0 | 1,149 | 0 | 1,149 | ||||||||||||||||||||||||||||
| Credit | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Currency/Interest Rate | 0 | 840 | 0 | 840 | ||||||||||||||||||||||||||||
| Equity | 10 | 2,168 | 0 | 2,178 | ||||||||||||||||||||||||||||
| Netting(1) | (22,973) | (22,973) | ||||||||||||||||||||||||||||||
| Total derivative liabilities | $ | 36 | $ | 27,117 | $ | 1 | $ | (22,973) | $ | 4,181 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
(1)“Netting” amounts represent cash collateral and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting agreements.
Changes in Level 3 Derivative Assets and Liabilities—The following tables provide a summary of the changes in fair value of Level 3 derivative assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods:
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Fair Value, beginning of period | Total realized and unrealized gains (losses) (1) | Purchases | Sales | Issuances | Settlements | Other | Transfers into Level 3 (2) | Transfers out of Level 3 (2) | Fair Value, end of period | Unrealized gains (losses) for assets still held (1) | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Net Derivative - Equity | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
| Net Derivative - Interest Rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Year Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| Fair Value, beginning of period | Total realized and unrealized gains (losses) (1) | Purchases | Sales | Issuances | Settlements | Other | Transfers into Level 3 (2) | Transfers out of Level 3 (2) | Fair Value, end of period | Unrealized gains (losses) for assets still held (1) | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Net Derivative - Equity | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
| Net Derivative - Interest Rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Year Ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||
| Fair Value, beginning of period | Total realized and unrealized gains (losses) (1) | Purchases | Sales | Issuances | Settlements | Other | Transfers into Level 3 (2) | Transfers out of Level 3 (2) | Fair Value, end of period | Unrealized gains (losses) for assets still held (1) | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Net Derivative - Equity | $ | 1 | $ | 1 | $ | 0 | $ | (2) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1 | ||||||||||||||||
| Net Derivative - Interest Rate | 1 | 0 | 0 | 0 | 0 | 0 | 0 | (1) | 0 | 0 | 0 |
(1)Total realized and unrealized gains (losses) as well as unrealized gains (losses) for assets still held at the end of the period are recorded in “Realized investment gains (losses), net.”
(2)Transfers into or out of Level 3 are generally reported at the value as of the beginning of the quarter in which the transfers occur for any such positions still held at the end of the quarter.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Nonrecurring Fair Value Measurements—The following tables represent information for assets measured at fair value on a nonrecurring basis. The fair value measurement is nonrecurring as these assets are measured at fair value only when there is a triggering event (e.g., an evidence of impairment). Assets included in the table are those that were impaired during the respective reporting periods and that are still held as of the reporting date. The estimated fair values for these amounts were determined using significant unobservable inputs (Level 3).
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Gains (Losses): | |||||||||||||||||
| Commercial mortgage loans(1) | $ | 0 | $ | (29) | $ | 0 | |||||||||||
| Mortgage servicing rights(2) | $ | 0 | $ | 0 | $ | (1) | |||||||||||
| Investment real estate | $ | (12) | $ | (17) | $ | (12) | |||||||||||
| Investment in JV/LP and Other | $ | (7) | $ | (76) | $ | (129) | |||||||||||
| Goodwill(4) | $ | 0 | $ | (177) | $ | (903) |
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Carrying value after measurement as of period end: | |||||||||||
| Commercial mortgage loans(1) | $ | 0 | $ | 34 | |||||||
| Mortgage servicing rights(2) | $ | 0 | $ | 0 | |||||||
| Investment real estate(3) | $ | 73 | $ | 113 | |||||||
| Investment in JV/LP and Other(3) | $ | 128 | $ | 186 | |||||||
| Goodwill(4) | $ | 0 | $ | 0 |
(1)Commercial mortgage loans are valued based on discounted cash flows utilizing market rates or the fair value of the underlying real estate collateral.
(2)Mortgage servicing rights are valued using a discounted cash flow model. The model incorporates assumptions for servicing revenues, which are adjusted for expected prepayments, delinquency rates, escrow deposit income and estimated loan servicing expenses. The discount rates incorporated into the model are determined based on the estimated returns a market participant would require for this business including a liquidity and risk premium. This estimate includes available relevant data from any active market sales of mortgage servicing rights.
(3)Reported carrying values for 2024 include values as of the measurement periods of March 31, 2024 for “Investment in JV/LP and Other” and June 30, 2024 and September 30, 2024 for “Investment real estate.” Reported carrying values for 2023 include values as of the measurement periods of June 30, 2023 for “Investment real estate” and June 30, 2023 and December 31, 2023 for “Investment in JV/LP and Other.”
(4)The Company recognized a goodwill impairment charge for AIQ in 2023 and 2022. The fair value was determined using weighting of an income approach based on discounted cash flow valuation techniques and a market approach based on forward market multiples of comparable publicly traded companies. The valuation in each year included unobservable inputs such as forecasted cash flows, discount rate applied, expected synergies and business growth rate assumptions under the income approach and forward market multiples of comparable peer companies and an implied control premium under the market approach. The inputs and assumptions applied are consistent with how a market participant would value AIQ and the related goodwill. See Note 10 for additional information.
Fair Value Option
The fair value option allows the Company to elect fair value as an alternative measurement for selected financial assets and financial liabilities not otherwise reported at fair value. Such elections have been made by the Company to help mitigate volatility in earnings that result from different measurement attributes. Electing the fair value option also allows the Company to achieve consistent accounting for certain assets and liabilities. Changes in fair value are reflected in “Realized investment gains (losses), net” for commercial mortgage and other loans and “Other income (loss)” for other assets and notes issued by consolidated VIEs. Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Interest income on commercial mortgage and other loans is included in “Net investment income.” Interest income on these loans is recorded based on the effective interest rate as determined at the closing of the loan.
The following tables present information regarding assets and liabilities where the fair value option has been elected:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Liabilities: | |||||||||||||||||
| Notes issued by consolidated VIEs: | |||||||||||||||||
| Changes in fair value | $ | 5 | $ | (9) | $ | 0 |
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Commercial mortgage and other loans: | |||||||||||||||||
| Interest income | $ | 26 | $ | 9 | $ | 23 | |||||||||||
| Notes issued by consolidated VIEs: | |||||||||||||||||
| Interest expense | $ | 14 | $ | 11 | $ | 0 |
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Commercial mortgage and other loans(1): | |||||||||||
| Fair value as of period end | $ | 702 | $ | 519 | |||||||
| Aggregate contractual principal as of period end | $ | 697 | $ | 512 | |||||||
| Other invested assets: | |||||||||||
| Fair value as of period end | $ | 19 | $ | 0 | |||||||
| Other assets: | |||||||||||
| Fair value as of period end | $ | 0 | $ | 11 | |||||||
| Notes issued by consolidated VIEs: | |||||||||||
| Fair value as of period end | $ | 60 | $ | 778 | |||||||
| Aggregate contractual principal as of period end | $ | 60 | $ | 787 |
(1)As of December 31, 2024, for loans for which the fair value option has been elected, none of the loans were 90 days or more past due.
Fair Value of Financial Instruments
The tables below present the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Consolidated Statements of Financial Position. In some cases, as described below, the carrying amount equals or approximates fair value.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2024 | |||||||||||||||||||||||||||||
| Fair Value | Carrying Amount(1) | ||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Commercial mortgage and other loans | $ | 0 | $ | 17 | $ | 58,446 | $ | 58,463 | $ | 61,639 | |||||||||||||||||||
| Policy loans | 8 | 0 | 9,787 | 9,795 | 9,795 | ||||||||||||||||||||||||
| Other invested assets | 0 | 95 | 0 | 95 | 95 | ||||||||||||||||||||||||
| Short-term investments | 453 | 21 | 0 | 474 | 474 | ||||||||||||||||||||||||
| Cash and cash equivalents | 7,352 | 454 | 0 | 7,806 | 7,806 | ||||||||||||||||||||||||
| Accrued investment income | 0 | 3,441 | 0 | 3,441 | 3,441 | ||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 0 | 8 | 5,782 | 5,790 | 5,790 | ||||||||||||||||||||||||
| Other assets | 23 | 3,062 | 1 | 3,086 | 3,086 | ||||||||||||||||||||||||
| Total assets | $ | 7,836 | $ | 7,098 | $ | 74,016 | $ | 88,950 | $ | 92,126 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Policyholders’ account balances—investment contracts | $ | 0 | $ | 31,405 | $ | 43,466 | $ | 74,871 | $ | 79,571 | |||||||||||||||||||
| Securities sold under agreements to repurchase | 0 | 6,796 | 0 | 6,796 | 6,796 | ||||||||||||||||||||||||
| Cash collateral for loaned securities | 0 | 9,621 | 0 | 9,621 | 9,621 | ||||||||||||||||||||||||
| Reinsurance and funds withheld payables(2) | 0 | 10,489 | (35) | 10,454 | 10,454 | ||||||||||||||||||||||||
| Short-term debt(3) | 0 | 521 | 439 | 960 | 953 | ||||||||||||||||||||||||
| Long-term debt(4) | 524 | 17,185 | 423 | 18,132 | 19,187 | ||||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | 0 | 1,370 | 1,370 | 1,370 | ||||||||||||||||||||||||
| Other liabilities | 0 | 6,886 | 32 | 6,918 | 6,918 | ||||||||||||||||||||||||
| Separate account liabilities—investment contracts | 0 | 21,144 | 18,677 | 39,821 | 39,821 | ||||||||||||||||||||||||
| Total liabilities | $ | 524 | $ | 104,047 | $ | 64,372 | $ | 168,943 | $ | 174,691 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2023 | |||||||||||||||||||||||||||||
| Fair Value | Carrying Amount(1) | ||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Commercial mortgage and other loans | $ | 0 | $ | 41 | $ | 55,611 | $ | 55,652 | $ | 58,786 | |||||||||||||||||||
| Policy loans | 8 | 0 | 10,039 | 10,047 | 10,047 | ||||||||||||||||||||||||
| Other invested assets | 0 | 97 | 0 | 97 | 97 | ||||||||||||||||||||||||
| Short-term investments | 1,092 | 13 | 0 | 1,105 | 1,105 | ||||||||||||||||||||||||
| Cash and cash equivalents | 8,709 | 408 | 0 | 9,117 | 9,117 | ||||||||||||||||||||||||
| Accrued investment income | 0 | 3,287 | 0 | 3,287 | 3,287 | ||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | 0 | 5 | 5,171 | 5,176 | 5,176 | ||||||||||||||||||||||||
| Other assets | 43 | 3,059 | 0 | 3,102 | 3,102 | ||||||||||||||||||||||||
| Total assets | $ | 9,852 | $ | 6,910 | $ | 70,821 | $ | 87,583 | $ | 90,717 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Policyholders’ account balances—investment contracts | $ | 0 | $ | 31,089 | $ | 37,794 | $ | 68,883 | $ | 72,604 | |||||||||||||||||||
| Securities sold under agreements to repurchase | 0 | 6,056 | 0 | 6,056 | 6,056 | ||||||||||||||||||||||||
| Cash collateral for loaned securities | 0 | 6,477 | 0 | 6,477 | 6,477 | ||||||||||||||||||||||||
| Reinsurance and funds withheld payables(2) | 0 | 9,553 | (23) | 9,530 | 9,530 | ||||||||||||||||||||||||
| Short-term debt(3) | 0 | 535 | 83 | 618 | 618 | ||||||||||||||||||||||||
| Long-term debt(4) | 564 | 16,938 | 766 | 18,268 | 18,882 | ||||||||||||||||||||||||
| Notes issued by consolidated VIEs | 0 | 0 | 596 | 596 | 596 | ||||||||||||||||||||||||
| Other liabilities | 0 | 6,950 | 32 | 6,982 | 6,982 | ||||||||||||||||||||||||
| Separate account liabilities—investment contracts | 0 | 24,050 | 21,315 | 45,365 | 45,365 | ||||||||||||||||||||||||
| Total liabilities | $ | 564 | $ | 101,648 | $ | 60,563 | $ | 162,775 | $ | 167,110 |
(1)Carrying values presented herein differ from those in the Company’s Consolidated Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or are out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments.
(2)Includes contracts reinsured through coinsurance with funds withheld agreement with Prismic Re with a fair value of $7,887 million (carrying amount of $7,887 million) and $8,036 million (carrying amount of $8,036 million), a portion of which relates to insurance contracts as of December 31, 2024 and December 31, 2023, respectively. See Note 15 for additional information regarding the reinsurance arrangement with Prismic Re.
(3)Excludes debt with fair value of $0 million (carrying amount of $0 million) and $2,000 million (carrying amount of $2,000 million) as of December 31, 2024 and December 31, 2023, respectively, which have been offset with the associated notes under a netting agreement.
(4)Excludes debt with fair value of $14,748 million (carrying amount of $14,748 million) and $10,370 million (carrying amount of $10,370 million) as of December 31, 2024 and December 31, 2023, respectively, which have been offset with the associated notes under a netting agreement.
The fair values presented above have been determined by using available market information and by applying market valuation methodologies, as described in more detail below.
Commercial Mortgage and Other Loans
The fair value of most commercial mortgage loans is based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate or foreign government bond rate (for non-U.S. dollar-denominated loans) plus an appropriate credit spread for loans of similar quality, average life and currency. The quality ratings for these loans, a primary determinant of the credit spreads and a significant component of the pricing process, are based on an internally-developed methodology. Certain commercial mortgage loans are valued incorporating other factors, including the terms of the loans, the relative strength of the underlying collateral, the principal exit strategies for the loans, prevailing interest rates and credit risk.
Policy Loans
The Company’s valuation technique for policy loans is to discount cash flows at the current policy loan coupon rate. Policy loans are fully collateralized by the cash surrender value of underlying insurance policies. As a result, the carrying value of the policy loans approximates the fair value.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Short-Term Investments, Cash and Cash Equivalents, Accrued Investment Income and Other Assets
The Company believes that due to the short-term nature of certain assets, the carrying value approximates fair value. These assets include: certain short-term investments, which are not securities, recorded at amortized cost; cash and cash equivalent instruments; accrued investment income; and other assets that meet the definition of financial instruments, including receivables, such as unsettled trades, accounts receivable and restricted cash.
Reinsurance Recoverables and Deposit Receivables
Reinsurance recoverables and deposit receivables includes receivables from modified coinsurance arrangements where the Company is the reinsurer and generally reflect the fair value of the invested assets retained by the cedant. Deposits made are included in “Reinsurance recoverables and deposit receivables.” The deposit assets are adjusted as amounts are paid, consistent with the underlying contracts.
Policyholders’ Account Balances—Investment Contracts
Only the portion of policyholders’ account balances related to products that are investment contracts (those without significant mortality or morbidity risk) are reflected in the table above. For fixed deferred annuities, single premium endowments, payout annuities and other similar contracts without life contingencies, fair values are generally derived using discounted projected cash flows based on interest rates that are representative of the Company’s financial strength ratings, and hence reflect the Company’s NPR. For GICs, funding agreements, structured settlements without life contingencies and other similar products, fair values are generally derived using discounted projected cash flows based on interest rates being offered for similar contracts with maturities consistent with those of the contracts being valued. For those balances that can be withdrawn by the customer at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the customer as of the reporting date, which is generally the carrying value. For defined contribution and defined benefit contracts and certain other products, the fair value is the market value of the assets supporting the liabilities.
Securities Sold Under Agreements to Repurchase
The Company receives collateral for selling securities under agreements to repurchase, or pledges collateral under agreements to resell. Repurchase and resale agreements are also generally short-term in nature and, therefore, the carrying amounts of these instruments approximate fair value.
Cash Collateral for Loaned Securities
Cash collateral for loaned securities represents the collateral received or paid in connection with loaning or borrowing securities, similar to the securities sold under agreement to repurchase above. Due to the short-term nature of these transactions, the carrying value approximates fair value.
Reinsurance and Funds Withheld Payables
Reinsurance and funds withheld payables includes amounts payable to the reinsurer under coinsurance with funds withheld arrangements where the Company is the cedant. Deposits received are included in “Reinsurance and funds withheld payables.” The deposit liabilities are adjusted as amounts are received, consistent with the underlying contracts.
Debt
The fair value of short-term and long-term debt, as well as notes issued by consolidated VIEs, is generally determined by either prices obtained from independent pricing services, which are validated by the Company, or discounted cash flow models. With the exception of the notes issued by consolidated VIEs for which recourse is limited to the assets of the respective VIE and does not extend to the general credit of the Company, the fair values of these instruments consider the Company’s NPR. Discounted cash flow models predominately use market observable inputs such as the borrowing rates currently available to the Company for debt and financial instruments with similar terms and remaining maturities. For commercial paper issuances and other debt with a maturity of less than 90 days, the carrying value approximates fair value.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Other Liabilities
Other liabilities are primarily payables, such as unsettled trades, drafts and accrued expense payables. Due to the short-term until settlement of most of these liabilities, the Company believes that carrying value approximates fair value.
Separate Account Liabilities—Investment Contracts
Only the portion of separate account liabilities related to products that are investment contracts are reflected in the table above. Separate account liabilities are recorded at the amount credited to the contractholder, which reflects the change in fair value of the corresponding separate account assets including contractholder deposits less withdrawals and fees; therefore, carrying value approximates fair value.
**7.**DEFERRED POLICY ACQUISITION COSTS, DEFERRED SALES INDUCEMENTS AND VALUE OF BUSINESS ACQUIRED
Deferred Policy Acquisition Costs
The following tables show a rollforward for the lines of business that contain material DAC balances, along with a reconciliation to the Company’s total DAC balance:
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Total | ||||||||||||||||||||||||||||||||
| Individual Variable | Term Life | Variable/ Universal Life | Life Planner | Gibraltar Life and Other | |||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 3,676 | $ | 2,237 | $ | 5,364 | $ | 4,909 | $ | 4,442 | $ | 20,628 | |||||||||||||||||||||||
| Capitalization | 423 | 186 | 734 | 564 | 575 | 2,482 | |||||||||||||||||||||||||||||
| Amortization expense | (386) | (208) | (241) | (340) | (330) | (1,505) | |||||||||||||||||||||||||||||
| Other adjustments(1) | 0 | 0 | (979) | (43) | 3 | (1,019) | |||||||||||||||||||||||||||||
| Foreign currency adjustment | 0 | 0 | 0 | (336) | (140) | (476) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 3,713 | $ | 2,215 | $ | 4,878 | $ | 4,754 | $ | 4,550 | 20,110 | ||||||||||||||||||||||||
| Other businesses | 338 | ||||||||||||||||||||||||||||||||||
| Total DAC balance | $ | 20,448 |
(1)Includes the impacts of the reinsurance transactions with Wilton Re and Somerset Re in Individual Life (Universal Life). See Note 15 for additional information.
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Total | ||||||||||||||||||||||||||||||||
| Individual Variable | Term Life | Variable/ Universal Life | Life Planner | Gibraltar Life and Other | |||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 4,171 | $ | 2,288 | $ | 5,000 | $ | 4,710 | $ | 4,231 | $ | 20,400 | |||||||||||||||||||||||
| Capitalization | 261 | 160 | 608 | 586 | 610 | 2,225 | |||||||||||||||||||||||||||||
| Amortization expense | (366) | (212) | (244) | (326) | (315) | (1,463) | |||||||||||||||||||||||||||||
| Other adjustments(1) | (390) | 1 | 0 | 20 | 0 | (369) | |||||||||||||||||||||||||||||
| Foreign currency adjustment | 0 | 0 | 0 | (81) | (84) | (165) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 3,676 | $ | 2,237 | $ | 5,364 | $ | 4,909 | $ | 4,442 | 20,628 | ||||||||||||||||||||||||
| Other businesses | 228 | ||||||||||||||||||||||||||||||||||
| Total DAC balance | $ | 20,856 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
(1)Includes the impact of the reinsurance transaction with AuguStar in Individual Retirement Strategies. See Note 15 for additional information.
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Total | ||||||||||||||||||||||||||||||||
| Individual Variable | Term Life | Variable/ Universal Life | Life Planner | Gibraltar Life and Other | |||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 4,872 | $ | 2,372 | $ | 4,679 | $ | 4,685 | $ | 4,135 | $ | 20,743 | |||||||||||||||||||||||
| Capitalization | 277 | 127 | 556 | 579 | 600 | 2,139 | |||||||||||||||||||||||||||||
| Amortization expense | (401) | (211) | (235) | (318) | (300) | (1,465) | |||||||||||||||||||||||||||||
| Other adjustments(1) | (577) | 0 | 0 | 22 | 0 | (555) | |||||||||||||||||||||||||||||
| Foreign currency adjustment | 0 | 0 | 0 | (258) | (204) | (462) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 4,171 | $ | 2,288 | $ | 5,000 | $ | 4,710 | $ | 4,231 | 20,400 | ||||||||||||||||||||||||
| Other businesses | 146 | ||||||||||||||||||||||||||||||||||
| Total DAC balance | $ | 20,546 |
(1)Includes $(584) million in Individual Retirement Strategies related to the sale of PALAC. See Note 1 for additional information.
Deferred Sales Inducements
The following table shows a rollforward of DSI balances for variable annuity products within Individual Retirement Strategies, which is the only line of business that contains a material DSI balance, along with a reconciliation to the Company’s total DSI balance:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Balance, BOP | $ | 410 | $ | 446 | $ | 799 | |||||||||||
| Capitalization | 1 | 2 | 1 | ||||||||||||||
| Amortization expense | (35) | (38) | (46) | ||||||||||||||
| Other adjustments(1) | 0 | 0 | (308) | ||||||||||||||
| Balance, EOP | 376 | 410 | 446 | ||||||||||||||
| Other businesses | 30 | 33 | 34 | ||||||||||||||
| Total DSI balance | $ | 406 | $ | 443 | $ | 480 |
(1)The 2022 amount relates to the sale of PALAC. See Note 1 for additional information.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Value of Business Acquired
The following table shows a rollforward of VOBA balances for Gibraltar Life and Other, which is the only line of business that contains a material VOBA balance, along with a reconciliation to the Company’s total VOBA balance:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Balance, BOP | $ | 511 | $ | 597 | $ | 746 | |||||||||||
| Amortization expense | (42) | (49) | (58) | ||||||||||||||
| Foreign currency adjustment | (48) | (37) | (91) | ||||||||||||||
| Balance, EOP | 421 | 511 | 597 | ||||||||||||||
| Other businesses(1) | 14 | 19 | 24 | ||||||||||||||
| Total VOBA balance | $ | 435 | $ | 530 | $ | 621 |
(1)Represents Aoba Life business.
The following table provides estimated future amortization for the periods indicated:
| 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Estimated future VOBA amortization | $ | 39 | $ | 36 | $ | 33 | $ | 30 | $ | 27 | $ | 270 | $ | 435 |
**8.**SEPARATE ACCOUNTS
The Company issues variable annuity and variable life insurance contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. Most variable annuity and variable life insurance contracts are offered with both separate and general account options. See Note 13 for additional information.
The assets supporting the variable portion of variable annuity and variable life insurance contracts are carried at fair value and reported as “Separate account assets” with an equivalent amount reported as “Separate account liabilities.” The liabilities related to the net amount at risk are reflected within “Future policy benefits” or “Market risk benefit liabilities” (or “assets,” if applicable). Amounts assessed against the contractholders for mortality, administration, and other services are included within revenue in “Policy charges and fee income” and changes in liabilities for minimum guarantees are generally included in “Policyholders’ benefits” or “Change in value of market risk benefits, net of related hedging gains (losses).”
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Separate Account Assets
The aggregate fair value of assets, by major investment asset category, supporting separate accounts is as follows:
| December 31, 2024 | December 31, 2023 | ||||||||||
| (in millions) | |||||||||||
| Asset Type: | |||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies | $ | 4,674 | $ | 4,411 | |||||||
| Obligations of U.S. states and their political subdivisions | 2,224 | 2,116 | |||||||||
| Foreign government bonds | 93 | 101 | |||||||||
| U.S. corporate securities | 11,440 | 12,782 | |||||||||
| Foreign corporate securities | 3,010 | 3,288 | |||||||||
| Asset-backed securities | 1,283 | 1,211 | |||||||||
| Mortgage-backed securities | 14,144 | 14,253 | |||||||||
| Mutual funds: | |||||||||||
| Equity | 90,180 | 88,397 | |||||||||
| Fixed Income | 33,828 | 37,065 | |||||||||
| Other | 5,439 | 5,587 | |||||||||
| Equity securities | 4,845 | 5,410 | |||||||||
| Commercial mortgage and other loans | 54 | 67 | |||||||||
| Other invested assets | 19,352 | 20,739 | |||||||||
| Short-term investments | 1,137 | 1,202 | |||||||||
| Cash and cash equivalents | 1,669 | 2,259 | |||||||||
| Total | $ | 193,372 | $ | 198,888 | |||||||
For the periods ended December 31, 2024, 2023 and 2022, there were no transfers of assets, other than cash, from the general account to a separate account; therefore, no gains or losses were recorded.
Separate Account Liabilities
The balances of and changes in separate account liabilities as of and for the periods ended are as follows:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | |||||||||||||||||||||||||||||||||||
| PGIM | Institutional | Individual | Group Insurance | Individual Life | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 32,648 | $ | 11,011 | $ | 94,130 | $ | 25,021 | $ | 39,223 | $ | 202,033 | |||||||||||||||||||||||
| Deposits | 15,374 | 143 | 606 | 734 | 3,728 | 20,585 | |||||||||||||||||||||||||||||
| Investment performance | (45) | 146 | 8,722 | 1,013 | 7,032 | 16,868 | |||||||||||||||||||||||||||||
| Policy charges | (69) | (11) | (2,231) | (317) | (1,168) | (3,796) | |||||||||||||||||||||||||||||
| Surrenders and withdrawals | (14,766) | (1,050) | (14,070) | (370) | (986) | (31,242) | |||||||||||||||||||||||||||||
| Benefit payments | (3,550) | (541) | (87) | (303) | (449) | (4,930) | |||||||||||||||||||||||||||||
| Net transfers (to) from general account | (184) | (76) | (102) | 6 | (577) | (933) | |||||||||||||||||||||||||||||
| Other | (763) | (314) | 6 | (658) | 88 | (1,641) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 28,645 | $ | 9,308 | $ | 86,974 | $ | 25,126 | $ | 46,891 | $ | 196,944 | |||||||||||||||||||||||
| Other businesses(1) | (3,572) | ||||||||||||||||||||||||||||||||||
| Total separate account liabilities | $ | 193,372 | |||||||||||||||||||||||||||||||||
| Cash surrender value(2) | $ | 28,645 | $ | 9,308 | $ | 86,081 | $ | 25,028 | $ | 43,333 | $ | 192,395 |
(1)Primarily represents activity from the Company’s Divested and Run-off Businesses as well as the impact of intercompany eliminations. There are no associated cash surrender charges.
(2)“Cash surrender value” represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges. There are no cash surrender charges for the PGIM and Institutional Retirement Strategies segments.
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | |||||||||||||||||||||||||||||||||||
| PGIM | Institutional | Individual | Group Insurance | Individual Life | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 40,056 | $ | 11,428 | $ | 93,395 | $ | 23,513 | $ | 32,930 | $ | 201,322 | |||||||||||||||||||||||
| Deposits | 6,848 | 259 | 446 | 103 | 2,972 | 10,628 | |||||||||||||||||||||||||||||
| Investment performance | (1,045) | 830 | 12,598 | 1,828 | 6,742 | 20,953 | |||||||||||||||||||||||||||||
| Policy charges | (81) | (12) | (2,316) | (337) | (1,075) | (3,821) | |||||||||||||||||||||||||||||
| Surrenders and withdrawals | (8,109) | (660) | (9,891) | (52) | (765) | (19,477) | |||||||||||||||||||||||||||||
| Benefit payments | (3,477) | (562) | (95) | (290) | (342) | (4,766) | |||||||||||||||||||||||||||||
| Net transfers (to) from general account | (501) | (74) | (17) | 44 | (1,344) | (1,892) | |||||||||||||||||||||||||||||
| Other | (1,043) | (198) | 10 | 212 | 105 | (914) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 32,648 | $ | 11,011 | $ | 94,130 | $ | 25,021 | $ | 39,223 | 202,033 | ||||||||||||||||||||||||
| Other businesses(1) | (3,145) | ||||||||||||||||||||||||||||||||||
| Total separate account liabilities | $ | 198,888 | |||||||||||||||||||||||||||||||||
| Cash surrender value(2) | $ | 32,648 | $ | 11,011 | $ | 92,927 | $ | 24,911 | $ | 35,921 | $ | 197,418 |
(1)Primarily represents activity from the Company’s Divested and Run-off Businesses as well as the impact of intercompany eliminations. There are no associated cash surrender charges.
(2)“Cash surrender value” represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges. There are no cash surrender charges for the PGIM and Institutional Retirement Strategies segments.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | |||||||||||||||||||||||||||||||||||
| PGIM | Institutional | Individual | Group Insurance | Individual Life | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 42,020 | $ | 14,064 | $ | 158,546 | $ | 27,097 | $ | 39,789 | $ | 281,516 | |||||||||||||||||||||||
| Deposits | 8,092 | 744 | 700 | 104 | 2,527 | 12,167 | |||||||||||||||||||||||||||||
| Investment performance | 645 | (2,256) | (23,956) | (3,984) | (6,934) | (36,485) | |||||||||||||||||||||||||||||
| Policy charges | (68) | (15) | (2,682) | (332) | (1,014) | (4,111) | |||||||||||||||||||||||||||||
| Surrenders and withdrawals | (6,561) | (3,177) | (9,422) | (34) | (712) | (19,906) | |||||||||||||||||||||||||||||
| Benefit payments | (3,319) | (553) | (95) | (251) | (421) | (4,639) | |||||||||||||||||||||||||||||
| Net transfers (to) from general account | (634) | 2,674 | (282) | 41 | (394) | 1,405 | |||||||||||||||||||||||||||||
| Other(1) | (119) | (53) | (29,414) | 872 | 89 | (28,625) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 40,056 | $ | 11,428 | $ | 93,395 | $ | 23,513 | $ | 32,930 | 201,322 | ||||||||||||||||||||||||
| Other businesses(2) | (3,643) | ||||||||||||||||||||||||||||||||||
| Total separate account liabilities | $ | 197,679 | |||||||||||||||||||||||||||||||||
| Cash surrender value(3) | $ | 40,056 | $ | 11,428 | $ | 91,831 | $ | 23,391 | $ | 30,049 | $ | 196,755 |
(1)Primarily represents the sale of PALAC in Individual Retirement Strategies.
(2)Primarily represents activity from the Company’s Divested and Run-off Businesses as well as the impact of intercompany eliminations. There are no associated cash surrender charges.
(3)“Cash surrender value” represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges. There are no cash surrender charges for the PGIM and Institutional Retirement Strategies segments.
**9.**INVESTMENTS IN JOINT VENTURES AND OTHER OPERATING ENTITIES
The Company has made investments in certain joint ventures and other operating entities that are strategic in nature and are made for other than the sole purpose of generating investment income. These investments are primarily accounted for under the equity method of accounting and are included in “Other assets” in the Company’s Consolidated Statements of Financial Position. The earnings from these investments are primarily included on an after-tax basis in “Equity in earnings of joint ventures and other operating entities, net of taxes” in the Company’s Consolidated Statements of Operations. The summarized financial information for the Company’s investments in joint ventures and other operating entities has been included in the summarized combined financial information for all significant equity method investments shown in Note 3.
The following table sets forth information related to the Company’s investments in joint ventures and other operating entities as of and for the years ended December 31:
| 2024 | 2023(1) | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Investment in joint ventures and other operating entities | $ | 782 | $ | 1,192 | $ | 1,211 | ||||||||||||||
| Dividends received from joint ventures and other operating entities | $ | 95 | $ | 66 | $ | 81 | ||||||||||||||
| After-tax equity in earnings of joint ventures and other operating entities | $ | 144 | $ | 49 | $ | (62) |
(1)In September of 2023, the Company acquired a 20% equity interest as a limited partner in Prismic. See Note 1 for additional information.
For the years ended December 31, 2024, 2023 and 2022, the Company recognized $31 million, $10 million and less than $1 million, respectively, of asset management fee income for services the Company provided to these joint ventures and other operating entities.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
**10.**GOODWILL AND OTHER INTANGIBLES
The changes in the carrying value of goodwill by reportable segment are as follows:
| PGIM | International Businesses | Corporate and Other | Other(1) | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Goodwill balance, December 31, 2021: | $ | 558 | $ | 130 | $ | 1,106 | $ | 10 | $ | 1,804 | |||||||||||||||||||
| Impairments | 0 | 0 | (903) | 0 | (903) | ||||||||||||||||||||||||
| Foreign currency translation | (9) | (15) | (1) | 0 | (25) | ||||||||||||||||||||||||
| Goodwill balance, December 31, 2022: | 549 | 115 | 202 | 10 | 876 | ||||||||||||||||||||||||
| Acquisitions(2) | 373 | 0 | 0 | 0 | 373 | ||||||||||||||||||||||||
| Impairments | 0 | 0 | (177) | 0 | (177) | ||||||||||||||||||||||||
| Divestitures(3) | 0 | 0 | (23) | 0 | (23) | ||||||||||||||||||||||||
| Foreign currency translation | 30 | (7) | (1) | 0 | 22 | ||||||||||||||||||||||||
| Goodwill balance, December 31, 2023: | 952 | 108 | 1 | 10 | 1,071 | ||||||||||||||||||||||||
| Foreign currency translation and other(2) | (6) | (12) | 0 | 0 | (18) | ||||||||||||||||||||||||
| Goodwill balance, December 31, 2024: | $ | 946 | $ | 96 | $ | 1 | $ | 10 | $ | 1,053 |
(1)Other includes goodwill balances assigned to Individual Retirement Strategies, Individual Life, and Group Insurance.
(2)During 2023, PGIM acquired a majority stake in Deerpath Capital Management, LP, a leading U.S.-based private credit and direct lending manager. The goodwill associated with that acquisition includes a measurement period adjustment made during 2024.
(3)Includes a sale of a foreign operation classified as a divested business within Corporate and Other.
The Company tests goodwill for impairment annually, as of December 31, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, as discussed in further detail in Note 2. The Company performed the annual goodwill impairment test using the quantitative approach for all reporting units at December 31, 2024. The estimated fair value of PGIM and Gibraltar and Other, within the International Businesses segment, incorporated a market approach based on earnings multiple and significantly exceeded their carrying value, resulting in no goodwill impairment as of December 31, 2024.
The Company recorded pre-tax impairment charges of $177 million and $903 million in 2023 and 2022, respectively, both related to AIQ, within Corporate and Other operations, resulting in no remaining goodwill assigned to AIQ as of December 31, 2023 and 2024.
Other Intangibles
Other intangible balances at December 31, are as follows:
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Subject to amortization: | |||||||||||||||||||||||||||||||||||
| Mortgage servicing rights | $ | 897 | $ | (630) | $ | 267 | $ | 884 | $ | (600) | $ | 284 | |||||||||||||||||||||||
| Customer relationships | 260 | (173) | 87 | 268 | (158) | 110 | |||||||||||||||||||||||||||||
| Software and other | 41 | (30) | 11 | 189 | (135) | 54 | |||||||||||||||||||||||||||||
| Not subject to amortization | 41 | N/A | 41 | 58 | N/A | 58 | |||||||||||||||||||||||||||||
| Total | $ | 406 | $ | 506 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The fair values of net mortgage servicing rights were $269 million and $286 million at December 31, 2024 and 2023, respectively. Amortization expense for other intangibles was $80 million, $89 million and $104 million for the years ending December 31, 2024, 2023 and 2022, respectively. The amortization expense amounts for 2024, 2023 and 2022 do not include impairments recorded for mortgage servicing rights or other intangibles. See the nonrecurring fair value measurements section of Note 6 for additional information regarding these impairments.
The following table provides estimated future amortization for the periods indicated:
| 2025 | 2026 | 2027 | 2028 | 2029 | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Estimated future amortization expense of other intangibles | $ | 63 | $ | 59 | $ | 53 | $ | 48 | $ | 34 |
**11.**LEASES
The Company occupies leased office space and other facilities in many locations under various long-term leases and has entered into numerous leases covering the long-term use of computers and other equipment. The leases, depending on their specific terms, are classified as either operating or finance with the vast majority of leases falling under the operating classification. The leases in the Company’s portfolio have remaining lease terms from less than one year to 24 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases within 12 years. An analysis of all economic and non-economic factors associated with leases containing certain options, including factors such as the existence of cancellation penalties, leasehold improvements made to the underlying assets and location of the underlying assets, is conducted to determine whether those leases are reasonably certain to renew, and hence, should be included in the lease term that is used to establish the right-of-use assets and lease liabilities for those arrangements.
The Company does not have residual guarantees associated with its lessee arrangements, nor are there any restrictions or covenants associated with its lease arrangements.
Lessee
Supplemental balance sheet information related to leases where the Company is the lessee is included below. Right-of-use assets and lease liabilities are included within “Other assets” and “Other liabilities” respectively.
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| ($ in millions) | |||||||||||
| Operating Leases: | |||||||||||
| Right-of-use assets | $ | 373 | $ | 286 | |||||||
| Lease liabilities | $ | 408 | $ | 311 | |||||||
| Weighted average remaining lease term | 9 years | 5 years | |||||||||
| Weighted average discount rate | 2.58 | % | 2.82 | % |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Maturities of operating lease liabilities are as follows:
| December 31, 2024 | |||||
| (in millions) | |||||
| 2025 | $ | 95 | |||
| 2026 | 73 | ||||
| 2027 | 54 | ||||
| 2028 | 42 | ||||
| 2029 | 35 | ||||
| Thereafter | 204 | ||||
| Total lease payments | 503 | ||||
| Less imputed interest | (95) | ||||
| Total | $ | 408 |
Lease expense is included in “General and administrative expenses,” which consisted of operating lease and short-term costs. Operating lease costs were $123 million, $121 million, and $133 million for the years ended December 31, 2024, 2023, and 2022, respectively. Short-term lease costs were $68 million, $74 million, and $80 million for the years ended December 31, 2024, 2023, and 2022, respectively. Short-term lease costs relate to those leases with terms of twelve months or less that do not include an option to purchase the underlying asset that is reasonably certain of exercise.
Lessor
The Company directly owns certain real estate properties that are primarily reported within the investment portfolio. Such real estate is leased to third parties, with the Company serving as the lessor. The terms of the leases vary depending on property type (e.g., commercial or residential). In most cases, the lessee has an option to renew the lease contract based on market rates but does not have an option to purchase the property. The terms of the leases may also include provisions for the use of common areas. Such non-lease components are not separately accounted for by the Company, as a result of applying a practical expedient. Lease income included in “Net investment income” was $69 million, $79 million, and $85 million for the years ended December 31, 2024, 2023, and 2022, respectively. Lease income included in “Other income” was $11 million, $11 million, and $12 million for the years ended December 31, 2024, 2023, and 2022, respectively.
**12.**LIABILITY FOR FUTURE POLICY BENEFITS
Liability for Future Policy Benefits primarily consists of the following sub-components, which are discussed in greater detail below.
-
Benefit Reserves;
-
Deferred Profit Liability; and
-
Additional Insurance Reserves
In 2024, the Company recognized a favorable impact to net income attributable to its annual reviews and update of assumptions and other refinements. The impact was favorable for direct and assumed Benefit Reserves and DPL, net of the impact of flooring these liabilities at zero for each issue year cohort, primarily due to updates to mortality assumptions in Institutional Retirement Strategies and Long-Term Care, partially offset by unfavorable updates to policyholder behavior assumptions on certain life policies in International Businesses. Additionally, there was an unfavorable impact for direct and assumed AIR, primarily due to updates to policyholder behavior assumptions on universal life polices with secondary guarantees in Individual Life.
In 2023, the Company recognized an unfavorable impact to net income attributable to its annual reviews and update of assumptions and other refinements. The impact was unfavorable for direct and assumed Benefit Reserves and DPL, net of the impact of flooring these liabilities at zero for each issue year cohort, primarily due to updates to policyholder behavior and claim assumptions in Long-Term Care. Additionally, there was an unfavorable impact for direct and assumed AIR, primarily due to unfavorable model refinements, partially offset by updates to economic assumptions, including expected future rates of returns on universal life policies with secondary guarantees in Individual Life.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
In 2022, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update for direct and assumed Benefit Reserves and DPL, net of the impact of flooring these liabilities at zero for each issue year cohort. This net impact was primarily due to updates to mortality assumptions on individual term life policies. Additionally, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update and other refinements for direct and assumed AIR, primarily due to updates to policyholder behavior assumptions on universal life policies with secondary guarantees.
Benefit Reserves
The balances of and changes in Benefit Reserves as of and for the periods indicated consist of the three tables presented below: Present Value of Expected Net Premiums rollforward, Present Value of Expected Future Policy Benefits rollforward, and Net Liability for Future Policy Benefits.
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Present Value of Expected Net Premiums | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 71,407 | $ | 11,274 | $ | 29,064 | $ | 26,367 | $ | 3,286 | $ | 141,398 | |||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, BOP | 11,869 | 228 | 596 | 622 | 16 | 13,331 | |||||||||||||||||||||||||||||
| Balance at original discount rate, BOP | 83,276 | 11,502 | 29,660 | 26,989 | 3,302 | 154,729 | |||||||||||||||||||||||||||||
| Effect of assumption update | 41 | 21 | (328) | (535) | (276) | (1,077) | |||||||||||||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 568 | (228) | (1,286) | (874) | 122 | (1,698) | |||||||||||||||||||||||||||||
| Adjusted balance, BOP | 83,885 | 11,295 | 28,046 | 25,580 | 3,148 | 151,954 | |||||||||||||||||||||||||||||
| Issuances | 24,498 | 857 | 2,241 | 1,113 | 0 | 28,709 | |||||||||||||||||||||||||||||
| Net premiums / considerations collected | (22,206) | (1,379) | (3,671) | (3,298) | (311) | (30,865) | |||||||||||||||||||||||||||||
| Interest accrual | 2,896 | 530 | 835 | 692 | 149 | 5,102 | |||||||||||||||||||||||||||||
| Foreign currency adjustment | (2,002) | 0 | (1,934) | (1,275) | 0 | (5,211) | |||||||||||||||||||||||||||||
| Other adjustments | 0 | (1) | 121 | 0 | 0 | 120 | |||||||||||||||||||||||||||||
| Balance at original discount rate, EOP | 87,071 | 11,302 | 25,638 | 22,812 | 2,986 | 149,809 | |||||||||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, EOP | (14,545) | (578) | (1,397) | (1,202) | (132) | (17,854) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 72,526 | $ | 10,724 | $ | 24,241 | $ | 21,610 | $ | 2,854 | 131,955 | ||||||||||||||||||||||||
| Other businesses, EOP | 93 | ||||||||||||||||||||||||||||||||||
| Total balance, EOP | $ | 132,048 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Present Value of Expected Future Policy Benefits | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 141,135 | $ | 19,852 | $ | 79,822 | $ | 79,036 | $ | 12,139 | $ | 331,984 | |||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, BOP | 14,751 | 334 | 563 | 7,355 | 603 | 23,606 | |||||||||||||||||||||||||||||
| Balance at original discount rate, BOP | 155,886 | 20,186 | 80,385 | 86,391 | 12,742 | 355,590 | |||||||||||||||||||||||||||||
| Effect of assumption update | (481) | 21 | (106) | (407) | (394) | (1,367) | |||||||||||||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 716 | (252) | (1,333) | (851) | 99 | (1,621) | |||||||||||||||||||||||||||||
| Adjusted balance, BOP | 156,121 | 19,955 | 78,946 | 85,133 | 12,447 | 352,602 | |||||||||||||||||||||||||||||
| Issuances | 24,498 | 857 | 2,241 | 1,113 | 0 | 28,709 | |||||||||||||||||||||||||||||
| Interest accrual | 6,290 | 945 | 2,551 | 2,166 | 606 | 12,558 | |||||||||||||||||||||||||||||
| Benefit payments | (13,131) | (1,615) | (4,370) | (4,793) | (327) | (24,236) | |||||||||||||||||||||||||||||
| Foreign currency adjustment | (2,017) | 0 | (5,251) | (4,702) | 0 | (11,970) | |||||||||||||||||||||||||||||
| Other adjustments | (95) | (12) | 290 | (5) | 0 | 178 | |||||||||||||||||||||||||||||
| Balance at original discount rate, EOP | 171,666 | 20,130 | 74,407 | 78,912 | 12,726 | 357,841 | |||||||||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, EOP | (20,182) | (1,134) | (6,272) | (11,562) | (1,548) | (40,698) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 151,484 | $ | 18,996 | $ | 68,135 | $ | 67,350 | $ | 11,178 | 317,143 | ||||||||||||||||||||||||
| Other businesses, EOP | 1,646 | ||||||||||||||||||||||||||||||||||
| Total balance, EOP | $ | 318,789 |
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Net Liability for Future Policy Benefits - Benefit Reserves | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, EOP, pre-flooring | $ | 78,958 | $ | 8,272 | $ | 43,894 | $ | 45,740 | $ | 8,324 | $ | 185,188 | |||||||||||||||||||||||
| Flooring impact, EOP | 68 | 0 | 24 | 13 | 0 | 105 | |||||||||||||||||||||||||||||
| Balance, EOP, post-flooring | 79,026 | 8,272 | 43,918 | 45,753 | 8,324 | 185,293 | |||||||||||||||||||||||||||||
| Less: Reinsurance recoverable | 5,057 | 654 | 89 | 260 | 0 | 6,060 | |||||||||||||||||||||||||||||
| Balance after reinsurance recoverable, EOP, post-flooring | $ | 73,969 | $ | 7,618 | $ | 43,829 | $ | 45,493 | $ | 8,324 | 179,233 | ||||||||||||||||||||||||
| Other businesses, EOP(1) | 1,493 | ||||||||||||||||||||||||||||||||||
| Total balance after reinsurance recoverable, EOP | $ | 180,726 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Present Value of Expected Net Premiums | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 52,620 | $ | 11,282 | $ | 30,689 | $ | 28,951 | $ | 2,932 | $ | 126,474 | |||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, BOP | 14,349 | 572 | 1,354 | 1,326 | 103 | 17,704 | |||||||||||||||||||||||||||||
| Balance at original discount rate, BOP | 66,969 | 11,854 | 32,043 | 30,277 | 3,035 | 144,178 | |||||||||||||||||||||||||||||
| Effect of assumption update | (1,117) | (1) | 78 | (175) | 266 | (949) | |||||||||||||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 540 | (223) | (1,092) | (845) | 161 | (1,459) | |||||||||||||||||||||||||||||
| Adjusted balance, BOP | 66,392 | 11,630 | 31,029 | 29,257 | 3,462 | 141,770 | |||||||||||||||||||||||||||||
| Issuances | 20,914 | 750 | 2,292 | 1,583 | 0 | 25,539 | |||||||||||||||||||||||||||||
| Net premiums / considerations collected | (10,389) | (1,413) | (3,917) | (3,720) | (317) | (19,756) | |||||||||||||||||||||||||||||
| Interest accrual | 2,233 | 538 | 889 | 780 | 157 | 4,597 | |||||||||||||||||||||||||||||
| Foreign currency adjustment | 4,126 | 0 | (756) | (907) | 0 | 2,463 | |||||||||||||||||||||||||||||
| Other adjustments | 0 | (3) | 123 | (4) | 0 | 116 | |||||||||||||||||||||||||||||
| Balance at original discount rate, EOP | 83,276 | 11,502 | 29,660 | 26,989 | 3,302 | 154,729 | |||||||||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, EOP | (11,869) | (228) | (596) | (622) | (16) | (13,331) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 71,407 | $ | 11,274 | $ | 29,064 | $ | 26,367 | $ | 3,286 | 141,398 | ||||||||||||||||||||||||
| Other businesses, EOP | 86 | ||||||||||||||||||||||||||||||||||
| Total balance, EOP | $ | 141,484 |
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Present Value of Expected Future Policy Benefits | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 117,754 | $ | 19,288 | $ | 78,639 | $ | 80,331 | $ | 10,685 | $ | 306,697 | |||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, BOP | 20,170 | 1,012 | 3,719 | 11,266 | 1,216 | 37,383 | |||||||||||||||||||||||||||||
| Balance at original discount rate, BOP | 137,924 | 20,300 | 82,358 | 91,597 | 11,901 | 344,080 | |||||||||||||||||||||||||||||
| Effect of assumption update | (1,289) | (1) | 145 | 44 | 357 | (744) | |||||||||||||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 514 | (269) | (1,030) | (806) | 160 | (1,431) | |||||||||||||||||||||||||||||
| Adjusted balance, BOP | 137,149 | 20,030 | 81,473 | 90,835 | 12,418 | 341,905 | |||||||||||||||||||||||||||||
| Issuances | 20,914 | 750 | 2,292 | 1,583 | 0 | 25,539 | |||||||||||||||||||||||||||||
| Interest accrual | 5,109 | 944 | 2,615 | 2,287 | 594 | 11,549 | |||||||||||||||||||||||||||||
| Benefit payments | (11,477) | (1,522) | (3,965) | (5,057) | (270) | (22,291) | |||||||||||||||||||||||||||||
| Foreign currency adjustment | 4,209 | 0 | (2,286) | (3,229) | 0 | (1,306) | |||||||||||||||||||||||||||||
| Other adjustments | (18) | (16) | 256 | (28) | 0 | 194 | |||||||||||||||||||||||||||||
| Balance at original discount rate, EOP | 155,886 | 20,186 | 80,385 | 86,391 | 12,742 | 355,590 | |||||||||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, EOP | (14,751) | (334) | (563) | (7,355) | (603) | (23,606) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 141,135 | $ | 19,852 | $ | 79,822 | $ | 79,036 | $ | 12,139 | 331,984 | ||||||||||||||||||||||||
| Other businesses, EOP | 1,716 | ||||||||||||||||||||||||||||||||||
| Total balance, EOP | $ | 333,700 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Net Liability for Future Policy Benefits - Benefit Reserves | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, EOP, pre-flooring | $ | 69,728 | $ | 8,578 | $ | 50,757 | $ | 52,669 | $ | 8,852 | $ | 190,584 | |||||||||||||||||||||||
| Flooring impact, EOP | 61 | 0 | 19 | 6 | 0 | 86 | |||||||||||||||||||||||||||||
| Balance, EOP, post-flooring | 69,789 | 8,578 | 50,776 | 52,675 | 8,852 | 190,670 | |||||||||||||||||||||||||||||
| Less: Reinsurance recoverable | 5,539 | 744 | 102 | 202 | 0 | 6,587 | |||||||||||||||||||||||||||||
| Balance after reinsurance recoverable, EOP, post-flooring | $ | 64,250 | $ | 7,834 | $ | 50,674 | $ | 52,473 | $ | 8,852 | 184,083 | ||||||||||||||||||||||||
| Other businesses, EOP(1) | 1,563 | ||||||||||||||||||||||||||||||||||
| Total balance after reinsurance recoverable, EOP | $ | 185,646 |
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||
| Present Value of Expected Net Premiums | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 68,791 | $ | 12,971 | $ | 39,517 | $ | 37,815 | $ | 3,585 | $ | 162,679 | |||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, BOP | (4,414) | (1,892) | (3,516) | (3,239) | (644) | (13,705) | |||||||||||||||||||||||||||||
| Balance at original discount rate, BOP | 64,377 | 11,079 | 36,001 | 34,576 | 2,941 | 148,974 | |||||||||||||||||||||||||||||
| Effect of assumption update | 249 | 1,313 | (76) | (176) | 49 | 1,359 | |||||||||||||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 371 | (139) | (1,621) | (989) | 184 | (2,194) | |||||||||||||||||||||||||||||
| Adjusted balance, BOP | 64,997 | 12,253 | 34,304 | 33,411 | 3,174 | 148,139 | |||||||||||||||||||||||||||||
| Issuances | 22,064 | 476 | 3,031 | 2,370 | 0 | 27,941 | |||||||||||||||||||||||||||||
| Net premiums / considerations collected | (14,765) | (1,404) | (4,149) | (4,218) | (284) | (24,820) | |||||||||||||||||||||||||||||
| Interest accrual | 1,640 | 542 | 935 | 859 | 145 | 4,121 | |||||||||||||||||||||||||||||
| Foreign currency adjustment | (6,967) | 0 | (2,220) | (2,145) | 0 | (11,332) | |||||||||||||||||||||||||||||
| Other adjustments | 0 | (13) | 142 | 0 | 0 | 129 | |||||||||||||||||||||||||||||
| Balance at original discount rate, EOP | 66,969 | 11,854 | 32,043 | 30,277 | 3,035 | 144,178 | |||||||||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, EOP | (14,349) | (572) | (1,354) | (1,326) | (103) | (17,704) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 52,620 | $ | 11,282 | $ | 30,689 | $ | 28,951 | $ | 2,932 | 126,474 | ||||||||||||||||||||||||
| Other businesses, EOP | 88 | ||||||||||||||||||||||||||||||||||
| Total balance, EOP | $ | 126,562 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||
| Present Value of Expected Future Policy Benefits | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, BOP | $ | 142,593 | $ | 22,768 | $ | 109,562 | $ | 114,846 | $ | 15,810 | $ | 405,579 | |||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, BOP | (13,706) | (3,876) | (21,554) | (13,476) | (4,482) | (57,094) | |||||||||||||||||||||||||||||
| Balance at original discount rate, BOP | 128,887 | 18,892 | 88,008 | 101,370 | 11,328 | 348,485 | |||||||||||||||||||||||||||||
| Effect of assumption update | (187) | 1,777 | (115) | (164) | 49 | 1,360 | |||||||||||||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 273 | (218) | (1,730) | (892) | 208 | (2,359) | |||||||||||||||||||||||||||||
| Adjusted balance, BOP | 128,973 | 20,451 | 86,163 | 100,314 | 11,585 | 347,486 | |||||||||||||||||||||||||||||
| Issuances | 22,064 | 476 | 3,031 | 2,370 | 0 | 27,941 | |||||||||||||||||||||||||||||
| Interest accrual | 4,231 | 937 | 2,641 | 2,399 | 554 | 10,762 | |||||||||||||||||||||||||||||
| Benefit payments | (9,629) | (1,547) | (3,725) | (5,975) | (238) | (21,114) | |||||||||||||||||||||||||||||
| Foreign currency adjustment | (7,180) | 0 | (6,043) | (7,489) | 0 | (20,712) | |||||||||||||||||||||||||||||
| Other adjustments | (535) | (17) | 291 | (22) | 0 | (283) | |||||||||||||||||||||||||||||
| Balance at original discount rate, EOP | 137,924 | 20,300 | 82,358 | 91,597 | 11,901 | 344,080 | |||||||||||||||||||||||||||||
| Effect of cumulative changes in discount rate assumptions, EOP | (20,170) | (1,012) | (3,719) | (11,266) | (1,216) | (37,383) | |||||||||||||||||||||||||||||
| Balance, EOP | $ | 117,754 | $ | 19,288 | $ | 78,639 | $ | 80,331 | $ | 10,685 | 306,697 | ||||||||||||||||||||||||
| Other businesses, EOP | 1,921 | ||||||||||||||||||||||||||||||||||
| Total balance, EOP | $ | 308,618 |
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||
| Net Liability for Future Policy Benefits - Benefit Reserves | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, EOP, pre-flooring | $ | 65,134 | $ | 8,006 | $ | 47,950 | $ | 51,380 | $ | 7,753 | $ | 180,223 | |||||||||||||||||||||||
| Flooring impact, EOP | 1 | 0 | 106 | 140 | 0 | 247 | |||||||||||||||||||||||||||||
| Balance, EOP, post-flooring | 65,135 | 8,006 | 48,056 | 51,520 | 7,753 | 180,470 | |||||||||||||||||||||||||||||
| Less: Reinsurance recoverable | 0 | 708 | 126 | 203 | 0 | 1,037 | |||||||||||||||||||||||||||||
| Balance after reinsurance recoverable, EOP, post-flooring | $ | 65,135 | $ | 7,298 | $ | 47,930 | $ | 51,317 | $ | 7,753 | 179,433 | ||||||||||||||||||||||||
| Other businesses, EOP(1) | 1,758 | ||||||||||||||||||||||||||||||||||
| Total balance after reinsurance recoverable, EOP | $ | 181,191 |
(1)Reflects balance after reinsurance recoverable of $60 million, $69 million, and $76 million at December 31, 2024, 2023 and 2022, respectively.
The following tables provide supplemental information related to the balances of and changes in Benefit Reserves included in the disaggregated tables above, on a gross (direct and assumed) basis, as of and for the period indicated:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | |||||||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||||||||
| Undiscounted expected future gross premiums | $ | 145,442 | $ | 22,947 | $ | 59,857 | $ | 47,987 | $ | 6,817 | |||||||||||||||||||||||||
| Discounted expected future gross premiums (at original discount rate) | $ | 94,222 | $ | 15,662 | $ | 46,238 | $ | 38,477 | $ | 4,542 | |||||||||||||||||||||||||
| Discounted expected future gross premiums (at current discount rate) | $ | 78,237 | $ | 14,901 | $ | 44,062 | $ | 36,554 | $ | 4,350 | |||||||||||||||||||||||||
| Undiscounted expected future benefits and expenses | $ | 274,071 | $ | 31,068 | $ | 126,508 | $ | 127,500 | $ | 29,661 | |||||||||||||||||||||||||
| Weighted-average duration of the liability in years (at original discount rate) | 8 | 10 | 18 | 17 | 17 | ||||||||||||||||||||||||||||||
| Weighted-average duration of the liability in years (at current discount rate) | 8 | 9 | 16 | 15 | 16 | ||||||||||||||||||||||||||||||
| Weighted-average interest rate (at original discount rate) | 4.74 | % | 5.30 | % | 3.48 | % | 2.65 | % | 4.91 | % | |||||||||||||||||||||||||
| Weighted-average interest rate (at current discount rate) | 5.59 | % | 5.78 | % | 3.76 | % | 3.65 | % | 5.85 | % | |||||||||||||||||||||||||
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | |||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Undiscounted expected future gross premiums | $ | 134,192 | $ | 23,083 | $ | 69,238 | $ | 56,398 | $ | 6,852 | |||||||||||||||||||
| Discounted expected future gross premiums (at original discount rate) | $ | 90,606 | $ | 15,322 | $ | 53,640 | $ | 45,319 | $ | 4,509 | |||||||||||||||||||
| Discounted expected future gross premiums (at current discount rate) | $ | 77,520 | $ | 15,044 | $ | 53,102 | $ | 44,420 | $ | 4,491 | |||||||||||||||||||
| Undiscounted expected future benefits and expenses | $ | 242,617 | $ | 31,114 | $ | 139,620 | $ | 141,171 | $ | 30,761 | |||||||||||||||||||
| Weighted-average duration of the liability in years (at original discount rate) | 9 | 10 | 19 | 19 | 18 | ||||||||||||||||||||||||
| Weighted-average duration of the liability in years (at current discount rate) | 8 | 10 | 19 | 17 | 17 | ||||||||||||||||||||||||
| Weighted-average interest rate (at original discount rate) | 4.62 | % | 5.17 | % | 3.43 | % | 2.57 | % | 4.91 | % | |||||||||||||||||||
| Weighted-average interest rate (at current discount rate) | 5.03 | % | 4.99 | % | 3.06 | % | 2.97 | % | 5.25 | % | |||||||||||||||||||
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | Corporate and Other | ||||||||||||||||||||||||||
| Institutional | Term Life | Life Planner | Gibraltar Life and Other | Long-Term Care | |||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Undiscounted expected future gross premiums | $ | 103,284 | $ | 23,526 | $ | 74,196 | $ | 64,059 | $ | 6,971 | |||||||||||||||||||
| Discounted expected future gross premiums (at original discount rate) | $ | 72,479 | $ | 15,628 | $ | 57,985 | $ | 50,968 | $ | 4,539 | |||||||||||||||||||
| Discounted expected future gross premiums (at current discount rate) | $ | 56,950 | $ | 14,886 | $ | 56,068 | $ | 48,902 | $ | 4,391 | |||||||||||||||||||
| Undiscounted expected future benefits and expenses | $ | 209,770 | $ | 31,412 | $ | 148,331 | $ | 155,711 | $ | 29,613 | |||||||||||||||||||
| Weighted-average duration of the liability in years (at original discount rate) | 8 | 10 | 20 | 20 | 19 | ||||||||||||||||||||||||
| Weighted-average duration of the liability in years (at current discount rate) | 8 | 10 | 19 | 18 | 18 | ||||||||||||||||||||||||
| Weighted-average interest rate (at original discount rate) | 4.37 | % | 5.21 | % | 3.40 | % | 2.50 | % | 4.91 | % | |||||||||||||||||||
| Weighted-average interest rate (at current discount rate) | 5.39 | % | 5.39 | % | 3.12 | % | 2.98 | % | 5.63 | % | |||||||||||||||||||
For additional information regarding observable market information and the techniques used to determine the interest rate assumptions seen above, see Note 2.
For non-participating traditional and limited-payment products, if a cohort is in a loss position where the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for the present value of expected future policy benefits and non-level claim settlement expenses, then the liability for future policy benefits is adjusted at that time, and thereafter, such that all changes, both favorable and unfavorable, in expected benefits resulting from both actual experience deviations and changes in future assumptions are recognized immediately as a gain or loss respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
In 2024, there was an immaterial impact to net income for non-participating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts.
In 2023, there was an immaterial impact to net income for non-participating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts.
In 2022, there was a $190 million charge to net income for non-participating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts, partially offset by a $80 million gain reflecting the impact of ceded reinsurance on the affected cohorts. The unfavorable impact in 2022 was primarily due to unfavorable assumption updates related to the term life business in Individual Life.
Deferred Profit Liability
The balances of and changes in DPL as of and for the period indicated are as follows:
| Year Ended December 31, 2024 | |||||||||||||||||||||||
| Deferred Profit Liability | |||||||||||||||||||||||
| Retirement Strategies | International Businesses | ||||||||||||||||||||||
| Institutional | Life Planner | Gibraltar Life and Other | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Balance, BOP | $ | 5,615 | $ | 3,956 | $ | 5,303 | $ | 14,874 | |||||||||||||||
| Flooring impact, BOP | 0 | 1 | 1 | 2 | |||||||||||||||||||
| Balance, BOP, pre-flooring | 5,615 | 3,955 | 5,302 | 14,872 | |||||||||||||||||||
| Effect of assumption update | 370 | (150) | (138) | 82 | |||||||||||||||||||
| Effect of actual variances from expected experience and other activity | (99) | (20) | (39) | (158) | |||||||||||||||||||
| Adjusted balance, BOP | 5,886 | 3,785 | 5,125 | 14,796 | |||||||||||||||||||
| Profits deferred | 142 | 1,530 | 1,149 | 2,821 | |||||||||||||||||||
| Interest accrual | 236 | 164 | 156 | 556 | |||||||||||||||||||
| Amortization | (588) | (1,129) | (980) | (2,697) | |||||||||||||||||||
| Foreign currency adjustment | (6) | (268) | (212) | (486) | |||||||||||||||||||
| Other adjustments | 0 | 32 | 0 | 32 | |||||||||||||||||||
| Balance, EOP, pre-flooring | 5,670 | 4,114 | 5,238 | 15,022 | |||||||||||||||||||
| Flooring impact, EOP | 0 | 1 | 1 | 2 | |||||||||||||||||||
| Balance, EOP | 5,670 | 4,115 | 5,239 | 15,024 | |||||||||||||||||||
| Less: Reinsurance recoverable | 391 | 9 | 31 | 431 | |||||||||||||||||||
| Balance after reinsurance recoverable | $ | 5,279 | $ | 4,106 | $ | 5,208 | 14,593 | ||||||||||||||||
| Other businesses | 161 | ||||||||||||||||||||||
| Total balance after reinsurance recoverable | $ | 14,754 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2023 | |||||||||||||||||||||||
| Deferred Profit Liability | |||||||||||||||||||||||
| Retirement Strategies | International Businesses | ||||||||||||||||||||||
| Institutional | Life Planner | Gibraltar Life and Other | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Balance, BOP | $ | 5,532 | $ | 3,379 | $ | 5,261 | $ | 14,172 | |||||||||||||||
| Flooring impact, BOP | 0 | 0 | 1 | 1 | |||||||||||||||||||
| Balance, BOP, pre-flooring | 5,532 | 3,379 | 5,260 | 14,171 | |||||||||||||||||||
| Effect of assumption update | 35 | (67) | (228) | (260) | |||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 21 | (14) | (61) | (54) | |||||||||||||||||||
| Adjusted balance, BOP | 5,588 | 3,298 | 4,971 | 13,857 | |||||||||||||||||||
| Profits deferred | 342 | 1,674 | 1,331 | 3,347 | |||||||||||||||||||
| Interest accrual | 227 | 148 | 152 | 527 | |||||||||||||||||||
| Amortization | (565) | (1,158) | (1,015) | (2,738) | |||||||||||||||||||
| Foreign currency adjustment | 15 | (39) | (137) | (161) | |||||||||||||||||||
| Other adjustments | 8 | 32 | 0 | 40 | |||||||||||||||||||
| Balance, EOP, pre-flooring | 5,615 | 3,955 | 5,302 | 14,872 | |||||||||||||||||||
| Flooring impact, EOP | 0 | 1 | 1 | 2 | |||||||||||||||||||
| Balance, EOP | 5,615 | 3,956 | 5,303 | 14,874 | |||||||||||||||||||
| Less: Reinsurance recoverable | 386 | 9 | 10 | 405 | |||||||||||||||||||
| Balance after reinsurance recoverable | $ | 5,229 | $ | 3,947 | $ | 5,293 | 14,469 | ||||||||||||||||
| Other businesses | 148 | ||||||||||||||||||||||
| Total balance after reinsurance recoverable | $ | 14,617 |
| Year Ended December 31, 2022 | |||||||||||||||||||||||
| Deferred Profit Liability | |||||||||||||||||||||||
| Retirement Strategies | International Businesses | ||||||||||||||||||||||
| Institutional | Life Planner | Gibraltar Life and Other | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Balance, BOP | $ | 5,183 | $ | 2,741 | $ | 5,014 | $ | 12,938 | |||||||||||||||
| Flooring impact, BOP | 0 | 0 | 1 | 1 | |||||||||||||||||||
| Balance, BOP, pre-flooring | 5,183 | 2,741 | 5,013 | 12,937 | |||||||||||||||||||
| Effect of assumption update | 382 | 28 | (5) | 405 | |||||||||||||||||||
| Effect of actual variances from expected experience and other activity | 102 | (1) | (110) | (9) | |||||||||||||||||||
| Adjusted balance, BOP | 5,667 | 2,768 | 4,898 | 13,333 | |||||||||||||||||||
| Profits deferred | 230 | 1,725 | 1,555 | 3,510 | |||||||||||||||||||
| Interest accrual | 214 | 123 | 143 | 480 | |||||||||||||||||||
| Amortization | (548) | (1,131) | (1,036) | (2,715) | |||||||||||||||||||
| Foreign currency adjustment | (30) | (131) | (300) | (461) | |||||||||||||||||||
| Other adjustments | (1) | 25 | 0 | 24 | |||||||||||||||||||
| Balance, EOP, pre-flooring | 5,532 | 3,379 | 5,260 | 14,171 | |||||||||||||||||||
| Flooring impact, EOP | 0 | 0 | 1 | 1 | |||||||||||||||||||
| Balance, EOP | 5,532 | 3,379 | 5,261 | 14,172 | |||||||||||||||||||
| Less: Reinsurance recoverable | 0 | 8 | 10 | 18 | |||||||||||||||||||
| Balance after reinsurance recoverable | $ | 5,532 | $ | 3,371 | $ | 5,251 | 14,154 | ||||||||||||||||
| Other businesses | 183 | ||||||||||||||||||||||
| Total balance after reinsurance recoverable | $ | 14,337 |
Additional Insurance Reserves
AIR represents the additional liability for annuitization, death, or other insurance benefits, including GMDB and GMIB contract features, that are above and beyond the contractholder's account balance.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following table shows a rollforward of AIR balances for variable and universal life products within Individual Life, which is the only line of business that contains a material AIR balance, for the period indicated, along with a reconciliation to the Company’s total AIR balance:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Balance, including amounts in AOCI, BOP, post-flooring | $ | 14,308 | $ | 12,684 | $ | 11,708 | |||||||||||
| Flooring impact and amounts in AOCI | 843 | 1,285 | (909) | ||||||||||||||
| Balance, excluding amounts in AOCI, BOP, pre-flooring | 15,151 | 13,969 | 10,799 | ||||||||||||||
| Effect of assumption update | 153 | 23 | 2,200 | ||||||||||||||
| Effect of actual variances from expected experience and other activity | 266 | 32 | (221) | ||||||||||||||
| Adjusted balance, BOP | 15,570 | 14,024 | 12,778 | ||||||||||||||
| Assessments collected(1) | 1,251 | 938 | 973 | ||||||||||||||
| Interest accrual | 539 | 488 | 435 | ||||||||||||||
| Benefits paid | (353) | (301) | (217) | ||||||||||||||
| Other adjustments | 1 | 2 | 0 | ||||||||||||||
| Balance, excluding amounts in AOCI, EOP, pre-flooring | 17,008 | 15,151 | 13,969 | ||||||||||||||
| Flooring impact and amounts in AOCI | (632) | (843) | (1,285) | ||||||||||||||
| Balance, including amounts in AOCI, EOP, post-flooring | 16,376 | 14,308 | 12,684 | ||||||||||||||
| Less: Reinsurance recoverable | 9,543 | 5,852 | 5,075 | ||||||||||||||
| Balance after reinsurance recoverable, including amounts in AOCI, EOP | 6,833 | 8,456 | 7,609 | ||||||||||||||
| Other businesses | 63 | 131 | 138 | ||||||||||||||
| Total balance after reinsurance recoverable | $ | 6,896 | $ | 8,587 | $ | 7,747 |
(1)Represents the portion of gross assessments required to fund the future policy benefits.
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Weighted-average duration of the liability in years (at original discount rate) | 21 | 22 | 23 | ||||||||||||||
| Weighted-average interest rate (at original discount rate) | 3.36 | % | 3.40 | % | 3.38 | % |
Future Policy Benefits Reconciliation
The following table presents the reconciliation of the ending balances from above rollforwards, Benefit Reserves, DPL, and AIR including other liabilities, gross of related reinsurance recoverable, to the total liability for Future Policy Benefits on the Company's Consolidated Statement of Financial Position as of the periods indicated:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Benefit reserves, EOP, post-flooring | $ | 186,846 | $ | 192,302 | $ | 182,304 | |||||||||||
| Deferred profit liability, EOP, post-flooring | 15,185 | 15,022 | 14,356 | ||||||||||||||
| Additional insurance reserves, including amounts in AOCI, EOP, post-flooring | 16,439 | 14,439 | 12,822 | ||||||||||||||
| Subtotal of amounts disclosed above | 218,470 | 221,763 | 209,482 | ||||||||||||||
| Other Future Policy Benefits reserves(1) | 50,442 | 51,518 | 52,291 | ||||||||||||||
| Total Future Policy Benefits | $ | 268,912 | $ | 273,281 | $ | 261,773 | |||||||||||
(1)Primarily represents balances for which disaggregated rollforward disclosures are not required, including Closed Block liabilities, unpaid claims and claims expenses, and incurred but not reported and in course of settlement claim liabilities.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Revenue and Interest Expense
The following tables present revenue and interest expense related to Benefit Reserves, DPL, and AIR as well as related revenue and interest expense not presented in the above supplemental tables, in the Company's Consolidated Statement of Operations as of the periods indicated:
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Revenues(1) | |||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | |||||||||||||||||||||||||||||||||||||||
| Institutional | Term Life | Variable/Universal Life | Life Planner | Gibraltar Life and Other | Other Businesses(2) | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Benefit reserves | $ | 22,814 | $ | 1,892 | $ | 0 | $ | 5,616 | $ | 5,445 | $ | 557 | $ | 36,324 | |||||||||||||||||||||||||||
| Deferred profit liability | (61) | 0 | 0 | (428) | (148) | (12) | (649) | ||||||||||||||||||||||||||||||||||
| Additional insurance reserves | 0 | 0 | 3,458 | 0 | 0 | 0 | 3,458 | ||||||||||||||||||||||||||||||||||
| Total | $ | 22,753 | $ | 1,892 | $ | 3,458 | $ | 5,188 | $ | 5,297 | $ | 545 | $ | 39,133 |
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Revenues(1) | |||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | |||||||||||||||||||||||||||||||||||||||
| Institutional | Term Life | Variable/Universal Life | Life Planner | Gibraltar Life and Other | Other Businesses(2) | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Benefit reserves | $ | 11,156 | $ | 1,848 | $ | 0 | $ | 6,199 | $ | 6,154 | $ | 540 | $ | 25,897 | |||||||||||||||||||||||||||
| Deferred profit liability | (68) | 0 | 0 | (615) | (179) | 34 | (828) | ||||||||||||||||||||||||||||||||||
| Additional insurance reserves | 0 | 0 | 2,947 | 0 | 0 | 0 | 2,947 | ||||||||||||||||||||||||||||||||||
| Total | $ | 11,088 | $ | 1,848 | $ | 2,947 | $ | 5,584 | $ | 5,975 | $ | 574 | $ | 28,016 |
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Revenues(1) | |||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | |||||||||||||||||||||||||||||||||||||||
| Institutional | Term Life | Variable/Universal Life | Life Planner | Gibraltar Life and Other | Other Businesses(2) | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Benefit reserves | $ | 15,427 | $ | 1,875 | $ | 0 | $ | 6,731 | $ | 6,987 | $ | 522 | $ | 31,542 | |||||||||||||||||||||||||||
| Deferred profit liability | (378) | 0 | 0 | (773) | (547) | 42 | (1,656) | ||||||||||||||||||||||||||||||||||
| Additional insurance reserves | 0 | 0 | 2,678 | 1 | 0 | 0 | 2,679 | ||||||||||||||||||||||||||||||||||
| Total | $ | 15,049 | $ | 1,875 | $ | 2,678 | $ | 5,959 | $ | 6,440 | $ | 564 | $ | 32,565 |
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Interest Expense | |||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | |||||||||||||||||||||||||||||||||||||||
| Institutional | Term Life | Variable/Universal Life | Life Planner | Gibraltar Life and Other | Other Businesses(2) | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Benefit reserves | $ | 3,394 | $ | 415 | $ | 0 | $ | 1,717 | $ | 1,474 | $ | 505 | $ | 7,505 | |||||||||||||||||||||||||||
| Deferred profit liability | 236 | 0 | 0 | 164 | 156 | 4 | 560 | ||||||||||||||||||||||||||||||||||
| Additional insurance reserves | 0 | 0 | 539 | 1 | 0 | 0 | 540 | ||||||||||||||||||||||||||||||||||
| Total | $ | 3,630 | $ | 415 | $ | 539 | $ | 1,882 | $ | 1,630 | $ | 509 | $ | 8,605 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Interest Expense | |||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | |||||||||||||||||||||||||||||||||||||||
| Institutional | Term Life | Variable/Universal Life | Life Planner | Gibraltar Life and Other | Other Businesses(2) | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Benefit reserves | $ | 2,876 | $ | 406 | $ | 0 | $ | 1,726 | $ | 1,507 | $ | 490 | $ | 7,005 | |||||||||||||||||||||||||||
| Deferred profit liability | 227 | 0 | 0 | 148 | 152 | 4 | 531 | ||||||||||||||||||||||||||||||||||
| Additional insurance reserves | 0 | 0 | 488 | 2 | 0 | 0 | 490 | ||||||||||||||||||||||||||||||||||
| Total | $ | 3,103 | $ | 406 | $ | 488 | $ | 1,876 | $ | 1,659 | $ | 494 | $ | 8,026 |
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Interest Expense | |||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Individual Life | International Businesses | |||||||||||||||||||||||||||||||||||||||
| Institutional | Term Life | Variable/Universal Life | Life Planner | Gibraltar Life and Other | Other Businesses(2) | Total | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Benefit reserves | $ | 2,591 | $ | 395 | $ | 0 | $ | 1,706 | $ | 1,540 | $ | 464 | $ | 6,696 | |||||||||||||||||||||||||||
| Deferred profit liability | 214 | 0 | 0 | 123 | 143 | 6 | 486 | ||||||||||||||||||||||||||||||||||
| Additional insurance reserves | 0 | 0 | 435 | 3 | 0 | 0 | 438 | ||||||||||||||||||||||||||||||||||
| Total | $ | 2,805 | $ | 395 | $ | 435 | $ | 1,832 | $ | 1,683 | $ | 470 | $ | 7,620 |
(1)Represents “Gross premiums” for benefit reserves, “Revenue” for DPL and “Gross assessments” for AIR.
(2)Includes remaining balances disclosed above and balances for which disaggregated rollforward disclosures may not be presented above.
**13.**POLICYHOLDERS’ ACCOUNT BALANCES
The balances of and changes in policyholders' account balances as of and for the periods ended are as follows:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Group Insurance | Individual Life | International Businesses | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Institutional | Individual Variable | Individual Fixed | Life/Disability | Variable/Universal Life | Life Planner | Gibraltar Life and Other | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 17,738 | $ | 23,765 | $ | 7,095 | $ | 5,293 | $ | 27,439 | $ | 12,949 | $ | 38,450 | $ | 132,729 | ||||||||||||||||||||||||||||||||||
| Deposits | 7,106 | 8,318 | 5,266 | 1,313 | 2,505 | 1,974 | 6,888 | 33,370 | ||||||||||||||||||||||||||||||||||||||||||
| Interest credited | 757 | 511 | 252 | 148 | 774 | 867 | 943 | 4,252 | ||||||||||||||||||||||||||||||||||||||||||
| Dispositions | 0 | 0 | 0 | 0 | 0 | (336) | 0 | (336) | ||||||||||||||||||||||||||||||||||||||||||
| Policy charges | (11) | (33) | (5) | (322) | (2,051) | (330) | (240) | (2,992) | ||||||||||||||||||||||||||||||||||||||||||
| Surrenders and withdrawals | (5,895) | (919) | (719) | (1,452) | (1,654) | (817) | (1,556) | (13,012) | ||||||||||||||||||||||||||||||||||||||||||
| Benefit payments | (607) | (85) | (79) | 0 | (137) | (264) | (2,084) | (3,256) | ||||||||||||||||||||||||||||||||||||||||||
| Net transfers (to) from separate account | 0 | 122 | 0 | (6) | 613 | 0 | 0 | 729 | ||||||||||||||||||||||||||||||||||||||||||
| Change in market value and other adjustments(1) | 0 | 2,406 | 210 | 0 | 107 | (17) | (13) | 2,693 | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustment | 0 | 0 | 0 | 0 | 0 | (967) | (1,177) | (2,144) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 19,088 | $ | 34,085 | $ | 12,020 | $ | 4,974 | $ | 27,596 | $ | 13,059 | $ | 41,211 | 152,033 | |||||||||||||||||||||||||||||||||||
| Closed Block Division | 4,359 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Unearned revenue reserve, unearned expense credit, and additional interest reserve | 6,009 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other(2) | 3,853 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total Policyholders' account balance | $ | 166,254 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted-average crediting rate | 4.11 | % | 1.77 | % | 2.64 | % | 2.88 | % | 2.81 | % | 6.67 | % | 2.37 | % | 2.99 | % | ||||||||||||||||||||||||||||||||||
| Net amount at risk(3) | $ | 0 | $ | 0 | $ | 0 | $ | 73,259 | $ | 400,990 | $ | 20,307 | $ | 6,128 | $ | 500,684 | ||||||||||||||||||||||||||||||||||
| Cash surrender value(4) | $ | 19,058 | $ | 32,501 | $ | 10,305 | $ | 3,892 | $ | 23,886 | $ | 12,191 | $ | 36,837 | $ | 138,670 |
| Year Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Group Insurance | Individual Life | International Businesses | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Institutional | Individual Variable | Individual Fixed | Life/Disability | Variable/Universal Life | Life Planner | Gibraltar Life and Other | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 17,376 | $ | 17,524 | $ | 4,643 | $ | 5,839 | $ | 26,502 | $ | 11,168 | $ | 35,325 | $ | 118,377 | ||||||||||||||||||||||||||||||||||
| Deposits | 5,657 | 4,638 | 2,659 | 1,212 | 2,447 | 2,417 | 6,611 | 25,641 | ||||||||||||||||||||||||||||||||||||||||||
| Interest credited | 677 | 305 | 129 | 165 | 773 | 709 | 736 | 3,494 | ||||||||||||||||||||||||||||||||||||||||||
| Dispositions | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Policy charges | (23) | (24) | (9) | (323) | (2,047) | (312) | (217) | (2,955) | ||||||||||||||||||||||||||||||||||||||||||
| Surrenders and withdrawals | (5,290) | (704) | (414) | (1,552) | (1,820) | (218) | (1,487) | (11,485) | ||||||||||||||||||||||||||||||||||||||||||
| Benefit payments | (659) | (76) | (76) | 0 | (154) | (266) | (1,919) | (3,150) | ||||||||||||||||||||||||||||||||||||||||||
| Net transfers (to) from separate account | 0 | 34 | 0 | (48) | 1,393 | 0 | 0 | 1,379 | ||||||||||||||||||||||||||||||||||||||||||
| Change in market value and other adjustments(1) | 0 | 2,068 | 163 | 0 | 345 | 31 | (9) | 2,598 | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustment | 0 | 0 | 0 | 0 | 0 | (580) | (590) | (1,170) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 17,738 | $ | 23,765 | $ | 7,095 | $ | 5,293 | $ | 27,439 | $ | 12,949 | $ | 38,450 | 132,729 | |||||||||||||||||||||||||||||||||||
| Closed Block Division | 4,500 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Unearned revenue reserve, unearned expense credit, and additional interest reserve | 5,326 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other(2) | 4,463 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total Policyholders' account balance | $ | 147,018 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted-average crediting rate | 3.85 | % | 1.48 | % | 2.21 | % | 2.96 | % | 2.87 | % | 5.88 | % | 1.99 | % | 2.78 | % | ||||||||||||||||||||||||||||||||||
| Net amount at risk(3) | $ | 0 | $ | 0 | $ | 0 | $ | 72,858 | $ | 382,399 | $ | 19,276 | $ | 6,453 | $ | 480,986 | ||||||||||||||||||||||||||||||||||
| Cash surrender value(4) | $ | 17,738 | $ | 21,640 | $ | 5,827 | $ | 4,021 | $ | 23,234 | $ | 11,268 | $ | 33,833 | $ | 117,561 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies | Group Insurance | Individual Life | International Businesses | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Institutional | Individual Variable | Individual Fixed | Life/Disability | Variable/Universal Life | Life Planner | Gibraltar Life and Other | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 16,391 | $ | 14,125 | $ | 4,652 | $ | 6,273 | $ | 26,859 | $ | 11,555 | $ | 37,615 | $ | 117,470 | ||||||||||||||||||||||||||||||||||
| Deposits | 6,083 | 4,777 | 753 | 1,233 | 2,551 | 1,499 | 3,978 | 20,874 | ||||||||||||||||||||||||||||||||||||||||||
| Interest credited | 561 | 211 | 87 | 153 | 816 | 38 | 518 | 2,384 | ||||||||||||||||||||||||||||||||||||||||||
| Dispositions(5) | 0 | (1,405) | (440) | 0 | 0 | 0 | 0 | (1,845) | ||||||||||||||||||||||||||||||||||||||||||
| Policy charges | (22) | (6) | (5) | (322) | (2,040) | (216) | (174) | (2,785) | ||||||||||||||||||||||||||||||||||||||||||
| Surrenders and withdrawals | (5,075) | (372) | (163) | (1,457) | (1,657) | (210) | (2,816) | (11,750) | ||||||||||||||||||||||||||||||||||||||||||
| Benefit payments | (562) | (92) | (176) | 0 | (197) | (253) | (1,966) | (3,246) | ||||||||||||||||||||||||||||||||||||||||||
| Net transfers (to) from separate account | 0 | 246 | 0 | (41) | 449 | 0 | 0 | 654 | ||||||||||||||||||||||||||||||||||||||||||
| Change in market value and other adjustments(1) | 0 | 40 | (65) | 0 | (279) | 28 | (10) | (286) | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustment | 0 | 0 | 0 | 0 | 0 | (1,273) | (1,820) | (3,093) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 17,376 | $ | 17,524 | $ | 4,643 | $ | 5,839 | $ | 26,502 | $ | 11,168 | $ | 35,325 | 118,377 | |||||||||||||||||||||||||||||||||||
| Closed Block Division | 4,607 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Unearned revenue reserve, unearned expense credit, and additional interest reserve | 4,581 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other(2) | 8,059 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total Policyholders' account balance | $ | 135,624 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted-average crediting rate | 3.33 | % | 1.34 | % | 1.88 | % | 2.53 | % | 3.06 | % | 3.41 | % | 1.42 | % | 2.32 | % | ||||||||||||||||||||||||||||||||||
| Net amount at risk(3) | $ | 0 | $ | 0 | $ | 0 | $ | 70,574 | $ | 367,698 | $ | 17,205 | $ | 7,138 | $ | 462,615 | ||||||||||||||||||||||||||||||||||
| Cash surrender value(4) | $ | 17,376 | $ | 15,297 | $ | 3,581 | $ | 4,147 | $ | 21,766 | $ | 9,612 | $ | 31,270 | $ | 103,049 |
(1)Primarily relates to changes in the value of embedded derivative instruments associated with the indexed options of certain products.
(2)Includes $5,099 million, $5,479 million and $8,133 million of Full Service account balances reinsured to Great-West for December 31, 2024, December 31, 2023 and December 31, 2022, respectively. See Note 1 for further information.
(3)The net amount at risk calculation includes both general account and separate account balances.
(4)Cash surrender value represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges. There are no cash surrender charges for the Institutional Retirement Strategies segment.
(5)Represents the net impact from the sale of PALAC in Individual Retirement Strategies.
Policyholders’ account balances for Institutional Retirement Strategies and Life Planner includes the Company’s Funding Agreement Notes Issuance Program (“FANIP”) at December 31, 2024, 2023 and 2022 are $5,547 million, $5,597 million and $5,064 million, respectively. Under this program, which has a maximum authorized amount of $15 billion of medium-term notes and $6 billion of commercial paper, Delaware statutory trusts issue short-term commercial paper and/or medium-term notes to investors that are secured by funding agreements issued to the trusts by PICA. The outstanding commercial paper and notes have fixed or floating interest rates that range from 0.0% to 5.6% and original maturities ranging from three months to seven years. Included in the amounts at December 31, 2024, 2023 and 2022 are funding agreements which secure the medium-term note liability, which are carried at amortized cost, of $3,486 million, $3,474 million and $2,968 million, respectively, and short-term note liability of $2,086 million, $2,156 million and $2,130 million, respectively.
Also included in Policyholders’ account balances for Institutional Retirement Strategies are collateralized funding agreements issued to the Federal Home Loan Bank of New York (“FHLBNY”) at December 31, 2024, 2023 and 2022 totaling $2,628 million, $2,628 million, and $2,628 million, respectively. These obligations, which are carried at amortized cost, have fixed interest rates that range from 1.925% to 4.510% and original maturities of seven years. For additional details on the FHLBNY program, see Note 18.
The Company issues variable life and universal life insurance contracts which may also include a “no-lapse guarantee” where the Company contractually guarantees to the contractholder a death benefit even when the account value drops to zero, as long as the “no-lapse guarantee” premium is paid.
The net amount at risk is generally defined as the current death benefit in excess of the current account balance at the balance sheet date. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to,
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
the assumptions used in the original pricing of these products, including contractholder mortality, contract lapses, and premium pattern, as well as interest rate and equity market returns.
The Company also issues annuity contracts that provide certain death benefit and/or living benefit guarantees and are accounted for as MRBs. See Note 14 for additional information, including the net amount at risk associated with these guarantees.
The balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points (“bps”), between rates being credited to policyholders and the respective guaranteed minimums are as follows:
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Range of Guaranteed Minimum Crediting Rate (1) | At guaranteed minimum | 1 - 50 bps above guaranteed minimum | 51 - 150 bps above guaranteed minimum | Greater than 150 bps above guaranteed minimum | Total | |||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Retirement Strategies - Institutional | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 401 | $ | 0 | $ | 0 | $ | 0 | $ | 401 | ||||||||||||||||||||||
| 1.00% - 1.99% | 1,552 | 0 | 0 | 0 | 1,552 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 79 | 0 | 0 | 0 | 79 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 3,889 | 0 | 0 | 0 | 3,889 | |||||||||||||||||||||||||||
| Greater than 4.00% | 3,341 | 0 | 0 | 0 | 3,341 | |||||||||||||||||||||||||||
| Total | $ | 9,262 | $ | 0 | $ | 0 | $ | 0 | $ | 9,262 | ||||||||||||||||||||||
| Retirement Strategies - Individual Variable | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 129 | $ | 503 | $ | 647 | $ | 0 | $ | 1,279 | ||||||||||||||||||||||
| 1.00% - 1.99% | 124 | 295 | 2 | 0 | 421 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 21 | 4 | 4 | 0 | 29 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 1,708 | 3 | 8 | 0 | 1,719 | |||||||||||||||||||||||||||
| Greater than 4.00% | 83 | 0 | 0 | 0 | 83 | |||||||||||||||||||||||||||
| Total | $ | 2,065 | $ | 805 | $ | 661 | $ | 0 | $ | 3,531 | ||||||||||||||||||||||
| Retirement Strategies - Individual Fixed | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 0 | $ | 3 | $ | 12 | $ | 1,022 | $ | 1,037 | ||||||||||||||||||||||
| 1.00% - 1.99% | 461 | 83 | 208 | 69 | 821 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 538 | 465 | 557 | 16 | 1,576 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 2,074 | 84 | 11 | 3 | 2,172 | |||||||||||||||||||||||||||
| Greater than 4.00% | 84 | 0 | 0 | 0 | 84 | |||||||||||||||||||||||||||
| Total | $ | 3,157 | $ | 635 | $ | 788 | $ | 1,110 | $ | 5,690 | ||||||||||||||||||||||
| Group Insurance - Life / Disability | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 0 | $ | 0 | $ | 0 | $ | 959 | $ | 959 | ||||||||||||||||||||||
| 1.00% - 1.99% | 0 | 0 | 3 | 2 | 5 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 24 | 15 | 0 | 0 | 39 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 1,482 | 0 | 38 | 22 | 1,542 | |||||||||||||||||||||||||||
| Greater than 4.00% | 3 | 0 | 0 | 0 | 3 | |||||||||||||||||||||||||||
| Total | $ | 1,509 | $ | 15 | $ | 41 | $ | 983 | $ | 2,548 | ||||||||||||||||||||||
| Individual Life - Variable / Universal Life | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 7 | $ | 0 | $ | 0 | $ | 317 | $ | 324 | ||||||||||||||||||||||
| 1.00% - 1.99% | 290 | 0 | 2,238 | 1,513 | 4,041 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 33 | 1,668 | 2,750 | 419 | 4,870 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 6,098 | 1,727 | 1,321 | 36 | 9,182 | |||||||||||||||||||||||||||
| Greater than 4.00% | 5,384 | 0 | 0 | 0 | 5,384 | |||||||||||||||||||||||||||
| Total | $ | 11,812 | $ | 3,395 | $ | 6,309 | $ | 2,285 | $ | 23,801 | ||||||||||||||||||||||
| International Businesses - Life Planner | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 288 | $ | 41 | $ | 80 | $ | 2,984 | $ | 3,393 | ||||||||||||||||||||||
| 1.00% - 1.99% | 2,653 | 27 | 0 | 0 | 2,680 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 1,901 | 0 | 0 | 0 | 1,901 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 372 | 0 | 0 | 0 | 372 | |||||||||||||||||||||||||||
| Greater than 4.00% | 384 | 0 | 0 | 0 | 384 | |||||||||||||||||||||||||||
| Total | $ | 5,598 | $ | 68 | $ | 80 | $ | 2,984 | $ | 8,730 | ||||||||||||||||||||||
| International Businesses - Gibraltar Life and Other | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 15,268 | $ | 0 | $ | 0 | $ | 0 | $ | 15,268 | ||||||||||||||||||||||
| 1.00% - 1.99% | 7,778 | 52 | 0 | 0 | 7,830 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 2,645 | 267 | 29 | 0 | 2,941 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 6,327 | 0 | 0 | 0 | 6,327 | |||||||||||||||||||||||||||
| Greater than 4.00% | 8,688 | 0 | 0 | 0 | 8,688 | |||||||||||||||||||||||||||
| Total | $ | 40,706 | $ | 319 | $ | 29 | $ | 0 | $ | 41,054 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| Range of Guaranteed Minimum Crediting Rate (1) | At guaranteed minimum | 1 - 50 bps above guaranteed minimum | 51 - 150 bps above guaranteed minimum | Greater than 150 bps above guaranteed minimum | Total | |||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Retirement Strategies - Institutional | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 589 | $ | 0 | $ | 0 | $ | 0 | $ | 589 | ||||||||||||||||||||||
| 1.00% - 1.99% | 1,552 | 0 | 0 | 0 | 1,552 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 596 | 0 | 0 | 0 | 596 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 5,041 | 0 | 0 | 0 | 5,041 | |||||||||||||||||||||||||||
| Greater than 4.00% | 1,906 | 0 | 0 | 0 | 1,906 | |||||||||||||||||||||||||||
| Total | $ | 9,684 | $ | 0 | $ | 0 | $ | 0 | $ | 9,684 | ||||||||||||||||||||||
| Retirement Strategies - Individual Variable | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 908 | $ | 807 | $ | 18 | $ | 0 | $ | 1,733 | ||||||||||||||||||||||
| 1.00% - 1.99% | 218 | 2 | 1 | 0 | 221 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 29 | 4 | 4 | 0 | 37 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 1,942 | 13 | 10 | 0 | 1,965 | |||||||||||||||||||||||||||
| Greater than 4.00% | 95 | 0 | 0 | 0 | 95 | |||||||||||||||||||||||||||
| Total | $ | 3,192 | $ | 826 | $ | 33 | $ | 0 | $ | 4,051 | ||||||||||||||||||||||
| Retirement Strategies - Individual Fixed | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 0 | $ | 0 | $ | 1 | $ | 117 | $ | 118 | ||||||||||||||||||||||
| 1.00% - 1.99% | 526 | 122 | 250 | 80 | 978 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 550 | 469 | 562 | 17 | 1,598 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 321 | 11 | 0 | 0 | 332 | |||||||||||||||||||||||||||
| Greater than 4.00% | 95 | 0 | 0 | 0 | 95 | |||||||||||||||||||||||||||
| Total | $ | 1,492 | $ | 602 | $ | 813 | $ | 214 | $ | 3,121 | ||||||||||||||||||||||
| Group Insurance - Life / Disability | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 0 | $ | 0 | $ | 0 | $ | 1,147 | $ | 1,147 | ||||||||||||||||||||||
| 1.00% - 1.99% | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 29 | 0 | 0 | 0 | 29 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 1,543 | 0 | 0 | 50 | 1,593 | |||||||||||||||||||||||||||
| Greater than 4.00% | 73 | 0 | 0 | 0 | 73 | |||||||||||||||||||||||||||
| Total | $ | 1,645 | $ | 0 | $ | 0 | $ | 1,197 | $ | 2,842 | ||||||||||||||||||||||
| Individual Life - Variable / Universal Life | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 0 | $ | 0 | $ | 0 | $ | 368 | $ | 368 | ||||||||||||||||||||||
| 1.00% - 1.99% | 201 | 0 | 2,588 | 813 | 3,602 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 30 | 1,445 | 2,944 | 340 | 4,759 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 4,422 | 4,092 | 1,311 | 19 | 9,844 | |||||||||||||||||||||||||||
| Greater than 4.00% | 5,491 | 0 | 0 | 0 | 5,491 | |||||||||||||||||||||||||||
| Total | $ | 10,144 | $ | 5,537 | $ | 6,843 | $ | 1,540 | $ | 24,064 | ||||||||||||||||||||||
| International Businesses - Life Planner | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 331 | $ | 43 | $ | 89 | $ | 1,996 | $ | 2,459 | ||||||||||||||||||||||
| 1.00% - 1.99% | 2,969 | 28 | 0 | 0 | 2,997 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 2,124 | 0 | 0 | 0 | 2,124 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 354 | 0 | 0 | 0 | 354 | |||||||||||||||||||||||||||
| Greater than 4.00% | 400 | 0 | 0 | 0 | 400 | |||||||||||||||||||||||||||
| Total | $ | 6,178 | $ | 71 | $ | 89 | $ | 1,996 | $ | 8,334 | ||||||||||||||||||||||
| International Businesses - Gibraltar Life and Other | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 15,975 | $ | 0 | $ | 0 | $ | 0 | $ | 15,975 | ||||||||||||||||||||||
| 1.00% - 1.99% | 9,016 | 63 | 0 | 0 | 9,079 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 3,114 | 310 | 36 | 0 | 3,460 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 4,378 | 0 | 0 | 0 | 4,378 | |||||||||||||||||||||||||||
| Greater than 4.00% | 5,419 | 0 | 0 | 0 | 5,419 | |||||||||||||||||||||||||||
| Total | $ | 37,902 | $ | 373 | $ | 36 | $ | 0 | $ | 38,311 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| December 31, 2022 | ||||||||||||||||||||||||||||||||
| Range of Guaranteed Minimum Crediting Rate (1) | At guaranteed minimum | 1 - 50 bps above guaranteed minimum | 51 - 150 bps above guaranteed minimum | Greater than 150 bps above guaranteed minimum | Total | |||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Retirement Strategies - Institutional | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 401 | $ | 0 | $ | 0 | $ | 0 | $ | 401 | ||||||||||||||||||||||
| 1.00% - 1.99% | 1,575 | 0 | 0 | 0 | 1,575 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 672 | 0 | 0 | 0 | 672 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 5,697 | 0 | 0 | 0 | 5,697 | |||||||||||||||||||||||||||
| Greater than 4.00% | 1,510 | 0 | 0 | 0 | 1,510 | |||||||||||||||||||||||||||
| Total | $ | 9,855 | $ | 0 | $ | 0 | $ | 0 | $ | 9,855 | ||||||||||||||||||||||
| Retirement Strategies - Individual Variable | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 1,009 | $ | 861 | $ | 19 | $ | 0 | $ | 1,889 | ||||||||||||||||||||||
| 1.00% - 1.99% | 246 | 2 | 1 | 0 | 249 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 33 | 1 | 0 | 0 | 34 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 2,289 | 10 | 10 | 0 | 2,309 | |||||||||||||||||||||||||||
| Greater than 4.00% | 111 | 0 | 0 | 0 | 111 | |||||||||||||||||||||||||||
| Total | $ | 3,688 | $ | 874 | $ | 30 | $ | 0 | $ | 4,592 | ||||||||||||||||||||||
| Retirement Strategies - Individual Fixed | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||
| 1.00% - 1.99% | 614 | 113 | 250 | 83 | 1,060 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 474 | 0 | 0 | 0 | 474 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 389 | 4 | 0 | 0 | 393 | |||||||||||||||||||||||||||
| Greater than 4.00% | 105 | 0 | 0 | 0 | 105 | |||||||||||||||||||||||||||
| Total | $ | 1,582 | $ | 117 | $ | 250 | $ | 83 | $ | 2,032 | ||||||||||||||||||||||
| Group Insurance - Life / Disability | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 0 | $ | 0 | $ | 0 | $ | 1,564 | $ | 1,564 | ||||||||||||||||||||||
| 1.00% - 1.99% | 7 | 0 | 0 | 0 | 7 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 53 | 0 | 0 | 0 | 53 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 1,658 | 0 | 0 | 0 | 1,658 | |||||||||||||||||||||||||||
| Greater than 4.00% | 3 | 0 | 0 | 0 | 3 | |||||||||||||||||||||||||||
| Total | $ | 1,721 | $ | 0 | $ | 0 | $ | 1,564 | $ | 3,285 | ||||||||||||||||||||||
| Individual Life - Variable / Universal Life | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 12 | $ | 0 | $ | 0 | $ | 0 | $ | 12 | ||||||||||||||||||||||
| 1.00% - 1.99% | 420 | 0 | 774 | 1,928 | 3,122 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 402 | 121 | 2,414 | 1,844 | 4,781 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 7,787 | 32 | 2,280 | 145 | 10,244 | |||||||||||||||||||||||||||
| Greater than 4.00% | 5,594 | 0 | 0 | 0 | 5,594 | |||||||||||||||||||||||||||
| Total | $ | 14,215 | $ | 153 | $ | 5,468 | $ | 3,917 | $ | 23,753 | ||||||||||||||||||||||
| International Businesses - Life Planner | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 356 | $ | 27 | $ | 93 | $ | 404 | $ | 880 | ||||||||||||||||||||||
| 1.00% - 1.99% | 3,175 | 24 | 0 | 0 | 3,199 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 2,285 | 0 | 0 | 0 | 2,285 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 330 | 0 | 0 | 0 | 330 | |||||||||||||||||||||||||||
| Greater than 4.00% | 405 | 0 | 0 | 0 | 405 | |||||||||||||||||||||||||||
| Total | $ | 6,551 | $ | 51 | $ | 93 | $ | 404 | $ | 7,099 | ||||||||||||||||||||||
| International Businesses - Gibraltar Life and Other | ||||||||||||||||||||||||||||||||
| Less than 1.00% | $ | 17,485 | $ | 0 | $ | 0 | $ | 0 | $ | 17,485 | ||||||||||||||||||||||
| 1.00% - 1.99% | 10,064 | 0 | 0 | 0 | 10,064 | |||||||||||||||||||||||||||
| 2.00% - 2.99% | 3,277 | 345 | 43 | 0 | 3,665 | |||||||||||||||||||||||||||
| 3.00% - 4.00% | 2,555 | 0 | 0 | 0 | 2,555 | |||||||||||||||||||||||||||
| Greater than 4.00% | 1,303 | 0 | 0 | 0 | 1,303 | |||||||||||||||||||||||||||
| Total | $ | 34,684 | $ | 345 | $ | 43 | $ | 0 | $ | 35,072 |
(1)Excludes contracts without minimum guaranteed crediting rates, such as funds with indexed-linked crediting options and Japan variable products.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Unearned Revenue Reserve
The balance of and changes in URR as of and for the periods ended are as follows:
| Year Ended December 31, 2024 | |||||||||||||||||||||||
| Individual Life | International Businesses | ||||||||||||||||||||||
| Variable/ Universal Life | Life Planner | Gibraltar Life and Other | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Balance, beginning of period | $ | 4,613 | $ | 359 | $ | 95 | $ | 5,067 | |||||||||||||||
| Unearned revenue | 872 | 141 | 20 | 1,033 | |||||||||||||||||||
| Amortization expense | (240) | (17) | (5) | (262) | |||||||||||||||||||
| Other adjustments | 0 | (57) | (1) | (58) | |||||||||||||||||||
| FX adjustment | 0 | (23) | (7) | (30) | |||||||||||||||||||
| Balance, end of period | $ | 5,245 | $ | 403 | $ | 102 | 5,750 | ||||||||||||||||
| Other | 59 | ||||||||||||||||||||||
| Total unearned revenue reserve balance | $ | 5,809 |
| Year Ended December 31, 2023 | |||||||||||||||||||||||
| Individual Life | International Businesses | ||||||||||||||||||||||
| Variable/ Universal Life | Life Planner | Gibraltar Life and Other | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Balance, beginning of period | $ | 3,983 | $ | 231 | $ | 81 | $ | 4,295 | |||||||||||||||
| Unearned revenue | 841 | 147 | 22 | 1,010 | |||||||||||||||||||
| Amortization expense | (211) | (10) | (5) | (226) | |||||||||||||||||||
| Other adjustments | 0 | 3 | 0 | 3 | |||||||||||||||||||
| FX adjustment | 0 | (12) | (3) | (15) | |||||||||||||||||||
| Balance, end of period | $ | 4,613 | $ | 359 | $ | 95 | 5,067 | ||||||||||||||||
| Other | 49 | ||||||||||||||||||||||
| Total unearned revenue reserve balance | $ | 5,116 |
| Year Ended December 31, 2022 | |||||||||||||||||||||||
| Individual Life | International Businesses | ||||||||||||||||||||||
| Variable/Universal Life | Life Planner | Gibraltar Life and Other | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Balance, beginning of period | $ | 3,357 | $ | 181 | $ | 68 | $ | 3,606 | |||||||||||||||
| Unearned revenue | 815 | 67 | 24 | 906 | |||||||||||||||||||
| Amortization expense | (189) | (5) | (6) | (200) | |||||||||||||||||||
| Other adjustments | 0 | 5 | 1 | 6 | |||||||||||||||||||
| FX adjustment | 0 | (17) | (6) | (23) | |||||||||||||||||||
| Balance, end of period | $ | 3,983 | $ | 231 | $ | 81 | 4,295 | ||||||||||||||||
| Other | 51 | ||||||||||||||||||||||
| Total unearned revenue reserve balance | $ | 4,346 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
**14.**MARKET RISK BENEFITS
The following table shows a rollforward of MRB balances for variable annuity products within Individual Retirement Strategies, which is the only line of business that contains a material MRB balance, along with a reconciliation to the Company’s total net MRB positions as of the following dates:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Balance, BOP | $ | 4,038 | $ | 4,987 | $ | 13,392 | |||||||||||
| Effect of cumulative changes in NPR | 1,137 | 1,828 | 898 | ||||||||||||||
| Balance, BOP, before effect of changes in NPR | 5,175 | 6,815 | 14,290 | ||||||||||||||
| Attributed fees collected | 1,122 | 1,186 | 1,339 | ||||||||||||||
| Claims paid | (79) | (114) | (99) | ||||||||||||||
| Interest accrual | 246 | 317 | 157 | ||||||||||||||
| Actual in force different from expected | 47 | 80 | 126 | ||||||||||||||
| Effect of changes in interest rates | (1,493) | (1,480) | (8,374) | ||||||||||||||
| Effect of changes in equity markets | (1,745) | (1,952) | 3,522 | ||||||||||||||
| Effect of assumption update | 93 | 342 | (152) | ||||||||||||||
| Issuances | 72 | 23 | 0 | ||||||||||||||
| Other adjustments(1) | (26) | (42) | (3,994) | ||||||||||||||
| Balance, EOP, before effect of changes in NPR | 3,412 | 5,175 | 6,815 | ||||||||||||||
| Effect of cumulative changes in NPR | (672) | (1,137) | (1,828) | ||||||||||||||
| Balance, EOP | 2,740 | 4,038 | 4,987 | ||||||||||||||
| Less: Reinsured MRBs | 654 | 616 | 24 | ||||||||||||||
| Balance, EOP, net of reinsurance | 2,086 | 3,422 | 4,963 | ||||||||||||||
| Other businesses | 38 | 64 | 101 | ||||||||||||||
| Total net MRB balance | $ | 2,124 | $ | 3,486 | $ | 5,064 |
(1)2022 includes $(4,061) million related to the sale of PALAC. See Note 1 for additional information.
In both 2024 and 2023, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update for direct and assumed MRBs, primarily due to updates to policyholder behavior assumptions on certain variable annuities. In 2022, the Company recognized a favorable impact to net income attributable to the actuarial assumption update for direct and assumed MRBs, primarily due to updates to mortality and policyholder behavior assumptions on certain variable annuities.
The Company issues certain variable annuity insurance contracts where the Company contractually guarantees to the contractholder a return of no less than (1) total deposits made to the contract adjusted for any partial withdrawals plus a minimum return, and/or (2) the highest anniversary contract value on a specified date adjusted for any withdrawals. These guarantees include benefits that are payable in the event of death, annuitization or at specified dates during the accumulation period and withdrawal and income benefits payable during specified periods.
The Company also issues indexed variable annuity contracts for which the return is tied to the return of specific indices where the Company contractually guarantees to the contractholder a return of no less than total deposits made to the contract adjusted for any partial withdrawals upon death. In certain of these indexed variable annuity contracts, the Company also contractually guarantees to the contractholder withdrawal benefits payable during specific periods.
For guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, contract lapses and contractholder mortality.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, timing of annuitization, contract lapses and contractholder mortality.
For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance.
For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, interest rates, market volatility and contractholder behavior.
The following table presents accompanying information to the rollforward table above.
| December 31, 2024 | December 31, 2023 | December 31, 2022 | |||||||||||||||
| ($ in millions) | |||||||||||||||||
| Net amount at risk(1) | $ | 9,285 | $ | 9,753 | $ | 13,180 | |||||||||||
| Weighted-average attained age of contractholders | 71 | 70 | 69 |
(1)For contracts with multiple benefit features, the highest net amount at risk for each contract is included.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The tables below reconcile MRB asset and liability positions as of the following dates:
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | |||||||||||||||||||||||||||||||||||
| Individual Variable | Other Businesses | Total | |||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Direct and assumed | $ | 1,516 | $ | 9 | $ | 1,525 | |||||||||||||||||||||||||||||
| Ceded | 804 | 2 | 806 | ||||||||||||||||||||||||||||||||
| Total MRB assets | $ | 2,320 | $ | 11 | $ | 2,331 | |||||||||||||||||||||||||||||
| Direct and assumed | $ | 4,256 | $ | 49 | $ | 4,305 | |||||||||||||||||||||||||||||
| Ceded | 150 | 0 | 150 | ||||||||||||||||||||||||||||||||
| Total MRB liabilities | $ | 4,406 | $ | 49 | $ | 4,455 | |||||||||||||||||||||||||||||
| Net liability | $ | 2,086 | $ | 38 | $ | 2,124 |
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | |||||||||||||||||||||||||||||||||||
| Individual Variable | Other Businesses | Total | |||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Direct and assumed | $ | 1,221 | $ | 11 | $ | 1,232 | |||||||||||||||||||||||||||||
| Ceded | 746 | 3 | 749 | ||||||||||||||||||||||||||||||||
| Total MRB assets | $ | 1,967 | $ | 14 | $ | 1,981 | |||||||||||||||||||||||||||||
| Direct and assumed | $ | 5,259 | $ | 78 | $ | 5,337 | |||||||||||||||||||||||||||||
| Ceded | 130 | 0 | 130 | ||||||||||||||||||||||||||||||||
| Total MRB liabilities | $ | 5,389 | $ | 78 | $ | 5,467 | |||||||||||||||||||||||||||||
| Net liability | $ | 3,422 | $ | 64 | $ | 3,486 |
| December 31, 2022 | |||||||||||||||||||||||||||||||||||
| Retirement Strategies | |||||||||||||||||||||||||||||||||||
| Individual Variable | Other Businesses | Total | |||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Direct and assumed | $ | 863 | $ | 9 | $ | 872 | |||||||||||||||||||||||||||||
| Ceded | (76) | 4 | (72) | ||||||||||||||||||||||||||||||||
| Total MRB assets | $ | 787 | $ | 13 | $ | 800 | |||||||||||||||||||||||||||||
| Direct and assumed | $ | 5,850 | $ | 114 | $ | 5,964 | |||||||||||||||||||||||||||||
| Ceded | (100) | 0 | (100) | ||||||||||||||||||||||||||||||||
| Total MRB liabilities | $ | 5,750 | $ | 114 | $ | 5,864 | |||||||||||||||||||||||||||||
| Net liability | $ | 4,963 | $ | 101 | $ | 5,064 |
.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
**15.**REINSURANCE
The Company participates in reinsurance with third parties primarily to provide additional capacity for future growth, limit the maximum net loss potential arising from large risks and acquire or dispose of businesses.
Effective October 2024, the Company entered into an agreement with Wilton Reassurance Company and Wilton Reinsurance Bermuda Limited (collectively, “Wilton Re”) to reinsure certain guaranteed universal life policies issued by Pruco Life Insurance Company (“Pruco Life”) and Pruco Life Insurance Company of New Jersey (“PLNJ”), both of which are wholly-owned subsidiaries of Prudential Financial. These policies represented approximately 40% of the Company’s remaining statutory reserves on its in-force guaranteed universal life block of business as of September 30, 2024, following the close of the reinsurance transaction with Somerset Reinsurance Ltd. (“Somerset Re”), as discussed below. The transaction is structured on a coinsurance basis and follows reinsurance accounting. As a result of the transaction, the Company recognized a $980 million deferred reinsurance loss at inception that is amortized into income over the estimated remaining life of the reinsured policies.
Effective January 2024, the Company entered into an agreement with Somerset Re to reinsure certain guaranteed universal life policies issued by Pruco Life and PLNJ, both of which are wholly-owned subsidiaries of Prudential Financial. These policies represented approximately 30% of the Company’s statutory reserves on its in-force guaranteed universal life block of business as of December 31, 2023. This transaction is structured on a modified coinsurance basis and follows reinsurance accounting. As a result of the transaction, the Company recognized a $363 million deferred reinsurance gain at inception that is amortized into income over the estimated remaining life of the reinsured policies. The reinsurance payables, which represent the Company’s obligations under the modified coinsurance arrangement, are netted with the reinsurance recoverables in the Consolidated Statements of Financial Position. Separately, effective September 2019, PALAC, a previously wholly-owned subsidiary of Prudential Financial, entered into an agreement with Somerset Re, to coinsure business, on a quota share funds withheld basis, related to fixed indexed annuities. This agreement was subsequently novated from PALAC to Pruco Life effective October 2021, in connection with the sale of PALAC effective April 2022. Under this reinsurance agreement, which is accounted for under the deposit method of accounting, the Company cedes to Somerset Re its quota share of the insurance liabilities with respect to the reinsured contracts. The deposit receivables were $2,795 million and $1,619 million as of December 31, 2024 and 2023, respectively, and the funds withheld liabilities were $2,595 million and $1,518 million as of December 31, 2024 and 2023, respectively.
Effective September 2023, the Company entered into an agreement with Prismic Re to reinsure approximately $9 billion of reserves, representing approximately 70% of the in-force structured settlement annuities business previously issued by PICA, 90% of which is on a coinsurance with funds withheld basis and 10% of which is on a coinsurance basis. The reinsurance of the structured settlement annuities that provide periodic payments for the lifetime of the annuitant follows reinsurance accounting. The reinsurance of structured settlement annuities that provide payments for a guaranteed period of time and do not include life contingency risk follows deposit accounting. As a result of the transaction, the Company recognized a $342 million deferred reinsurance loss at inception, including a post-closing true-up, that is amortized into income over the estimated remaining life of the reinsured contracts.
Effective April 2023, the Company entered into an agreement with The Ohio National Life Insurance Company, now known as AuguStar, an affiliate of Constellation Insurance Holdings, Inc., to reinsure approximately $10 billion of account values of PDI traditional variable annuity contracts with guaranteed living benefits issued by Pruco Life, a wholly-owned subsidiary of Prudential Financial. This block represents approximately 10% of the Company’s remaining legacy in-force traditional variable annuity block by account value. The Company ceded 100% of separate account liabilities under modified coinsurance and 100% of general account liabilities under coinsurance of its Pruco Life issued PDI traditional variable annuity contracts. The general account liabilities associated with PDI’s guaranteed living and death benefits and the corresponding reinsurance of those liabilities are accounted for as market risk benefits. As a result of the transaction, the Company recognized a $309 million deferred reinsurance gain at inception that is amortized into income over the estimated remaining life of the reinsured policies.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Effective April 2022, in connection with the sale of the Full Service Retirement business, the Company entered into separate agreements with external counterparties, Great-West and Great-West Life & Annuity Insurance Company of New York, now known as Empower Annuity Insurance Company of America and Empower Life & Annuity Insurance Company of New York, respectively, to reinsure a portion of its Full Service Retirement business. The Company ceded 100% of separate account liabilities under modified coinsurance and 100% of general account liabilities under coinsurance of its Full Service Retirement business. The Company’s Full Service Retirement business consists of market value and stable value separate accounts as well as general account products, including stable value accumulation funds and a stable value wrap product known as a synthetic guaranteed investment contract. The majority of these products are considered investment contracts as they do not contain significant insurance risk; therefore, the reinsurance of such products are accounted for under the deposit method of accounting. The reinsurance agreement offers the policyholders the opportunity to novate their contracts from the Company to Empower and any such novated contracts shall cease to be reinsured under this agreement.
Effective April 2022, in connection with the sale of the PALAC legal entity, now known as Fortitude Life Insurance and Annuity Company (“FLIAC”), the Company entered into a reinsurance agreement with FLIAC under which the Company assumed all of FLIAC’s indexed variable annuities under modified coinsurance. The reinsurance of the indexed variable annuities transfers all significant risks, including mortality risk, embedded in the reinsured contracts. As a result of the agreement, reinsurance recoverables includes the assumed modified coinsurance receivable, which reflects the value of the invested assets retained by FLIAC and the associated asset returns. The Company also assumed via coinsurance all of FLIAC’s fixed indexed annuities with a guaranteed lifetime withdrawal income feature, which are accounted for under the deposit method of accounting. The reinsurance agreement offers the policyholders the opportunity to novate their contracts from FLIAC to the Company and any such novated contracts shall cease to be reinsured under this agreement.
Effective April 2015, the Company entered into an agreement with Union Hamilton Reinsurance, Ltd. (“Union Hamilton”) an external counterparty, to reinsure approximately 50% of the Prudential Premier® Retirement Variable Annuity with Highest Daily Lifetime Income (“HDI”) v.3.0 business, a guaranteed benefit feature. This reinsurance agreement covered most new HDI v.3.0 variable annuity business issued between April 1, 2015 and December 31, 2016 on a quota share basis, with Union Hamilton’s cumulative quota share amounting to $2.9 billion of new rider premiums as of December 31, 2016. Reinsurance on business subject to this agreement remains in force for the duration of the underlying annuity contracts. New sales subsequent to December 31, 2016 are not covered by this external reinsurance agreement. This reinsurance agreement is accounted for as market risk benefits.
In January 2013, the Company acquired the Hartford Life Business through reinsurance transactions with three subsidiaries of Hartford Financial Services Group, Inc. (“Hartford Financial”). Under the related agreements, the Company provided reinsurance for approximately 700,000 life insurance policies with net retained face amount in force of approximately $141 billion. The Company acquired the general account business through a coinsurance arrangement and, for certain types of general account policies, a modified coinsurance arrangement. The Company acquired the separate account business through a modified coinsurance arrangement. In May 2018, Hartford Financial sold a group of operating subsidiaries, which included two of the Company’s counterparties to these reinsurance arrangements, to Talcott Resolution Life Insurance Company (“Talcott Resolution”). Talcott Resolution was acquired by Sixth Street in July 2021. There was no impact to the terms, rights or obligations of the Company, or operation of these reinsurance arrangements, as a result of these changes in control of such counterparties.
Since 2011, the Company has entered into a number of reinsurance agreements to assume pension liabilities in the United Kingdom. Under these arrangements, the Company assumes the longevity risk, and in some arrangements, also the investment risk associated with the pension benefits of certain specified beneficiaries.
In 2006, the Company acquired the variable annuity business of The Allstate Corporation (“Allstate”) through a reinsurance transaction. The reinsurance arrangements with Allstate include a coinsurance arrangement associated with the general account liabilities assumed and a modified coinsurance arrangement associated with the separate account liabilities assumed. The reinsurance payables, which represent the Company’s obligations under the modified coinsurance arrangement, are netted with the reinsurance recoverables in the Consolidated Statements of Financial Position. During the fourth quarter of 2021, Allstate sold the two counterparties to the aforementioned variable annuity reinsurance transaction to third parties. There was no impact to the terms, rights or obligations of the Company, or operation of these reinsurance arrangements, as a result of this change in control of such counterparties.
For the domestic business, life and disability reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term, per person excess, excess of loss, and coinsurance. On policies sold since 2000, the Company has
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
reinsured a significant portion of the individual life mortality risk. Placement of reinsurance is accomplished primarily on an automatic basis with some specific risks reinsured on a facultative basis. The Company is authorized and has historically retained up to $30 million per life, but reduced its operating retention limit to $20 million per life in 2013 and then down to $10 million per life for new business starting in 2020. Retention in excess of the operating limit is on an exception basis.
The international business primarily uses reinsurance to obtain experience with respect to certain new product offerings and to a lesser extent, to mitigate mortality risk for certain protection products and for capital management purposes.
Reinsurance amounts included in the Consolidated Statements of Operations for “Premiums,” “Policy charges and fee income,” “Change in value of market risk benefits, net of related hedging gains (losses),” “Policyholders’ benefits” and “Change in estimates of liability for future policy benefits” for the years ended December 31, are as follows:
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Direct premiums | $ | 39,222 | $ | 29,475 | $ | 34,721 | |||||||||||
| Reinsurance assumed | 6,167 | 5,005 | 4,072 | ||||||||||||||
| Reinsurance ceded | (2,492) | (7,116) | (2,318) | ||||||||||||||
| Premiums | $ | 42,897 | $ | 27,364 | $ | 36,475 | |||||||||||
| Direct policy charges and fee income | $ | 4,629 | $ | 3,933 | $ | 3,916 | |||||||||||
| Reinsurance assumed | 1,188 | 1,228 | 1,247 | ||||||||||||||
| Reinsurance ceded | (1,519) | (634) | (548) | ||||||||||||||
| Policy charges and fee income | $ | 4,298 | $ | 4,527 | $ | 4,615 | |||||||||||
| Direct change in value of market risk benefits, net of related hedging gains (losses) | $ | (405) | $ | 123 | $ | (308) | |||||||||||
| Reinsurance assumed | 134 | 120 | 21 | ||||||||||||||
| Reinsurance ceded | (126) | (187) | (122) | ||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | $ | (397) | $ | 56 | $ | (409) | |||||||||||
| Direct policyholders’ benefits | $ | 43,743 | $ | 32,044 | $ | 38,081 | |||||||||||
| Reinsurance assumed | 7,722 | 7,128 | 5,900 | ||||||||||||||
| Reinsurance ceded | (4,346) | (8,241) | (3,165) | ||||||||||||||
| Policyholders’ benefits | $ | 47,119 | $ | 30,931 | $ | 40,816 | |||||||||||
| Direct change in estimates of liability for future policy benefits | $ | 112 | $ | 447 | $ | 1,504 | |||||||||||
| Reinsurance assumed | 78 | (147) | 471 | ||||||||||||||
| Reinsurance ceded | (227) | 37 | (1,321) | ||||||||||||||
| Change in estimates of liability for future policy benefits | $ | (37) | $ | 337 | $ | 654 | |||||||||||
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Reinsurance recoverables at December 31, are as follows:
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Individual and group annuities(1) | $ | 6,987 | $ | 7,516 | |||||||
| Life insurance(2) | 19,098 | 8,806 | |||||||||
| Other reinsurance | 401 | 415 | |||||||||
| Total reinsurance recoverables(3)(4) | $ | 26,486 | $ | 16,737 |
(1)Primarily represents $5,506 million and $5,981 million of reinsurance recoverables as of December 31, 2024 and 2023, respectively, established under the reinsurance agreement with Prismic Re under which the Company reinsured a portion of its in-force structured settlement annuities business. The Company has also recorded a funds withheld payable related to the reinsurance agreement with Prismic Re of $7,796 million and $8,543 million as of December 31, 2024 and 2023, respectively. Also includes reinsurance recoverables representing the modified coinsurance receivable established under the reinsurance agreement with FLIAC in which the Company assumed all of FLIAC’s indexed variable annuities of $1,442 million and $1,485 million as of December 31, 2024 and 2023, respectively.
(2)Includes reinsurance recoverables established under the reinsurance arrangements associated with the acquisition of the Hartford Life Business of $2,033 million and $2,090 million as of December 31, 2024 and 2023, respectively. The Company has also recorded reinsurance payables related to the Hartford Life Business acquisition of $1,387 million and $1,396 million as of December 31, 2024 and 2023, respectively. Also includes net reinsurance recoverables of $1,591 million as of December 31, 2024 for the modified coinsurance receivable established under the reinsurance agreement with Somerset Re in which the Company reinsured a portion of its in-force guaranteed universal life block of business. Additionally, includes reinsurance recoverables of $7,478 million as of December 31, 2024 for the coinsurance receivable established under the reinsurance agreement with Wilton Re in which the Company reinsured a portion of its in-force guaranteed universal life block of business.
(3)Net of $(12) million of allowance for credit losses as of both December 31, 2024 and 2023, respectively.
(4)Excludes deposit receivables of arrangements that are accounted for under the deposit method of accounting of $11,194 million and $10,574 million as of December 31, 2024 and 2023, respectively. Deposit receivables related to the reinsurance agreement with Prismic Re were $3,578 million and $3,771 million as of December 31, 2024 and 2023, respectively.
Excluding the reinsurance recoverables associated with the acquisition of the Hartford Life Business, four major reinsurance companies account for approximately 67% of the Company’s reinsurance recoverables as of December 31, 2024. The Company periodically reviews the financial condition of its reinsurers, amounts recoverable therefrom, and unearned reinsurance premium, in order to reduce its exposure to loss from reinsurer insolvencies. Any expected credit losses are reflected in the CECL allowance, after considering any collateral the Company obtained in the form of a trust, letter of credit, or funds withheld arrangement. See Note 2 for additional details regarding CECL. Under the Company’s international longevity reinsurance transactions, the Company obtains collateral from its counterparties to mitigate counterparty default risk.
**16.**CLOSED BLOCK
On December 18, 2001, the date of demutualization, PICA established a closed block for certain in-force participating insurance policies and annuity products, along with corresponding assets used for the payment of benefits and policyholders’ dividends on these products, (collectively the “Closed Block”), and ceased offering these participating products. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block division. See Note 23 for financial information regarding the Closed Block. The insurance policies and annuity contracts comprising the Closed Block are managed in accordance with the Plan of Reorganization approved by the New Jersey Department of Banking and Insurance (“NJDOBI”) on December 18, 2001, and PICA is directly obligated for the insurance policies and annuity contracts in the Closed Block.
The policies included in the Closed Block are specified individual life insurance policies and individual annuity contracts that were in force on the date of demutualization and for which PICA is currently paying or expects to pay experience-based policy dividends. Assets have been allocated to the Closed Block in an amount that has been determined to produce cash flows which, together with revenues from policies included in the Closed Block, are expected to be sufficient to support obligations and liabilities relating to these policies, including provision for payment of benefits, certain expenses and taxes and to provide for continuation of the policyholder dividend scales in effect in 2000, assuming experience underlying such scales continues. To the extent that, over time, cash flows from the assets allocated to the Closed Block and claims and other experience related to the Closed Block are, in the aggregate, more or less favorable than what was assumed when the Closed Block was established, total dividends paid to Closed Block policyholders may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect in 2000 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to Closed Block policyholders and will not be available to shareholders. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
payments will be made from PICA’s assets outside of the Closed Block. The Closed Block will continue in effect as long as any policy in the Closed Block remains in force unless, with the consent of the New Jersey insurance regulator, it is terminated earlier.
The excess of Closed Block liabilities over Closed Block assets at the date of the demutualization (adjusted to eliminate the impact of related amounts in AOCI) represented the estimated maximum future earnings at that date from the Closed Block expected to result from operations attributed to the Closed Block after income taxes. In establishing the Closed Block, the Company developed an actuarial calculation of the timing of such maximum future earnings. If actual cumulative earnings of the Closed Block from inception through the end of any given period are greater than the expected cumulative earnings, only the expected earnings will be recognized in income. Any excess of actual cumulative earnings over expected cumulative earnings will represent undistributed accumulated earnings attributable to policyholders, which are recorded as a policyholder dividend obligation. The policyholder dividend obligation represents amounts to be paid to Closed Block policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance that is less favorable than originally expected. If the actual cumulative earnings of the Closed Block from its inception through the end of any given period are less than the expected cumulative earnings of the Closed Block, the Company will recognize only the actual earnings in income.
As of December 31, 2024, the Company recognized a policyholder dividend obligation of $2,096 million to Closed Block policyholders for the excess of actual cumulative earnings over expected cumulative earnings; however, due to accumulated net unrealized investment losses in excess of this amount, the policyholder dividend obligation balance as of December 31, 2024 was reduced to zero. At December 31, 2023, the Company recognized a policyholder dividend obligation of $2,873 million to Closed Block policyholders for the excess of actual cumulative earnings over the expected cumulative earnings. Additionally, accumulated net unrealized investment gains (losses) were reflected as a policyholder dividend obligation of $(2,081) million at December 31, 2023, with a corresponding amount reported in AOCI.
In December of each year, PICA’s Board of Directors takes actions to either increase, continue, or decrease the dividend scale that was in effect on Closed Block policies. These actions taken resulted in increases of approximately $30 million, $77 million and $109 million for the years ended December 31, 2022, 2023 and 2024, respectively, in the liability for policyholders’ dividends recognized.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
As of December 31, 2024, the Closed Block has sufficient funds to make guaranteed policy benefit payments and there is no expectation that assets outside of the Closed Block will be needed to fund future payments. The excess of Closed Block liabilities over Closed Block assets as of the end of the reporting period shown in the table below is a reasonable measure of the margin in the reported liabilities compared to best estimate liabilities assuming the current dividend scale. Closed Block liabilities and assets designated to the Closed Block, as well as maximum future earnings to be recognized from these liabilities and assets, are as follows:
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Closed Block liabilities | ||||||||||||||
| Future policy benefits | $ | 42,464 | $ | 43,587 | ||||||||||
| Policyholders’ dividends payable | 688 | 648 | ||||||||||||
| Policyholders’ dividend obligation | 0 | 792 | ||||||||||||
| Policyholders’ account balances | 4,359 | 4,500 | ||||||||||||
| Other Closed Block liabilities | 3,346 | 3,605 | ||||||||||||
| Total Closed Block liabilities | 50,857 | 53,132 | ||||||||||||
| Closed Block assets | ||||||||||||||
| Fixed maturities, available-for-sale, at fair value | 28,570 | 30,314 | ||||||||||||
| Fixed maturities, trading, at fair value | 647 | 887 | ||||||||||||
| Equity securities, at fair value | 1,642 | 1,970 | ||||||||||||
| Commercial mortgage and other loans | 7,652 | 7,769 | ||||||||||||
| Policy loans | 3,348 | 3,479 | ||||||||||||
| Other invested assets | 4,929 | 4,513 | ||||||||||||
| Short-term investments | 520 | 232 | ||||||||||||
| Total investments | 47,308 | 49,164 | ||||||||||||
| Cash and cash equivalents | 400 | 993 | ||||||||||||
| Accrued investment income | 403 | 421 | ||||||||||||
| Other Closed Block assets | 367 | 138 | ||||||||||||
| Total Closed Block assets | 48,478 | 50,716 | ||||||||||||
| Excess of reported Closed Block liabilities over Closed Block assets | 2,379 | 2,416 | ||||||||||||
| Portion of above representing accumulated other comprehensive income (loss): | ||||||||||||||
| Net unrealized investment gains (losses) | (2,299) | (2,241) | ||||||||||||
| Allocated to policyholder dividend obligation | 2,096 | 2,081 | ||||||||||||
| Future earnings to be recognized from Closed Block assets and Closed Block liabilities | $ | 2,176 | $ | 2,256 |
Information regarding the policyholder dividend obligation is as follows:
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Balance, January 1 | $ | 792 | $ | 0 | ||||||||||
| Impact from earnings allocable to policyholder dividend obligation | (777) | (334) | ||||||||||||
| Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation | (15) | 1,126 | ||||||||||||
| Balance, December 31 | $ | 0 | $ | 792 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Closed Block revenues and benefits and expenses for the years ended December 31, are as follows:
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Revenues | ||||||||||||||||||||
| Premiums | $ | 1,689 | $ | 1,675 | $ | 1,698 | ||||||||||||||
| Net investment income | 2,041 | 1,949 | 1,980 | |||||||||||||||||
| Realized investment gains (losses), net | (769) | (380) | (270) | |||||||||||||||||
| Other income (loss) | 319 | 411 | (447) | |||||||||||||||||
| Total Closed Block revenues | 3,280 | 3,655 | 2,961 | |||||||||||||||||
| Benefits and Expenses | ||||||||||||||||||||
| Policyholders’ benefits | 2,343 | 2,354 | 2,428 | |||||||||||||||||
| Interest credited to policyholders’ account balances | 117 | 118 | 121 | |||||||||||||||||
| Dividends to policyholders | 641 | 1,008 | 115 | |||||||||||||||||
| General and administrative expenses | 266 | 280 | 302 | |||||||||||||||||
| Total Closed Block benefits and expenses | 3,367 | 3,760 | 2,966 | |||||||||||||||||
| Closed Block revenues, net of Closed Block benefits and expenses, before income taxes | (87) | (105) | (5) | |||||||||||||||||
| Income tax expense (benefit) | (166) | (176) | (103) | |||||||||||||||||
| Closed Block revenues, net of Closed Block benefits and expenses and income taxes | $ | 79 | $ | 71 | $ | 98 |
**17.**INCOME TAXES
The following schedule discloses significant components of income tax expense (benefit) for each year presented:
| Year Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Current tax expense (benefit): | ||||||||||||||||||||
| U.S. | $ | 495 | $ | (4) | $ | 214 | ||||||||||||||
| State and local | 35 | 25 | 15 | |||||||||||||||||
| Foreign | 755 | 667 | 480 | |||||||||||||||||
| Total current tax expense (benefit) | 1,285 | 688 | 709 | |||||||||||||||||
| Deferred tax expense (benefit): | ||||||||||||||||||||
| U.S. | (545) | 323 | (789) | |||||||||||||||||
| State and local | (1) | 0 | 1 | |||||||||||||||||
| Foreign | (232) | (398) | (200) | |||||||||||||||||
| Total deferred tax expense (benefit) | (778) | (75) | (988) | |||||||||||||||||
| Total income tax expense (benefit) on income (loss) before equity in earnings of joint ventures and other operating entities | 507 | 613 | (279) | |||||||||||||||||
| Income tax expense (benefit) on equity in earnings of joint ventures and other operating entities | 41 | 34 | 25 | |||||||||||||||||
| Income tax expense (benefit) on discontinued operations | 0 | 0 | 0 | |||||||||||||||||
| Income tax expense (benefit) reported in equity related to: | ||||||||||||||||||||
| Other comprehensive income (loss) | 364 | (837) | 2,555 | |||||||||||||||||
| Total income taxes | $ | 912 | $ | (190) | $ | 2,301 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Reconciliation of Expected Tax at Statutory Rates to Reported Income Tax Expense (Benefit)
The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% applicable for 2024, 2023 and 2022, and the reported income tax expense (benefit) are summarized as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2024 | 2023(1) | 2022(1) | ||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
| Expected federal income tax expense (benefit) | $ | 674 | $ | 645 | $ | (397) | ||||||||||||||
| Non-taxable investment income | (168) | (162) | (86) | |||||||||||||||||
| Foreign taxes at other than U.S. rate | 189 | 191 | 122 | |||||||||||||||||
| Low-income housing and other tax credits | (94) | (106) | (128) | |||||||||||||||||
| Changes in tax law | 50 | (99) | (11) | |||||||||||||||||
| GILTI | (24) | 5 | 101 | |||||||||||||||||
| Sale of subsidiary | (10) | 0 | 86 | |||||||||||||||||
| Non-deductible expenses | 39 | 29 | 21 | |||||||||||||||||
| Change in valuation allowance | (45) | 111 | 16 | |||||||||||||||||
| State taxes (net of federal benefit) | 26 | 20 | 13 | |||||||||||||||||
| Other | (130) | (21) | (16) | |||||||||||||||||
| Reported income tax expense (benefit) | $ | 507 | $ | 613 | $ | (279) | ||||||||||||||
| Effective tax rate | 15.8 | % | 20.0 | % | 14.7 | % |
(1)Prior period amounts have been updated to conform to current period presentation.
The effective tax rate is the ratio of “Total income tax expense (benefit)” divided by “Income before income taxes and equity in earnings of joint ventures and other operating entities.” The Company’s effective tax rate for fiscal years 2024, 2023 and 2022 was 15.8%, 20.0%, and 14.7%, respectively. The following is a description of items that had a significant impact on the difference between the Company’s statutory U.S. federal income tax rate of 21% applicable for 2024, 2023 and 2022, and the Company’s effective tax rate during the periods presented:
Non-Taxable Investment Income*.* The U.S. Dividends Received Deduction (“DRD”) reduces the amount of dividend income subject to U.S. tax and is included in the non-taxable investment income shown in the table above. More specifically, the U.S. DRD constitutes $55 million of the total $168 million of 2024 non-taxable investment income, $62 million of the total $162 million of 2023 non-taxable investment income, and $78 million of the total $86 million of 2022 non-taxable investment income. The DRD for the current period was estimated using information from 2023, current year investment results, and current year’s equity market performance. The actual current year DRD can vary based on factors such as, but not limited to, changes in the amount of dividends received that are eligible for the DRD, changes in the amount of distributions received from fund investments, changes in the account balances of variable life and annuity contracts, and the Company’s taxable income before the DRD.
Foreign Taxes at Other Than U.S. Rates*.* The combined statutory income tax rate in the Company’s largest non-U.S. tax jurisdiction is approximately 28% in Japan as compared to the U.S. federal income tax rate of 21% applicable for 2024, 2023 and 2022.
The 952 Election. The Company made a tax election, effective for the 2017 and later tax years, to subject earnings from its insurance operations in Brazil to tax in the U.S. in the tax year earned, net of related foreign tax credits. This election has the effect of reducing the rate at which the Company will incur taxes on these earnings from the approximately 40% tax rate in Brazil to the 21% tax rate in the U.S. In conjunction with this election, the Company remeasured its related deferred tax assets from the previous 45% rate in Brazil to the new rate of 21% in the U.S., which resulted in additional income tax expense at the time of election. The net effect of the lower tax rate was a net increase / (decrease) in income tax expense of $(12) million in 2021. As a result of the issuance of foreign tax credit regulations during 2022 and the uncertainty regarding the creditability of Brazil income taxes in years post-2021, the net effect of the 952 Election for tax years 2017 and after was reversed in 2022. See “Foreign Tax Credit Regulations” discussed below.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Foreign Tax Credit Regulations. The Treasury Department and the IRS published Final Regulations in the Federal Register (Treasury Decision 9959) on January 4, 2022, which affect the creditability of certain foreign taxes for U.S. federal income tax purposes. The Final Regulations created uncertainty as to whether a U.S. foreign tax credit could be claimed for taxes paid to Brazil. The ability to claim a foreign tax credit for taxes paid to Brazil impacted the benefit of the election made pursuant to Internal Revenue Code Section 952 to subject earnings from the Company’s insurance operations in Brazil to tax in the U.S. in the tax year earned, net of related foreign tax credits. Based on the Company’s interpretation of the Final Regulations, a net $11 million tax expense is reflected as part of the Company’s results for the year ended December 31, 2022, which reversed the net effect of the 952 Election for the tax years 2017 through 2021. The Company continues to assume that the election does not apply in tax years post 2021.
On August 7, 2023, the IRS issued Notice 2023-55 which provides temporary relief to taxpayers in determining whether a foreign tax is eligible for a U.S. foreign tax credit for tax years 2022 and 2023. Subsequently, on December 11, 2023 the IRS issued Notice 2023-80 which extended that relief to taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued and abolished certain changes that the Final Regulations had made to the creditability of tax paid in lieu of a generally imposed foreign income tax. As a result of this new guidance, the Company claimed a U.S. foreign tax credit for taxes paid to Brazil for 2022 and 2023 and will claim a U.S. foreign tax credit for taxes paid to Brazil in 2024. This resulted in a $7 million reduction in 2022 GILTI tax and contributed to the Company’s Brazil operations not being subject to GILTI in 2023 and 2024.
Low-Income Housing and Other Tax Credits*.* These amounts include credits within the U.S. tax code for the development of affordable housing aiming at low-income Americans as well as foreign tax credits.
Changes in Tax Law. In December 2023, the Government of Bermuda enacted a corporate income tax, which imposes a 15% income tax, less applicable foreign tax credits, on companies that are organized or operate within Bermuda that are within the scope of the OECD Pillar Two rules. The Bermuda corporate income tax will be effective for tax years beginning on January 1, 2025. The Company intends to make an election to exclude the income of a Bermuda entity that is a controlled foreign corporation within the meaning of the U.S. tax rules from the Bermuda corporate income tax for fiscal years ending prior to January 1, 2027. There are several open items with respect to the possible application of the Bermuda corporate income tax. In 2023, the Company reflected a $99 million net tax benefit as a result of the change in Bermuda tax law, which was entirely offset by a corresponding change in valuation allowance. In 2024, the Company recorded an adjustment of $50 million net tax expense, which was entirely offset by a corresponding change in valuation allowance.
Sale of Subsidiary. This line item is primarily related to the difference between tax basis and GAAP basis for subsidiaries sold. See Note 1 for additional information regarding recent dispositions.
GILTI. The GILTI provision applies a minimum U.S. tax to earnings of consolidated foreign subsidiaries in excess of a 10% deemed return on tangible assets of foreign subsidiaries by imposing the U.S. tax rate to 50% of earnings of such foreign affiliates and provides for a partial foreign tax credit for foreign income taxes. In years that the PFI consolidated federal income tax return reports a net operating loss or has a loss attributable to U.S. sources of operations, including as a result of loss carrybacks, the GILTI provision would limit the amount of deductions or credits permissible against GILTI. In 2022, the company incurred $101 million of tax primarily due to foreign tax credit limitations related to the GILTI provisions. These limitations did not have a material impact in 2023 or 2024. In 2024, the Company received IRS consent to change its tax accounting method for certain products in its Japan operations which resulted in a reduction of the 2022 GILTI tax liability.
On July 20, 2020, the U.S. Treasury and the Internal Revenue Service issued Final Regulations (Treasury Decision 9902) pursuant to Internal Revenue Code Section 951A which allow an annual election to exclude from the U.S. tax return certain GILTI amounts when the taxes paid by a foreign affiliate exceed 18.9% (90% of U.S. statutory rate of 21%) of the GILTI amount for that foreign affiliate (the “high-tax exception”). These regulations are effective for the 2021 taxable year with an election to apply to any taxable year beginning after 2017. In many of the countries in which the Company operates, including Japan and Brazil, there are differences between local tax rules used to determine the tax base and the U.S. tax principles used to determine GILTI. Also, the Company’s Japan affiliates have a different tax year than the U.S. calendar tax year used to determine GILTI. Therefore, while many of the countries, including Japan and Brazil, have a statutory tax rate above the 18.9% threshold, separate affiliates may not meet the 18.9% threshold each year and, as such, may not qualify for this annual exclusion. The Company made the high-tax exception election for the 2022 and 2023 tax years and anticipates to make the high-tax exception election for the 2024 tax year.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Other*.* This line item represents reconciling items that are individually less than 5% of the computed expected federal income tax expense (benefit) and have therefore been aggregated for purposes of this reconciliation in accordance with relevant disclosure guidance.
Schedule of Deferred Tax Assets and Deferred Tax Liabilities
| As of December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net unrealized investment losses | $ | 6,987 | $ | 4,047 | ||||||||||
| Policyholders’ dividends | 55 | 213 | ||||||||||||
| Net operating and capital loss carryforwards | 360 | 178 | ||||||||||||
| Employee benefits | 271 | 332 | ||||||||||||
| Investments | 2,448 | 2,883 | ||||||||||||
| Goodwill and other intangibles | 313 | 335 | ||||||||||||
| Deferred tax assets before valuation allowance | 10,434 | 7,988 | ||||||||||||
| Valuation allowance | (238) | (290) | ||||||||||||
| Deferred tax assets after valuation allowance | 10,196 | 7,698 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Insurance reserves | 4,629 | 2,742 | ||||||||||||
| Deferred policy acquisition costs | 3,851 | 3,897 | ||||||||||||
| Value of business acquired | 147 | 166 | ||||||||||||
| Other | 1,261 | 969 | ||||||||||||
| Deferred tax liabilities | 9,888 | 7,774 | ||||||||||||
| Net deferred tax asset (liability)(1) | $ | 308 | $ | (76) |
(1)As of December 31, 2024, includes net deferred tax assets of $840 million and $401 million related to the Company’s U.S. operations and Bermuda operations, respectively. As of December 31, 2023, includes a net deferred tax asset of $542 million and $403 million, related to the Company’s U.S. operations and Bermuda operations, respectively.
The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, the Company considers many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) in which tax jurisdictions they were generated and the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable earnings exclusive of reversing temporary differences and carryforwards; (5) the length of time that carryovers can be utilized in the various taxing jurisdictions; (6) any unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused. Although realization is not assured, management believes it is more likely than not that the deferred tax assets, net of valuation allowances, will be realized.
Changes in market conditions, including the significant rise in interest rates since the beginning of 2022, resulted in the recording of deferred tax assets related to net unrealized tax capital losses in the Company’s U.S. businesses. When assessing recoverability of these deferred tax assets, the Company considers its ability and intent to hold the underlying securities to recovery in value, if necessary, as well as other factors as noted above. As of December 31, 2024, based on all available evidence, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
A valuation allowance has been recorded against deferred tax assets related to certain federal, state and local taxes and foreign operations. Adjustments to the valuation allowance are made to reflect changes in management’s assessment of the amount of the deferred tax asset that is realizable and the amount of deferred tax asset actually realized during the year. The valuation allowance includes amounts recorded in connection with deferred tax assets as follows:
| Federal | State | Foreign Operations | Total | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | 22 | $ | 109 | $ | 28 | $ | 159 | ||||||||||||||||||
| Charged to costs and expenses | 3 | 0 | 8 | 11 | ||||||||||||||||||||||
| Other adjustments | 0 | 23 | 97 | 120 | ||||||||||||||||||||||
| Balance at December 31, 2023 | 25 | 132 | 133 | 290 | ||||||||||||||||||||||
| Charged to costs and expenses | (2) | 0 | 7 | 5 | ||||||||||||||||||||||
| Other adjustments | 0 | (4) | (53) | (57) | ||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 23 | $ | 128 | $ | 87 | $ | 238 |
The following table sets forth the amount and expiration dates of federal, state and foreign operating, capital loss and tax credit carryforwards for tax purposes, as of the periods indicated:
| As of December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Federal net operating and capital loss carryforwards | $ | 23 | $ | 0 | ||||||||||
| State net operating and capital loss carryforwards(1) | $ | 1,888 | $ | 1,670 | ||||||||||
| Foreign net operating and capital loss carryforwards(2) | $ | 907 | $ | 356 | ||||||||||
| Federal foreign tax credit carryforwards(3) | $ | 15 | $ | 18 | ||||||||||
(1)Certain state net operating loss carryforwards expire between 2025 and 2044, whereas others have an unlimited carryforward.
(2)$37 million expires between 2025 and 2041 and $870 million has an unlimited carryforward.
(3)Expires between 2028 and 2033. These relate to foreign non-general basket tax credits.
Consistent with the Tax Act of 2017, the Company provides applicable U.S. income tax for all unremitted earnings of the Company’s foreign affiliates. For certain foreign affiliates organized in withholding tax jurisdictions or that may be subject to other foreign country tax upon a remittance, the Company considers the unremitted foreign earnings of those affiliates to be indefinitely reinvested, and therefore does not provide for the withholding tax when calculating its current and deferred tax obligations. For certain other foreign affiliates organized in withholding tax jurisdictions or that may be subject to other foreign country tax upon a remittance, the Company does not consider unremitted earnings indefinitely reinvested, and therefore provides for foreign withholding tax when calculating its current and deferred tax obligations. The following table summarizes the Company’s indefinite reinvestment assertions for jurisdictions in which the Company operates that impose a withholding tax on dividends that is not eliminated by a tax treaty or may be subject to other foreign country tax upon a remittance:
| Unremitted earnings are indefinitely reinvested | Unremitted earnings are not indefinitely reinvested | ||||
| Insurance operations in Chile and China and non-insurance operations in Korea and certain operations in Italy, France and Luxembourg. | Insurance operations in Argentina, India, Indonesia, Ghana, Kenya and South Africa, and non-insurance operations in China, India, Taiwan and certain Germany and Luxembourg entities. |
During the first quarter of 2022, the Company changed the permanent investment assertion for certain French and Italian entities due to a plan to permanently reinvest the earnings in these operations, which gave rise to an immaterial amount of income tax expense during 2022. The Company made no changes with respect to its repatriation assumptions in 2023 and 2024.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following table sets forth the undistributed earnings of foreign subsidiaries, where the Company assumes indefinite reinvestment of such earnings and for which, in 2024, 2023, and 2022, foreign deferred withholding or other foreign income taxes have not been provided. The net tax liability that may arise if the 2024 earnings were remitted which includes any foreign exchange impacts, is immaterial.
| At December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Undistributed earnings of foreign subsidiaries (assuming indefinite reinvestment only for Withholding or other non-U.S. Taxes) | $ | 351 | $ | 291 | $ | 238 |
The Company’s “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” includes income (loss) from domestic operations of $2,077 million, $1,341 million, and $(2,262) million and income (loss) from foreign operations of $1,132 million, $1,731 million, and $369 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Tax Audit and Unrecognized Tax Benefits
The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest that relate to tax years still subject to review by the IRS or other taxing authorities. The completion of review or the expiration of the Federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes.
The following table reconciles the total amount of unrecognized tax benefits at the beginning and end of the periods indicated:
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Balance at January 1, | $ | 133 | $ | 84 | $ | 12 | ||||||||||||||
| Increases in unrecognized tax benefits—prior years | 4 | 13 | 81 | |||||||||||||||||
| (Decreases) in unrecognized tax benefits—prior years | (5) | 0 | (1) | |||||||||||||||||
| Increases in unrecognized tax benefits—current year | 0 | 36 | 0 | |||||||||||||||||
| (Decreases) in unrecognized tax benefits—current year | 0 | 0 | (8) | |||||||||||||||||
| Settlements with taxing authorities | 0 | 0 | 0 | |||||||||||||||||
| Balance at December 31, | $ | 132 | $ | 133 | $ | 84 | ||||||||||||||
| Unrecognized tax benefits that, if recognized, would favorably impact the effective rate | $ | 132 | $ | 133 | $ | 84 |
It is possible the Company will pay the unrecognized tax benefit attributable to the Section 952 election described above of approximately $86 million for prior year audit cycles within the next 12 months as it pursues resolution of the matter. The Company cannot predict with reasonable accuracy whether there will be any significant changes within the next twelve months to its total unrecognized tax benefits related to tax years for which the statute of limitations has not expired.
The Company classifies all interest and penalties related to tax uncertainties as income tax expense (benefit). The amounts recognized in the consolidated financial statements for tax-related interest and penalties for the years ended December 31 are as follows:
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Interest and penalties recognized in the Consolidated Statements of Operations | $ | 10 | $ | 7 | $ | 8 |
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Interest and penalties recognized in liabilities in the Consolidated Statements of Financial Position | $ | 33 | $ | 22 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Listed below are the tax years that remain subject to examination, by major tax jurisdiction, as of December 31, 2024:
| Major Tax Jurisdiction | Open Tax Years | |||||||
| United States | 2014-2024 | |||||||
| Japan | Fiscal years ended March 31, 2020-2024 |
The Company participates in the IRS’s Compliance Assurance Program. Under this program, the IRS assigns an examination team to review completed transactions as they occur in order to reach agreement with the Company on how they should be reported in the relevant tax returns. If disagreements arise, accelerated resolutions programs are available to resolve the disagreements in a timely manner.
Some of the Company’s affiliates in Japan file a consolidated tax return, while others file separate tax returns. The Company’s affiliates in Japan are subject to audits by the local taxing authority. The general statute of limitations is five years from when the return is filed. During 2023, the Japanese National Tax Service concluded tax audits of The Gibraltar Life Insurance Company Ltd. for the three tax years ending March 31, 2022 and The Prudential Gibraltar Financial Life Insurance Company Ltd. for the four tax years ending March 31, 2022. The tax authority also conducted tax audits of some non-insurance companies during the reporting period. The audits had no material impact on the Company’s results.
In August 2020, the Company sold an affiliate in South Korea, Prudential of Korea, that was subject to routine tax audits by the local taxing authority for 2017, 2016, and 2015 tax years. In November 2023, the disputed issue on the treatment of foreign tax credits was decided in favor of Prudential of Korea at the Tax Tribunal appeal and therefore had no material impact on the Company’s results.
**18.**SHORT-TERM AND LONG-TERM DEBT
Short-term Debt
The table below presents the Company’s short-term debt at December 31, for the years indicated as follows:
| 2024 | 2023 | ||||||||||
| ($ in millions) | |||||||||||
| Commercial paper: | |||||||||||
| Prudential Financial | $ | 25 | $ | 25 | |||||||
| Prudential Funding, LLC | 496 | 510 | |||||||||
| Subtotal commercial paper | 521 | 535 | |||||||||
| Current portion of long-term debt: | |||||||||||
| Surplus Notes | 347 | 0 | |||||||||
| Mortgage Debt | 85 | 83 | |||||||||
| Surplus Notes subject to set-off arrangements(1) | 0 | 2,000 | |||||||||
| Subtotal Current portion of long-term debt | 432 | 2,083 | |||||||||
| Subtotal | 953 | 2,618 | |||||||||
| Less: Assets under set-off arrangements(1) | 0 | 2,000 | |||||||||
| Total short-term debt(2) | $ | 953 | $ | 618 | |||||||
| Supplemental short-term debt information: | |||||||||||
| Portion of commercial paper borrowings due overnight | $ | 310 | $ | 110 | |||||||
| Daily average commercial paper outstanding for the quarter ended | $ | 1,823 | $ | 1,334 | |||||||
| Weighted average maturity of outstanding commercial paper, in days | 15 | 49 | |||||||||
| Weighted average interest rate on outstanding commercial paper | 4.61 | % | 5.50 | % |
(1)The surplus notes have corresponding assets where rights to set-off exist, thereby reducing the amount of surplus notes.
(2)Includes Prudential Financial debt of $25 million at both December 31, 2024 and 2023.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
At December 31, 2024 and 2023, the Company was in compliance with all covenants related to the above debt.
Commercial Paper
Prudential Financial has a commercial paper program with an authorized capacity of $3.0 billion. Prudential Financial’s commercial paper borrowings have generally been used to fund the working capital needs of its subsidiaries and provide short-term liquidity at Prudential Financial.
Prudential Funding, LLC (“Prudential Funding”), a wholly-owned subsidiary of PICA, has a commercial paper program, with an authorized capacity of $7.0 billion. Prudential Funding commercial paper borrowings generally have served as an additional source of financing to meet the working capital needs of PICA and its subsidiaries. Prudential Funding also lends to other subsidiaries of Prudential Financial up to limits agreed with the NJDOBI. Prudential Funding maintains a support agreement with PICA whereby PICA has agreed to maintain Prudential Funding’s tangible net worth at a positive level. Additionally, Prudential Financial has issued a subordinated guarantee covering Prudential Funding’s $7.0 billion commercial paper program.
Federal Home Loan Bank of New York
PICA is a member of the FHLBNY. Membership allows PICA access to the FHLBNY’s financial services, including the ability to obtain collateralized loans and to issue collateralized funding agreements. Under applicable law, the funding agreements issued to the FHLBNY have priority claim status above debt holders of PICA. FHLBNY borrowings and funding agreements are collateralized by qualifying mortgage-related assets or U.S. Treasury securities, the fair value of which must be maintained at certain specified levels relative to outstanding borrowings. FHLBNY membership requires PICA to own member stock and borrowings require the purchase of activity-based stock in an amount equal to 4.5% of outstanding borrowings. Under FHLBNY guidelines, if any of PICA’s financial strength ratings decline below A-/A3/A- Negative by S&P/Moody’s/Fitch, respectively, and the FHLBNY does not receive written assurances from the NJDOBI regarding PICA’s solvency, new borrowings from the FHLBNY would be limited to a term of 90 days or less. Currently there are no restrictions on the term of borrowings from the FHLBNY. All FHLBNY stock purchased by PICA is classified as restricted general account investments within “Other invested assets,” and the carrying value of these investments was $142 million and $169 million as of December 31, 2024 and 2023, respectively.
NJDOBI permits PICA to pledge collateral to the FHLBNY in an amount of up to 5% of its prior year-end statutory net admitted assets, excluding separate account assets. Based on PICA’s statutory net admitted assets as of December 31, 2023, the 5% limitation equates to a maximum amount of eligible assets of $7.4 billion and an estimated maximum borrowing capacity (after taking into account required collateralization levels) of $5.9 billion. Nevertheless, FHLBNY borrowings are subject to the FHLBNY’s discretion and to the availability of qualifying assets at PICA.
As of December 31, 2024, $2.5 billion of funding agreements remain outstanding under this facility, with maturities ranging from February 2027 to November 2029 and rates ranging from 1.925% to 4.510%. These funding agreements are reflected as “Policyholders’ account balances” on the Consolidated Statements of Financial Position and as such are not included in the table above.
Federal Agricultural Mortgage Corporation
In September 2023, as an additional source of liquidity, the Company entered into an agreement with the Federal Agricultural Mortgage Corporation (“Farmer Mac”), under which the Company can borrow up to $750 million by issuing funding agreements to a subsidiary of Farmer Mac, with borrowings secured by a pledge of certain eligible agricultural mortgage loans. At December 31, 2024, no amounts were drawn from this facility.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Credit Facilities
As of December 31, 2024, the Company maintained syndicated, unsecured committed credit facilities as described below.
| Borrower | Original Term | Expiration Date | Capacity | Amount Outstanding | |||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Prudential Financial and Prudential Funding | 5 years | Jul-29 | $ | 4,000 | $ | 0 | |||||||||||||||||
| Prudential Holdings of Japan, Inc. | 5 years | Sep-29 | ¥ | 100,000 | ¥ | 0 |
In July 2024, the Company amended and restated its $4.0 billion five-year credit facility that has both Prudential Financial and Prudential Funding as borrowers and a syndicate of financial institutions as lenders, extending the term of the facility to July 2029. The credit facility contains customary representations and warranties, covenants and events of default, and borrowings are not contingent on the borrowers’ credit ratings nor subject to material adverse change clauses. Borrowings under this facility are conditioned on the continued satisfaction of customary conditions, including Prudential Financial’s maintenance of consolidated net worth of at least $22.1 billion. For these purposes, consolidated net worth is calculated as U.S. GAAP equity excluding AOCI, equity of noncontrolling interests, equity attributable to the Closed Block, and certain adjustments related to the Company’s adoption of ASU 2018-12. The Company expects that it may borrow under the facility from time to time to fund its working capital needs. In addition, amounts under this credit facility may be drawn in the form of standby letters of credit that can be used to meet the Company’s operating needs.
In September 2024, the Company refinanced its ¥100 billion five-year credit facility, on which Prudential Holdings of Japan, Inc. (“PHJ”) is a borrower, extending the term of the facility to September 2029. This facility also contains customary representations and warranties, covenants, and events of default and borrowings are not contingent on the borrower’s credit ratings nor subject to material adverse change clauses.
Borrowings under each of these credit facilities may be used for general corporate purposes. As of December 31, 2024, the Company was in compliance with the covenants under each of these credit facilities.
In addition to the above credit facilities, the Company had access to $223 million of certain other lines of credit at December 31, 2024, of which $110 million was for the sole use of certain real estate separate accounts. The separate account facilities include loan-to-value ratio requirements and other financial covenants, and recourse on obligations under these facilities is limited to the assets of the applicable separate account. At December 31, 2024, none of these credit facilities were used. The Company also has access to uncommitted lines of credit from financial institutions.
Agreements for Senior Notes Issuance
In May 2020, Prudential Financial entered into a ten-year facility agreement with a Delaware trust upon the completion of the sale of $1.5 billion of trust securities by that Delaware trust in a Rule 144A private placement. The trust invested the proceeds from the sale of the trust securities in a portfolio of principal and/or interest strips of U.S. Treasury securities. The facility agreement provides Prudential Financial the right to issue and sell to the trust from time to time up to $1.5 billion of 2.850% senior notes due May 15, 2030 and receive in exchange a corresponding amount of the U.S. Treasury securities held by the trust. In return, the Company agreed to pay a semi-annual facility fee to the trust at a rate of 2.175% per annum applied to the maximum amount of senior notes that the Company could issue and sell to the trust. Similar to the Company’s put option agreement, the facility agreement with the trust provides Prudential Financial with a source of liquid assets.
The right to issue senior notes described above will be exercised automatically in full upon the Company’s failure to make certain payments to the trust, such as paying the facility fee or reimbursing the trust for its expenses, if the Company’s failure to pay is not cured within 30 days, and upon an event involving its bankruptcy. The Company is also required to exercise this issuance right if its consolidated stockholders’ equity, calculated in accordance with U.S. GAAP but excluding AOCI, falls below $9.0 billion, subject to adjustment in certain cases. Prior to any involuntary exercise of the issuance right, the Company has the right to repurchase any of its senior notes then held by the trust in exchange for a corresponding amount of U.S. Treasury securities. Finally, Prudential Financial may redeem any outstanding senior notes, in whole or in part, prior to February 15, 2030, at a redemption price equal to the greater of par or a make-whole price, or thereafter, at par.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
In March 2023, Prudential Financial entered into ten-year and thirty-year facility agreements with two Delaware trusts upon the completion of the sale of $1.5 billion of trust securities by the trusts in a Rule 144A private placement. The trusts invested the proceeds from the sale of the trust securities in portfolios of principal and/or interest strips of U.S. Treasury securities. The facility agreements provide Prudential Financial the right to issue and sell to the trusts from time to time up to $800 million of 5.791% senior notes due February 15, 2033 and $700 million of 5.997% senior notes due February 15, 2053, and receive in exchange a corresponding amount of the U.S. Treasury securities held by the trusts. In return, the Company agreed to pay semi-annual facility fees to the trusts at rates of 1.815% and 2.066% per annum for the ten-year and thirty-year facilities, respectively, applied to the maximum amount of senior notes that the Company could issue and sell to the trusts.
The right to issue senior notes described above will be exercised automatically in full upon the Company’s failure to make certain payments to the trusts, such as paying the facility fee or reimbursing the trusts for their expenses, if the Company’s failure to pay is not cured within 30 days, and upon an event involving its bankruptcy. The Company is also required to exercise this issuance right if its consolidated stockholders’ equity, calculated in accordance with U.S. GAAP but excluding AOCI, falls below $9.0 billion, subject to adjustment in certain cases. Prior to any involuntary exercise of the issuance right, the Company has the right to repurchase any of its senior notes then held by the trusts in exchange for a corresponding amount of U.S. Treasury securities. Finally, Prudential Financial may redeem any outstanding senior notes, in whole or in part, prior to February 15, 2033 and February 15, 2053 for the ten-year and thirty-year facilities, respectively, at a redemption price equal to the greater of par or a make-whole price, or thereafter, at par.
Long-term Debt
The table below presents the Company’s long-term debt at December 31, for the years indicated as follows:
| Maturity Dates | Rate(1) | December 31, | |||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Fixed-rate notes: | |||||||||||||||||||||||
| Surplus Notes | $ | 0 | $ | 346 | |||||||||||||||||||
| Surplus Notes subject to set-off arrangements(2) | 2035-2049 | 3.66%-5.48% | 14,748 | 9,790 | |||||||||||||||||||
| Senior Notes | 2026-2051 | 1.50%-6.63% | 10,245 | 10,112 | |||||||||||||||||||
| Mortgage Debt(3) | 2029-2034 | 1.28%-1.72% | 69 | 0 | |||||||||||||||||||
| Floating-rate notes: | |||||||||||||||||||||||
| Line of Credit | 2027 | 6.42%-7.00% | 255 | 255 | |||||||||||||||||||
| Surplus Notes subject to set-off arrangements | 0 | 580 | |||||||||||||||||||||
| Mortgage Debt(3) | 2029-2031 | 0.73%-1.40% | 31 | 75 | |||||||||||||||||||
| Junior Subordinated Notes(4) | 2045-2062 | 1.63%-6.75% | 8,587 | 8,094 | |||||||||||||||||||
| Subtotal | 33,935 | 29,252 | |||||||||||||||||||||
| Less: Assets under set-off arrangements(5) | 14,748 | 10,370 | |||||||||||||||||||||
| Total long-term debt(6) | $ | 19,187 | $ | 18,882 |
(1)Ranges of interest rates are for the year ended December 31, 2024.
(2)Amount includes $6.9 billion of surplus notes used to finance Guideline AXXX reserves for business reinsured to Somerset Re in March 2024. See Note 15 for additional information.
(3)Includes $100 million and $27 million of debt denominated in foreign currency at December 31, 2024 and 2023, respectively.
(4)Includes Prudential Financial debt of $8,548 million and subsidiary debt of $39 million denominated in foreign currency at December 31, 2024.
(5)Assets under set-off arrangements represent a reduction in the amount of surplus notes included in long-term debt, resulting from an arrangement where valid rights of set-off exist and it is the intent of both parties to settle on a net basis under legally enforceable arrangements. These assets include available-for-sale securities that are reported at fair value.
(6)Includes Prudential Financial debt of $18,793 million and $18,162 million at December 31, 2024 and 2023, respectively.
At December 31, 2024 and 2023, the Company was in compliance with all debt covenants related to the borrowings in the table above.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The following table presents the contractual maturities of the Company’s long-term debt as of December 31, 2024:
| Calendar Year | |||||||||||||||||||||||||||||||||||
| 2026 | 2027 | 2028 | 2029 | 2030 and thereafter | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Long-term debt | $ | 536 | $ | 287 | $ | 390 | $ | 95 | $ | 17,879 | $ | 19,187 |
Senior Notes
Under its shelf registration statement, the Company has issued Medium-Term Notes and InterNotes® Retail Notes. In addition, the Company completed a debt exchange offer in 2017, pursuant to which it issued two series of Senior Notes.
The table below presents the Company’s balances related to these issuances, as well as its mortgage debt balance, as of December 31 for the years indicated as follows:
| Facility Name | Maturity Date Range | 2024 Amount Outstanding | 2023 Amount Outstanding | |||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Medium-Term Notes | 2026-2051 | $ | 8,382 | $ | 8,378 | |||||||||||||||
| Senior Notes | 2047-2049 | 1,493 | 1,484 | |||||||||||||||||
| InterNotes® Retail Notes | 2026-2045 | 370 | 249 | |||||||||||||||||
| Mortgage Debt(1) | 2024-2034 | 185 | 158 | |||||||||||||||||
| Total | $ | 10,430 | $ | 10,269 | ||||||||||||||||
(1)Includes $85 million of notes from current portion of long-term debt as of December 31, 2024.
The weighted average interest rate on outstanding Medium-Term Notes, Senior Notes, and InterNotes® Retail Notes, including the effect of interest rate hedging activity, was 4.43% for both the years ended December 31, 2024 and 2023, excluding the effect of debt issued to consolidated subsidiaries.
Funding Agreement Notes Issuance Program
The Company maintains a FANIP in which statutory trusts issue medium-term notes and commercial paper secured by funding agreements issued to the trusts by PICA. These obligations are included in “Policyholders’ account balances” and not included in the foregoing table. See Note 13 for further discussion of these obligations.
Surplus Notes
As of December 31, 2024, PICA had $347 million of fixed-rate surplus notes outstanding. These notes are subordinated to other PICA borrowings and policyholder obligations, and the payment of interest and principal may only be made with the prior approval of the NJDOBI. The NJDOBI could prohibit the payment of the interest and principal on the surplus notes if certain statutory capital requirements are not met. At December 31, 2024 and 2023, the Company met these statutory capital requirements.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Surplus Notes with Set-Off Arrangements
| Agreement Start Date | Maturity Years | Maximum Borrowing Capacity | 2024 Amount Outstanding | 2023 Amount Outstanding | ||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Regulation XXX | ||||||||||||||||||||||||||
| 2024 | 2044 | $ | 8,000 | $ | 7,560 | $ | 0 | |||||||||||||||||||
| 2014-2021 | 2024-2036 | NA(1) | 0 | 1,600 | ||||||||||||||||||||||
| 2014-2017 | 2024-2037 | NA(1) | 0 | 2,330 | ||||||||||||||||||||||
| 2018 | 2038 | NA(1) | 0 | 1,000 | ||||||||||||||||||||||
| Guideline AXXX | ||||||||||||||||||||||||||
| 2024(2) | 2049 | 9,500 | 6,888 | $ | 0 | |||||||||||||||||||||
| 2013 | 2033 | NA(1) | 0 | 3,500 | ||||||||||||||||||||||
| 2017 | 2037 | NA(1) | 0 | 1,540 | ||||||||||||||||||||||
| 2020 | 2032 | NA(1) | 0 | 2,100 | ||||||||||||||||||||||
| Other Notes | ||||||||||||||||||||||||||
| 2019 | 2035 | 4,000 | 300 | 300 | ||||||||||||||||||||||
| Total | $ | 21,500 | $ | 14,748 | $ | 12,370 |
(1)These notes were redeemed in 2024.
(2)Amount includes $6.9 billion of surplus notes used to finance Guideline AXXX reserves for business reinsured to Somerset Re in March 2024. See Note 15 for additional information.
Surplus Notes Supporting Regulation XXX and Guideline AXXX Reserves
As shown in the table above, the Company’s captive reinsurance subsidiaries maintain facilities with external counterparties providing for the issuance of surplus notes by the captive to finance reserves required under Regulation XXX and Guideline AXXX. Under these facilities, the captives receive in exchange for the surplus notes one or more credit-linked notes issued by special-purpose affiliates in aggregate principal amounts equal to the surplus notes issued. The captives hold the credit-linked notes as assets supporting the non-economic portion of the statutory reserves required to be held by the Company’s domestic insurance subsidiaries under Regulation XXX and Guideline AXXX in connection with the reinsurance of term life or universal life insurance policies through the captive. The non-economic portion of the statutory reserve equals the difference between the statutory reserve required under Regulation XXX and Guideline AXXX and the amount the Company considers necessary to maintain solvency for moderately adverse experience. The credit-linked notes are redeemable for cash upon the occurrence of a liquidity stress event affecting the captives and external counterparties have agreed to fund these payments in return for a fee. Under certain of these different transactions, Prudential Financial has agreed to reimburse the captive for investment losses in excess of specified amounts.
For each of the above transactions, because valid rights of set-off exist, interest and principal payments on the surplus notes and on the related credit-linked notes are settled on a net basis, and the surplus notes are reflected in the Company’s total consolidated borrowings on a net basis. The surplus notes for the captive reinsurance subsidiaries described above are subordinated to policyholder obligations, and the repayment of principal may only be made with prior approval of the Arizona Department of Insurance and Financial Institutions, the domiciliary insurance regulator of the captives. The payment of interest on the surplus notes has been approved by the Arizona Department of Insurance and Financial Institutions, subject to its ability to withdraw that approval.
Other Surplus Notes
The surplus note facility listed under “Other Notes” in the table above reflects a financing facility that Prudential Legacy Insurance Company of New Jersey (“PLIC”) has entered into with certain external counterparties and a special-purpose affiliate, pursuant to which PLIC may, at its option, issue and sell to the affiliate up to $4.0 billion in aggregate principal amount of surplus notes, in return for an equal principal amount of credit-linked notes. The credit-linked notes are redeemable for cash upon the occurrence of a liquidity stress event affecting PLIC, and external counterparties have agreed to fund these payments in return for a fee. Upon issuance, PLIC would hold any credit-linked notes as assets to support future statutory surplus needs within PLIC.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Junior Subordinated Notes
Prudential Financial’s junior subordinated notes outstanding are considered hybrid securities that receive enhanced equity treatment from the rating agencies. These notes outstanding, along with their key terms, are as follows:
| Issue Date | Principal Amount | Initial Interest Rate | Investor Type | Optional Redemption Date | Interest Rate Subsequent to Optional Redemption Date (1) | Maturity Date | |||||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||||||||
| May-15 | $ | 1,000 | 5.38 | % | Institutional | 5/15/2025 | SOFR + 3.29% (2) | 5/15/2045 | |||||||||||||||||||||||||||
| Sep-17 | $ | 750 | 4.50 | % | Institutional | 9/15/2027 | SOFR + 2.64% (2) | 9/15/2047 | |||||||||||||||||||||||||||
| Aug-18 | $ | 565 | 5.63 | % | Retail | 8/15/2023 | 5.63% | 8/15/2058 | |||||||||||||||||||||||||||
| Sep-18 | $ | 1,000 | 5.70 | % | Institutional | 9/15/2028 | SOFR + 2.93% (2) | 9/15/2048 | |||||||||||||||||||||||||||
| Aug-20 | $ | 500 | 4.13 | % | Retail | 9/1/2025 | 4.13% | 9/1/2060 | |||||||||||||||||||||||||||
| Aug-20 | $ | 800 | 3.70 | % | Institutional | 10/1/2030 | US Treasury + 3.04% | 10/1/2050 | |||||||||||||||||||||||||||
| Feb-22 | $ | 1,000 | 5.13 | % | Institutional | 2/28/2032 | US Treasury + 3.16% | 3/1/2052 | |||||||||||||||||||||||||||
| Aug-22 | $ | 300 | 5.95 | % | Retail | 9/1/2027 | 5.95% | 9/1/2062 | |||||||||||||||||||||||||||
| Aug-22 | $ | 1,200 | 6.00 | % | Institutional | 9/1/2032 | US Treasury + 3.23% | 9/1/2052 | |||||||||||||||||||||||||||
| Feb-23 | $ | 500 | 6.75 | % | Institutional | 3/1/2033 | US Treasury + 2.85% | 3/1/2053 | |||||||||||||||||||||||||||
| Mar-24 | $ | 1,000 | 6.50 | % | Institutional | 3/15/2034 | US Treasury + 2.40% | 3/15/2054 |
(1) Effective June 30, 2023, SOFR is the replacement reference rate for certain outstanding junior subordinated notes issued by the Company that previously used London Inter-Bank Offered Rate (“LIBOR”) as the reference rate.
(2) The spread incorporates the contractual LIBOR-based spread and a 0.26% tenor spread adjustment.
The Company has the right to defer interest payments on these notes for specified periods, typically 5 to 10 years without resulting in a default, during which time interest will be compounded. On or after the optional redemption dates, Prudential Financial may redeem the notes at par plus accrued and unpaid interest. Prior to those optional redemption dates, redemptions generally are subject to a make-whole price; however, the Company may redeem the notes prior to these dates at par upon the occurrence of certain events, such as a future change in the regulatory capital treatment of the notes with respect to the Company.
Interest Expense
In order to manage exposure to interest rate and currency exchange rate movements, the Company utilizes derivative instruments, primarily interest rate swaps, in conjunction with some of its debt issuances. The impact of these derivative instruments is not reflected in the rates presented in the tables above. For those derivative instruments that qualify for hedge accounting, interest expense was $0 million for both the years ended December 31, 2024 and 2023, and less than $1 million for the year ended December 31, 2022. See Note 5 for additional information regarding the Company’s use of derivative instruments.
Interest expense for short-term and long-term debt was $1,956 million, $1,749 million and $1,562 million for the years ended December 31, 2024, 2023 and 2022, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
**19.**EMPLOYEE BENEFIT PLANS
Pension and Other Postretirement Plans
The Company has funded and non-funded non-contributory defined benefit pension plans (“Pension Benefits”), which cover substantially all of its employees. For some employees, benefits are based on final average earnings and length of service (the “traditional formula”), while benefits for other employees are based on an account balance that takes into consideration age, length of service and earnings during their career (the “cash balance formula”). At December 31, 2024, approximately 81% of the Company’s Pension Benefits relate to its domestic qualified pension plan, which initially determined benefits based on the traditional formula. Effective January 1, 2001, active domestic employees covered under this plan were given the option to convert from the traditional formula to the cash balance formula, and all new domestic employees began accruing benefits under the cash balance formula. As of December 31, 2024, approximately 66% and 34% of the benefit obligation under this plan relates to participants under the traditional formula (including all retirees who are receiving an annuity payment) and cash balance formula, respectively. At December 31, 2024, the vast majority of active employees under this plan are accruing benefits under the cash balance formula.
The Company provides certain health care and life insurance benefits for its retired employees, their beneficiaries and covered dependents (“Other Postretirement Benefits”). The health care plan is contributory; the life insurance plan is non-contributory. Substantially all of the Company’s U.S. employees are eligible to receive Other Postretirement Benefits if they retire after age 55 with at least 10 years of service or under certain circumstances after age 50 with at least 20 years of continuous service.
Prepaid benefits costs and accrued benefit liabilities are included in “Other assets” and “Other liabilities,” respectively, in the Company’s Consolidated Statements of Financial Position. The status of these plans as of December 31, 2024 and 2023 is summarized below:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Change in benefit obligation | ||||||||||||||||||||||||||
| Benefit obligation at the beginning of period | $ | (11,238) | $ | (11,099) | $ | (1,032) | $ | (1,348) | ||||||||||||||||||
| Service cost | (206) | (204) | (7) | (9) | ||||||||||||||||||||||
| Interest cost | (539) | (551) | (51) | (71) | ||||||||||||||||||||||
| Plan participants’ contributions | 0 | 0 | (21) | (24) | ||||||||||||||||||||||
| Amendments | 0 | 2 | 0 | 298 | ||||||||||||||||||||||
| Actuarial gains (losses), net(1)(2) | 360 | (274) | (29) | (66) | ||||||||||||||||||||||
| Settlements | 62 | 22 | 0 | 0 | ||||||||||||||||||||||
| Special termination benefits | (1) | (25) | 0 | (5) | ||||||||||||||||||||||
| Benefits paid | 823 | 827 | 113 | 193 | ||||||||||||||||||||||
| Foreign currency changes and other | 110 | 64 | 1 | 0 | ||||||||||||||||||||||
| Benefit obligation at end of period | $ | (10,629) | $ | (11,238) | $ | (1,026) | $ | (1,032) | ||||||||||||||||||
| Change in plan assets | ||||||||||||||||||||||||||
| Plan assets at beginning of period | $ | 12,649 | $ | 12,519 | $ | 1,186 | $ | 1,191 | ||||||||||||||||||
| Actual return on plan assets | 366 | 788 | 88 | 155 | ||||||||||||||||||||||
| Employer contributions | 177 | 185 | 5 | 9 | ||||||||||||||||||||||
| Plan participants’ contributions | 0 | 0 | 21 | 24 | ||||||||||||||||||||||
| Disbursement for settlements | (62) | (22) | 0 | 0 | ||||||||||||||||||||||
| Benefits paid | (823) | (827) | (113) | (193) | ||||||||||||||||||||||
| Foreign currency changes and other | (14) | 6 | 0 | 0 | ||||||||||||||||||||||
| Plan assets at end of period | $ | 12,293 | $ | 12,649 | $ | 1,187 | $ | 1,186 | ||||||||||||||||||
| Funded status at end of period | $ | 1,664 | $ | 1,411 | $ | 161 | $ | 154 | ||||||||||||||||||
| Amounts recognized in the Statements of Financial Position | ||||||||||||||||||||||||||
| Prepaid benefit cost | $ | 3,451 | $ | 3,385 | $ | 232 | $ | 240 | ||||||||||||||||||
| Accrued benefit liability | (1,787) | (1,974) | (71) | (86) | ||||||||||||||||||||||
| Net amount recognized | $ | 1,664 | $ | 1,411 | $ | 161 | $ | 154 | ||||||||||||||||||
| Items recorded in “Accumulated other comprehensive income (loss)” not yet recognized as a component of net periodic (benefit) cost: | ||||||||||||||||||||||||||
| Prior service cost | $ | (1) | $ | (2) | $ | (278) | $ | (345) | ||||||||||||||||||
| Net actuarial loss | 2,924 | 2,797 | 218 | 209 | ||||||||||||||||||||||
| Net amount not recognized | $ | 2,923 | $ | 2,795 | $ | (60) | $ | (136) | ||||||||||||||||||
| Accumulated benefit obligation | $ | (9,925) | $ | (10,512) | $ | (1,026) | $ | (1,032) |
(1)For 2024, actuarial gains for pension were primarily driven by an increase in the discount rate. For 2024, actuarial losses for other postretirement benefits were primarily driven by an increase in medical trend rate.
(2)For 2023, actuarial losses for pension and other postretirement benefits were primarily driven by a decrease in the discount rate.
In addition to the plan assets above, the Company in 2007 established an irrevocable trust, commonly referred to as a “rabbi trust,” for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain non-qualified retirement plans ($861 million and $893 million benefit obligation at December 31, 2024 and 2023, respectively). Assets held in the rabbi trust are available to the general creditors of the Company in the event of insolvency or bankruptcy. The Company may from time to time in its discretion make contributions to the trust to fund accrued benefits payable to participants in one or more of the plans, and, in the case of a change in control of the Company, as defined in the trust agreement, the Company will be required to make contributions to the trust to fund the accrued benefits, vested and unvested, payable on a pre-tax basis to participants in the plans. In addition, the Company may from time to time at its discretion make a withdrawal from or request a policy loan through the trust to fund operational or capital needs. The Company requested policy loans through the trust of $0 million and $900 million in 2024 and 2023, respectively. The Company did not make any
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
discretionary payments to the trust or receive any withdrawals from the trust in either 2024 or 2023. As of December 31, 2024 and 2023, the assets in the trust had a carrying value of $157 million and $118 million, respectively.
The Company also maintains a separate rabbi trust for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain other non-qualified retirement plans ($51 million and $57 million benefit obligation at December 31, 2024 and 2023, respectively), as well as certain cash-based deferred compensation arrangements. As of December 31, 2024 and 2023, the assets in the trust had a carrying value of $75 million and $77 million, respectively.
Pension benefits for foreign plans comprised 10% and 11% of the ending benefit obligation for 2024 and 2023, respectively. Foreign pension plans comprised 3% of the ending fair value of plan assets for both 2024 and 2023, respectively. There are no material foreign postretirement plans.
Information for pension plans with a projected benefit obligation in excess of plan assets
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Projected benefit obligation | $ | 1,787 | $ | 1,974 | ||||||||||
| Fair value of plan assets | $ | 0 | $ | 0 |
Information for pension plans with an accumulated benefit obligation in excess of plan assets
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Accumulated benefit obligation | $ | 1,625 | $ | 1,795 | ||||||||||
| Fair value of plan assets | $ | 0 | $ | 0 |
Components of Net Periodic Benefit Cost
The Company uses market related value to determine components of net periodic (benefit) cost. Market related value recognizes certain changes in fair value of plan assets over a period of five years. Changes in the fair value of U.S. equities, international equities, real estate and other assets are recognized over a five year period. However, changes in the fair value for fixed maturity assets (including short-term investments) are recognized immediately for the purposes of market related value.
Net periodic (benefit) cost included in “General and administrative expenses” in the Company’s Consolidated Statements of Operations for the years ended December 31, includes the following components:
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Service cost | $ | 206 | $ | 204 | $ | 276 | $ | 7 | $ | 9 | $ | 13 | ||||||||||||||||||||||||||
| Interest cost | 539 | 551 | 431 | 51 | 71 | 56 | ||||||||||||||||||||||||||||||||
| Expected return on plan assets | (953) | (926) | (866) | (76) | (86) | (102) | ||||||||||||||||||||||||||||||||
| Amortization of prior service cost | (1) | (1) | (1) | (67) | (7) | (8) | ||||||||||||||||||||||||||||||||
| Amortization of actuarial (gain) loss, net | 90 | 69 | 160 | 8 | 10 | 6 | ||||||||||||||||||||||||||||||||
| Settlements | 1 | 3 | 2 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
| Curtailments(1) | 0 | 0 | 0 | 0 | 0 | (7) | ||||||||||||||||||||||||||||||||
| Special termination benefits(2)(3)(4) | 1 | 25 | 4 | 0 | 5 | 4 | ||||||||||||||||||||||||||||||||
| Net periodic (benefit) cost | $ | (117) | $ | (75) | $ | 6 | $ | (77) | $ | 2 | $ | (38) |
(1)For 2022, curtailments were recognized as a result of the sale of the Full Service Retirement business for other postretirement benefit plans.
(2)For 2024, certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of their involuntary termination.
(3)For 2023, certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of their involuntary termination while others were provided enhanced benefits due to the Company’s organizational restructuring.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
(4)For 2022, certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of their involuntary termination while others were provided enhanced benefits due to the sale of the Full Service Retirement business.
Changes in Accumulated Other Comprehensive Income (Loss)
The benefit obligation is based upon actuarial assumptions such as discount, termination, retirement, mortality and salary growth rates. Changes at year-end in these actuarial assumptions, along with experience changes based on updated participant census data are deferred in AOCI. Plan assets generate actuarial gains and losses when actual returns on plan assets differ from expected returns on plan assets, and these differences are also deferred in AOCI. The cumulative deferred gain (loss) within AOCI is amortized into earnings if it exceeds 10% of the greater of the benefit obligation or plan assets at the beginning of the year, and the amortization period is based upon the actuarially calculated expected future years of service for a given plan.
The amounts recorded in AOCI as of the end of the period, which have not yet been recognized as a component of net periodic (benefit) cost, and the related changes in these items during the period that are recognized in “Other comprehensive income (loss)” are as follows:
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||
| Prior Service Cost | Net Actuarial (Gain) Loss | Prior Service Cost | Net Actuarial (Gain) Loss | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | (5) | $ | 3,131 | $ | (69) | $ | 211 | ||||||||||||||||||
| Amortization for the period | 1 | (160) | 8 | (6) | ||||||||||||||||||||||
| Deferrals for the period(1) | 1 | (431) | 0 | 20 | ||||||||||||||||||||||
| Impact of foreign currency changes and other | 1 | (74) | 7 | (3) | ||||||||||||||||||||||
| Balance, December 31, 2022 | (2) | 2,466 | (54) | 222 | ||||||||||||||||||||||
| Amortization for the period | 1 | (69) | 7 | (10) | ||||||||||||||||||||||
| Deferrals for the period(2) | (2) | 411 | (298) | (3) | ||||||||||||||||||||||
| Impact of foreign currency changes and other | 1 | (11) | 0 | 0 | ||||||||||||||||||||||
| Balance, December 31, 2023 | (2) | 2,797 | (345) | 209 | ||||||||||||||||||||||
| Amortization for the period | 1 | (90) | 67 | (8) | ||||||||||||||||||||||
| Deferrals for the period(3) | 0 | 227 | 0 | 17 | ||||||||||||||||||||||
| Impact of foreign currency changes and other | 0 | (10) | 0 | 0 | ||||||||||||||||||||||
| Balance, December 31, 2024 | $ | (1) | $ | 2,924 | $ | (278) | $ | 218 |
(1)For 2022, deferred gains for pension were driven by an increase in discount rate offset partially by unfavorable asset performance. Deferred losses for other postretirement benefits were driven by unfavorable asset performance partially offset by an increase in discount rate.
(2)For 2023, deferred losses for pension were driven by a decrease in discount rate and unfavorable asset performance. Deferred gains for other postretirement benefits were driven by a change to the Retiree Medical Plan, decrease in discount rate and favorable asset performance.
(3)For 2024, deferred losses for pension were driven by unfavorable asset performance offset by an increase in discount rate. Deferred losses for other postretirement benefits were driven by an increase in medical trend experience offset by an increase in discount rate and favorable asset performance.
The Company’s assumptions related to the calculation of the domestic benefit obligation (end of period) and the determination of net periodic (benefit) cost (beginning of period) are presented in the table below:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Weighted average assumptions | ||||||||||||||||||||||||||||||||||||||
| Discount rate (beginning of period) | 5.30 | % | 5.45 | % | 2.85 | % | 5.20 | % | 5.55 | % | 2.75 | % | ||||||||||||||||||||||||||
| Discount rate (end of period) | 5.85 | % | 5.30 | % | 5.45 | % | 5.70 | % | 5.20 | % | 5.55 | % | ||||||||||||||||||||||||||
| Rate of increase in compensation levels (beginning of period) | 6.25 | % | 4.50 | % | 4.50 | % | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Rate of increase in compensation levels (end of period) | 6.25 | % | 6.25 | % | 4.50 | % | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Expected return on plan assets (beginning of period) | 7.50 | % | 7.50 | % | 6.00 | % | 6.75 | % | 7.75 | % | 7.00 | % | ||||||||||||||||||||||||||
| Interest crediting rate (beginning of period) | 4.95 | % | 4.25 | % | 4.25 | % | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Interest crediting rate (end of period) | 4.35 | % | 4.95 | % | 4.25 | % | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Health care cost trend rates (beginning of period) | N/A | N/A | N/A | 7.35 | % | 6.50 | % | 6.00 | % | |||||||||||||||||||||||||||||
| Health care cost trend rates (end of period) | N/A | N/A | N/A | 7.90 | % | 7.35 | % | 6.50 | % | |||||||||||||||||||||||||||||
| For 2024, 2023 and 2022, the ultimate health care cost trend rate after gradual decrease until: 2034, 2030, 2028, (beginning of period) | N/A | N/A | N/A | 4.75 | % | 4.75 | % | 4.50 | % | |||||||||||||||||||||||||||||
| For 2024, 2023 and 2022, the ultimate health care cost trend rate after gradual decrease until: 2035, 2034, 2030 (end of period) | N/A | N/A | N/A | 4.75 | % | 4.75 | % | 4.75 | % |
The domestic discount rate used to value the pension and postretirement obligations at December 31, 2024 and December 31, 2023 is based upon the value of a portfolio of Aa-rated investments whose cash flows would be available to pay the benefit obligation’s cash flows when due. The December 31, 2024 portfolio is selected from a compilation of approximately 885 Aa-rated bonds across the full range of maturities. Since bond ratings and yields can vary widely at each maturity point, the Company uses an average bond rating and excludes bonds with unusually high or low yields, so as to avoid relying on bonds that might be mispriced or misrated. The Aa-rated portfolio is then selected and, accordingly, its value is a measure of the benefit obligation. A single equivalent discount rate is calculated to equate the value of the Aa-rated portfolio to the cash flows for the benefit obligation. The result is rounded to the nearest 5 basis points and the benefit obligation is recalculated using the rounded discount rate.
The pension and postretirement expected long-term rates of return on plan assets for 2024 were determined based upon an approach that considered the allocation of plan assets as of December 31, 2023. Expected returns are estimated by asset class as noted in the discussion of investment policies and strategies below. Expected returns on asset classes are developed using a building-block approach that is forward looking and are not strictly based upon historical returns. The building blocks for equity returns include inflation, real return, a term premium, an equity risk premium, capital appreciation, expenses, the effect of active management and the effect of rebalancing. The building blocks for fixed maturity returns include inflation, real return, a term premium, credit spread, capital appreciation, effect of active management, expenses and the effect of rebalancing.
The Company applied a similar approach to the determination of the expected rate of return on plan assets in 2025. The expected rate of return for 2025 is 8.00% and 6.50% for pension and postretirement, respectively.
The assumptions for foreign pension plans are based on local markets. There are no material foreign postretirement plans.
Plan Assets
The investment goal of the domestic pension plan is to generate an above benchmark return on a diversified portfolio of stocks, bonds and other investments. The cash requirements of the plan’s pension obligation, which include a traditional defined benefit formula principally representing payments to annuitants and a cash balance formula that allows lump sum payments and annuity payments, are designed to be met by the bonds and short-term investments in the portfolio.
The investment goal of the domestic postretirement plan assets is to generate an above benchmark return on a diversified portfolio of stocks, bonds, and other investments, while meeting the cash requirements for the postretirement obligation that includes a medical benefit including prescription drugs, a dental benefit and a life benefit.
The pension and postretirement plans risk management practices include guidelines for asset concentration, credit rating, liquidity and tax efficiency. The fiduciaries of the pension and postretirement plans select investment managers to invest the assets of the plans consistent with each manager’s investment mandate. These managers may use derivatives such as futures
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
contracts to reduce transaction costs and change asset concentration and may use interest rate swaps and futures to adjust duration.
The plan fiduciaries for the Company’s pension and postretirement plans have developed guidelines for asset allocations reflecting a percentage of total assets by asset class, which are reviewed on a regular basis. Asset allocation targets as of December 31, 2024 are as follows:
| Pension | Postretirement | |||||||||||||||||||||||||
| Minimum | Maximum | Minimum | Maximum | |||||||||||||||||||||||
| Asset Category | ||||||||||||||||||||||||||
| U.S. Equities | 0 | % | 3 | % | 10 | % | 30 | % | ||||||||||||||||||
| International Equities | 0 | % | 11 | % | 3 | % | 20 | % | ||||||||||||||||||
| Fixed Maturities | 52 | % | 71 | % | 6 | % | 76 | % | ||||||||||||||||||
| Short-term Investments | 0 | % | 11 | % | 0 | % | 24 | % | ||||||||||||||||||
| Real Estate | 3 | % | 18 | % | 0 | % | 0 | % | ||||||||||||||||||
| Other | 8 | % | 40 | % | 0 | % | 0 | % |
To implement the investment strategy, plan assets are invested in funds that primarily invest in securities that correspond to one of the asset categories under the investment guidelines. However, at any point in time, some of the assets in a fund may be of a different nature than the specified asset category.
Assets held with PICA are in either pooled separate accounts or single client separate accounts. Assets held with a bank are either in common/collective trusts or single client trusts. Pooled separate accounts and common/collective trusts hold assets for multiple investors. Each investor owns a “unit of account.” The asset allocation targets above include the underlying asset mix in the Pooled Separate Accounts and Common/Collective Trusts. Single client separate accounts or trusts hold assets for only one investor, the domestic qualified pension plan, and each security in the fund is treated as individually owned.
There were no investments in Prudential Financial Common Stock as of both December 31, 2024 and 2023 for either the pension or postretirement plans.
The authoritative guidance around fair value established a framework for measuring fair value. Fair value is disclosed using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as described in Note 6.
The following describes the valuation methodologies used for pension and postretirement plans assets measured at fair value.
Insurance Company Pooled Separate Accounts, Common/Collective Trusts, and United Kingdom Insurance Pooled Funds—Insurance company pooled separate accounts are invested via group annuity contracts issued by PICA. Assets are represented by a “unit of account.” The redemption value of those units is based on a per unit value whose value is the result of the accumulated values of underlying investments. The unit of account value is used as a practical expedient to estimate fair value.
Equities—See Note 6 for a discussion of the valuation methodologies for equity securities.
U.S. Government Securities (both Federal and State & Other), Non–U.S. Government Securities, and Corporate Debt—See Note 6 for a discussion of the valuation methodologies for fixed maturity securities.
Interest Rate Swaps—See Note 6 for a discussion of the valuation methodologies for derivative instruments.
Registered Investment Companies (Mutual Funds)—Securities are priced at the NAV, which is the closing price published by the registered investment company on the reporting date.
Short-term Investments—Securities are valued initially at cost and thereafter adjusted for amortization of any discount or premium (i.e., amortized cost). Amortized cost approximates fair value.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Partnerships—The value of interests owned in partnerships is based on valuations of the underlying investments that include private placements, structured debt, real estate, equities, fixed maturities, commodities and other investments.
Hedge Funds—The value of interests in hedge funds is based on the underlying investments that include equities, debt and other investments.
Variable Life Insurance Policies—These assets are held in group and individual variable life insurance policies issued by PICA. Group policies are invested in Insurance Company Pooled Separate Accounts. Individual policies are invested in Registered Investment Companies (Mutual Funds). The value of interest in these policies is the cash surrender value (contract value) of the policies based on the underlying investments. The variable life insurance policies are valued at contract value which approximates fair value.
Pension plan asset allocations in accordance with the investment guidelines are as follows:
| As of December 31, 2024 | As of December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed maturities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. government securities (federal) | $ | 0 | $ | 919 | $ | 0 | $ | 919 | $ | 0 | $ | 536 | $ | 0 | $ | 536 | ||||||||||||||||||||||||||||||||||
| U.S. government securities (state & other) | 0 | 273 | 0 | 273 | 0 | 365 | 0 | 365 | ||||||||||||||||||||||||||||||||||||||||||
| Non-U.S. government securities | 0 | 42 | 0 | 42 | 0 | 51 | 0 | 51 | ||||||||||||||||||||||||||||||||||||||||||
| Corporate debt: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | 0 | 2,035 | 6 | 2,041 | 0 | 2,480 | 9 | 2,489 | ||||||||||||||||||||||||||||||||||||||||||
| Asset-backed | 0 | 560 | 0 | 560 | 0 | 66 | 0 | 66 | ||||||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations | 0 | 453 | 0 | 453 | 0 | 447 | 0 | 447 | ||||||||||||||||||||||||||||||||||||||||||
| Collateralized loan obligations | 0 | 24 | 0 | 24 | 0 | 549 | 0 | 549 | ||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps(1) | 0 | (12) | 0 | (12) | 0 | 5 | 0 | 5 | ||||||||||||||||||||||||||||||||||||||||||
| Registered investment companies | 44 | 0 | 0 | 44 | 110 | 0 | 0 | 110 | ||||||||||||||||||||||||||||||||||||||||||
| Common stock | 20 | 0 | 0 | 20 | 20 | 0 | 0 | 20 | ||||||||||||||||||||||||||||||||||||||||||
| Other(2) | 22 | 1 | 29 | 52 | 63 | (6) | 82 | 139 | ||||||||||||||||||||||||||||||||||||||||||
| Subtotal fixed maturities | 86 | 4,295 | 35 | 4,416 | 193 | 4,493 | 91 | 4,777 | ||||||||||||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Partnerships | 0 | 0 | 770 | 770 | 0 | 0 | 942 | 942 | ||||||||||||||||||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Partnerships | 0 | 0 | 2,437 | 2,437 | 0 | 0 | 2,142 | 2,142 | ||||||||||||||||||||||||||||||||||||||||||
| Hedge funds | 0 | 0 | 1,685 | 1,685 | 0 | 0 | 1,495 | 1,495 | ||||||||||||||||||||||||||||||||||||||||||
| Subtotal other | 0 | 0 | 4,122 | 4,122 | 0 | 0 | 3,637 | 3,637 | ||||||||||||||||||||||||||||||||||||||||||
| Net assets in the fair value hierarchy | $ | 86 | $ | 4,295 | $ | 4,927 | $ | 9,308 | $ | 193 | $ | 4,493 | $ | 4,670 | $ | 9,356 | ||||||||||||||||||||||||||||||||||
| Investments Measured at Net Asset Value, as a Practical Expedient(3): | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pooled separate accounts | $ | 2,090 | $ | 2,222 | ||||||||||||||||||||||||||||||||||||||||||||||
| Common/collective trusts | 802 | 958 | ||||||||||||||||||||||||||||||||||||||||||||||||
| United Kingdom insurance pooled funds | 93 | 113 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets at fair value | $ | 12,293 | $ | 12,649 |
(1)Interest rate swaps notional amount is $1,227 million for the years ended December 31, 2024 and 2023.
(2)This category primarily consists of cash and cash equivalents, short-term investments, payables and receivables, and open future contract positions (including fixed income collateral).
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
(3)The pension plan excludes from the fair value hierarchy investments that are measured at NAV per share (or its equivalent) as a practical expedient to estimate fair value. U.S. equities totaled $37 million and $63 million at December 31, 2024 and 2023, respectively. International equities totaled $185 million and $237 million at December 31, 2024 and 2023, respectively. Fixed maturities totaled $2,186 million and $2,249 million at December 31, 2024 and 2023, respectively. Short-term investments totaled $67 million and $118 million at December 31, 2024 and 2023, respectively. Real estate totaled $510 million and $626 million at December 31, 2024 and 2023, respectively.
Changes in Fair Value of Level 3 Pension Assets
| Fixed Maturities | Real Estate | Other | ||||||||||||||||||||||||||||||
| Corporate Bonds | Other | Partnerships | Partnerships | Hedge Fund | ||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Fair Value, January 1, 2023 | $ | 0 | $ | 65 | $ | 1,004 | $ | 1,713 | $ | 1,455 | ||||||||||||||||||||||
| Actual return on assets: | ||||||||||||||||||||||||||||||||
| Relating to assets still held at the reporting date | 0 | 0 | (57) | 197 | 121 | |||||||||||||||||||||||||||
| Relating to assets sold during the period | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Purchases | 12 | 0 | (5) | 232 | (81) | |||||||||||||||||||||||||||
| Sales | (3) | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Issuances | 0 | 82 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Settlements | 0 | (65) | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Transfers in and/or out of Level 3 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Fair Value, December 31, 2023 | $ | 9 | $ | 82 | $ | 942 | $ | 2,142 | $ | 1,495 | ||||||||||||||||||||||
| Actual return on assets: | ||||||||||||||||||||||||||||||||
| Relating to assets still held at the reporting date | 0 | 0 | (95) | 219 | 158 | |||||||||||||||||||||||||||
| Relating to assets sold during the period | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Purchases | 0 | 0 | (18) | 76 | 32 | |||||||||||||||||||||||||||
| Sales | (3) | 0 | (59) | 0 | 0 | |||||||||||||||||||||||||||
| Issuances | 0 | 29 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Settlements | 0 | (82) | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Transfers in and/or out of Level 3 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Fair Value, December 31, 2024 | $ | 6 | $ | 29 | $ | 770 | $ | 2,437 | $ | 1,685 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Postretirement plan asset allocations in accordance with the investment guidelines are as follows:
| As of December 31, 2024 | As of December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. equities | $ | 0 | $ | 38 | $ | 0 | $ | 38 | $ | 0 | $ | 30 | $ | 0 | $ | 30 | ||||||||||||||||||||||||||||||||||
| International equities | 0 | 10 | 0 | 10 | 0 | 9 | 0 | 9 | ||||||||||||||||||||||||||||||||||||||||||
| Subtotal equities | 0 | 48 | 0 | 48 | 0 | 39 | 0 | 39 | ||||||||||||||||||||||||||||||||||||||||||
| Fixed maturities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equities | 0 | 2 | 0 | 2 | 0 | 8 | 0 | 8 | ||||||||||||||||||||||||||||||||||||||||||
| Subtotal fixed maturities | 0 | 2 | 0 | 2 | 0 | 8 | 0 | 8 | ||||||||||||||||||||||||||||||||||||||||||
| Short-term investments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Registered investment companies | 46 | 0 | 0 | 46 | 40 | 0 | 0 | 40 | ||||||||||||||||||||||||||||||||||||||||||
| Net assets in the fair value hierarchy | $ | 46 | $ | 50 | $ | 0 | $ | 96 | $ | 40 | $ | 47 | $ | 0 | $ | 87 | ||||||||||||||||||||||||||||||||||
| Investments Measured at Net Asset Value, as a Practical Expedient(1): | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common/collective trusts | $ | 148 | $ | 162 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net assets at fair value | 244 | 249 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Variable Life Insurance Policies at contract value | 943 | 937 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total net assets | $ | 1,187 | $ | 1,186 |
(1)The postretirement plan excludes from the fair value hierarchy investments that are measured at NAV per share (or its equivalent) as a practical expedient to estimate fair value and Variable Life Insurance Policies valued at contract value. U.S. equities totaled $192 million and $351 million at December 31, 2024 and 2023, respectively. International equities totaled $99 million and $88 million at December 31, 2024 and 2023, respectively. Fixed maturities totaled $652 million and $660 million at December 31, 2024 and 2023, respectively.
(2)There were no changes in the fair value of Level 3 postretirement assets from December 31, 2023 through December 31, 2024.
The expected benefit payments for the Company’s pension and postretirement plans for the years indicated are as follows:
| Pension Benefit Payments | Other Postretirement Benefit Payments | |||||||||||||
| (in millions) | ||||||||||||||
| 2025 | $ | 1,148 | $ | 127 | ||||||||||
| 2026 | 850 | 127 | ||||||||||||
| 2027 | 882 | 123 | ||||||||||||
| 2028 | 892 | 112 | ||||||||||||
| 2029 | 927 | 105 | ||||||||||||
| 2030-2034 | 4,532 | 402 | ||||||||||||
| Total | $ | 9,231 | $ | 996 |
The Company anticipates that it will make cash contributions in 2025 of approximately $160 million to the pension plans and approximately $10 million to the postretirement plans.
Postemployment Benefits
The Company accrues postemployment benefits for income continuance and health and life benefits provided to former or inactive employees who are not retirees. The net accumulated liability for these benefits at December 31, 2024 and 2023 was $30 million and $27 million, respectively, and is included in “Other liabilities.”
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Other Employee Benefits
The Company sponsors voluntary savings plans for employees (401(k) plans). The plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The matching contributions by the Company included in “General and administrative expenses” were $87 million, $79 million and $77 million for the years ended December 31, 2024, 2023 and 2022, respectively.
**20.**EQUITY
Preferred Stock
As of December 31, 2024, 2023 and 2022, the Company had 10,000,000 shares of preferred stock authorized but none issued or outstanding.
Common Stock
On the date of demutualization in December 2001, Prudential Financial completed an initial public offering of its Common Stock. The shares of Common Stock issued were in addition to shares of Common Stock the Company distributed to policyholders as part of the demutualization. The Common Stock is traded on the New York Stock Exchange under the symbol “PRU.” In the event of a liquidation, dissolution or winding-up of the Company, holders of Common Stock would be entitled to receive a proportionate share of the net assets of the Company that remain after paying all liabilities and the liquidation preferences of any preferred stock.
The changes in the number of shares of Common Stock issued, held in treasury and outstanding, are as follows for the periods indicated:
| Common Stock | ||||||||||||||||||||
| Issued | Held In Treasury | Outstanding | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Balance, December 31, 2021 | 666.3 | 290.0 | 376.3 | |||||||||||||||||
| Common Stock issued | 0.0 | 0.0 | 0.0 | |||||||||||||||||
| Common Stock acquired | 0.0 | 14.5 | (14.5) | |||||||||||||||||
| Stock-based compensation programs(1) | 0.0 | (4.2) | 4.2 | |||||||||||||||||
| Balance, December 31, 2022 | 666.3 | 300.3 | 366.0 | |||||||||||||||||
| Common Stock issued | 0.0 | 0.0 | 0.0 | |||||||||||||||||
| Common Stock acquired | 0.0 | 10.9 | (10.9) | |||||||||||||||||
| Stock-based compensation programs(1) | 0.0 | (4.1) | 4.1 | |||||||||||||||||
| Balance, December 31, 2023 | 666.3 | 307.1 | 359.2 | |||||||||||||||||
| Common Stock issued | 0.0 | 0.0 | 0.0 | |||||||||||||||||
| Common Stock acquired | 0.0 | 8.6 | (8.6) | |||||||||||||||||
| Stock-based compensation programs(1) | 0.0 | (4.0) | 4.0 | |||||||||||||||||
| Balance, December 31, 2024 | 666.3 | 311.7 | 354.6 |
(1)Represents net shares issued from treasury pursuant to the Company’s stock-based compensation programs.
Additional paid-in capital
“Additional paid-in capital” primarily consists of the cumulative excess between: (a) the total cash received by the Company in conjunction with past issuances of Common Stock shares or Common Stock shares reissued from treasury in conjunction with the Company’s stock-based compensation program and (b) the total par value associated with those shares ($.01 per share).
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Common stock held in treasury
Common Stock held in treasury represents the Company’s previously issued shares of stock which have been repurchased by the Company but not retired. These shares are accounted for at the cost at which they were acquired. Common Stock held in treasury is typically impacted by repurchases of shares under the Board of Directors approved share repurchase program and by reissuances of shares associated with the Company’s stock-based compensation programs, or for other purposes, which are accounted for at average cost upon reissuance. Gains resulting from the reissuance of Common Stock held in treasury are credited to “Additional paid-in capital.” Losses resulting from the reissuance of Common Stock held in treasury are charged first to “Additional paid-in capital” to the extent the Company has previously recorded gains on treasury share transactions, then to “Retained earnings.”
The Board of Directors may from time to time, at its discretion, authorize management to repurchase shares of Common Stock of the Company. The timing and amount of share repurchases are determined by management based upon market conditions and other considerations, and such repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through plans complying with Rule 10b5-1(c) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. Numerous factors could affect the timing and amount of any future repurchases under the share repurchase authorization, including, but not limited to: compliance with laws, increased capital needs of the Company due to changes in regulatory capital requirements, opportunities for growth and acquisitions, and the effect of adverse market conditions.
The following table summarizes share repurchases for each of the past three years as well as the share repurchase authorization for 2025, which was approved by the Board of Directors in December 2024:
| January 1, 2025 - December 31, 2025 | January 1, 2024 - December 31, 2024 | January 1, 2023 - December 31, 2023 | January 1, 2022 - December 31, 2022 | |||||||||||||||||||||||
| Total Board authorized share repurchase amount ($ in billions) | $ | 1.0 | $ | 1.0 | $ | 1.0 | $ | 1.5 | ||||||||||||||||||
| Total number of shares repurchased under this authorization as of the period end (in millions) | N/A* | 8.6 | 10.9 | 14.5 |
- Share repurchase authorization for a future period.
Dividends declared per share of Common Stock are as follows for the years indicated:
| 2024 | 2023 | 2022 | ||||||||||||||||||
| Dividends declared per share of Common Stock | $ | 5.20 | $ | 5.00 | $ | 4.80 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Accumulated Other Comprehensive Income (Loss)
AOCI represents the cumulative OCI items that are reported separate from net income and detailed on the Consolidated Statements of Comprehensive Income. Each of the components that comprise OCI are described in further detail in Note 2 (Foreign Currency Translation Adjustment and Net Unrealized Investment Gains (Losses)), Note 12 (Interest rate remeasurement of Liability for Future Policy Benefits), Note 14 (Gains (losses) from Changes in Nonperformance Risk on Market Risk Benefits) and Note 19 (Pension and Postretirement Unrecognized Net Periodic Benefit (Cost)). The balance of and changes in each component of AOCI as of and for the years ended December 31, are as follows:
| Accumulated Other Comprehensive Income (Loss) Attributable to Prudential Financial, Inc. | |||||||||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | Net Unrealized Investment Gains (Losses)(1) | Interest rate remeasurement of Liability for Future Policy Benefits | Gains (Losses) from Changes in Nonperformance Risk on Market Risk Benefits | Pension and Postretirement Unrecognized Net Periodic Benefit (Cost) | Total Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | (1,107) | $ | 26,640 | $ | (33,220) | $ | 707 | $ | (2,513) | $ | (9,493) | |||||||||||||||||||||||
| Change in OCI before reclassifications | (1,145) | (56,430) | 63,643 | 938 | 478 | 7,484 | |||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | 15 | 586 | 0 | 0 | 157 | 758 | |||||||||||||||||||||||||||||
| Income tax benefit (expense) | (37) | 13,010 | (15,181) | (197) | (150) | (2,555) | |||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | (2,274) | $ | (16,194) | $ | 15,242 | $ | 1,448 | $ | (2,028) | $ | (3,806) | |||||||||||||||||||||||
| Change in OCI before reclassifications | (246) | 5,076 | (8,770) | (693) | (98) | (4,731) | |||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | (18) | 1,143 | 0 | 0 | 71 | 1,196 | |||||||||||||||||||||||||||||
| Income tax benefit (expense) | (148) | (1,238) | 2,075 | 145 | 3 | 837 | |||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | (2,686) | $ | (11,213) | $ | 8,547 | $ | 900 | $ | (2,052) | $ | (6,504) | |||||||||||||||||||||||
| Change in OCI before reclassifications | (811) | (12,822) | 11,804 | (466) | (234) | (2,529) | |||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | (41) | 2,697 | 0 | 0 | 30 | 2,686 | |||||||||||||||||||||||||||||
| Income tax benefit (expense) | (77) | 2,651 | (3,045) | 98 | 9 | (364) | |||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | (3,615) | $ | (18,687) | $ | 17,306 | $ | 532 | $ | (2,247) | $ | (6,711) |
(1)Includes cash flow hedges of $1,780 million, $869 million and $2,616 million as of December 31, 2024, 2023, and 2022, respectively, and fair value hedges of $(64) million, $(60) million, and $(54) million as of December 31, 2024, 2023, and 2022, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Reclassifications out of Accumulated Other Comprehensive Income (Loss)
| Years Ended December 31, | Affected line item in Consolidated Statements of Operations | ||||||||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Amounts reclassified from AOCI(1)(2): | |||||||||||||||||||||||
| Foreign currency translation adjustment: | |||||||||||||||||||||||
| Foreign currency translation adjustment | $ | 41 | $ | 18 | $ | (15) | Realized investment gains (losses), net | ||||||||||||||||
| Foreign currency translation adjustment | 0 | 0 | 0 | Other income (loss) | |||||||||||||||||||
| Total foreign currency translation adjustment | 41 | 18 | (15) | ||||||||||||||||||||
| Net unrealized investment gains (losses): | |||||||||||||||||||||||
| Cash flow hedges—Interest Rate | (30) | (38) | (7) | (3) | |||||||||||||||||||
| Cash flow hedges—Currency | 3 | 14 | 15 | (3) | |||||||||||||||||||
| Cash flow hedges—Currency/Interest rate | 612 | 200 | 897 | (3) | |||||||||||||||||||
| Fair value hedges—Currency | (10) | (8) | (4) | (3) | |||||||||||||||||||
| Net unrealized investment gains (losses) on available-for-sale securities | (3,272) | (1,311) | (1,487) | Realized investment gains (losses), net | |||||||||||||||||||
| Total net unrealized investment gains (losses) | (2,697) | (1,143) | (586) | (4) | |||||||||||||||||||
| Amortization of defined benefit items: | |||||||||||||||||||||||
| Prior service cost | 68 | 8 | 9 | (5) | |||||||||||||||||||
| Actuarial gain (loss) | (98) | (79) | (166) | (5) | |||||||||||||||||||
| Total amortization of defined benefit items | (30) | (71) | (157) | ||||||||||||||||||||
| Total reclassifications for the period | $ | (2,686) | $ | (1,196) | $ | (758) |
(1)All amounts are shown before tax.
(2)Positive amounts indicate gains/benefits reclassified out of AOCI. Negative amounts indicate losses/costs reclassified out of AOCI.
(3)See Note 5 for additional information regarding cash flow and fair value hedges.
(4)See table below for additional information regarding unrealized investment gains (losses), including the impact on future policy benefits and policyholders’ dividends.
(5)See Note 19 for information regarding employee benefit plans.
Net Unrealized Investment Gains (Losses)
Net unrealized investment gains (losses) on available-for-sale fixed maturity securities and certain other invested assets and other assets are included in the Company’s Consolidated Statements of Financial Position as a component of AOCI. Changes in these amounts include reclassification adjustments to exclude from “Other comprehensive income (loss)” those items that are included as part of “Net income (loss)” for a period that had been part of “Other comprehensive income (loss)” in earlier periods. The amounts for the periods indicated below, split between amounts related to available-for-sale fixed maturity securities on which an allowance for credit losses has been recorded, and all other net unrealized investment gains (losses), are as follows:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Net Unrealized Investment Gains (Losses) on AFS Fixed Maturity Securities on Which an ACL has been Recognized | Net Unrealized Gains (Losses) on All Other Investments(1) | Reinsurance Recoverables | Future Policy Benefits, Policyholders’ Account Balances and Reinsurance Payables | Policyholders' Dividends | Income Tax Benefit (Expense) | AOCI Related to Net Unrealized Investment Gains (Losses) | |||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | 23 | $ | 40,415 | $ | 417 | $ | (1,921) | $ | (3,657) | $ | (8,637) | $ | 26,640 | |||||||||||||||||||||||||||
| Net investment gains (losses) on investments arising during the period | (90) | (65,938) | 15,164 | (50,864) | |||||||||||||||||||||||||||||||||||||
| Reclassification adjustment for (gains) losses included in net income | 23 | 563 | (135) | 451 | |||||||||||||||||||||||||||||||||||||
| Reclassification due to allowance for credit losses recorded during the period | (1) | 1 | 0 | 0 | |||||||||||||||||||||||||||||||||||||
| Impact of net unrealized investment (gains) losses | (1,120) | 3,867 | 6,851 | (2,019) | 7,579 | ||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | (45) | $ | (24,959) | $ | (703) | $ | 1,946 | $ | 3,194 | $ | 4,373 | $ | (16,194) | |||||||||||||||||||||||||||
| Net investment gains (losses) on investments arising during the period | 15 | 6,595 | (1,327) | 5,283 | |||||||||||||||||||||||||||||||||||||
| Reclassification adjustment for (gains) losses included in net income | (3) | 1,146 | (229) | 914 | |||||||||||||||||||||||||||||||||||||
| Reclassification due to allowance for credit losses recorded during the period | (39) | 39 | 0 | 0 | |||||||||||||||||||||||||||||||||||||
| Impact of net unrealized investment (gains) losses | 219 | (640) | (1,113) | 318 | (1,216) | ||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | (72) | $ | (17,179) | $ | (484) | $ | 1,306 | $ | 2,081 | $ | 3,135 | $ | (11,213) | |||||||||||||||||||||||||||
| Net investment gains (losses) on investments arising during the period | (24) | (12,703) | 3,339 | (9,388) | |||||||||||||||||||||||||||||||||||||
| Reclassification adjustment for (gains) losses included in net income | 97 | 2,600 | (708) | 1,989 | |||||||||||||||||||||||||||||||||||||
| Reclassification due to allowance for credit losses recorded during the period | 5 | (5) | 0 | 0 | |||||||||||||||||||||||||||||||||||||
| Impact of net unrealized investment (gains) losses | 215 | (325) | 15 | 20 | (75) | ||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | 6 | $ | (27,287) | $ | (269) | $ | 981 | $ | 2,096 | $ | 5,786 | $ | (18,687) |
(1)Includes cash flow and fair value hedges. See Note 5 for additional information.
Retained earnings
Retained earnings primarily represents the cumulative net income earned by the Company that has been retained by the Company as of the reporting date. Other unique items, included but not limited to the adoption of new accounting standards updates, may also impact retained earnings. In any given period, retained earnings may increase due to net income and may decrease due to net losses or the declaration of dividends. The declaration and payment of dividends on the Common Stock is limited by New Jersey corporate law, pursuant to which Prudential Financial is prohibited from paying a Common Stock dividend if, after giving effect to that dividend, either (a) the Company would be unable to pay its debts as they become due in the usual course of its business or (b) the Company’s total assets would be less than its liabilities. In addition, the terms of the Company’s outstanding junior subordinated debt include a “dividend stopper” provision that restricts the payment of dividends on the Common Stock if interest payments are not made on the junior subordinated debt.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Other than the above limitations, the Company’s Retained earnings balance is free of restrictions for the payment of Common Stock dividends; however, Common Stock dividends will be dependent upon financial conditions, results of operations, cash needs, future prospects and other factors, including cash available to Prudential Financial, the parent holding company. The principal sources of funds available to Prudential Financial are dividends and returns of capital from its subsidiaries, loans from its subsidiaries, repayments of operating loans from its subsidiaries, and cash and other highly liquid assets. The primary uses of funds at Prudential Financial include servicing its debt, operating expenses, capital contributions and loans to subsidiaries, the payment of declared shareholder dividends and repurchases of outstanding shares of Common Stock if executed under Board authority. As of December 31, 2024, Prudential Financial had highly liquid assets (excluding amounts held in an intercompany liquidity account) of $4,641 million predominantly including cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds.
Future cash available at Prudential Financial to support the payment of future Common Stock dividends is dependent on the receipt of dividends or other funds from its subsidiaries, the majority of which are subject to comprehensive regulation, including limitations on their payment of dividends and other transfers of funds, which are discussed in this Note further below.
Noncontrolling interests
For certain subsidiaries, the Company owns a controlling interest that is less than 100% ownership of the subsidiary but must consolidate 100% of the subsidiary’s financial statements in accordance with U.S. GAAP. Noncontrolling interests represent the portion of equity ownership in a consolidated subsidiary that is not attributable to the Company.
Insurance Subsidiaries - Statutory Financial Information and Restrictions on Payments of Dividends
U.S. Insurance Subsidiaries—Statutory Financial Information
The Company’s domestic insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile. Statutory accounting practices primarily differ from U.S. GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.
The risk-based capital (“RBC”) ratio is a primary measure by which the Company and its insurance regulators evaluate the capital adequacy of PICA and the Company’s other domestic insurance subsidiaries. RBC is determined by NAIC-prescribed formulas that consider, among other things, risks related to the type and quality of the invested assets, insurance-related risks associated with an insurer’s products and liabilities, interest rate risks and general business risks. The RBC ratio is equal to an insurer’s total adjusted capital divided by the minimum amount of statutory capital and surplus needed by the insurer to support its operations, which is referred to as its “company action level RBC.” Insurers that have less statutory capital than required by their company action level RBC are considered to have inadequate capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy. The Company expects to report RBC ratios for PICA and its other domestic insurance subsidiaries as of December 31, 2024 above the 100% regulatory required minimum that would require corrective action and above PICA’s target level that would support a “AA” financial strength rating.
The following table summarizes certain statutory financial information for the Company’s U.S. insurance subsidiary as of and for the years ended:
| PICA | ||||||||||||||||||||
| December 31, 2024 | December 31, 2023 | December 31, 2022 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Statutory net income (loss) | $ | 1,245 | $ | 1,732 | $ | 1,116 | ||||||||||||||
| Statutory capital and surplus | $ | 15,753 | $ | 16,085 | $ | 14,049 |
U.S. Insurance Subsidiaries—Restrictions on Payment of Dividends to Prudential Financial, the Parent Holding Company
With respect to PICA, a New Jersey domiciled insurance subsidiary which is also the Company’s primary domestic insurance subsidiary, New Jersey insurance law provides that, except in the case of extraordinary dividends (as described
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
below), all dividends or other distributions paid by PICA may be paid only from unassigned surplus, as determined pursuant to statutory accounting principles, less cumulative unrealized investment gains and losses and revaluation of assets as of the prior calendar year-end. As of December 31, 2024, PICA’s unassigned surplus less applicable adjustments for cumulative unrealized investment gains was $3,444 million. PICA must give prior notification to the NJDOBI of its intent to pay any such dividend or distribution. Also, if any dividend, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of statutory capital and surplus as of the preceding December 31 or (ii) its statutory net gain from operations excluding realized investment gains and losses for the twelve-month period ending on the preceding December 31, the dividend is considered to be an “extraordinary dividend” and requires the prior approval of the NJDOBI. Under New Jersey insurance law, PICA is permitted to pay an ordinary dividend of up to $1,575 million in 2025, without prior approval of the NJDOBI. Of the $1,575 million, $275 million is permitted to be paid after March 28, 2025, an additional $400 million is permitted to be paid after June 27, 2025 and the remaining $900 million is permitted to be paid after December 27, 2025, without prior approval of the NJDOBI.
International Insurance Subsidiaries—Statutory Financial Information
The Company’s international insurance subsidiaries prepare financial statements in accordance with local regulatory requirements. These statutory accounting practices differ from U.S. GAAP primarily by charging policy acquisition costs to expense as incurred and establishing future policy benefit liabilities using different actuarial assumptions, as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.
The Japan Financial Services Agency (“FSA”) utilizes a solvency margin ratio to evaluate the capital adequacy of Japanese insurance companies. The solvency margin ratio considers the level of solvency margin capital to a solvency margin risk amount, which is calculated in a similar manner to RBC. As of December 31, 2024, the Company expects The Prudential Life Insurance Company Ltd. (“Prudential of Japan”) and Gibraltar Life both had solvency margin capital in excess of 3.5 times the regulatory required minimums that would require corrective action.
All of the Company’s domestic and international insurance subsidiaries have capital and surplus levels that exceed their respective regulatory minimum requirements, and none utilized prescribed or permitted practices that vary materially from the practices prescribed by the NAIC or equivalent regulatory bodies for results reported as of December 31, 2024 and 2023, respectively, or for the years ended December 31, 2024, 2023 and 2022, respectively.
International Insurance Subsidiaries—Restrictions on Payment of Dividends to Prudential Financial, the Parent Holding Company
The Company’s international insurance operations are subject to dividend restrictions from the regulatory authorities in the jurisdictions in which they operate. With respect to Prudential of Japan and Gibraltar Life, the Company’s most significant international insurance subsidiaries, both of which are domiciled in Japan, Japan law provides that common stock dividends may be paid in an amount of up to 83% of prior fiscal year statutory after-tax earnings, after certain reserving thresholds are met, including providing for policyholder dividends. If statutory retained earnings exceed 100% of statutory paid-in capital, 100% of prior year statutory after-tax earnings may be paid, after reserving thresholds are met. Dividends in excess of these amounts and other forms of capital distribution may require the prior approval of the FSA. Additionally, Prudential of Japan and Gibraltar Life must give prior notification to the FSA of their intent to pay any dividend or distribution.
For the year ended December 31, 2024, Prudential Financial received $585 million from its international insurance subsidiaries and $800 million from a holding company. In addition to paying Common Stock dividends, the Company’s international insurance operations may return capital to Prudential Financial through, or facilitated by, other means, such as the repayment of Preferred Stock obligations held by Prudential Financial or other affiliates, affiliated lending, affiliated derivatives and reinsurance with U.S.- and Bermuda-based affiliates. The Company’s Japan insurance operations have entered into reinsurance agreements with Gibraltar Re, the Company’s Bermuda-based reinsurance affiliate, as well as with the Company’s domestic insurance operations to reinsure the mortality and morbidity risk associated with a portion of the in-force contracts as well as newly-issued contracts for certain products. The Company expects these transactions will allow it to more efficiently manage its capital and risk profile. The current regulatory fiscal year end for both Prudential of Japan and Gibraltar Life is March 31, 2025, after which time the common stock dividend amount permitted to be paid without prior approval from the FSA can be determined.
In addition, although prior regulatory approval may not be required by law for the payment of dividends up to the limitations described above, in practice, the Company would typically discuss any dividend payments with the applicable
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
regulatory authority prior to payment. Additionally, the payment of dividends by the Company’s subsidiaries is subject to declaration by their Board of Directors and may be affected by market conditions and other factors.
**21.**EARNINGS PER SHARE
A reconciliation of the numerators and denominators of the basic and diluted per share computations of Common Stock based on the consolidated earnings of Prudential Financial for the years ended December 31, is as follows:
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income | Weighted Average Shares | Per Share Amount | Income | Weighted Average Shares | Per Share Amount | Income | Weighted Average Shares | Per Share Amount | ||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic earnings per share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 2,846 | $ | 2,508 | $ | (1,675) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 119 | 20 | (28) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards | 32 | 29 | 25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Prudential Financial available to holders of Common Stock | $ | 2,695 | 357.5 | $ | 7.54 | $ | 2,459 | 363.5 | $ | 6.76 | $ | (1,672) | 372.3 | $ | (4.49) | |||||||||||||||||||||||||||||||||||||||||
| Effect of dilutive securities and compensation programs | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Add: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Basic | $ | 32 | $ | 29 | $ | 25 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Diluted | 32 | 29 | 25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options | 0.3 | 0.2 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred and long-term compensation programs | 1.5 | 0.9 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted earnings per share(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Prudential Financial available to holders of Common Stock | $ | 2,695 | 359.3 | $ | 7.50 | $ | 2,459 | 364.6 | $ | 6.74 | $ | (1,672) | 372.3 | $ | (4.49) |
(1)For the year ended December 31, 2022, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because dilutive shares and dilutive earnings per share are not applicable when a net loss is reported. As a result of the net loss attributable to Prudential Financial available to holders of Common Stock for the year ended December 31, 2022, all potential stock options and compensation programs were considered antidilutive.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and included in the computation of earnings per share pursuant to the two-class method. Under this method, earnings attributable to Prudential Financial are allocated between Common Stock and the participating awards, as if the awards were a second class of stock. During periods of net income available to holders of Common Stock, the calculation of earnings per share excludes the income attributable to participating securities in the numerator and the dilutive impact of these securities from the denominator. In the event of a net loss available to holders of Common Stock, undistributed earnings are not allocated to participating securities and the denominator excludes the dilutive impact of these securities as they do not share in the losses of the Company. Undistributed earnings allocated to participating unvested share-based payment awards for the years ended December 31, 2024, 2023 and 2022, as applicable, were based on 4.0 million, 4.1 million and 4.9 million of such awards, respectively, weighted for the period they were outstanding.
Stock options and shares related to deferred and long-term compensation programs that are considered antidilutive are excluded from the computation of diluted earnings per share. Stock options are considered antidilutive based on application of the treasury stock method or in the event of a net loss available to holders of Common Stock. Shares related to deferred and long-term compensation programs are considered antidilutive in the event of a net loss available to holders of Common Stock. For the years ended December 31, the number of stock options and shares related to deferred and long-term compensation programs that were considered antidilutive and were excluded from the computation of diluted earnings per share, weighted for the portion of the period they were outstanding, are as follows:
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||
| Shares | Exercise Price Per Share | Shares | Exercise Price Per Share | Shares | Exercise Price Per Share | |||||||||||||||||||||||||||||||||
| (in millions, except per share amounts, based on weighted average) | ||||||||||||||||||||||||||||||||||||||
| Antidilutive stock options based on application of the treasury stock method | 0.1 | $ | 110.42 | 1.2 | $ | 102.63 | 0.5 | $ | 108.19 | |||||||||||||||||||||||||||||
| Antidilutive stock options due to net loss available to holders of Common Stock | 0.0 | 0.0 | 0.4 | |||||||||||||||||||||||||||||||||||
| Antidilutive shares based on application of the treasury stock method | 0.0 | 0.1 | 0.1 | |||||||||||||||||||||||||||||||||||
| Antidilutive shares due to net loss available to holders of Common Stock | 0.0 | 0.0 | 2.0 | |||||||||||||||||||||||||||||||||||
| Total antidilutive stock options and shares | 0.1 | 1.3 | 3.0 |
**22.**SHARE-BASED PAYMENTS
Omnibus Incentive Plan
Prudential Financial, Inc.’s Omnibus Incentive Plan provides stock-based awards including stock options, stock appreciation rights, restricted stock shares, restricted stock units, stock settled performance shares, and cash settled performance units. Dividend equivalents are generally provided on restricted stock shares and restricted stock units outstanding as of the record date. Dividend equivalents are generally accrued on target performance shares and units outstanding as of the record date. These dividend equivalents are paid only on the performance shares and units released up to a maximum of the target number of shares and units awarded. Generally, the requisite service period is the vesting period. There were 13,684,720 authorized shares available for grant under the Omnibus Incentive Plan as of December 31, 2024.
Assurance IQ Acquisition
The Company acquired AIQ on October 10, 2019. The terms of the acquisition included compensation awards that involved share-based payment arrangements that are linked to retention and therefore fall under the reporting requirements of ASC 718, Stock Compensation. These compensation awards include stock options, restricted stock units and performance shares.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Compensation Costs
Compensation cost for restricted stock units, performance shares and performance units granted to employees is measured by the share price of the underlying Common Stock at the date of grant.
Compensation cost for employee stock options is based on the fair values estimated on the grant date. Under the Omnibus Incentive Plan, the fair value of each stock option award is estimated using a binomial option pricing model on the date of grant for stock options issued to employees. For the awards related to the AIQ acquisition, the fair value of each stock option award is based on its intrinsic value on the date of grant. There were no stock options granted in 2024, 2023 and 2022.
Expected volatility is based on historical volatility of Prudential Financial’s Common Stock and implied volatility from traded options on Prudential Financial’s Common Stock. The Company uses historical data and expectations of future exercise patterns to estimate option exercises and employee terminations within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods associated with the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The following table summarizes the compensation cost recognized and the related income tax benefit for stock options, restricted stock units, performance shares and performance units for the years ended December 31:
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||
| Omnibus Incentive Plan: | Total Compensation Cost Recognized (1) | Income Tax Benefit | Total Compensation Cost Recognized (1) | Income Tax Benefit | Total Compensation Cost Recognized (1) | Income Tax Benefit | ||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Employee stock options | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1 | $ | 0 | ||||||||||||||||||||||||||
| Employee restricted stock units | 200 | 47 | 200 | 47 | 189 | 44 | ||||||||||||||||||||||||||||||||
| Employee performance shares and performance units | 114 | 27 | 54 | 12 | 18 | 4 | ||||||||||||||||||||||||||||||||
| Total | $ | 314 | $ | 74 | $ | 254 | $ | 59 | $ | 208 | $ | 48 |
(1) Compensation costs related to retirement eligible participants are recorded on the grant date (typically in the first quarter of every year).
On January 10, 2024, the Board of Directors of Prudential Financial, Inc. adopted certain modifications to the terms and conditions of performance shares granted in 2021, 2022, and 2023. These modifications 1) mitigate the impact of outsized interest rate volatility, both positive and negative, as it relates to achieving adjusted book value per share growth goals, and 2) reduce certain book value per share goals and maximum payout opportunities. The impact from these modifications increased shares to be delivered to 161 employees across all three performance plans by a total of approximately 600,000 shares. In addition, total compensation costs resulting from these modifications increased by approximately $62 million.
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||
| Assurance IQ Acquisition: | Total Compensation Cost Recognized | Income Tax Benefit | Total Compensation Cost Recognized | Income Tax Benefit | Total Compensation Cost Recognized | Income Tax Benefit | ||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Employee stock options | $ | 0 | $ | 0 | $ | 2 | $ | 1 | $ | 10 | $ | 2 | ||||||||||||||||||||||||||
| Employee restricted stock units | 0 | 0 | 1 | 0 | 2 | 1 | ||||||||||||||||||||||||||||||||
| Employee performance shares | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
| Total | $ | 0 | $ | 0 | $ | 3 | $ | 1 | $ | 12 | $ | 3 |
Compensation costs related to stock-based compensation plans capitalized in deferred acquisition costs for the years ended December 31, 2024, 2023 and 2022 were de minimis.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Stock Options
Each stock option granted under the Omnibus Incentive Plan has an exercise price at the fair market value of Prudential Financial’s Common Stock on the date of grant and has a maximum term of 10 years. Generally, one third of the option grant vests in each of the first three years. Options granted related to the AIQ acquisition have an exercise price based on the original strike price of the AIQ options that they replaced and have a maximum term of 10 years from the date the AIQ options were originally granted. Options granted related to the AIQ acquisition generally vest quarterly over three years.
A summary of the status of the Company’s stock option grants is as follows:
| Employee Stock Options | ||||||||||||||||||||||||||
| Omnibus Incentive Plan | Assurance IQ Acquisition | |||||||||||||||||||||||||
| Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||||||||||||
| Outstanding at December 31, 2023 | 1,700,332 | $ | 95.22 | 18,358 | $ | 1.53 | ||||||||||||||||||||
| Granted | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||
| Exercised | (1,037,398) | 94.74 | (15,949) | 1.64 | ||||||||||||||||||||||
| Forfeited | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||
| Expired | (1,039) | 84.53 | (238) | 7.56 | ||||||||||||||||||||||
| Outstanding at December 31, 2024 | 661,895 | $ | 96.00 | 2,171 | $ | 0.09 | ||||||||||||||||||||
| Exercisable at December 31, 2024 | 661,895 | $ | 96.00 | 2,171 | $ | 0.09 |
There were no stock options granted for the years 2024, 2023 or 2022. No AIQ acquisition related options were granted in 2024, 2023 or 2022.
The total intrinsic value (i.e., market price of the stock less the option exercise price) of employee stock options exercised during the years ended December 31, 2024, 2023 and 2022 was $26 million, $8 million, and $33 million, respectively. For the AIQ acquisition related awards, the total intrinsic value of employee stock options exercised during the years ended December 31, 2024, 2023 and 2022 was $2 million, $3 million and $15 million, respectively.
The weighted average remaining contractual term and the aggregate intrinsic value of stock options outstanding and exercisable as of December 31, 2024 is as follows:
| Employee Stock Options | ||||||||||||||||||||||||||
| Omnibus Incentive Plan | Assurance IQ Acquisition | |||||||||||||||||||||||||
| Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||||||||||
| (in years) | (in millions) | (in years) | (in millions) | |||||||||||||||||||||||
| Outstanding | 3.28 years | $ | 15 | 0.25 years | $ | 0 | ||||||||||||||||||||
| Exercisable | 3.28 years | $ | 15 | 0.25 years | $ | 0 |
Restricted Stock Units, Performance Share Awards and Performance Unit Awards
A restricted stock unit is an unfunded, unsecured right to receive a share of Prudential Financial’s Common Stock at the end of a specified period of time, which is subject to forfeiture and transfer restrictions. Generally, the restrictions will lapse one third annually over 3 years. Performance shares and performance units are awards denominated in Prudential Financial’s Common Stock. The number of units is determined over the performance period and may be adjusted based on the satisfaction of certain performance goals for the Company. Performance share awards are payable in Prudential Financial’s Common Stock. Performance unit awards are payable in cash. Effective October 2019, the Company no longer grants performance unit awards. Any residual compensation costs have been recorded and disclosed above through 2022.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
A summary of the Company’s restricted stock unit and performance share awards under the Omnibus Incentive Plan is as follows:
| Restricted Stock Units | Weighted Average Grant Date Fair Value | Performance Share Awards(1) | Weighted Average Grant Date Fair Value | |||||||||||||||||||||||
| Restricted at December 31, 2023 | 4,058,190 | $ | 103.48 | 2,102,693 | $ | 103.72 | ||||||||||||||||||||
| Granted | 2,146,030 | 102.66 | 709,411 | 97.67 | ||||||||||||||||||||||
| Forfeited | (276,716) | 105.56 | (72,428) | 105.88 | ||||||||||||||||||||||
| Performance adjustment(2) | 0 | 0.00 | (40,560) | 103.71 | ||||||||||||||||||||||
| Released | (2,008,167) | 100.26 | (775,967) | 103.48 | ||||||||||||||||||||||
| Restricted at December 31, 2024 | 3,919,337 | $ | 104.53 | 1,923,149 | $ | 101.50 |
(1)Performance share awards reflect the target units awarded, reduced for forfeitures and releases to date. The actual number of units to be awarded at the end of each performance period will range between 0% and 150% of the target number of units granted, based upon a measure of the reported performance for the Company relative to stated goals. Performance awards granted to senior management in 2021 include a stated goal related to diversity & inclusion that can modify the performance result by +/- 10%.
(2)Represents the difference between the target units granted and the actual units awarded based upon the attainment of performance goals for the Company.
A summary of the Company’s restricted stock unit awards related to the AIQ acquisition is as follows:
| Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||||||||||||||||||||||
| Restricted at December 31, 2023 | 4,101 | $ | 87.67 | |||||||||||||||||||||||
| Granted | 0 | 0.00 | ||||||||||||||||||||||||
| Forfeited | (485) | 87.67 | ||||||||||||||||||||||||
| Released | (3,616) | 87.67 | ||||||||||||||||||||||||
| Restricted at December 31, 2024 | 0 | $ | 0.00 |
The fair market value of restricted stock units and performance shares released under the Omnibus Incentive Plan for the years ended December 31, 2024, 2023 and 2022 was $302 million, $360 million and $366 million, respectively. The fair market value of restricted stock units released for the AIQ acquisition related awards under the Omnibus Incentive Plan for the years ended December 31, 2024, 2023 and 2022 was less than $1 million, $1 million and $2 million, respectively.
The weighted average grant date fair value for restricted stock units granted under the Omnibus Incentive Plan during the years ended December 31, 2024, 2023 and 2022 was $102.66, $102.64 and $119.71, respectively. The weighted average grant date fair value for performance shares granted under the Omnibus Incentive Plan during the years ended December 31, 2024, 2023 and 2022 was $97.67, $103.27 and $121.29, respectively. There were no restricted stock units granted for the AIQ acquisition during the year ended December 31, 2024, 2023 and 2022.
Unrecognized Compensation Cost
There was no unrecognized compensation cost for stock options under the Omnibus Incentive Plan as of December 31, 2024. Unrecognized compensation cost for restricted stock units and performance shares under the Omnibus Incentive Plan as of December 31, 2024 was $174 million with a weighted average recognition period of 1.69 years. There was no unrecognized compensation cost for stock options or restricted units related to the AIQ acquisition as of December 31, 2024.
Tax Benefits Realized
The Company’s tax benefit realized for exercises of stock options under the Omnibus Incentive Plan during the years ended December 31, 2024, 2023 and 2022 was $3 million, $2 million and $8 million, respectively. The tax benefit realized for exercises of stock options related to the AIQ acquisition during the years ended December 31, 2024, 2023 and 2022 was less than $1 million, $1 million and $4 million, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
The Company’s tax benefit realized upon vesting of restricted stock units, performance shares and performance units under the Omnibus Incentive Plan for the years ended December 31, 2024, 2023 and 2022 was $60 million, $77 million and $75 million, respectively. The tax benefit realized upon vesting of restricted stock units related to the AIQ acquisition during the years ended December 31, 2023, 2022 and 2021 was less than $1 million, less than $1 million and less than $1 million, respectively.
Settlement of Awards
The Company’s policy is to issue shares from Common Stock held in treasury upon exercise of stock options, the release of restricted stock units and performance shares. The Company uses cash to settle performance units. The amount of cash used to settle performance units during the years ended December 31, 2024, 2023 and 2022 were $0, $0 and $1 million, respectively. As of December 31, 2022, there were no longer any performance units outstanding.
**23.**SEGMENT INFORMATION
Segments
The Company’s principal operations consist of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the Retirement Strategies, Group Insurance, and Individual Life businesses), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other operations. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under U.S. GAAP. The Company’s Corporate and Other operations include corporate items and initiatives that are not allocated to business segments as well as the Divested and Run-off Businesses described above.
The PGIM segment provides investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit and other alternatives, and multi-asset class strategies, to institutional and retail clients globally, as well as the Company’s insurance and retirement businesses.
The U.S. Businesses offer a broad range of products and solutions that cover protection, retirement, savings, income and investment needs. The U.S. Businesses are organized into the following segments:
*•*The Retirement Strategies segment, including the Institutional and Individual Retirement Strategies businesses, respectively provides a broad range of retirement investment and income products and services to retirement plan sponsors in the public, private and not-for-profit sectors, and develops and distributes individual variable and fixed annuity products, primarily to the U.S. mass affluent and affluent markets.
-
The Group Insurance segment provides a full range of group life, long-term and short-term group disability, and group corporate-, bank- and trust-owned life insurance in the U.S. primarily to institutional clients for use in connection with employee and membership benefits plans. In addition, the segment sells accidental death and dismemberment and other supplemental health solutions and provides plan administration services in connection with its insurance coverages.
-
The Individual Life segment develops and distributes variable life, universal life and term life insurance products primarily to the U.S. mass middle, mass affluent and affluent markets.
The International Businesses segment develops and distributes life insurance, retirement products, investment products and certain accident and health products with fixed benefits to mass affluent and affluent customers through its Life Planner operations in Japan, Brazil and Mexico. Its Gibraltar Life and Other operations also provide similar products, as well as advisory and administration services to broad middle income and mass affluent customers across Japan, and through joint ventures in Chile, China, India and Indonesia, and strategic investments in Ghana, Kenya and South Africa through multiple distribution channels (including Life Consultants, banks and independent agencies).
The Closed Block division includes certain in-force participating insurance and annuity products and corresponding assets that are used for the payment of benefits, expenses and policyholders’ dividends related to these products, as well as certain related assets and liabilities. In connection with demutualization, the Company ceased offering these participating products. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Businesses that are included in the Company’s Corporate and Other operations. See Note 16 for additional information regarding the Closed Block.
Corporate and Other Operations consists primarily of: (1) capital that is not deployed in any business segment; (2) investments not allocated to business segments; (3) capital debt; (4) the Company’s qualified and non-qualified pension and other employee benefit plans, after allocations to business segments; (5) corporate-level activities, after allocations to business segments, primarily including strategic expenditures, acquisition and disposition costs, corporate governance, corporate advertising, philanthropic activities, deferred compensation, and costs related to certain contingencies and legal matters; (6) expenses associated with the multi-year plan of programs that span across the Company’s businesses and the functional areas that support those businesses; (7) certain retained obligations relating to pre-demutualization policyholders; (8) impacts of risk management activities pursuant to the Company’s Risk Appetite Framework; (9) the foreign currency income hedging program used to hedge certain non-U.S. dollar denominated earnings in the International Businesses segment; (10) intercompany arrangements with the International Businesses and PGIM segments to translate certain non-U.S. dollar-denominated earnings at fixed currency exchange rates; (11) results of certain consolidated investment funds managed by the Company’s PGIM business; (12) Prudential Advisors, Prudential’s proprietary nationwide sales organization; (13) the Company’s share of earnings in Prismic as well as the invested assets supporting the contracts reinsured via coinsurance with funds withheld arrangements and the offsetting funds withheld payable; and (14) transactions with and between other segments, including the elimination of intercompany transactions for consolidation purposes.
Segment Accounting Policies. The accounting policies of the segments are the same as those described in Note 2. Results for each segment include earnings on attributed equity established at a level which management considers necessary to support each segment’s risks. Operating expenses specifically identifiable to a particular segment are allocated to that segment as incurred. Operating expenses not identifiable to a specific segment that are incurred in connection with the generation of segment revenues are generally allocated based upon the segment’s historical percentage of general and administrative expenses.
For information related to significant acquisitions and dispositions, see Note 1. For information related to the adoption of new accounting pronouncements, see Note 2. The segments’ results in prior years have been revised for these items, as applicable, to conform to current year presentation.
Adjusted Operating Income
The Company analyzes the operating performance of each segment using “adjusted operating income.” Adjusted operating income does not equate to “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” or “Net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss used by the chief executive officer, who is the Company’s chief operating decision maker (“CODM”), and is the measure of segment performance presented below. The CODM uses adjusted operating income to (1) evaluate segment performance; (2) allocate resources and capital, predominantly during the annual budgeting and planning processes; and (3) consider variances to pre-established targets during the compensation process. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and the Company’s definition of adjusted operating income may differ from that used by other companies. The Company, however, believes that the presentation of adjusted operating income as measured for management purposes enhances the understanding of results of operations by highlighting the results from ongoing operations and the underlying profitability factors of its businesses.
Adjusted operating income is calculated by adjusting each segment’s “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” for the following items which are important to an understanding of overall results of operations, and are described in greater detail below:
-
Realized investment gains (losses), net, and related charges and adjustments;
-
Change in value of market risk benefits, net of related hedging gains (losses);
-
Market experience updates;
-
Divested and Run-off Businesses;
-
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests; and
-
Other adjustments.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
During the fourth quarter of 2024, the Company identified an immaterial error in the application of adjusted operating income, which resulted in an overstatement thereof for indexed variable and fixed annuity products within the Retirement Strategies segment in the first three quarters of 2024 and each of the four quarters of 2023. As a result, the Company has voluntarily revised its historical adjusted operating income for the relevant periods, resulting in decreases in pre-tax adjusted operating income of $149 million (unaudited) for the nine months ended September 30, 2024, and $55 million for the year ended December 31, 2023.
Realized investment gains (losses), net, and related charges and adjustments
Realized investment gains (losses), net
Adjusted operating income excludes “Realized investment gains (losses), net,” except for certain items described below. Significant activity excluded from adjusted operating income includes impairments and credit-related gains (losses) from sales of securities, the timing of which depends largely on market credit cycles and can vary considerably across periods, and interest rate-related gains (losses) from sales of securities, which are largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile. Additionally, adjusted operating income excludes realized investment gains (losses) from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset/liability management program related to the risk of those products, as well as from investment performance of invested assets and embedded derivatives associated with certain coinsurance with funds withheld and modified coinsurance reinsurance arrangements.
The following table sets forth the significant components of “Realized investment gains (losses), net” that are included in adjusted operating income and, as a result, are reflected as adjustments to “Realized investment gains (losses), net” for purposes of calculating adjusted operating income:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Net gains (losses) from(1): | |||||||||||||||||
| Terminated hedges of foreign currency earnings | $ | (11) | $ | (32) | $ | 22 | |||||||||||
| Current period yield adjustments | $ | 216 | $ | 467 | $ | 515 | |||||||||||
| Principal source of earnings | $ | 50 | $ | 1 | $ | 245 |
(1)In addition to the items in the table above, “Realized investment gains (losses), net, and related charges and adjustments” also includes an adjustment to reflect “Realized investment gains (losses), net” related to Divested and Run-off Businesses. See “Divested and Run-off Businesses” discussed below.
Terminated Hedges of Foreign Currency Earnings. The amounts shown in the table above primarily reflect the impact of an intercompany arrangement between Corporate and Other operations and the International Businesses segment, pursuant to which the non-U.S. dollar-denominated earnings in all countries for a particular year, including its interim reporting periods, are translated at fixed currency exchange rates. The fixed rates are determined in connection with a currency hedging program designed to mitigate the risk that unfavorable rate changes will reduce the segment’s U.S. dollar-equivalent earnings. Pursuant to this program, the Company’s Corporate and Other operations may execute forward currency contracts with third parties to sell the net exposure of projected earnings from the hedged currency in exchange for U.S. dollars at a specified exchange rate. The maturities of these contracts correspond with the future periods in which the identified non-U.S. dollar-denominated earnings are expected to be generated. These contracts do not qualify for hedge accounting under U.S. GAAP, so the resulting profits or losses are recorded in “Realized investment gains (losses), net.” When the contracts are terminated in the same period that the expected earnings emerge, the resulting positive or negative cash flow effect is included in adjusted operating income.
Current Period Yield Adjustments. The Company uses interest rate and currency swaps and other derivatives to manage interest and currency exchange rate exposures arising from mismatches between assets and liabilities, including duration mismatches. For derivative contracts that do not qualify for hedge accounting treatment, the periodic swap settlements, as well as certain other derivative related yield adjustments are recorded in “Realized investment gains (losses), net,” and are included in adjusted operating income to reflect the after-hedge yield of the underlying instruments. In certain instances, when these derivative contracts are terminated or offset before their final maturity, the resulting realized gains or losses are recognized in adjusted operating income over periods that generally approximate the expected terms of the derivatives or underlying
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
instruments in order for adjusted operating income to reflect the after-hedge yield of the underlying instruments. Included in the amounts shown in the table above are gains (losses) on certain derivative contracts that were terminated or offset before their final maturity of $140 million, $178 million and $100 million for the years ended 2024, 2023 and 2022, respectively. As of December 31, 2024, there was a $466 million deferred net gain related to certain derivative contracts that were terminated or offset before their final maturity, primarily within the Individual Retirement Strategies business and International Businesses. Also included in the amounts shown in the table above are fees related to synthetic GICs of $100 million, $107 million and $113 million for the years ended 2024, 2023 and 2022, respectively. Synthetic GICs are accounted for as derivatives under U.S. GAAP and, therefore, these fees are recorded in “Realized investment gains (losses), net.” See Note 5 for additional information regarding synthetic GICs.
Principal Source of Earnings. The Company conducts certain activities for which realized investment gains (losses) are a principal source of earnings for its businesses and are therefore included in adjusted operating income, particularly within the Company’s PGIM segment. For example, PGIM’s strategic investing business makes investments for sale or syndication to other investors or for placement or co-investment in the Company’s managed funds and structured products. The realized investment gains (losses) associated with the sale of these strategic investments, as well as the majority of derivative results, are a principal activity for this business and included in adjusted operating income. In addition, the realized investment gains (losses) associated with loans originated by the Company’s commercial mortgage operations, as well as related derivative results and retained mortgage servicing rights, are a principal activity for this business and are therefore included in adjusted operating income.
Adjustments related to Realized investment gains (losses), net
The following table sets forth certain other items excluded from adjusted operating income and reflected as an adjustment to “Realized investment gains (losses), net” for purposes of calculating adjusted operating income:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Net gains (losses) from: | |||||||||||||||||
| Investments carried at fair value through net income | $ | (337) | $ | 754 | $ | (1,562) | |||||||||||
| Foreign currency exchange movements | $ | (76) | $ | (123) | $ | 286 | |||||||||||
| Other activities(1) | $ | (1) | $ | (10) | $ | (33) |
(1)Prior period amounts have been updated to conform to current period presentation.
Investments carried at fair value through net income. The Company has certain investments in its general account portfolios that are carried at fair value with changes in fair value reported in “Other income (loss).” Examples include the Company’s investments in equity securities and fixed maturities designated as trading. Consistent with the exclusion of realized investment gains (losses) with respect to other investments managed on a consistent basis, the net gains or losses on these investments are excluded from adjusted operating income.
Foreign Currency Exchange Movements. The Company has certain assets and liabilities for which, under U.S. GAAP, the changes in value, including those associated with changes in foreign currency exchange rates during the period, are recorded in “Other income (loss).” To the extent the foreign currency exposure on these assets and liabilities is economically hedged or considered part of the Company’s capital funding strategies for its international subsidiaries, the change in value included in “Other income (loss)” is excluded from adjusted operating income. The insurance liabilities are supported by investments denominated in corresponding currencies, including a significant portion designated as available-for-sale. While these non-yen denominated assets and liabilities are economically hedged, unrealized gains (losses) on available-for-sale investments, including those arising from foreign currency exchange rate movements, are recorded in AOCI under U.S. GAAP, while the non-yen denominated liabilities are remeasured for foreign currency exchange rate movements, with the related change in value recorded in earnings within “Other income (loss).” Due to this non-economic volatility that has been reflected in U.S. GAAP earnings, the change in value recorded within “Other income (loss)” is excluded from adjusted operating income.
Other Activities. The Company excludes certain other items from adjusted operating income that are consistent with similar adjustments described above.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Charges related to realized investment gains (losses), net
Charges that relate to realized investment gains (losses) are also excluded from adjusted operating income, and include the following:
-
Policyholder dividends and interest credited to policyholders’ account balances that relate to certain life policies that pass back certain realized investment gains (losses) to the policyholder, and reserves for future policy benefits for certain policies that are affected by net realized investment gains (losses); and
-
Market value adjustments paid or received upon a contractholder’s surrender of certain of the Company’s annuity products as these amounts mitigate the net realized investment gains or losses incurred upon the disposition of the underlying invested assets.
Change in value of market risk benefits, net of related hedging gains (losses)
The Company is required to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value. In order to enhance the understanding of underlying performance trends, the Company excludes from adjusted operating income “Change in value of market risk benefits, net of related hedging gains (losses),” which reflects the impact from changes in current market conditions. See Note 2 for additional information regarding market risk benefits.
Market experience updates
“Market experience updates” represent the immediate impacts from changes in current market conditions on estimates of profitability and the impact of those changes on reserves, primarily related to variable and universal life products. These amounts are excluded from adjusted operating income, which the Company believes enhances the understanding of underlying performance trends.
Divested and Run-off Businesses
The contribution to income (loss) of Divested and Run-off Businesses that have been or will be sold or exited, including businesses that have been placed in wind down, but that did not qualify for “discontinued operations” accounting treatment under U.S. GAAP, are excluded from adjusted operating income as the results of Divested and Run-off Businesses are not considered relevant to understanding the Company’s ongoing operating results.
The Closed Block division is accounted for as a divested business because it consists primarily of certain participating insurance and annuity products that the Company ceased selling at demutualization in 2001. See Note 16 for additional information regarding the Closed Block.
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests
Equity in earnings of joint ventures and other operating entities, on a pre-tax basis, are included in adjusted operating income as these results are a principal source of earnings. These earnings are reflected on a U.S. GAAP basis on an after-tax basis as a separate line on the Company’s Consolidated Statements of Operations.
Earnings attributable to noncontrolling interests are excluded from adjusted operating income. Earnings attributable to noncontrolling interests represents the portion of earnings from consolidated entities that relates to the equity interests of minority investors, and are reflected on a U.S. GAAP basis as a separate line on the Company’s Consolidated Statements of Operations.
Other adjustments
“Other adjustments” represents all other adjustments that are excluded from adjusted operating income. These primarily include certain components of the consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Reconciliation of select financial information
The tables below present certain financial information that is regularly provided to the CODM for the Company’s segments, including revenues and significant benefits and expenses, on an adjusted operating income basis, as well as assets by segment, and the reconciliation of the segment totals to amounts reported in the Consolidated Financial Statements.
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Select revenues and significant benefits and expenses, on an adjusted operating income basis, by segment | Net Investment Income | Total Revenues | Policyholders’ Benefits | Interest Credited to Policyholders’ Account Balances | Interest Expense | Amortization of DAC | General and Administrative Expenses(5) | Other Benefits and Expenses(6) | Total Benefits and Expenses | Total Revenue Less Total Benefits and Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PGIM | $ | 15 | $ | 4,092 | $ | 0 | $ | 0 | $ | 105 | $ | 2 | $ | 3,110 | $ | 0 | $ | 3,217 | $ | 875 | |||||||||||||||||||||||||||||||||||||||
| U.S. Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Institutional Retirement Strategies | 4,674 | 28,195 | 25,752 | 664 | 31 | 11 | 257 | (376) | 26,339 | 1,856 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Individual Retirement Strategies(1) | 2,110 | 5,125 | 141 | 1,039 | 84 | 394 | 1,696 | 8 | 3,362 | 1,763 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies(1)(2) | 6,784 | 33,320 | 25,893 | 1,703 | 115 | 405 | 1,953 | (368) | 29,701 | 3,619 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Group Insurance | 530 | 6,427 | 4,801 | 149 | 11 | 6 | 1,146 | 0 | 6,113 | 314 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Individual Life(2) | 3,089 | 6,195 | 3,095 | 803 | 1,113 | 442 | 815 | 132 | 6,400 | (205) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total U.S. Businesses | 10,403 | 45,942 | 33,789 | 2,655 | 1,239 | 853 | 3,914 | (236) | 42,214 | 3,728 | |||||||||||||||||||||||||||||||||||||||||||||||||
| International Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life Planner | 2,508 | 9,352 | 5,605 | 288 | (9) | 320 | 1,044 | 234 | 7,482 | 1,870 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gibraltar Life and Other | 3,215 | 8,573 | 4,643 | 922 | 7 | 326 | 1,272 | 167 | 7,337 | 1,236 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total International Businesses | 5,723 | 17,925 | 10,248 | 1,210 | (2) | 646 | 2,316 | 401 | 14,819 | 3,106 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate and Other(3) | 1,234 | 94 | (19) | 84 | 677 | (56) | 1,191 | 0 | 1,877 | (1,783) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total segment adjusted operating income before income taxes(1) | 17,375 | 68,053 | 44,018 | 3,949 | 2,019 | 1,445 | 10,531 | 165 | 62,127 | 5,926 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments(1)(4) | (17) | (1,741) | (3) | 347 | 0 | 32 | 0 | 33 | 409 | (2,150) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | 0 | (397) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (397) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Market experience updates | 0 | (88) | (3) | 0 | 0 | 0 | 0 | (33) | (36) | (52) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Divested and Run-off Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Closed Block division | 2,048 | 3,287 | 2,342 | 117 | (2) | 12 | 290 | 641 | 3,400 | (113) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other Divested and Run-off Businesses | 503 | 1,426 | 765 | 169 | 13 | 3 | 591 | (145) | 1,396 | 30 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests | 0 | (135) | 0 | 0 | 0 | 0 | (119) | 0 | (119) | (16) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other adjustments | 0 | 0 | 0 | 0 | 0 | 0 | 19 | 0 | 19 | (19) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 19,909 | $ | 70,405 | $ | 47,119 | $ | 4,582 | $ | 2,030 | $ | 1,492 | $ | 11,312 | $ | 661 | $ | 67,196 | $ | 3,209 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Select revenues and significant benefits and expenses, on an adjusted operating income basis, by segment | Net Investment Income | Total Revenues | Policyholders’ Benefits | Interest Credited to Policyholders’ Account Balances | Interest Expense | Amortization of DAC | General and Administrative Expenses(5) | Other Benefits and Expenses(6) | Total Benefits and Expenses | Total Revenue Less Total Benefits and Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PGIM | $ | 268 | $ | 3,638 | $ | 0 | $ | 0 | $ | 113 | $ | 2 | $ | 2,810 | $ | 0 | $ | 2,925 | $ | 713 | |||||||||||||||||||||||||||||||||||||||
| U.S. Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Institutional Retirement Strategies | 4,180 | 11,030 | 8,759 | 552 | 1 | 16 | 208 | (201) | 9,335 | 1,695 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Individual Retirement Strategies(1)(7) | 1,454 | 4,532 | 134 | 560 | 72 | 349 | 1,591 | 8 | 2,714 | 1,818 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies(1)(2)(7) | 5,634 | 15,562 | 8,893 | 1,112 | 73 | 365 | 1,799 | (193) | 12,049 | 3,513 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Group Insurance | 512 | 6,285 | 4,703 | 166 | 8 | 9 | 1,080 | 0 | 5,966 | 319 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Individual Life(2) | 2,860 | 6,274 | 3,295 | 912 | 898 | 456 | 694 | 114 | 6,369 | (95) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total U.S. Businesses | 9,006 | 28,121 | 16,891 | 2,190 | 979 | 830 | 3,573 | (79) | 24,384 | 3,737 | |||||||||||||||||||||||||||||||||||||||||||||||||
| International Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life Planner | 2,351 | 9,596 | 5,841 | 243 | (3) | 306 | 1,104 | 105 | 7,596 | 2,000 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gibraltar Life and Other | 2,938 | 9,086 | 5,216 | 700 | 26 | 316 | 1,361 | 284 | 7,903 | 1,183 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total International Businesses | 5,289 | 18,682 | 11,057 | 943 | 23 | 622 | 2,465 | 389 | 15,499 | 3,183 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate and Other(3) | 730 | 49 | (11) | 113 | 639 | (37) | 1,379 | 0 | 2,083 | (2,034) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total segment adjusted operating income before income taxes(1) | 15,293 | 50,490 | 27,937 | 3,246 | 1,754 | 1,417 | 10,227 | 310 | 44,891 | 5,599 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments(1)(4)(7) | (18) | (2,103) | (105) | 431 | 0 | 29 | 0 | 52 | 407 | (2,510) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | 0 | 56 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 56 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Market experience updates | 0 | 67 | (2) | 0 | 0 | 0 | 0 | (41) | (43) | 110 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Divested and Run-off Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Closed Block division | 1,959 | 3,666 | 2,354 | 118 | 0 | 13 | 273 | 1,008 | 3,766 | (100) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other Divested and Run-off Businesses(5)(7) | 631 | 1,888 | 747 | 188 | 9 | 0 | 669 | 254 | 1,867 | 21 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests | 0 | (85) | 0 | 0 | 0 | 0 | (17) | 0 | (17) | (68) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other adjustments | 0 | 0 | 0 | 0 | 0 | 0 | 36 | 0 | 36 | (36) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 17,865 | $ | 53,979 | $ | 30,931 | $ | 3,983 | $ | 1,763 | $ | 1,459 | $ | 11,188 | $ | 1,583 | $ | 50,907 | $ | 3,072 |
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Year Ended Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Select revenues and significant benefits and expenses, on an adjusted operating income basis, by segment | Net Investment Income | Total Revenues | Policyholders’ Benefits | Interest Credited to Policyholders’ Account Balances | Interest Expense | Amortization of DAC | General and Administrative Expenses(5) | Other Benefits and Expenses(6) | Total Benefits and Expenses | Total Revenue Less Total Benefits and Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PGIM | $ | 94 | $ | 3,622 | $ | 0 | $ | 0 | $ | 57 | $ | 3 | $ | 2,719 | $ | 0 | $ | 2,779 | $ | 843 | |||||||||||||||||||||||||||||||||||||||
| U.S. Businesses: | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Institutional Retirement Strategies | 3,653 | 19,116 | 17,476 | 394 | 15 | 11 | 207 | (534) | 17,569 | 1,547 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Individual Retirement Strategies(1)(7) | 918 | 5,470 | 149 | 314 | (55) | 362 | 1,708 | 10 | 2,488 | 2,982 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Strategies(1)(2)(7) | 4,571 | 24,586 | 17,625 | 708 | (40) | 373 | 1,915 | (524) | 20,057 | 4,529 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Group Insurance | 479 | 6,115 | 4,914 | 153 | 4 | 2 | 1,058 | 0 | 6,131 | (16) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Individual Life(2) | 2,467 | 5,786 | 3,290 | 926 | 810 | 446 | 738 | 1,378 | 7,588 | (1,802) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total U.S. Businesses | 7,517 | 36,487 | 25,829 | 1,787 | 774 | 821 | 3,711 | 854 | 33,776 | 2,711 | |||||||||||||||||||||||||||||||||||||||||||||||||
| International Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life Planner | 2,119 | 9,541 | 5,992 | 183 | 18 | 296 | 1,101 | 7 | 7,597 | 1,944 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gibraltar Life and Other | 2,847 | 9,470 | 5,735 | 555 | 17 | 300 | 1,431 | 171 | 8,209 | 1,261 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total International Businesses | 4,966 | 19,011 | 11,727 | 738 | 35 | 596 | 2,532 | 178 | 15,806 | 3,205 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate and Other(3) | 605 | (84) | 0 | 137 | 712 | (39) | 667 | 0 | 1,477 | (1,561) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total segment adjusted operating income before income taxes(1) | 13,182 | 59,036 | 37,556 | 2,662 | 1,578 | 1,381 | 9,629 | 1,032 | 53,838 | 5,198 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments(1)(4)(7) | (23) | (6,083) | 207 | (156) | 0 | 37 | 0 | 154 | 242 | (6,325) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | 0 | (443) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (443) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Market experience updates | 0 | 161 | (6) | 0 | 0 | 0 | 0 | (475) | (481) | 642 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Divested and Run-off Businesses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Closed Block division | 1,976 | 2,958 | 2,428 | 121 | 9 | 14 | 289 | 115 | 2,976 | (18) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other Divested and Run-off Businesses(5)(7) | 902 | 1,250 | 631 | (434) | 10 | 1 | 1,000 | 929 | 2,137 | (887) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests | 0 | 2 | 0 | 0 | 0 | 0 | 38 | 0 | 38 | (36) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other adjustments | 0 | 0 | 0 | 0 | 0 | 0 | 23 | 0 | 23 | (23) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 16,037 | $ | 56,881 | $ | 40,816 | $ | 2,193 | $ | 1,597 | $ | 1,433 | $ | 10,979 | $ | 1,755 | $ | 58,773 | $ | (1,892) |
(1)The amount for 2023 reflects the correction of an error related to indexed variable and fixed annuity products within the Individual Retirement Strategies segment. See “—Adjusted Operating Income” above for additional information.
(2)The Retirement Strategies and Individual Life segments’ results reflect DAC as if the business is a stand-alone operation. The elimination of intersegment costs capitalized in accordance with this policy is included in consolidating adjustments within Corporate and Other operations.
(3)Corporate and Other operations, through Prudential Advisors, generates fee revenues from the sale and distribution of certain insurance, annuity and investment products offered by Prudential and third parties.
(4)As a result of the adoption of ASU 2018-12, “Charges related to realized investment gains (losses),” no longer includes the current period impact of net realized investment gains (losses) on the amortization of DAC. Amounts above reflect amortization of historical DAC balances related to realized investment gains (losses) prior to the adoption of the ASU.
(5)“General and administrative expenses” includes amounts related to salaries, employee benefits, occupancy, technology, consulting, external and contracted services, legal, corporate charges, costs for initiatives, and other miscellaneous expenses, as well as variable expenses such as commissions, net of deferrals, and other fees related to sales of certain insurance and investment products.
(6)“Other benefits and expenses” primarily includes: (i) the change in estimates of liability for future policy benefits, which can be either positive or negative, for Retirement Strategies, Individual Life and International Businesses; (ii) dividends to policyholders for Individual Life and International Businesses, which are included in adjusted operating income; and (iii) dividends to policyholders in the Closed Block Division and goodwill impairments for Other Divested and Run-off Businesses related to AIQ, which are not included in adjusted operating income.
(7)Prior period amounts have been updated to conform to current period presentation.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Assets by segment: | |||||||||||
| PGIM(1) | $ | 36,044 | $ | 42,153 | |||||||
| U.S. Businesses: | |||||||||||
| Institutional Retirement Strategies | 126,842 | 111,308 | |||||||||
| Individual Retirement Strategies | 150,151 | 139,934 | |||||||||
| Retirement Strategies | 276,993 | 251,242 | |||||||||
| Group Insurance | 39,340 | 39,214 | |||||||||
| Individual Life | 122,590 | 116,449 | |||||||||
| Total U.S. Businesses | 438,923 | 406,905 | |||||||||
| International Businesses: | |||||||||||
| Life Planner | 76,089 | 81,164 | |||||||||
| Gibraltar Life and Other | 103,949 | 110,060 | |||||||||
| Total International Businesses | 180,038 | 191,224 | |||||||||
| Corporate and Other | 31,767 | 29,842 | |||||||||
| Closed Block division | 48,815 | 51,088 | |||||||||
| Total assets per Consolidated Statements of Financial Position | $ | 735,587 | $ | 721,212 |
(1)Prior period amounts have been updated to conform to current period presentation.
Revenues, calculated in accordance with U.S. GAAP, for the years ended December 31, include the following by geographic location that are 10 percent or more of the Company’s total consolidated revenue:
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| United States | $ | 48,568 | $ | 31,031 | $ | 36,826 | |||||||||||
| Japan | 13,760 | 15,538 | 14,599 | ||||||||||||||
| Other countries | 8,077 | 7,410 | 5,456 | ||||||||||||||
| Total PFI consolidated revenue | $ | 70,405 | $ | 53,979 | $ | 56,881 |
Intersegment revenues
Management has determined the intersegment revenues with reference to market rates. Intersegment revenues are eliminated in consolidation in the Company’s Corporate and Other operations. The PGIM segment revenues include intersegment revenues, primarily consisting of asset-based management and administration fees, for the years ended December 31, as follows:
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| PGIM segment intersegment revenues | $ | 837 | $ | 796 | $ | 822 |
Segments may also enter into internal derivative contracts with other segments. For adjusted operating income, each segment accounts for the internal derivative results consistent with the manner in which that segment accounts for other similar external derivatives.
Asset management and service fees
The table below presents asset management and service fees, predominantly related to investment management activities, for the periods indicated:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| 2024 | 2023 | 2022 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Asset-based management fees | $ | 3,386 | $ | 3,169 | $ | 3,434 | |||||||||||
| Performance-based incentive fees | 198 | 45 | 84 | ||||||||||||||
| Other fees | 506 | 503 | 544 | ||||||||||||||
| Total asset management and service fees | $ | 4,090 | $ | 3,717 | $ | 4,062 |
**24.**RELATED PARTY TRANSACTIONS
In September 2023, the Company invested approximately $200 million, and acquired a 20% equity interest as a limited partner, in Prismic, a Bermuda-exempted limited partnership that owns all of the outstanding capital stock of Prismic Re, a licensed Bermuda-based life and annuity reinsurance company. As this investment is accounted for under the equity method, both Prismic and Prismic Re are considered related parties.
Also in September 2023, the Company entered into an agreement with Prismic Re, to reinsure approximately $9 billion of reserves for certain structured settlement annuity contracts issued by PICA, a wholly-owned subsidiary of the Company. These contracts represent approximately 70% of the Company’s in-force structured settlement annuities business. Separately, the Company, through PGIM, entered into an investment management agreement with Prismic to manage a large portion of Prismic Re's assets. The following tables summarize the impacts to the Company’s financial statements related to the agreements that the Company entered with Prismic and Prismic Re.
The related party balances with Prismic and Prismic Re impacted the Company’s balance sheet as of the periods indicated as follows:
| December 31, 2024 | December 31, 2023 | ||||||||||
| (in millions) | |||||||||||
| Reinsurance recoverables and deposit receivables | $ | 9,084 | $ | 9,752 | |||||||
| Other assets | $ | 187 | $ | 132 | |||||||
| Reinsurance and funds withheld payables (includes $(91) and $508 of embedded derivatives at fair value at December 31, 2024 and 2023, respectively) | $ | 7,796 | $ | 8,544 | |||||||
| Accumulated other comprehensive income (loss) | $ | (139) | $ | 335 |
The Company has agreed to guarantee Prismic Re's reimbursement obligations on letters of credit that may be obtained by Prismic Re from third-party financial institutions to support Prismic Re’s obligations under the reinsurance agreement with the Company for a total amount up to $2.0 billion as of both December 31, 2024 and 2023. See Note 25 for additional information on the Company’s guarantees and commitments.
The related party activity with Prismic and Prismic Re impacted the Company’s results of operations and cash flows for the periods indicated as follows:
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Premiums | $ | 6 | $ | (4,811) | |||||||
| Asset management and service fees | 38 | 10 | |||||||||
| Other income | 150 | 52 | |||||||||
| Realized investment gains(losses), net | 255 | (491) | |||||||||
| Policyholders’ benefits | (281) | (4,915) | |||||||||
| Change in estimates of liability for future policy benefits | 7 | 5 | |||||||||
| General and administrative expenses | 48 | 3 | |||||||||
| Income (loss) from related parties, before income taxes | 675 | (333) | |||||||||
| Other comprehensive income (loss), before tax | (473) | 335 | |||||||||
| Total comprehensive income (loss), before tax | $ | 202 | $ | 2 |
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Realized investment (gains) losses, net | $ | (255) | $ | 491 | |||||||
| Change in: | |||||||||||
| Reinsurance related-balances | $ | (743) | $ | (235) | |||||||
| Other, net | $ | 16 | $ | 29 | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Other, net | $ | 374 | $ | 3 |
**25.**COMMITMENTS AND CONTINGENT LIABILITIES
Commitments and Guarantees
Commercial Mortgage Loan Commitments
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Total outstanding mortgage loan commitments | $ | 2,552 | $ | 1,798 | |||||||
| Portion of commitment where prearrangement to sell to investor exists | $ | 578 | $ | 366 |
The Company originates commercial mortgage loans as part of its commercial mortgage operations. Commitments for loans that will be held for sale are recognized as derivatives and recorded at fair value. In certain of these transactions, the Company prearranges that it will sell the loan to an investor, including to government sponsored entities as discussed below, after the Company funds the loan. The above amount includes unfunded commitments that are not unconditionally cancellable. For related credit exposure, there was an allowance for credit losses of $2 million and $1 million as of December 31, 2024 and 2023, respectively. The change in allowance is $1 million and $0 million for the years ended December 31, 2024 and 2023, respectively.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Commitments to Purchase Investments (excluding Commercial Mortgage Loans)
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Expected to be funded from the general account and other operations outside the separate accounts | $ | 11,664 | $ | 10,675 | |||||||
| Expected to be funded from separate accounts | $ | 0 | $ | 39 |
The Company has other commitments to purchase or fund investments, some of which are contingent upon events or circumstances not under the Company’s control, including those at the discretion of the Company’s counterparties. The Company anticipates a portion of these commitments will ultimately be funded from its separate accounts. The above amount includes unfunded commitments that are not unconditionally cancellable. There were no related charges for credit losses for the years ended December 31, 2024 or 2023.
Indemnification of Securities Lending and Securities Repurchase Transactions
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Indemnification provided to certain clients for securities lending and securities repurchase transactions(1) | $ | 5,015 | $ | 5,409 | |||||||
| Fair value of related collateral associated with above indemnifications(1) | $ | 5,119 | $ | 5,528 | |||||||
| Accrued liability associated with guarantee | $ | 0 | $ | 0 |
(1)Includes $240 million and $0 million related to securities repurchase transactions as of December 31, 2024 and December 31, 2023, respectively.
In the normal course of business, the Company may facilitate securities lending or securities repurchase transactions on behalf of certain client accounts (collectively, “the accounts”). In certain of these arrangements, the Company has provided an indemnification to the accounts to hold them harmless against losses caused by counterparty (i.e., borrower) defaults associated with such transactions facilitated by the Company. In securities lending transactions, collateral is provided by the counterparty to the accounts at the inception of the transaction in an amount at least equal to 102% of the fair value of the loaned securities and the collateral is maintained daily to equal at least 102% of the fair value of the loaned securities. In securities repurchase transactions, collateral is provided by the counterparty to the accounts at the inception of the transaction in an amount at least equal to 95% of the fair value of the securities subject to repurchase and the collateral is maintained daily to equal at least 95% of the fair value of the securities subject to repurchase. The Company is only at risk if the counterparty to the transaction defaults and the value of the collateral held is less than the value of the securities loaned to, or subject to repurchase from, such counterparty. The Company believes the possibility of any payments under these indemnities is remote.
Credit Derivatives Written
As discussed further in Note 5, the Company writes credit derivatives under which the Company is obligated to pay the counterparty the referenced amount of the contract and receive in return the defaulted security or similar security.
Guarantees of Asset Values
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Guaranteed value of third parties’ assets | $ | 76,416 | $ | 78,009 | |||||||
| Fair value of collateral supporting these assets | $ | 71,423 | $ | 73,186 | |||||||
| Asset (liability) associated with guarantee, carried at fair value | $ | (1) | $ | (2) |
Certain contracts underwritten by the Retirement Strategies segment include guarantees related to financial assets owned by the guaranteed party. These contracts are accounted for as derivatives and carried at fair value. The collateral supporting these guarantees is not reflected on the Consolidated Statements of Financial Position.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Indemnification of Serviced Mortgage Loans
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Maximum exposure under indemnification agreements for mortgage loans serviced by the Company | $ | 3,272 | $ | 3,102 | |||||||
| First-loss exposure portion of above | $ | 942 | $ | 898 | |||||||
| Accrued liability associated with guarantees(1) | $ | 25 | $ | 28 |
(1)The accrued liability associated with guarantees includes an allowance for credit losses of $12 million and $14 million as of December 31, 2024 and 2023, respectively. The change in allowance is a reduction of $2 million and $3 million for the years ended December 31, 2024 and 2023, respectively.
As part of the commercial mortgage activities of the Company’s PGIM segment, the Company provides commercial mortgage origination, underwriting and servicing for certain government sponsored entities, such as Fannie Mae and Freddie Mac. The Company has agreed to indemnify the government sponsored entities for a portion of the credit risk associated with certain of the mortgages it services through a delegated authority arrangement. Under these arrangements, the Company originates multi-family mortgages for sale to the government sponsored entities based on underwriting standards they specify, and makes payments to them for a specified percentage share of losses they incur on certain loans serviced by the Company. The Company’s percentage share of losses incurred generally varies from 4% to 20% of the loan balance, and is typically based on a first-loss exposure for a stated percentage of the loan balance, plus a shared exposure with the government sponsored entity for any losses in excess of the stated first-loss percentage, subject to a contractually specified maximum percentage. The Company determines the liability related to this exposure using historical loss experience, and the size and remaining life of the asset. The Company serviced $25,763 million and $24,875 million of mortgages subject to these loss-sharing arrangements as of December 31, 2024 and 2023, respectively, all of which are collateralized by first priority liens on the underlying multi-family residential properties. As of December 31, 2024, these mortgages had a weighted-average debt service coverage ratio of 1.95 times and a weighted-average loan-to-value ratio of 62%. As of December 31, 2023, these mortgages had a weighted-average debt service coverage ratio of 1.97 times and a weighted-average loan-to-value ratio of 60%. The Company had no losses related to indemnifications that were settled for either the twelve months ended December 31, 2024 and 2023.
Other Guarantees
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Other guarantees where amount can be determined | $ | 289 | $ | 36 | |||||||
| Accrued liability for other guarantees and indemnifications | $ | 32 | $ | 32 |
The Company is also subject to other financial guarantees and indemnity arrangements. The Company has provided indemnities and guarantees related to acquisitions, dispositions, investments and other transactions that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or applicable. This includes guarantees issued on $1.5 billion of standby committed letters of credit and $0.5 billion of standby uncommitted letters of credit that may be obtained by Prismic Re from third-party financial institutions, for the benefit of PICA as beneficiary, to support U.S. statutory reserve credit related to a reinsurance agreement with PICA. As of December 31, 2024, no letters of credit have been issued to PICA under the facility, and the likelihood of PICA drawing upon them is remote. The guarantees are renewable on an annual basis. The current value of the guarantees is estimated to be immaterial. See Note 24 for additional information on the related party relationship between the Company and Prismic Re and Note 15 for additional information on the Company’s reinsurance transactions.
Since certain of these obligations are not subject to limitations, it is not possible to determine the maximum potential amount due under these guarantees. The accrued liability identified above relates to the sale of The Prudential Life Insurance Company of Taiwan Inc. (“POT”) and represents a financial guarantee of certain insurance obligations of POT.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Insolvency Assessments
Most of the jurisdictions in which the Company is admitted to transact business require insurers doing business within the jurisdiction to participate in guarantee associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. In addition, Japan has established the Japan Policyholders Protection Corporation as a contingency to protect policyholders against the insolvency of life insurance companies in Japan through assessments to companies licensed to provide life insurance.
Assets and liabilities held for insolvency assessments were as follows:
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Other assets: | |||||||||||
| Premium tax offset for future undiscounted assessments | $ | 25 | $ | 35 | |||||||
| Premium tax offset currently available for paid assessments | 62 | 2 | |||||||||
| Total | $ | 87 | $ | 37 | |||||||
| Other liabilities: | |||||||||||
| Insolvency assessments | $ | 29 | $ | 29 |
Contingent Liabilities
On an ongoing basis, the Company and its regulators review its operations including, but not limited to, sales and other customer interface procedures and practices, and procedures for meeting obligations to its customers and other parties. These reviews may result in the modification or enhancement of processes or the imposition of other action plans, including concerning management oversight, sales and other customer interface procedures and practices, and the timing or computation of payments to customers and other parties. In certain cases, if appropriate, the Company may offer customers or other parties remediation and may incur charges, including the cost of such remediation, administrative costs and regulatory fines.
The Company is subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment of unclaimed or abandoned funds, and is subject to audit and examination for compliance with these requirements.
It is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual period could be materially affected as a result of payments in connection with the matters discussed above or other matters depending, in part, upon the results of operations or cash flow for such period. Management believes, however, that ultimate payments in connection with these matters, after consideration of applicable reserves and rights to indemnification, should not have a material adverse effect on the Company’s financial position.
Litigation and Regulatory Matters
The Company is subject to legal and regulatory actions in the ordinary course of its businesses. Pending legal and regulatory actions include proceedings relating to aspects of the Company’s businesses and operations that are specific to it and proceedings that are typical of the businesses in which it operates, including in both cases businesses that have been either divested or placed in wind-down status. Some of these proceedings have been brought on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages. The outcome of litigation or a regulatory matter, and the amount or range of potential loss at any particular time, is often inherently uncertain.
The Company establishes accruals for litigation and regulatory matters when it is probable that a loss has been incurred and the amount of that loss can be reasonably estimated. For litigation and regulatory matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
material, is disclosed, including matters discussed below. The Company estimates that as of December 31, 2024, the aggregate range of reasonably possible losses in excess of accruals established for those litigation and regulatory matters for which such an estimate currently can be made is less than $250 million. Any estimate is not an indication of expected loss, if any, or the Company’s maximum possible loss exposure on such matters. The Company reviews relevant information with respect to its litigation and regulatory matters on a quarterly and annual basis and updates its accruals, disclosures and estimates of reasonably possible loss based on such reviews.
Labor and Employment Matters
Prudential of Brazil Labor and Employment Matters
Prudential of Brazil (“POB”) sells insurance products to consumers through life planner franchisees (“Life Planners”), who are engaged as independent life insurance brokers and not as employees. When a Life Planner’s contractual relationship with POB is terminated, in many cases the Life Planner commences a labor suit against POB alleging entitlement to employment related benefits. POB is a defendant in numerous such lawsuits in Brazil brought by former Life Planners and has been subject to regulatory actions challenging the validity of POB’s franchise model. POB has continued to receive additional labor suits and regulatory actions involving the operation of its franchise model notwithstanding steps that POB has taken to attempt to mitigate the labor risk by modifying its franchise model. POB continues to modify its franchise model to further mitigate this risk.
Individual Annuities, Individual Life and Group Insurance
California Advocates for Nursing Home Reform v. The Prudential Insurance Company of America and Pruco Life Insurance Company, et al.
In January 2024, a putative class action complaint entitled California Advocates for Nursing Home Reform v. The Prudential Insurance Company of America and Pruco Life Insurance Company, et al., was filed in California Superior Court, Alameda County, alleging that the Company has failed to comply with California laws requiring that life insurance policies issued or delivered in California: (i) provide for a contractual 60-day grace period pre-lapse during which a policy must stay in force; (ii) provide policyholders and designees with notice of payment default within 30 days and a 30-day advance written notice of pending lapse; and (iii) notify policyholders annually of their right to designate additional recipients for lapse notices. The complaint asserts claims for violation of California’s Unfair Competition law and seeks unspecified damages along with declaratory and injunctive relief. In February 2024, defendants removed the action from California state court to the United States District Court for the Northern District of California. Plaintiff filed a motion to remand the action to the California Superior Court, Alameda County, and in December 2024, the motion was granted.
Escheatment Litigation
Total Asset Recovery Services, LLC v. MetLife, Inc., et al., Prudential Financial, Inc., The Prudential Insurance Company of America, and Prudential Insurance Agency, LLC
In December 2017, Total Asset Recovery Services, LLC, on behalf of the State of New York, filed a Second Amended Complaint in the Supreme Court of the State of New York, County of New York, against, among other 19 defendants, Prudential Financial, Inc., The Prudential Insurance Company of America and Prudential Insurance Agency, LLC, alleging that the Company failed to escheat life insurance proceeds in violation of the New York False Claims Act. The second amended complaint seeks injunctive relief, compensatory damages, civil penalties, treble damages, prejudgment interest, attorneys’ fees and costs. In May 2018, defendants filed a motion to dismiss the Second Amended Complaint. In April 2019, defendants’ motion to dismiss the Second Amended Complaint was granted and plaintiff subsequently filed a Notice of Appeal with the New York State Supreme Court, First Department. In December 2020, the New York Supreme Court, First Department, reversed and vacated the judgment of the trial court and granted leave to plaintiff to file a third amended complaint. In March 2021, the plaintiff filed a third amended complaint asserting claims against all defendants for violation of the New York False Claims Act, and seeking injunctive relief, compensatory and treble damages, attorneys’ fees and costs. In January 2023, the plaintiff filed a Fourth Amended Complaint. In March 2023, defendants filed a motion to dismiss the Fourth Amended Complaint. In October 2024, defendants’ motion to dismiss the Fourth Amended Complaint was denied. In December 2024, defendants filed an Answer to the Fourth Amended Complaint.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Securities Litigation
City of Warren v. PFI, et al.
In November 2019, a putative class action complaint entitled City of Warren Police and Fire Retirement System v. Prudential Financial, Inc., Charles F. Lowrey and Kenneth Y. Tanji, was filed in the United States District Court for the District of New Jersey. The complaint asserts claims for federal securities law violations against PFI, and Charles Lowrey, PFI’s chief executive officer, and Kenneth Tanji, PFI’s chief financial officer, individually, and alleges that: (i) the Company's reserve assumptions failed to account for adversely developing mortality experience in the Individual Life business segment; (ii) the Company's reserves were insufficient to satisfy its future policy benefit liabilities; and (iii) the Company materially understated its liabilities and overstated net income due to flawed assumptions in calculating mortality experience. The putative class includes all purchasers of PFI common stock between February 15, 2019 and August 2, 2019. In March 2020, the court issued an order consolidating this action with Donald P. Crawford v. PFI, et al. under the caption In re Prudential Financial, Inc. Securities Litigation. In June 2020, plaintiffs filed an amended complaint and added Robert M. Falzon, PFI’s vice chairman, as an individual defendant. In August 2020, the Company filed a motion to dismiss the amended complaint. In December 2020, the court issued an order granting defendants’ motion to dismiss the amended complaint with prejudice and plaintiff subsequently filed, in January 2021, a Notice of Appeal to the United States Court of Appeals for the Third Circuit. In June 2023, the Court of Appeals for the Third Circuit affirmed in part and reversed in part the trial court’s December 2020 decision dismissing the amended complaint with prejudice and remanded the case to the District Court to consider alternative grounds for dismissal not reached by the District Court’s 2020 decision. In February 2024, plaintiff filed a motion seeking preliminary certification of a settlement class, approval of class notice, and preliminary approval of the proposed class action settlement. In March 2024, the court issued an order granting the motion for preliminary approval of the Settlement. In June 2024, the Court granted final approval of the Settlement and issued a final judgment dismissing the action with prejudice. This matter is now closed.
Donel Davidson v. Charles F. Lowrey, et al.
In September 2020, a shareholder derivative complaint entitled Pekin Police Pension Fund, Derivatively on Behalf of Prudential Financial, Inc. v. Charles F. Lowrey, et al., was filed in the United States District Court for the District of New Jersey (the “Derivative Complaint”) against PFI as a “nominal” defendant, PFI’s chairman and chief executive officer, vice chairman, chief financial officer, certain former officers of PFI, and all of the current outside directors of PFI’s Board. The Derivative Complaint asserts claims for federal securities law violations, breach of fiduciary duty, waste of corporate assets, and unjust enrichment, and alleges that: (i) the Company's reserve assumptions failed to account for adversely developing mortality experience in the Individual Life business segment; (ii) the Company's reserves were insufficient to satisfy its future policy benefit liabilities; (iii) the Company materially understated its liabilities and overstated net income due to flawed assumptions in calculating mortality experience; and (iv) the individual defendants breached their duty of care and loyalty to the Company by allowing the alleged improper activity. In December 2020, the Court issued an order substituting Donel Davidson for Pekin Police Pension Fund as the named plaintiff. In March 2021, the court issued an order consolidating this action with Robert Lalor, Derivatively on behalf of Prudential Financial, Inc. v. Charles F. Lowrey, et al. under the caption In re Prudential Financial, Inc. Derivative Litigation. In May 2021, the Company filed a motion to dismiss the complaint.
Daniel Plaut v. Prudential Financial, Inc.
In October 2020, a shareholder derivative complaint entitled Daniel Plaut, Derivatively on Behalf of Prudential Financial, Inc. v. Charles F. Lowrey, et al., was filed in the Superior Court of New Jersey, Law Division, Essex County (the “Derivative Complaint”) against PFI as a “nominal” defendant, PFI’s chairman and chief executive officer, vice chairman, and all of the current outside directors of PFI’s Board. The Derivative Complaint asserts claims for breach of fiduciary duty, unjust enrichment, and abuse of control and alleges that: (i) the Company's reserve assumptions failed to account for adversely developing mortality experience in the Individual Life business segment; (ii) the Company's reserves were insufficient to satisfy its future policy benefit liabilities; (iii) the Company materially understated its liabilities and overstated net income due to flawed assumptions in calculating mortality experience; and (iv) the individual defendants engaged in corporate misconduct, mismanagement and waste through their participation in the alleged wrongdoing. In September 2024, the court issued an order consolidating this action with Kevin M. Frost et al. v. Prudential Financial, Inc., under the caption In re Prudential Financial, Inc. Derivative Litigation.
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
Kevin M. Frost et al. v. Prudential Financial, Inc.
In November 2023, a shareholder derivative complaint entitled Kevin M. Frost et al., Derivatively on behalf of Prudential Financial, Inc. v. Charles Lowrey, et al., was filed in the Superior Court of New Jersey, Law Division, Essex County (the “Derivative Complaint”) against PFI as a “nominal” defendant, PFI’s chairman and chief executive officer, vice chairman, chief financial officer, and certain current and former members of PFI’s Board. The Derivative Complaint asserts a claim for breach of fiduciary duty against the individual defendants and allege that they harmed the Company by permitting the dissemination of allegedly misleading and inaccurate financial information related to the Company’s 2Q 2019 increased reserve estimates involving its Individual Life business. In September 2024, the court issued an order consolidating this action with Daniel Plaut v. Prudential Financial, Inc., under the caption In re Prudential Financial, Inc. Derivative Litigation. Case updates will be consolidated with the Daniel Plaut action.
Shareholder Demands
In January 2020, the Board of Directors received a shareholder demand letter containing allegations: (i) of wrongdoing similar to those alleged in the City of Warren and Crawford complaints; and (ii) that certain of the Company’s current and former directors and executive officers breached their fiduciary duties of loyalty, due care and candor. The demand letter requests that the Board of Directors investigate and commence legal proceedings against the named individuals to recover for the Company’s benefit the damages purportedly sustained by the Company as a result of the alleged breaches. In February 2020, the Board of Directors authorized the creation of a special committee to investigate the allegations set forth in the shareholder demand letter. In April 2020, the Company received additional shareholder demands raising allegations similar to those contained in the January 2020 demand, and may be subject prospectively to additional activity relating to these matters. In January 2021, the special committee completed its investigation, and in February 2021, the Board provided notice rejecting the shareholder demands and dissolved the special committee.
Assurance IQ, LLC
William James Griffin, et al. v. Benefytt Technologies, Inc., et al. and Assurance IQ, LLC
In February 2021, an amended putative class action complaint entitled William James Griffin, et al. v. Benefytt Technologies, Inc. (f/k/a Health Insurance Innovations, Inc.), Health Plan Intermediaries Holdings, Inc. and Assurance IQ, LLC, was filed in the United States District Court for the Southern District of Florida, alleging that the defendants violated the Racketeering Influenced and Corrupt Organizations Act, and engaged in a conspiracy to defraud customers through the sale of limited indemnity and short term health insurance products to individuals seeking comprehensive medical insurance. The complaint seeks unspecified treble damages, declaratory and injunctive relief. In June 2021, the Company filed a motion to dismiss the amended complaint. In March 2022, the court issued an order granting Assurance IQ, LLC’s motion to dismiss the claims for declaratory and injunctive relief and denying the motion to dismiss as to the remaining claims. In May 2022, plaintiffs filed a second amended complaint narrowing the scope of the putative plaintiff class, and the Company filed its answer. In January 2023, plaintiffs filed a motion for class certification, and in February 2023, plaintiffs filed a third amended complaint. In February 2023, the Company filed its answer to the third amended complaint. In November 2023, plaintiff filed a motion seeking preliminary certification of a settlement class and approval of class notice, appointment of a class representative and class counsel, and preliminary approval of the proposed class action settlement (the “Settlement”). In December 2023, the court issued an order granting the motion for preliminary approval of the Settlement. In May 2024, the Court granted final approval of the Settlement and issued a final judgment dismissing the action with prejudice. This matter is now closed.
Other Matters
Cho v. PICA, et al.
In November 2019, a putative class action complaint entitled Cho v. The Prudential Insurance Company of America, et. al., was filed in the United States District Court for the District of New Jersey. The Complaint purports to be brought on behalf of participants in the Prudential Employee Savings Plan (the “Plan”) and (i) alleges that defendants failed to fulfill their fiduciary obligations under the Employee Retirement Income Security Act of 1974, in the administration, management and operation of the Plan, including engaging in prohibited transactions; and (ii) seeks declaratory, injunctive and equitable relief, and unspecified damages including interest, attorneys’ fees and costs. In January 2020, defendants filed a motion to dismiss the complaint. In September 2020, plaintiff filed an amended complaint and added as individual defendants certain PFI officers and current and former members of the Company’s Administrative Committee and Investment Oversight Committee. In December
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
2020, defendants filed a motion to dismiss the amended complaint. In September 2021, the court granted defendants’ motion to dismiss the amended complaint without prejudice. In October 2021, plaintiff filed a second amended complaint asserting claims against defendants under the Employee Retirement Income Security Act of 1974 for breach of fiduciary duty, prohibited transactions and failure to monitor fiduciaries. The second amended complaint seeks declaratory, injunctive and equitable relief, unspecified damages, attorneys’ fees and costs. In December 2021, defendants filed a motion to dismiss the second amended complaint. In August 2022, the court: (i) dismissed, with prejudice, the breach of the fiduciary duty of loyalty and prohibited transaction claims based on the inclusion of Prudential-affiliated funds in the Plan’s investment options; (ii) dismissed, without prejudice, the breach of fiduciary duty claims based on certain alleged underperforming Plan funds; and (iii) denied the motion to dismiss plaintiffs’ claims for breach of the fiduciary duties of prudence and to monitor other fiduciaries, based on alleged delays in removing other alleged underperforming funds. In September 2022, plaintiff filed a third amended complaint asserting claims for breach of duty of prudence and to monitor fiduciaries, and in October 2022, defendants filed their answer to the third amended complaint. In May 2023, plaintiff filed a motion for class certification. In August 2023, the court issued an Order granting plaintiff’s class certification motion. In January 2024, by an October 2023 court Order, defendants submitted to plaintiffs their summary judgment brief. In December 2024, the court issued an order granting Prudential’s motion for summary judgment. In January 2025, plaintiff filed a Notice of Appeal to the Third Circuit.
LIBOR Litigation
Prudential Investment Portfolios 2, f/k/a Dryden Core Investment Fund, o/b/o Prudential Core Short-Term Bond Fund and Prudential Core Taxable Money Market Fund v. Bank of America Corporation, et al.
In May 2014, Prudential Investment Portfolios 2, on behalf of the Prudential Core Short-Term Bond Fund and the Prudential Core Taxable Money Market Fund (the “Funds”), filed an action against ten banks in the United States District Court for the District of New Jersey asserting that the banks participated in the setting of LIBOR, a major benchmark interest rate. The complaint alleges that the defendant banks manipulated LIBOR, and asserts, among other things, claims for common law fraud, negligent misrepresentation, breach of contract, intentional interference with contract and with prospective economic relations, unjust enrichment, breaches of the New Jersey Civil RICO (“Racketeer Influenced and Corrupt Organizations Act”) statute, and violations of the Sherman Act. In June 2014, the United States Judicial Panel on Multidistrict Litigation transferred the action to the United States District Court for the Southern District of New York, where it has been consolidated for pre-trial purposes with other pending LIBOR-related actions. In October 2014, the Funds filed an amended complaint. In November 2014, the defendants filed a motion to dismiss the amended complaint. In August 2015, the court issued a decision granting in part, and denying in part, defendants' motions to dismiss. The court dismissed certain of the Funds' claims, including those alleging fraud based on offering material statements; New Jersey RICO; and express breach of contract. The court upheld certain of the Funds' claims, including those alleging fraud based on false LIBOR submissions to the British Bankers’ Association; negligent misrepresentation; unjust enrichment; and breach of the implied covenant of good faith and fair dealing. Following the August 2015 decision, granting in part defendants' motions to dismiss, in September 2015, Prudential filed the following LIBOR complaints: (i) in the Southern District of New York, captioned Prudential Investment Portfolios 2 et al. v. Barclays Bank PLC, et al. (the “New York Complaint”), naming as defendants Barclays Bank PLC, Barclays Capital Inc., Barclays PLC, Citibank, N.A., Citigroup Funding Inc., Credit Suisse AG, Credit Suisse Group AG, Credit Suisse (USA) Inc., Deutsche Bank AG, HSBC Bank plc, HSBC Holdings PLC, JPMorgan Chase & Co., JPMorgan Chase Bank, N.A., Royal Bank of Canada, and The Royal Bank of Scotland PLC. These defendants were dismissed from the original LIBOR action on jurisdictional grounds. The New York complaint reasserts the causes of action brought in the original LIBOR action; and (ii) in the Western district of North Carolina, captioned Prudential Investment Portfolios 2 et al. v. Bank of America Corporation et al. (the “North Carolina Complaint”), naming as defendants Bank of America Corporation and Bank of America, N.A. These defendants were dismissed from the original LIBOR action on jurisdictional grounds. The North Carolina Complaint reasserts the causes of action brought in the original LIBOR action. Both the New York Complaint and the North Carolina Complaint have been transferred for pre-trial purposes to the LIBOR multi-district litigation presided over by Judge Buchwald in the U.S. District Court for the Southern District of New York. In May 2016, the Second Circuit Court of Appeals vacated the district court’s dismissal of the LIBOR plaintiffs’ antitrust claims and remanded to the district court the question of whether plaintiffs possess standing as “efficient enforcers” of applicable antitrust laws. In July 2016, defendants filed a joint motion to dismiss all antitrust claims based on lack of standing and lack of personal jurisdiction. In December 2016, the motion was granted in part and denied in part. In January 2017, the United States Supreme Court denied defendants’ petition for certiorari. In February 2017, the court clarified its December 2016 order, holding that antitrust claims only exist against panel banks, not their affiliates. This clarification resulted in the Funds’ New Jersey antitrust claims being dismissed for lack of personal jurisdiction. The Funds antitrust claims in the New York and North Carolina actions remain pending. In July 2017, the Funds obtained an entry of judgment on the New Jersey antitrust claims dismissed on personal jurisdiction grounds. In July 2017, the Funds filed with the Second Circuit Court an appeal from the dismissal of their New Jersey anti-trust claims. In June 2019, the court issued
PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements—(Continued)
two orders approving stipulations dismissing with prejudice Prudential’s claims against Citigroup Inc., Citibank, N.A., Citigroup Funding Inc., and Citigroup Global Markets Inc. In December 2019, the court issued two orders approving stipulations dismissing with prejudice Prudential’s claims against HSBC Holdings PLC, HSBC Bank PLC, HSBC Finance Corp., HSBC Securities (USA) Inc., and HSBC USA Inc. In May 2020, the court issued two orders approving stipulations dismissing with prejudice Prudential’s claims against Barclays Bank PLC, Barclays Capital Inc., and Barclays PLC. In August 2020, the court issued two orders approving stipulations dismissing with prejudice, Prudential’s claims against Deutsche Bank AG. In October 2020, the court issued orders approving stipulations dismissing with prejudice, Prudential’s claims against JPMorgan Chase & Co., JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC, f/k/a/ J.P. Morgan Securities Inc., Bank of America Corporation, Bank of America, N.A., and Merrill Lynch, Pierce, Fenner & Smith Inc., f/k/a Banc of America Securities LLC. In December 2021, the Second Circuit Court of Appeals affirmed the district court’s order dismissing federal and state antitrust claims based on lack of privity with a defendant bank and reversed the district court’s personal jurisdiction based dismissal of the non-U.S. incorporated defendants. In February 2022, the court issued orders approving stipulations dismissing with prejudice Prudential’s claims against Credit Suisse Group AG, Credit Suisse AG, Credit Suisse (USA) Inc., and Credit Suisse Securities (USA) LLC. In March 2022, defendants petitioned the United States Supreme Court for a writ of certiorari to review the Second Circuit Court of Appeals judgment that personal jurisdiction extends to foreign defendants. In June 2022, the United States Supreme Court denied defendants’ petition. In December 2024, the court issued an order dismissing with prejudice the remaining defendants in this case. This matter is now closed.
Regulatory
Civil Investigative Demand
The Company has received a civil investigative demand and other inquiries related to the appropriateness of Assurance IQ’s supplemental health product sales and marketing activity. The Company is cooperating with regulators and may become subject to additional regulatory inquiries and other investigations and actions related to this matter.
Variable Products
The Company has received regulatory inquiries and requests for information from state and federal regulators, including subpoenas from the U.S. Securities and Exchange Commission (the “SEC”), concerning the appropriateness of variable product sales and replacement activity. The Company is cooperating with regulators and may become subject to additional regulatory inquiries and other actions related to this matter. In September 2024, the SEC notified the Company that the SEC has concluded its investigation and is not recommending an enforcement action.
Summary
The Company’s litigation and regulatory matters are subject to many uncertainties, and given their complexity and scope, their outcome cannot be predicted. It is possible that the Company’s results of operations or cash flow in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters depending, in part, upon the results of operations or cash flow for such period. In light of the unpredictability of the Company’s litigation and regulatory matters, it is also possible that in certain cases an ultimate unfavorable resolution of one or more pending litigation or regulatory matters could have a material adverse effect on the Company’s financial statements. Management believes, however, that, based on information currently known to it, the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves and rights to indemnification, is not likely to have a material adverse effect on the Company’s financial statements.
26. SUBSEQUENT EVENTS
Common Stock Dividend
On February 4, 2025, Prudential Financial’s Board of Directors declared a cash dividend of $1.35 per share of Common Stock, payable on March 13, 2025 to shareholders of record as of February 18, 2025.
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