Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TABLE OF CONTENTS


			Page
Overview			69
COVID-19			70
Impact of a Low Interest Rate Environment			71
Results of Operations			74
Consolidated Results of Operations			74
Segment Results of Operations			75
Segment Measures			77
Impact of Foreign Currency Exchange Rates			77
Accounting Policies & Pronouncements			80
Results of Operations by Segment			81
PGIM			81
U.S. Businesses			85
Retirement			86
Group Insurance			87
Individual Annuities			88
Individual Life			93
Assurance IQ			94
International Businesses			95
Corporate and Other			98
Divested and Run-off Businesses			98
Closed Block Division			99
Income Taxes			100
Experience-Rated Contractholder Liabilities, Assets Supporting Experience-Rated Contractholder Liabilities and Other Related Investments			100
Valuation of Assets and Liabilities			102
General Account Investments			103
Liquidity and Capital Resources			121
Ratings			131

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the consolidated financial condition of Prudential Financial, Inc. (“Prudential,” “Prudential Financial,” “PFI,” or “the Company”) as of March 31, 2022, compared with December 31, 2021, and its consolidated results of operations for the three months ended March 31, 2022 and 2021. You should read the following analysis of our consolidated financial condition and results of operations in conjunction with the MD&A, the “Risk Factors” section, and the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as well as the statements under “Forward-Looking Statements,” and the Unaudited Interim Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Prudential Financial, a financial services leader with approximately $1.620 trillion of assets under management as of March 31, 2022, has operations primarily in the United States of America (“U.S.”), Asia, Europe and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. We offer these products and services to individual and institutional customers through one of the largest distribution networks in the financial services industry.

Our principal operations consist of PGIM (our global investment management business), our U.S. Businesses (consisting of our Retirement, Group Insurance, Individual Annuities, Individual Life and Assurance IQ businesses), our International Businesses, the Closed Block division, and our 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. 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 generally accepted accounting principles in the United States of America (“U.S. GAAP”). Our 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.

We attribute financing costs to each segment based on the amount of financing used by each segment, excluding financing costs associated with corporate debt, which are reflected in our Corporate and Other operations. The net investment income of each segment includes earnings on the amount of capital that management believes is necessary to support the risks of that segment.

In October 2021, we announced the creation of Retirement Strategies, a new U.S. business that will serve the retirement needs of both individual and institutional customers. This business will bring the financial solutions and capabilities of our Individual Annuities business together with the institutional investment and pension solutions offered through our Retirement business. The new leadership team continues to make decisions around the business’s operating structure. When this new structure is finalized and operational, the presentation of our segment results may be modified to conform to this new structure.

Management expects that results will continue to benefit from our differentiated mix of market-leading businesses that complement each other to provide competitive advantages, earnings diversification and capital benefits from a balanced risk profile. We believe we are well-positioned to tap into market opportunities to meet the evolving needs of individual customers, workplace clients, and society at large. Our mix of high-quality protection, retirement and investment management businesses enables us to offer solutions that cover a broad range of financial needs and to engage with our clients through multiple channels, including the ability to sell solutions across a broad socio-economic spectrum through Assurance IQ’s digital platform. We aim to expand our addressable market, build deeper and longer-lasting relationships with customers and clients, and meaningfully improve their financial wellness. While challenges have existed in the form of a sustained low interest rate environment, interest rates have begun to rise from historically low levels. In the short term, rising interest rates will cause a decrease in our assets under management and associated fee income in our fee-based businesses, while over the longer term, rising interest rates will drive an increase in investment income from higher portfolio reinvestment rates.

In order to further increase our competitive advantage, we are working to enhance the experience of our customers and the capabilities of our businesses, which we expect will also help us realize improved margins. In 2019, we launched programs in pursuit of these objectives that have resulted and will continue to result in multi-year investments in technology, systems and employee reskilling, as well as severance and related charges. For the three months ended March 31, 2022, we incurred approximately $25 million of costs in connection with these programs. We expect these programs will generate significant expense efficiencies over several years that will mitigate the impact from increases in other expenses due to inflation and business growth initiatives. For the three months ended March 31, 2022, the Company estimates that these programs generated cost savings of approximately $170 million and, as of March 31, 2022, we remain on track to accumulate approximately $750 million of annual run-rate cost savings by the end of 2023.

Annually during the second quarter of each year, we perform a comprehensive review of actuarial assumptions. As part of this review, we may update these assumptions and make refinements to our models based upon emerging experience, future expectations and other data, including any observable market data. For additional information, see “—Accounting Policies & Pronouncements—Application of Critical Accounting Estimates” below as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

COVID-19

Since the first quarter of 2020, the COVID-19 pandemic has caused extreme stress and disruption in the global economy and financial markets and elevated mortality and morbidity for the global population. The COVID-19 pandemic impacted our results of operations in the current period and is expected to impact our results of operations in future periods.

The Company has taken several measures to manage the impacts of this crisis. The actual and expected impacts of these events and other items are included in the following update:

Outlook.

U.S. Businesses:

The United States has experienced multiple waves of COVID-19, with the severity of each wave depending on such factors as seasonality, varying levels of population immunity, and the evolution of the virus itself into different variants. Throughout the course of the pandemic, deaths from COVID-19 in the United States have ranged from a few hundred to several thousand per day. In December 2021, the Omicron variant emerged in the U.S. and quickly became the dominant strain, causing many more infections but with a smaller percentage of infections resulting in hospitalizations and deaths compared to prior waves, though still causing deaths to spike during the first quarter of 2022. Vaccines and other therapeutics, such as antiviral treatments, are now widely available and non-pharmaceutical interventions, such as mandatory social distancing and mask wearing, are being relaxed in most communities; however, the future evolution of the virus, among other factors, could cause the actual course of the pandemic and its impact on our business to differ from our current expectations.

Specific outlook considerations for certain of our U.S. businesses include the following:

Retirement. As many of the products in our Institutional Investment Products business assume longevity risk, elevated levels of mortality resulting from COVID-19 may continue to contribute to higher levels of underwriting gains.

Group Insurance. We anticipate that COVID-19 will continue to contribute in the near-term to elevated levels of mortality resulting in increased life insurance claims. In addition, we are continuing to monitor the potential impact of the pandemic on our disability business, overall sales volumes, and the utilization of our workplace benefit offerings.

Individual Life. We expect COVID-19 to continue to contribute in the near-term to elevated levels of mortality, resulting in increased life insurance claims.

International Businesses:

Our Japanese operations experienced an elevated level of COVID-19 claims due to the spread of the Omicron variant in the first quarter of 2022. In response to this spread, Japanese authorities enacted control measures, which disrupted sales and agent recruiting while these measures were in place; however, these restrictions were subsequently lifted towards the end of the quarter. Although we have seen signs of improvement across all key markets, the situation remains fluid and COVID-19 might impact future claims and sales depending on the state of the pandemic in the geographic markets in which we operate. We believe our needs-based selling and death protection focus are even more valuable to consumers based on the global experience of COVID-19 and will help support the continued long-term growth of our businesses.

*•*Results of Operations. See “—Results of Operations” and “—Results of Operations by Segment” for a discussion of results for the first quarter of 2022.

Investment Portfolio. The economy continues to recover and remains on a path to re-opening. Credit migration and defaults were low in 2021 and have remained limited in 2022. The sectors most impacted from COVID-19 have started to recover but could be influenced by periods of volatility due to the possibility of additional variants emerging.
Sales and Flows. See “—Segment Results of Operations” for a discussion of sales and flows in each of our segments.

*•*Underwriting Results. Through the first three months of 2022, we estimate that COVID-19 had a significant net negative impact on our underwriting results reflecting unfavorable mortality impacts in our Group Insurance, Individual Life and International businesses, partially offset by favorable mortality impacts in our Retirement business. For the

second quarter of 2022, the Company expects underwriting results to be adversely impacted by approximately $40 million in our U.S. Businesses, predominantly in our Group Insurance business, and approximately $25 million in our International Businesses; however, the ultimate impact on our underwriting results will depend on various factors including: an insured’s age; geographic concentration; insured versus uninsured populations among the fatalities; the transmissibility and virulence of the virus, including the potential for further mutation; and the ongoing acceptance and efficacy of the vaccines and other therapeutics.

Risk Management. Prudential has a robust risk management framework that seeks to ensure we can fulfill our customer, regulatory, and other stakeholder obligations under a range of stress scenarios by maintaining the appropriate balance between the Company’s resources and risks. We evaluate the Company’s exposure to stress under four lenses (economic, STAT, GAAP, and liquidity).

Our risk management framework incorporates severe to very severe stresses across equities, interest rates, credit migration and defaults, currencies and mortality. This framework includes a specific “pandemic and sell-off” scenario with a mortality calamity (1.5 extra deaths per 1,000 lives in the first year) based on a modern-day interpretation of the 1918 Spanish Flu experience that is aligned with most regulatory frameworks. The stress scenario assumes an even distribution of increased mortality across the population, which is more adversely impactful to the Company than our current understanding of COVID-19 mortality, which is skewed toward older ages. As the COVID-19 pandemic continues to unfold, we continue to update our analysis and take management actions in response to this specific event.

As of March 31, 2022, the COVID-19 pandemic has not reached the most severe levels of financial impacts included in the Company’s stress testing. In addition, the net mortality impact of COVID-19 has been moderated by the balance between our mortality exposure (such as in our Individual Life and Group Insurance businesses) and our offsetting longevity exposure (such as in our Retirement business), and is influenced by the age distribution of U.S. COVID-19 mortality. The future evolution of the virus, among other factors, could cause the actual course of the pandemic to differ from our current expectations.

Risk Factors. The COVID-19 pandemic has adversely impacted our results of operations, financial position, investment portfolio, new business opportunities and operations, and these impacts are expected to continue. For additional information on the risks to our business posed by the COVID-19 pandemic, see “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Business Continuity. Throughout the COVID-19 pandemic, we have been executing our business continuity protocols to ensure our employees are safe and able to serve our customers. This included effectively transitioning the vast majority of our employees to remote work arrangements. In March 2022, our offices were reopened to employees and we expect that most of our workforce will adopt a hybrid arrangement for the foreseeable future.

We believe all of our businesses can sustain long-term hybrid or fully remote work arrangements while ensuring that critical business operations are sustained. In addition, we are managing COVID-19 related impacts on third-party provided services, and do not anticipate significant interruption in critical operations.

Impact of a Low Interest Rate Environment

As a global financial services company, market interest rates are a key driver of our results of operations and financial condition. Changes in interest rates can affect our results of operations and/or our financial condition in several ways, including favorable or adverse impacts to:

investment-related activity, including: investment income returns, net interest margins, net investment spread results, new money rates, mortgage loan prepayments and bond redemptions;
hedging costs and other risk mitigation activities;
insurance reserve levels, market experience true-ups and amortization of both deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”);
customer account values, including their impact on fee income;
fair value of, and possible impairments on, intangible assets such as goodwill;
product offerings, design features, crediting rates and sales mix; and
policyholder behavior, including surrender or withdrawal activity.

For more information on interest rate risks, see “Risk Factors—Market Risk” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

See below for discussions related to the current interest rate environments in our two largest markets, the U.S. and Japan; the composition of our insurance liabilities and policyholder account balances; and the hypothetical impacts to our investment related results if these interest rate environments are sustained.

U.S. Operations excluding the Closed Block Division

Interest rates in the U.S. have experienced a sustained period of historically low levels with certain benchmarks reaching significant lows in recent years, while increasing more recently. Although more recent impacts of inflation in the U.S., along with other varying market conditions and events, make uncertain the timing, amount and impact of any monetary policy decisions by the Federal Reserve, changes in interest rates may impact our reinvestment yields, primarily for our investments in fixed maturity securities and commercial mortgage loans. As interest rates decline, our reinvestment yield may be below our overall portfolio yield, resulting in an unfavorable impact to earnings. Conversely, as interest rates rise, our reinvestment yield may exceed the overall portfolio yield resulting in a favorable impact to earnings.

For the general account supporting our U.S. Businesses and our Corporate and Other operations, we estimate annual principal payments and prepayments that we would be required to reinvest to be approximately 5.6% of the fixed maturity security and commercial mortgage loan portfolios through 2023. The portion of the general account attributable to these operations has approximately $224 billion of such assets (based on net carrying value and including assets classified as “held-for-sale”) as of March 31, 2022. The average portfolio yield for fixed maturity securities and commercial mortgage loans is approximately 3.7% as of March 31, 2022.

Included in the $224 billion of fixed maturity securities and commercial mortgage loans are approximately $174 billion that are subject to call or redemption features at the issuer’s option and have a weighted average interest rate of approximately 4%. Of this $174 billion, approximately 51% contain provisions for prepayment premiums. If we reinvest scheduled payments or prepayments (not subject to a prepayment fee) at rates below the current portfolio yield, including in some cases at rates below those guaranteed under our insurance contracts, future operating results will be impacted to the extent we do not, or are unable to, reduce crediting rates on in-force blocks of business, or effectively utilize other asset/liability management strategies described below, in order to maintain current net interest margins.

The following table sets forth the insurance liabilities and policyholder account balances of our U.S. operations excluding the Closed Block Division, by type, for the date indicated:


	As of March 31, 2022
	(in billions)
Long-duration insurance products with fixed and guaranteed terms	$	150
Contracts with adjustable crediting rates subject to guaranteed minimums	61
Participating contracts where investment income risk ultimately accrues to contractholders	13
Total	$	224

The $150 billion above relates to long-duration products such as group annuities, structured settlements and other insurance products that have fixed and guaranteed terms, for which underlying assets may have to be reinvested at interest rates that are lower than portfolio rates. We seek to mitigate the impact of a prolonged low interest rate environment on these contracts through asset/liability management, as discussed further below.

The $61 billion above relates to contracts with crediting rates that may be adjusted over the life of the contract, subject to guaranteed minimums. Although we may have the ability to lower crediting rates for those contracts above guaranteed minimums, our willingness to do so may be limited by competitive pressures. The following table sets forth the related account values by range of guaranteed minimum crediting rates and the related range of the difference, in basis points (“bps”), between rates being credited to contractholders as of March 31, 2022, and the respective guaranteed minimums.


	Account Values with Adjustable Crediting Rates Subject to Guaranteed Minimums:
	At guaranteed minimum			1-49 bps above guaranteed minimum			50-99 bps above guaranteed minimum			100-150 bps above guaranteed minimum			Greater than 150 bps above guaranteed minimum			Total
	($ in billions)
Range of Guaranteed Minimum Crediting Rates:
Less than 1.00%	$	1.1		$	1.1		$	0.1		$	0.0		$	0.0		$	2.3
1.00% - 1.99%	4.3			13.4			1.9			0.8			2.4			22.8
2.00% - 2.99%	1.3			0.0			1.2			1.4			3.3			7.2
3.00% - 4.00%	25.7			0.0			1.7			0.7			0.1			28.2
Greater than 4.00%	0.8			0.0			0.0			0.0			0.0			0.8
Total(1)	$	33.2		$	14.5		$	4.9		$	2.9		$	5.8		$	61.3
Percentage of total	54		%	24		%	8		%	5		%	9		%	100		%

(1)Includes approximately $0.52 billion related to contracts that impose a market value adjustment if the invested amount is not held to maturity.

The remaining $13 billion of insurance liabilities and policyholder account balances in these operations relates to participating contracts for which the investment income risk is expected to ultimately accrue to contractholders. The crediting rates for these contracts are periodically adjusted based on the return earned on the related assets.

Assuming a hypothetical scenario where the average 10-year U.S. Treasury rate is 2.50% (which is reasonably consistent with recent rates) for the period from April 1, 2022 through March 31, 2023 (and credit spreads remain unchanged from average levels experienced during the first quarter 2022), we estimate that the impact to net investment income of reinvesting activities, including scheduled maturities and estimated prepayments of fixed maturities and commercial mortgage and other loans (excluding assets supporting participating contracts), would be between $0 million and $(20) million over this period.

In order to mitigate the unfavorable impact that a low interest rate environment has on our net interest margins, we employ a proactive asset/liability management program, which includes strategic asset allocation and hedging strategies within a disciplined risk management framework. These strategies seek to match the characteristics of our products, and to closely approximate the interest rate sensitivity of the assets with the estimated interest rate sensitivity of the product liabilities. Our asset/liability management program also helps manage duration gaps, currency and other risks between assets and liabilities through the use of derivatives. We adjust this dynamic process as products change, as customer behavior changes and as changes in the market environment occur. As a result, our asset/liability management process has permitted us to manage the interest rate risk associated with our products through several market cycles. Our interest rate exposure is also mitigated by our business mix, which includes lines of business for which fee-based and insurance underwriting earnings play a more prominent role in product profitability. We also regularly examine our product offerings and their profitability. As a result, we may reprice certain products and discontinue sales of other products that do not meet our profit expectations.

Closed Block Division

Substantially all of the $55 billion of general account assets in the Closed Block division support obligations and liabilities relating to the Closed Block policies only. See Note 7 to the Unaudited Interim Consolidated Financial Statements for additional information on the Closed Block.

International Insurance Operations

While our international insurance operations have experienced a low interest rate environment for many years, the current reinvestment yields for certain blocks of business in our international insurance operations are generally lower than the current portfolio yield supporting these blocks of business. In recent years, the Bank of Japan’s monetary policy has resulted in even lower and, at times, negative yields for certain tenors of government bonds. Our international insurance operations employ a proactive asset/liability management program in order to mitigate, to the extent possible, the unfavorable impact that the current interest rate environment has on our net interest margins. In conjunction with this program, we have not purchased negative yielding assets to support the portfolio and we continue to purchase long-term bonds with tenors of 30 years or greater. Additionally, our diverse product portfolio in terms of currency mix and premium payment structure allows us to further mitigate the negative impact from this low interest rate environment. We also regularly examine our product offerings and their profitability. As a result, we may reprice certain products, adjust commissions for certain products and discontinue sales of other products that do not meet our profit expectations. The impact of these actions and the introduction of certain new products

has resulted in an increase in sales of U.S. dollar-denominated products relative to products denominated in other currencies. For additional information on sales within our international insurance operations, see “—International Businesses—Sales Results,” below.

The following table sets forth the insurance liabilities and policyholder account balances of our Japanese operations, by type, for the date indicated:


	As of March 31, 2022
	(in billions)
Insurance products with fixed and guaranteed terms	$	137
Contracts with a market value adjustment if invested amount is not held to maturity	25
Contracts with adjustable crediting rates subject to guaranteed minimums	10
Total	$	172

The $137 billion is primarily comprised of long-duration insurance products that have fixed and guaranteed terms- for which underlying assets may have to be reinvested at interest rates that are lower than current portfolio yields. The remaining insurance liabilities and policyholder account balances include $25 billion related to contracts that impose a market value adjustment if the invested amount is not held to maturity and $10 billion related to contracts with crediting rates that may be adjusted over the life of the contract, subject to guaranteed minimums. Most of the current crediting rates on these contracts, however, are at or near contractual minimums. Although we have the ability in some cases to lower crediting rates for those contracts that are above guaranteed minimum crediting rates, the majority of this business has interest crediting rates that are determined by formula.

Assuming a hypothetical scenario where the average 30-year Japanese Government Bond yield is 0.90% and the 10-year U.S. Treasury rate is 2.50% (which is reasonably consistent with recent rates) for the period from April 1, 2022 through March 31, 2023 (and credit spreads remain unchanged from average levels experienced during the first quarter 2022), we estimate that there would be no material impact to net investment income of reinvesting activities, including scheduled maturities and estimated prepayments of fixed maturities and commercial mortgage and other loans (excluding assets supporting participating contracts), over this period.

Results of Operations

Consolidated Results of Operations

The following table summarizes net income (loss) for the periods presented.


	Three Months Ended March 31,
		2022		2021
		(in millions)
Revenues		$	13,215	$	16,952
Benefits and expenses		13,330		13,538
Income (loss) before income taxes and equity in earnings of operating joint ventures		(115)		3,414
Income tax expense (benefit)		(69)		636
Income (loss) before equity in earnings of operating joint ventures		(46)		2,778
Equity in earnings of operating joint ventures, net of taxes		2		26


Net income (loss)		(44)		2,804
Less: Income attributable to noncontrolling interests		(13)		(24)
Net income (loss) attributable to Prudential Financial, Inc.		$	(31)	$	2,828

The $2,859 decrease in “Net income (loss) attributable to Prudential Financial, Inc.” for the first quarter of 2022 compared to the first quarter of 2021 reflected the following notable items on a pre-tax basis:

$1,546 million unfavorable variance from realized investment gains (losses), net, and related charges and adjustments for PFI, excluding the impact of the hedging program associated with certain variable annuities (see “General Account Investments” for additional information);
$869 million unfavorable variance reflecting the impact from changes in the value of our embedded derivatives and related hedge positions, net of DAC and other costs, associated with certain variable annuities;
$477 million unfavorable variance from lower adjusted operating income from our business segments, including the absence of a gain from the sale of the Company’s 35% ownership stake in Pramerica SGR recorded in the prior year period (see “Segment Results of Operations” for additional information);
$355 million unfavorable variance from a loss in the current period from our Divested and Run-off Businesses compared to income in the prior year period; and
$310 million unfavorable variance driven by market experience updates primarily within our Individual Annuities and Individual Life businesses.

Partially offsetting these decreases in “Net income (loss) attributable to Prudential Financial, Inc.” was a $705 million favorable variance from income taxes reflecting the decrease in pre-tax earnings.

Segment Results of Operations

We analyze the performance of our segments and Corporate and Other operations using a measure of segment profitability called adjusted operating income. See “—Segment Measures” for a discussion of adjusted operating income and its use as a measure of segment operating performance.

Shown below are the adjusted operating income contributions of each segment and Corporate and Other operations for the periods indicated and a reconciliation of this segment measure of performance to “Income (loss) before income taxes and equity in earnings of operating joint ventures” as presented in the Unaudited Interim Consolidated Statements of Operations.


	Three Months Ended March 31,
		2022		2021(1)
		(in millions)
Adjusted operating income before income taxes by segment:
PGIM		$	188	$	651
U.S. Businesses:
Retirement		568		614
Group Insurance		(111)		(132)
Individual Annuities		472		444
Individual Life		51		(44)
Assurance IQ		(37)		(39)
Total U.S. Businesses		943		843
International Businesses		801		871
Corporate and Other		(366)		(322)
Total segment adjusted operating income before income taxes		1,566		2,043
Reconciling items:
Realized investment gains (losses), net, and related adjustments(2)		(1,021)		1,294
Charges related to realized investment gains (losses), net(3)		(339)		(239)
Market experience updates		(6)		304
Divested and Run-off Businesses(4):
Closed Block division		23		34
Other Divested and Run-off Businesses		(299)		45
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests(5)		(22)		(54)
Other adjustments(6)		(17)		(13)
Consolidated income (loss) before income taxes and equity in earnings of operating joint ventures		$	(115)	$	3,414

(1)Effective third quarter of 2021, the results of the Full Service Retirement business are excluded from the Retirement segment and are included in Divested and Run-off Businesses. Prior period amounts have been updated to conform to current period presentation. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information.

(2)See “—General Account Investments” and Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

(3)Includes charges that represent the impact of realized investment gains (losses), net, on the amortization of DAC and other costs, and on changes in reserves. Also includes charges resulting from payments related to market value adjustment features of certain of our annuity products and the impact of realized investment gains (losses), net, on the amortization of unearned revenue reserves (“URR”).

(4)Represents 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. See “—Divested and Run-off Businesses” for additional information.

(5)Equity in earnings of operating joint ventures are included in adjusted operating income but excluded from “Income (loss) before income taxes and equity in earnings of operating joint ventures” as they are reflected on an after-tax U.S. GAAP basis as a separate line in the Unaudited Interim Consolidated Statements of Operations. Earnings attributable to noncontrolling interests are excluded from adjusted operating income but included in “Income (loss) before income taxes and equity in earnings of operating joint ventures” as they are reflected on a U.S. GAAP basis as a separate line in the Unaudited Interim Consolidated Statements of Operations. Earnings attributable to noncontrolling interests represent the portion of earnings from consolidated entities that relates to the equity interests of minority investors.

(6)Includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration.

Segment results for the period presented above reflect the following:

PGIM. Results for the first quarter of 2022 decreased in comparison to the prior year period, primarily reflecting the absence of a gain in the prior year period from the sale of our 35% ownership stake in Pramerica SGR, higher expenses and lower other related revenues, partially offset by an increase in asset management fees.

Retirement. Results for the first quarter of 2022 decreased in comparison to the prior year period, primarily driven by less favorable reserve experience, partially offset by higher net investment spread results.

Group Insurance. Results for the first quarter of 2022 increased in comparison to the prior year period, driven by more favorable underwriting results, partially offset by higher expenses.

Individual Annuities. Results for the first quarter of 2022 increased in comparison to the prior year period, primarily driven by higher net investment spread results and lower expenses, partially offset by lower fee income, net of distribution expenses and other associated costs.

Individual Life. Results for the first quarter of 2022 increased in comparison to the prior year period, primarily driven by less unfavorable underwriting results and higher net investment spread results.

Assurance IQ. Results for the first quarter of 2022 were relatively flat in comparison to the prior year period as an increase in the Medicare line was mostly offset by a decrease in the Health Under 65 line.

International Businesses. Results for the first quarter of 2022 decreased in comparison to the prior year period, inclusive of an unfavorable net impact from foreign currency exchange rates, primarily driven by lower net investment spread results and lower earnings from our joint venture investments, partially offset by more favorable underwriting results.

Corporate and Other. Results for the first quarter of 2022 reflected increased losses in comparison to the prior year period, primarily driven by higher net charges from other corporate activities and lower investment income, partially offset by favorable pension and employee benefit results and lower interest expense on debt.

Closed Block Division. Results for the first quarter of 2022 decreased in comparison to the prior year period, primarily driven by lower net investment activity results, partially offset by a reduction in the policyholder dividend obligation.

Segment Measures

Adjusted Operating Income. In managing our business, we analyze our segments’ operating performance using “adjusted operating income.” Adjusted operating income does not equate to “Income (loss) before income taxes and equity in earnings of operating joint ventures” or “Net income (loss)” as determined in accordance with U.S. GAAP, but is the measure of segment profit or loss we use to evaluate segment performance and allocate resources and, consistent with authoritative guidance, is our measure of segment performance. The adjustments to derive adjusted operating income are important to an understanding of our overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and our definition of adjusted operating income may differ from that used by other companies; however, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses.

See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information on the presentation of segment results and our definition of adjusted operating income.

Annualized New Business Premiums. In managing our Individual Life, Group Insurance and International Businesses, we analyze annualized new business premiums, which do not correspond to revenues under U.S. GAAP. Annualized new business premiums measure the current sales performance of the business, while revenues primarily reflect the renewal persistency of policies written in prior years and net investment income, in addition to current sales. Annualized new business premiums include 10% of first year premiums or deposits from single pay products. No other adjustments are made for limited pay contracts.

The amount of annualized new business premiums for any given period can be significantly impacted by several factors, including but not limited to: addition of new products, discontinuation of existing products, changes in credited interest rates for certain products and other product modifications, changes in premium rates, changes in tax laws, changes in regulations or changes in the competitive environment. Sales volume may increase or decrease prior to certain of these changes becoming effective, and then fluctuate in the other direction following such changes.

Assets Under Management. In managing our PGIM business, we analyze assets under management (which do not correspond directly to U.S. GAAP assets) because the principal source of revenues is fees based on assets under management. Assets under management represent the fair market value or account value of assets that we manage directly for institutional clients, retail clients, and for our general account, as well as assets invested in our products that are managed by third-party managers.

Account Values. In managing our Individual Annuities and Retirement businesses, we analyze account values, which do not correspond directly to U.S. GAAP assets. Net sales (redemptions) in our Individual Annuities business and net additions (withdrawals) in our Retirement business do not correspond to revenues under U.S. GAAP, but are used as a relevant measure of business activity.

Impact of Foreign Currency Exchange Rates

Foreign currency exchange rate movements and related hedging strategies

As a U.S.-based company with significant business operations outside the U.S., particularly in Japan, we are subject to foreign currency exchange rate movements that could impact our U.S. dollar (“USD”)-equivalent earnings and shareholder return on equity. Our USD-equivalent earnings could be materially affected by currency fluctuations from period to period, even if earnings on a local currency basis are relatively constant. Our USD-equivalent equity is impacted as the value of our investment in international operations may also fluctuate based on changes in foreign currency exchange rates. We seek to mitigate these impacts through various hedging strategies, including the use of derivative contracts and by holding USD-denominated assets in certain of our foreign subsidiaries.

In order to reduce earnings volatility from foreign currency exchange rate movements, we enter into forward currency derivative contracts to effectively fix the currency exchange rates for a portion of our prospective non-USD-denominated earnings streams. This forward currency hedging program is primarily associated with our insurance operations in Japan.

In order to reduce equity volatility from foreign currency exchange rate movements, we primarily utilize a yen hedging strategy that calibrates the hedge level to preserve the relative contribution of our yen-based business to the Company’s overall return on equity on a leverage neutral basis. We implement this hedging strategy utilizing a variety of instruments, including USD-denominated assets, foreign currency derivative contracts, and dual currency and synthetic dual currency investments held

locally in our Japanese insurance subsidiaries. The total hedge level may vary based on our periodic assessment of the relative contribution of our yen-based business to the Company’s overall return on equity.

The table below presents the aggregate amount of instruments that serve to hedge the impact of foreign currency exchange movements on our USD-equivalent shareholder return on equity from our Japanese insurance subsidiaries as of the dates indicated.


	March 31, 2022		December 31, 2021
	(in billions)
Foreign currency hedging instruments:
Hedging USD-equivalent earnings:
Forward currency contracts (notional amount outstanding)	$	0.0	$	0.0
Hedging USD-equivalent equity:
USD-denominated assets held in yen-based entities(1)	9.4		9.5
Dual currency and synthetic dual currency investments(2)	0.4		0.5
Total USD-equivalent equity foreign currency hedging instruments	9.8		10.0
Total foreign currency hedges	$	9.8	$	10.0

(1)Includes USD-denominated fixed maturities at amortized cost plus any related accrued investment income, as well as USD notional amount of foreign currency derivative contracts outstanding. Note this amount represents only those USD assets serving to hedge the impact of foreign currency volatility on equity. Separate from this program, our Japanese operations also have $75.1 billion and $74.3 billion as of March 31, 2022 and December 31, 2021, respectively, of USD-denominated assets supporting USD-denominated liabilities related to USD-denominated products.

(2)Dual currency and synthetic dual currency investments are held by our yen-based entities in the form of fixed maturities and loans with a yen-denominated principal component and USD-denominated interest income. The amounts shown represent the present value of future USD-denominated cash flows.

The USD-denominated investments that hedge the impact of foreign currency exchange rate movements on USD-equivalent earnings and shareholder return on equity from our Japanese insurance operations are reported within yen-based entities and, as a result, foreign currency exchange rate movements will impact their value reported within our yen-based Japanese insurance entities. We seek to mitigate the risk that future unfavorable foreign currency exchange rate movements will decrease the value of these USD-denominated investments reported within our yen-based Japanese insurance entities, and therefore negatively impact their equity and regulatory solvency margins, by having our Japanese insurance operations enter into currency hedging transactions with a subsidiary of Prudential Financial. These hedging strategies have the economic effect of moving the change in value of these USD-denominated investments due to foreign currency exchange rate movements from our Japanese yen-based entities to our USD-based entities.

These USD-denominated investments also pay a coupon which is generally higher than what a similar yen-denominated investment would pay. The incremental impact of this higher yield on our USD-denominated investments, as well as our dual currency and synthetic dual currency investments, will vary over time, and is dependent on the duration of the underlying investments as well as interest rate environments in both the U.S. and Japan at the time of the investments.

Impact of intercompany foreign currency exchange rate arrangements on segment results of operations

The financial results of our International Businesses and PGIM reflect the impact of intercompany arrangements with our Corporate and Other operations pursuant to which these segments’ non-USD-denominated earnings are translated at fixed currency exchange rates. Results of our Corporate and Other operations include differences between the translation adjustments recorded by the segments at the fixed currency exchange rate versus the actual average rate during the period. In addition, specific to our International Businesses where we hedge certain currencies, the results of our Corporate and Other operations also include the impact of any gains or losses recorded from the forward currency contracts that settled during the period, which include the impact of any over or under hedging of actual earnings that differ from projected earnings.

For our International Businesses, the fixed currency exchange rates are generally determined in connection with a foreign currency income hedging program designed to mitigate the impact of exchange rate changes on the segment’s expected USD-equivalent earnings. Pursuant to this program, our Corporate and Other operations execute forward currency contracts with third-parties to sell the net exposure of projected earnings for certain currencies in exchange for USD at specified exchange rates. The maturities of these contracts correspond with the future periods (typically on a three-year rolling basis) in which the identified non-USD-denominated earnings are expected to be generated. In establishing the level of non-USD-denominated

earnings that will be hedged through this program, we exclude the anticipated level of USD-denominated earnings that will be generated by USD-denominated products and investments.

For PGIM and certain other currencies within our International Businesses, the fixed currency exchange rates for the current year are predetermined during the third quarter of the prior year using forward currency exchange rates.

The table below presents, for the periods indicated, the increase (decrease) to revenues and adjusted operating income for the International Businesses, PGIM and Corporate and Other operations, reflecting the impact of these intercompany arrangements.


	Three Months Ended March 31,
	2022		2021
	(in millions)
Segment impacts of intercompany arrangements:
International Businesses	$	3	$	1
PGIM	2		0
Impact of intercompany arrangements(1)	5		1
Corporate and Other:
Impact of intercompany arrangements(1)	(5)		(1)
Settlement gains (losses) on forward currency contracts(2)	11		8
Net benefit (detriment) to Corporate and Other	6		7
Net impact on consolidated revenues and adjusted operating income	$	11	$	8

(1)Represents the difference between non-USD-denominated earnings translated on the basis of weighted average monthly currency exchange rates versus fixed currency exchange rates determined in connection with the foreign currency income hedging program.

(2)As of March 31, 2022 and 2021, the total notional amounts of these forward currency contracts within our Corporate and Other operations were $0.6 billion and $0.9 billion, respectively, of which $0.0 billion and $0.4 billion, respectively, were related to our Japanese insurance operations.

Impact of products denominated in non-local currencies on U.S. GAAP earnings

While our international insurance operations offer products denominated in local currency, several also offer products denominated in non-local currencies. This is most notable in our Japanese operations, which currently offer primarily USD-denominated products, but have also historically offered Australian dollar (“AUD”)-denominated products. The non-local currency-denominated insurance liabilities related to these products are supported by investments denominated in corresponding currencies, including a significant portion designated as available-for-sale. While the impact from foreign currency exchange rate movements on these non-local currency-denominated assets and liabilities is economically matched, differences in the accounting for changes in the value of these assets and liabilities due to changes in foreign currency exchange rate movements have historically resulted in volatility in U.S. GAAP earnings.

As a result, we implemented a structure in Gibraltar Life’s operations that disaggregated the USD- and AUD-denominated businesses into separate divisions, each with its own functional currency that aligns with the underlying products and investments. The result of this alignment was to reduce differences in the accounting for changes in the value of these assets and liabilities that arise due to changes in foreign currency exchange rate movements. For the USD- and AUD-denominated assets that were transferred under this structure, the net cumulative unrealized investment gains associated with foreign exchange remeasurement that were recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) totaled $1.8 billion and $2.0 billion as of March 31, 2022 and December 31, 2021, respectively, and will be recognized in earnings within “Realized investment gains (losses), net” over time as these assets mature or are sold. Absent the sale of any of these assets prior to their stated maturity, approximately 10% of the $1.8 billion balance as of March 31, 2022 will be recognized throughout the remainder of 2022, approximately 3% will be recognized in 2023, and the remaining balance will be recognized from 2024 through 2051.

Highly inflationary economy in Argentina

Our insurance operations in Argentina, Prudential of Argentina (“POA”), have historically utilized the Argentine peso as the functional currency given it is the currency of the primary economic environment in which the entity operates. During 2018, Argentina experienced a cumulative inflation rate that exceeded 100% over a 3-year period. As a result, Argentina’s economy was deemed to be highly inflationary, resulting in reporting changes effective July 1, 2018. Under U.S. GAAP, the financial

statements of a foreign entity in a highly inflationary economy are to be remeasured as if its functional currency (formerly the Argentine peso) is the reporting currency of its parent reporting entity (the USD) on a prospective basis. While this changed how the results of POA are remeasured and/or translated into USD, the impact to our financial statements was not material nor is it expected to be material in future periods given the relative size of our POA operations. It should also be noted that due to the macroeconomic environment in Argentina, the majority of POA’s balance sheet consists of USD-denominated product liabilities supported by USD-denominated assets. As a result, this accounting change serves to reduce the remeasurement impact reflected in net income given that the functional currency and currency in which the assets and liabilities are denominated will be more closely aligned.

Accounting Policies & Pronouncements

Application of Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, the Company’s results of operations and financial position as reported in the Unaudited Interim Consolidated Financial Statements could change significantly.

Management believes the accounting policies relating to the following areas are most dependent on the application of estimates and assumptions and require management’s most difficult, subjective, or complex judgments:

DAC, deferred sales inducements (“DSI”) and VOBA;
Policyholder liabilities;
Goodwill;
Valuation of investments including derivatives, measurement of allowance for credit losses, and recognition of other-than-temporary impairments (“OTTI”);
Pension and other postretirement benefits;
Taxes on income; and
Reserves for contingencies, including reserves for losses in connection with unresolved legal matters.

Market Performance - Equity and Interest Rate Assumptions

DAC, DSI and VOBA, associated with the variable and universal life policies of our Individual Life and International Businesses segments and the variable and fixed annuity contracts of our Individual Annuities and International Businesses segments, are generally amortized over the expected lives of these policies in proportion to total gross profits. Total gross profits include both actual gross profits and estimates of gross profits for future periods. The quarterly adjustments for market performance reflect the impact of changes to our estimate of total gross profits to reflect actual fund performance and market conditions. A significant portion of gross profits for our variable annuity contracts and, to a lesser degree, our variable life contracts are dependent upon the total rate of return on assets held in separate account investment options. This rate of return influences the fees we earn on variable annuity and variable life contracts, costs we incur associated with the guaranteed minimum death and guaranteed minimum income benefit features related to our variable annuity contracts and expected claims to be paid on variable life contracts, as well as other sources of profit. Returns that are higher than our expectations for a given period produce higher than expected account balances, which increase the future fees we expect to earn on variable annuity and variable life contracts and decrease the future costs we expect to incur associated with the guaranteed minimum death and guaranteed minimum income benefit features related to our variable annuity contracts and expected claims to be paid on variable life contracts. The opposite occurs when returns are lower than our expectations. The changes in future expected gross profits are used to recognize a cumulative adjustment to all prior periods’ amortization.

Furthermore, the calculation of the estimated liability for future policy benefits related to certain insurance products includes an estimate of associated revenues and expenses that are dependent on both historical market performance as well as estimates of market performance in the future. Similar to DAC, DSI and VOBA described above, these liabilities are subject to quarterly adjustments for experience including market performance, in addition to annual adjustments resulting from our annual reviews of assumptions.

The weighted average rate of return assumptions used in developing estimated market returns consider many factors specific to each product type, including asset durations, asset allocations and other factors. With regard to equity market assumptions, the near-term future rate of return assumption used in evaluating DAC, DSI and VOBA and liabilities for future policy benefits for certain of our products, primarily our domestic variable annuity and domestic and international variable life insurance products, is generally updated each quarter and is derived using a reversion to the mean approach, a common industry

practice. Under this approach, we consider historical equity returns and adjust projected equity returns over an initial future period of five years (the “near-term”) so that equity returns converge to the long-term expected rate of return. If the near-term projected future rate of return is greater than our near-term maximum future rate of return of 15.0%, we use our maximum future rate of return. If the near-term projected future rate of return is lower than our near-term minimum future rate of return of 0%, we use our minimum future rate of return. As of March 31, 2022, our domestic variable annuities and variable life insurance businesses assume an 8.0% long-term equity expected rate of return and a 0.9% near-term mean reversion equity expected rate of return, and our international variable life insurance business assumes a 4.8% long-term equity expected rate of return and a 1.6% near-term mean reversion equity expected rate of return.

With regard to interest rate assumptions used in evaluating DAC, DSI and VOBA and liabilities for future policy benefits for certain of our products, we update the long-term and near-term future rates used to project fixed income returns annually and quarterly, respectively. As a result of our 2021 annual reviews and update of assumptions and other refinements, we kept our long-term expectation of the 10-year U.S. Treasury rate and 10-year Japanese Government Bond yield unchanged and continue to grade to rates of 3.25% and 1.00%, respectively, over ten years. As part of our quarterly market experience updates, we update our near-term projections of interest rates to reflect changes in current rates.

In accordance with our established practice, we will update actuarial assumptions during the second quarter of 2022. We have a comprehensive process that will include, among other things, the review of long-term interest rates, inflation, COVID-19 mortality experience, and industry studies, including evaluating industry data as to its applicability to the Company’s experience. We have recently obtained industry data that reflects experience that is more adverse than the assumptions we currently use in our Individual Life segment. We are evaluating the applicability of this information to our block of business and the extent to which it would cause an increase in reserves and corresponding decline in earnings within Individual Life. The overall process to update assumptions is ongoing and the outcome across our businesses is uncertain.

For further discussion of impacts that could result from changes in certain key assumptions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Accounting Policies and Pronouncements—Application of Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Future Adoption of New Accounting Pronouncements

ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, was issued by the FASB on August 15, 2018, and was amended by ASU 2019-09, Financial Services - Insurance (Topic 944): Effective Date, issued in October 2019, and ASU 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application, issued in November 2020. The Company will adopt ASU 2018-12 effective January 1, 2023 using the modified retrospective transition method where permitted, and apply the guidance as of January 1, 2021 (and record transition adjustments as of January 1, 2021) in the 2023 financial statements.

The Company has an established governance framework to manage the implementation of the standard. The Company’s implementation efforts continue to progress including, but not limited to, implementing refinements to key accounting policy decisions, modifications to actuarial valuation models, updates to data sourcing capabilities, automation of key financial reporting and analytical processes and updates to internal controls over financial reporting.

ASU 2018-12 will impact, at least to some extent, the accounting and disclosure requirements for all long-duration insurance and investment contracts issued by the Company. While the magnitude of impacts is still being assessed, the Company expects the standard to result in a significant decrease to “Total equity”, primarily from remeasuring in-force contract liabilities using upper-medium grade fixed income instrument yields as of the adoption date through “Accumulated other comprehensive income (loss)”. The standard also requires a significant increase in disclosures. In addition to the significant impacts to the balance sheet, the Company also expects an impact to the pattern of earnings emergence following the transition date. See Note 2 to the Unaudited Interim Consolidated Financial Statements for a more detailed discussion of ASU 2018-12, as well as other accounting pronouncements issued but not yet adopted and newly adopted accounting pronouncements.

Results of Operations by Segment

PGIM

Operating Results

The following table sets forth PGIM’s operating results for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in millions)
Operating results(1):
Revenues(2)		$	926	$	1,314
Expenses		738		663
Adjusted operating income		188		651
Realized investment gains (losses), net, and related adjustments		(3)		(2)
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		7		(28)
Other adjustments(3)		(12)		0
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	180	$	621

(1)Certain of PGIM’s investment activities are based in currencies other than the U.S. dollar and are therefore subject to foreign currency exchange rate risk. The financial results of PGIM include the impact of an intercompany arrangement with our Corporate and Other operations designed to mitigate the impact of exchange rate changes on PGIM’s U.S. dollar-equivalent earnings. For more information related to this intercompany arrangement, see “—Results of Operations—Impact of Foreign Currency Exchange Rates,” above.

(2)2021 includes a $378 million pre-tax gain related to the sale of our 35% ownership stake in Pramerica SGR, an asset management joint venture in Italy.

(3)Includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods.

Adjusted Operating Income

Adjusted operating income decreased $463 million, primarily reflecting a decrease in service, distribution and other revenues, primarily driven by the absence of a gain in the prior year period from the sale of our Pramerica SGR joint venture, higher compensation expenses associated with business growth, and lower other related revenues, net of related expenses. These impacts were partially offset by higher asset management fees, net of related expenses.

Revenues and Expenses

The following table sets forth PGIM’s revenues, presented on a basis consistent with the table above under “—Operating Results,” by type:


	Three Months Ended March 31,
		2022		2021
		(in millions)
Revenues by type:
Asset management fees by source:
Institutional customers		$	363	$	348
Retail customers(1)		301		302
General account		145		145
Total asset management fees		809		795
Other related revenues by source:
Incentive fees		4		27
Transaction fees		4		5
Seed and co-investments		(21)		5
Commercial mortgage(2)		32		45
Total other related revenues		19		82
Service, distribution and other revenues(3)		98		437
Total revenues		$	926	$	1,314

(1)Consists of fees from: individual mutual funds and variable annuities and variable life insurance separate account assets; funds invested in proprietary mutual funds through our defined contribution plan products; and third-party sub-advisory relationships. Revenues from fixed annuities and the fixed-rate accounts of variable annuities and variable life insurance are included in the general account.

(2)Includes mortgage origination revenues from our commercial mortgage origination and servicing business.

(3)2021 includes a $378 million pre-tax gain related to the sale of our 35% ownership stake in Pramerica SGR, an asset management joint venture in Italy.

Revenues decreased $388 million. Service, distribution and other revenues decreased, primarily reflecting the absence of a gain in the prior year period from the sale of our Pramerica SGR joint venture, partially offset by more favorable revenues from certain consolidated funds (which were fully offset by higher expenses related to noncontrolling interests in these funds). Also contributing to the decrease were lower other related revenues primarily driven by a decrease in seed and co-investments reflecting investment underperformance, lower performance-based incentive fees due to more favorable fees earned in the prior year period, and lower commercial mortgage origination revenues primarily driven by higher interest rates. These impacts were partially offset by higher asset management fees, net of related expenses, primarily reflecting an increase in higher fee yielding strategies, partially offset by lower average assets under management, primarily driven by market depreciation reflecting higher interest rates and spreads.

Expenses increased $75 million, reflecting higher compensation and operating expenses driven by business growth, and higher variable expenses primarily associated with an increase in revenues of certain consolidated funds, as discussed above.

Assets Under Management

The following table sets forth assets under management by asset class as of the dates indicated:


	March 31, 2022		December 31, 2021		March 31, 2021
	(in billions)
Assets Under Management(1) (at fair value):
Public equity	$	190.3	$	216.2	$	199.3
Public fixed income	907.1		980.7		951.8
Real estate	132.8		132.6		121.1
Private credit and other alternatives	104.0		108.7		103.5
Multi-asset	80.4		85.6		75.6
Total PGIM assets under management	$	1,414.6	$	1,523.8	$	1,451.3

Assets under management within other reporting segments(2)	205.5		218.5		212.1
Total PFI assets under management	$	1,620.1	$	1,742.3	$	1,663.4

(1)“Public equity” represents stock ownership interest in a corporation or partnership (excluding hedge funds) or real estate investment trust. “Public fixed income” represents debt instruments that pay interest and usually have a maturity (excluding mortgages). “Real estate” includes direct real estate equity and real estate mortgages. “Private credit and other alternatives” includes private credit, private equity, hedge funds and other alternative strategies. “Multi-asset” includes funds or products that invest in more than one asset class, balancing equity and fixed income funds and target date funds.

(2)Primarily includes assets related to certain annuity, variable life, retirement and group life products in our U.S. Businesses and Corporate & Other operations, and certain general account assets in our International Businesses. These assets are not directly managed by PGIM, but rather are invested in non-proprietary funds or are managed by either the divisions themselves or by our Chief Investment Officer Organization.

PGIM’s assets under management as of March 31, 2022 decreased $37 billion in comparison to the prior year quarter, primarily driven by market depreciation, resulting from higher interest rates and spreads, and unfavorable foreign exchange rate impacts. PGIM’s assets under management as of March 31, 2022 decreased $109 billion in comparison to the prior quarter, primarily driven by market depreciation resulting from higher interest rates and spreads, and lower equity markets.

The following table sets forth assets under management by source as of the dates indicated:


	March 31, 2022		December 31, 2021		March 31, 2021
	(in billions)
Assets Under Management(1) (at fair value):
Institutional customers	$	593.7	$	629.4	$	591.8
Retail customers	364.7		401.4		381.0
General account	456.2		493.0		478.5
Total PGIM assets under management	$	1,414.6	$	1,523.8	$	1,451.3

Assets under management within other reporting segments(2)	205.5		218.5		212.1
Total PFI assets under management	$	1,620.1	$	1,742.3	$	1,663.4

(1)“Institutional customers” consist of third-party institutional assets and group insurance contracts. “Retail customers” consist of individual mutual funds and variable annuities and variable life insurance separate account assets, funds invested in proprietary mutual funds through our defined contribution plan products, and third-party sub-advisory relationships. “General account” also includes fixed annuities and the fixed-rate accounts of variable annuities and variable life insurance.

The following table sets forth the component changes in PGIM’s assets under management for the periods indicated:


	Three Months Ended March 31,			Twelve Months Ended March 31,
		2022		2021		2022
		(in billions)
Beginning assets under management		$	1,523.8	$	1,498.6	$	1,451.3
Institutional third-party flows		0.3		1.1		10.1
Retail third-party flows		(4.6)		4.4		(8.9)
Total third-party flows		(4.3)		5.5		1.2
Affiliated flows(1)		(0.5)		(3.4)		(9.3)
Market appreciation (depreciation)(2)		(99.3)		(43.3)		(20.6)
Foreign exchange rate impact		(5.1)		(7.4)		(10.1)
Net money market activity and other increases (decreases)		0.0		1.3		2.1
Ending assets under management		$	1,414.6	$	1,451.3	$	1,414.6

(1)Represents assets that PGIM manages for the benefit of other reporting segments within the Company. Additions and withdrawals of these assets are attributable to third-party product inflows and outflows in other reporting segments.

(2)Includes income reinvestment, where applicable.

Private Capital Deployment

Private capital deployment is indicative of the pace and magnitude of capital that is invested and will result in future revenues that may include management fees, transaction fees, incentive fees and servicing revenues, as well as future costs to manage these assets.

Private capital deployment represents the gross value of private capital invested in real estate debt and equity, and private credit and equity asset classes. Assets under management resulting from private capital deployment are included in “Real estate” and “Private credit and other alternatives” in the “—Assets Under Management— by asset class table” above. As of March 31, 2022, these assets decreased approximately $4.3 billion compared to December 31, 2021, primarily reflecting market depreciation partially offset by net private capital inflows.

Private capital deployment includes PGIM’s real estate agency debt business, which consists of agency commercial loans that are originated and sold to third party investors. PGIM continues to service these commercial loans; however, they are not included in assets under management.

The following table sets forth PGIM’s private capital deployed by asset class for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in billions)
Private capital deployed:
Real estate debt and equity		$	5.6	$	5.8
Private credit and equity		4.0		2.1
Total private capital deployed		$	9.6	$	7.9

Seed and Co-Investments

As of March 31, 2022 and December 31, 2021, PGIM had approximately $1,067 million and $1,175 million of seed investments and $504 million and $517 million of co-investments at carrying value, respectively, primarily consisting of public fixed income, public equity and real estate investments.

U.S. Businesses

Operating Results

The following table sets forth the operating results for our U.S. Businesses for the periods indicated:


	Three Months Ended March 31, 2022
		2022		2021(1)
		(in millions)
Adjusted operating income before income taxes:
U.S. Businesses:
Retirement		$	568	$	614
Group Insurance		(111)		(132)
Individual Annuities		472		444
Individual Life		51		(44)
Assurance IQ		(37)		(39)
Total U.S. Businesses		943		843
Reconciling items:
Realized investment gains (losses), net, and related adjustments		(295)		1,919
Charges related to realized investment gains (losses), net		(344)		(236)
Market experience updates		(4)		307
Other adjustments(2)		(5)		(13)
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		1		0
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	296	$	2,820

(1)Effective third quarter of 2021, the results of the Full Service Retirement business are included in the Divested and Run-off Businesses in Corporate and Other. Prior period amounts have been updated to conform to current period presentation. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information.

(2)Includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration.

Adjusted operating income for our U.S. Businesses increased by $100 million primarily due to:

Higher net investment spread results driven by portfolio growth and higher interest rates, as well as higher income on non-coupon investments; and
Higher underwriting results primarily driven by lower COVID-19 related mortality claims in our Individual Life business and more favorable disability results in our Group Insurance business, partially offset by lower COVID-19 related mortality gains in our Retirement business.
Partially offsetting these increases was lower fee income, net of distribution expenses and other associated costs, primarily in our Individual Annuities business.

Retirement

Business Update

In April 2022, the Company completed the sale of its Full Service Retirement business to Great-West Life & Annuity Insurance Company (“Great-West”). The transaction involved the sale of legal entities, reinsurance, and the transfer of contracts and brokerage accounts. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information.

Beginning in the third quarter of 2021, the Company reported the assets and liabilities of the Full Service Retirement business as “held-for-sale” and transferred the results of this business to Divested and Run-off Businesses within Corporate and Other operations. As such, the following results are now solely reflective of Retirement’s Institutional Investment Products business. All prior period amounts have been restated to conform to current period presentation.

Operating Results

The following table sets forth Retirement’s operating results for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in millions)
Operating results:
Revenues		$	2,643	$	2,102
Benefits and expenses		2,075		1,488
Adjusted operating income		568		614
Realized investment gains (losses), net, and related adjustments		(534)		(450)
Charges related to realized investment gains (losses), net		(10)		13
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		1		0
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	25	$	177

Adjusted Operating Income

Adjusted operating income decreased $46 million, primarily driven by less favorable reserve experience due to lower COVID-19 related mortality gains, partially offset by higher net investment spread results.

Revenues, Benefits and Expenses

Revenues increased $541 million. This increase primarily reflected higher pension risk transfer premiums due to new sales in the current quarter, with corresponding offsets in policyholders’ benefits, as discussed below, and higher net investment income.

Benefits and expenses increased $587 million. Policyholders’ benefits, including the change in policy reserves, increased primarily related to the higher pension risk transfer premiums discussed above.

Account Values

Account values are a significant driver of our operating results, and are primarily driven by net additions (withdrawals) and the impact of market changes. The investment income and interest we credit to policyholders on our spread-based products varies with the level of general account values. The income we earn on most of our fee-based products varies with the level of fee-based account values as many policy fees are determined by these values.

The following table shows the changes in the account values of Retirement’s products for the periods indicated. Account values include both internally- and externally-managed client balances as the total balances drive revenue for the Retirement business. For more information on internally-managed balances, see “—PGIM.”


	Three Months Ended March 31,			Twelve Months Ended March 31,
		2022		2021		2022
		(in millions)

Beginning total account value		$	245,720	$	243,387	$	247,496
Additions(1)		2,278		9,760		14,485
Withdrawals and benefits		(4,899)		(5,642)		(20,082)
Change in market value, interest credited and interest income		(1,570)		(653)		964
Other(2)		(2,427)		644		(3,761)
Ending total account value		$	239,102	$	247,496	$	239,102

(1)Additions primarily include: group annuities and funded pension reinsurance calculated based on premiums received; international longevity reinsurance contracts calculated as the present value of future projected benefits; investment-only stable value contracts calculated as the fair value of customers’ funds held in a client-owned trust; and funding agreements issued calculated based on premiums received.

(2)“Other” activity includes the effect of foreign exchange rate changes associated with our British pounds sterling denominated international reinsurance business and changes in asset balances for externally-managed accounts. For the three months ended March 31, 2022 and 2021, “Other” activity also includes $819 million in receipts offset by $841 million in payments and $722 million in receipts offset by $765 million in payments, respectively, related to funding agreements backed by commercial paper which typically have maturities of less than 90 days.

The decrease in account values for the three months and twelve months ended March 31, 2022 both reflect net withdrawals primarily driven by net account run-off, and decreases in other activity primarily driven by the negative impact of foreign exchange rate changes. Account values for the three months ended March 31, 2022 also reflect a decline in the market value of account assets.

Group Insurance

Operating Results

The following table sets forth Group Insurance’s operating results and benefits and administrative operating expense ratios for the periods indicated:


	Three Months Ended March 31,
		2022			2021
		($ in millions)
Operating results:
Revenues		$	1,544		$	1,556
Benefits and expenses		1,655			1,688
Adjusted operating income		(111)			(132)
Realized investment gains (losses), net, and related adjustments		(51)			(34)


Income (loss) before income taxes and equity in earnings of operating joint ventures		$	(162)		$	(166)
Benefits ratio(1)(3):
Group life		103.6		%	104.2		%
Group disability		73.4		%	80.5		%
Total Group Insurance		96.5		%	99.0		%
Administrative operating expense ratio(2)(3):
Group life		10.7		%	10.8		%
Group disability		31.1		%	32.2		%
Total Group Insurance		15.6		%	15.8		%

(1)Ratio of policyholder benefits to earned premiums plus policy charges and fee income.

(2)Ratio of general and administrative expenses (excluding commissions) to gross premiums plus policy charges and fee income.

(3)The benefits and administrative ratios are measures used to evaluate profitability and efficiency.

Adjusted Operating Income

Adjusted operating income increased $21 million, primarily reflecting more favorable underwriting results in our group disability business driven by favorable claims experience and the impact to reserves from higher interest rates on long-term disability contracts, as well as business growth. Also contributing to the increase were less unfavorable underwriting results in our group life business driven by business growth. These increases were partially offset by higher expenses.

Revenues, Benefits and Expenses

Revenues decreased $12 million. The decrease primarily reflected lower premiums and policy charges and fee income in our group life business due to lower COVID-19 impacts on experience-rated contracts, with offsets in policyholders’ benefits and changes in reserves, as discussed below, partially offset by business growth.

Benefits and expenses decreased $33 million. The decrease primarily reflected lower policyholders’ benefits, including changes in reserves, in our group life business mostly due to lower COVID-19 impacts on experience-rated contracts, and decreases in our group disability business driven by a favorable impact from claims experience on long-term disability contracts, partially offset by higher expenses driven by increased commissions from business growth.

Sales Results

The following table sets forth Group Insurance’s annualized new business premiums, as defined under “—Segment Measures” above, for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	(in millions)
Annualized new business premiums(1):
Group life	$	180	$	175
Group disability	130		120
Total	$	310	$	295

(1)Amounts exclude new premiums resulting from rate changes on existing policies, from additional coverage under our Servicemembers’ Group Life Insurance contract and from excess premiums on group universal life insurance that build cash value but do not purchase face amounts.

Total annualized new business premiums for the three months ended March 31, 2022 increased $15 million compared to the prior year period, driven by higher sales in our group disability business, reflecting an increase in supplemental health product sales in the Premier and National segments.

Individual Annuities

Business Update

In April 2022, the Company completed the sale of its equity interest in Prudential Annuities Life Assurance Corporation (“PALAC”), which represents a portion of its in-force traditional variable annuity block of business, to Fortitude Group Holdings, LLC. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information.

Beginning in the third quarter of 2021, the Company reported the assets and liabilities of this block of business as “held-for-sale” with the results continuing to be reported within Individual Annuities’ operating results until the completion of the sale.

Operating Results

The following table sets forth Individual Annuities’ operating results for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in millions)
Operating results:
Revenues		$	1,207	$	1,199
Benefits and expenses		735		755
Adjusted operating income		472		444
Realized investment gains (losses), net, and related adjustments		764		2,555
Charges related to realized investment gains (losses), net		(377)		(407)
Market experience updates		(100)		176
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	759	$	2,768

Adjusted Operating Income

Adjusted operating income increased $28 million primarily due to higher net investment spread results, driven by business growth in our indexed variable annuities as well as higher income on non-coupon investments, and lower operating expenses. These impacts were partially offset by lower fee income, net of distribution expenses and other associated costs, resulting from lower average separate account values due to net outflows, partially offset by equity market appreciation and favorable impacts from our living benefits guarantees.

Revenues, Benefits and Expenses

Revenues increased $8 million as higher net investment income was partially offset by lower policy charges and fee income, as discussed above.

Benefits and expenses decreased $20 million primarily driven by lower general and administrative expenses, net of capitalization, reflecting lower operating expenses.

Account Values

Account values are a significant driver of our operating results. Since most fees are determined by the level of separate account assets, fee income varies primarily based on the level of account values. Additionally, our fee income generally drives other items such as the pattern of amortization of DAC and other costs. Account values are driven by net flows from new business sales, surrenders, withdrawals and benefit payments, policy charges and the impact of positive or negative market value changes. The annuity industry’s competitive and regulatory landscapes, which have been dynamic over the last few years, may impact our net flows, including new business sales. The following table sets forth account value information for the periods indicated:


	Three Months Ended March 31,			Twelve Months Ended March 31,
		2022		2021		2022
		(in millions)
Total Individual Annuities(1):
Beginning total account value		$	182,305	$	176,280	$	176,442
Sales		1,543		1,855		6,287
Full surrenders and death benefits		(2,188)		(2,492)		(10,097)
Sales, net of full surrenders and death benefits		(645)		(637)		(3,810)
Partial withdrawals and other benefit payments		(1,467)		(1,429)		(5,750)
Net flows		(2,112)		(2,066)		(9,560)
Change in market value, interest credited and other activity		(10,547)		3,142		5,499
Policy charges		(852)		(914)		(3,587)
Ending total account value(2)		$	168,794	$	176,442	$	168,794

(1)Includes gross variable and fixed annuities sold as retail investment products. Investments sold through defined contribution plan products are included with such products within our Retirement business. Variable annuity account values were $162.9 billion and $170.6 billion as of March 31, 2022 and 2021, respectively. Fixed annuity account values were $5.9 billion and $5.8 billion as of March 31, 2022 and 2021, respectively.

(2)Includes approximately $30 billion of account values that are classified as “held-for-sale” as of March 31, 2022 in relation to the PALAC sale, as discussed above.

Sales, net of full surrenders and death benefits, for the three months ended March 31, 2022 were relatively flat in comparison to the prior year period as a decrease in surrender activity was mostly offset by lower sales.

The decrease in account values for the three months ended March 31, 2022 was primarily driven by market value depreciation and net outflows. The decrease in account values for the twelve months ended March 31, 2022 was driven by net outflows and policy charges on contractholder accounts, partially offset by market value appreciation.

Risks and Risk Mitigants

The following is a summary of certain risks associated with Individual Annuities’ products, certain strategies in mitigating those risks including any updates to those strategies since the previous year-end, and the related financial results.

Fixed Annuity Risks and Risk Mitigants. The primary risk exposure of our fixed annuity products relates to investment risks we bear for providing customers a minimum guaranteed interest rate or an index-linked interest rate required to be credited to the customer’s account value, which include interest rate fluctuations and/or sustained periods of low interest rates, and credit risk related to the underlying investments. We manage these risk exposures primarily through our investment strategies and product design features, which include credit rate resetting subject to the minimum guaranteed interest rate as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals. In addition, a portion of our fixed products has a market value adjustment provision that affords protection of lapse in the case of rising interest rates. We also manage these risk exposures through external reinsurance for certain of our fixed annuity products.

Indexed Variable Annuity Risks and Risk Mitigants. The primary risk exposure of our indexed variable annuity products relates to the investment risks we bear in order to credit to the customer’s account balance the required crediting rate based on the performance of the elected indices at the end of each term. We manage this risk primarily through our investment strategies including derivatives and product design features, which include credit rate resetting subject to contractual minimums as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals. In addition, our indexed variable annuity strategies have an interim value provision that provides a certain level of protection from lapse in the case of rising interest rates.

Variable Annuity Risks and Risk Mitigants. The primary risk exposures of our variable annuity contracts relate to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including capital markets assumptions such as equity market returns, interest rates and market volatility, along with actuarial assumptions such as contractholder mortality, the timing and amount of annuitization and withdrawals, and contract lapses. For these risk exposures, achievement of our expected returns is subject to the risk that actual experience will differ from the assumptions used in the original pricing of these products. We manage our exposure to certain risks driven by fluctuations in capital markets primarily

through a combination of i) Product Design Features, ii) our Asset Liability Management Strategy, and iii) our Capital Hedge Program, as discussed below. We also manage these risk exposures through external reinsurance for certain of our variable annuity products. Sales of traditional variable annuities with guaranteed living benefit riders were discontinued as of December 31, 2020, and, in April of 2022, the Company completed the sale of a portion of our in-force traditional variable annuity block, as discussed above.

i.Product Design Features:

A portion of the variable annuity contracts that we offered include an automatic rebalancing feature, also referred to as an asset transfer feature. This feature is implemented at the contract level, and transfers assets between certain variable investment sub-accounts selected by the annuity contractholder and, depending on the benefit feature, a fixed-rate account in the general account or a bond fund sub-account within the separate accounts. The objective of the automatic rebalancing feature is to reduce our exposure to equity market risk and market volatility. Other product design features we utilize include, among others, asset allocation restrictions, minimum issuance age requirements and certain limitations on the amount of purchase payments, as well as a required minimum allocation to our general account for certain of our products. In addition, there is diversity in our fee arrangements, as certain fees are primarily based on the benefit guarantee amount, the contractholder account value and/or premiums, which helps preserve certain revenue streams when market fluctuations cause account values to decline.

ii.Asset Liability Management (“ALM”) Strategy (including fixed income instruments and derivatives):

We employ an ALM strategy that utilizes a combination of both traditional fixed income instruments and derivatives to meet expected liabilities associated with our variable annuity living benefit guarantees. The economic liability we manage with this ALM strategy consists of expected living benefit claims under less severe market conditions, which are managed using fixed income instruments, derivatives, or a combination thereof, and potential living benefit claims resulting from more severe market conditions, which are hedged using derivative instruments. For our Prudential Defined Income (“PDI”) variable annuity, we utilize fixed income instruments to meet expected liabilities. For the portion of our ALM strategy executed with derivatives, we enter into a range of exchange-traded and over-the-counter (“OTC”) equity, interest rate and credit derivatives, including, but not limited to: equity and treasury futures; total return, credit default and interest rate swaps; and options including equity options, swaptions, and floors and caps. The intent of this strategy is to more efficiently manage the capital and liquidity associated with these products while continuing to mitigate fluctuations in net income due to movements in capital markets. To achieve this, we periodically review and recalibrate the ALM strategy by optimizing the mix of derivatives and fixed income instruments to achieve expected outcomes.

The valuation of the economic liability we seek to defray excludes certain items that are included within the U.S. GAAP liability, such as non-performance risk (“NPR”) in order to maximize protection irrespective of the possibility of our own default, as well as risk margins (required by U.S. GAAP but different from our best estimate) and valuation methodology differences. The following table, which includes the portion of the traditional variable annuities block of business that is classified as “held-for-sale”, as discussed above, provides a reconciliation between the liability reported under U.S. GAAP and the economic liability we manage through our ALM strategy as of the periods indicated:


	March 31, 2022		December 31, 2021
	(in millions)
U.S. GAAP liability, including NPR, net of reinsurance recoverables	$	10,318	$	13,028
NPR adjustment, net of reinsurance recoverables	3,530		2,832
Subtotal	13,848		15,860
Adjustments including risk margins and valuation methodology differences	(3,177)		(3,444)
Economic liability managed through the ALM strategy	$	10,671	$	12,416

As of March 31, 2022, the fair value of our fixed income instruments and derivative assets exceed the economic liability within the entities in which the risks reside.

Under our ALM strategy, we expect differences in the U.S. GAAP net income impact between the changes in value of the fixed income instruments (either designated as available-for-sale or designated as trading) and derivatives as compared to the changes in the embedded derivative liability these assets support. These differences can be primarily attributed to three distinct areas:

Different valuation methodologies in measuring the liability we intend to cover with fixed income instruments and derivatives versus the liability reported under U.S. GAAP. The valuation methodology utilized in estimating the economic liability we intend to defray with fixed income instruments and derivatives is different from that required to be utilized to measure the liability under U.S. GAAP. Additionally, the valuation of the economic liability excludes certain items that are included within the U.S. GAAP liability, such as NPR in order to maximize protection irrespective of the possibility of our own default and risk margins (required by U.S. GAAP but different from our best estimate).
Different accounting treatment between liabilities and assets supporting those liabilities. Under U.S. GAAP, changes in the fair value of the embedded derivative liability, derivative instruments and fixed income instruments designated as trading are immediately reflected in net income, while changes in the fair value of fixed income instruments that are designated as available-for-sale are recorded as unrealized gains (losses) in other comprehensive income.
General hedge results. For the derivative portion of the ALM strategy, the net hedging impact (the extent to which the changes in value of the hedging instruments offset the change in value of the portion of the economic liability we are hedging) may be impacted by a number of factors, including: cash flow timing differences between our hedging instruments and the corresponding portion of the economic liability we are hedging, basis differences attributable to actual underlying contractholder funds to be hedged versus hedgeable indices, rebalancing costs related to dynamic rebalancing of hedging instruments as markets move, certain elements of the economic liability that may not be hedged (including certain actuarial assumptions), and implied and realized market volatility on the hedge positions relative to the portion of the economic liability we seek to hedge.

iii. Capital Hedge Program:

We employ a capital hedge program to protect a portion of the overall capital position of the variable annuities business against its exposure to the equity markets. The capital hedge program is conducted using equity derivatives which include equity call and put options, total return swaps and futures contracts. Changes in value of these derivatives are excluded from adjusted operating income, which the Company believes enhances the understanding of underlying performance trends.

Results excluded from adjusted operating income

The following table provides the net impact to the Unaudited Interim Consolidated Statements of Operations from the results excluded from adjusted operating income, which is primarily driven by the changes in the U.S. GAAP embedded derivative liability and hedge positions under the ALM strategy as described above, and the related amortization of DAC and other costs:


	Three Months Ended March 31,
		2022		2021
		(in millions)(1)
Results excluded from adjusted operating income:
Change in value of U.S. GAAP liability, pre-NPR(2)		$	2,200	$	8,392
Change in the NPR adjustment		697		(884)
Change in fair value of hedge assets, excluding capital hedges(3)		(1,986)		(4,992)
Change in fair value of capital hedges(4)		225		(295)
Other		(372)		334
Realized investment gains (losses), net, and related adjustments		764		2,555
Market experience updates(5)		(100)		176
Charges related to realized investment gains (losses), net		(377)		(407)
Total results excluded from adjusted operating income(6)		$	287	$	2,324

(1)Positive amounts represent income; negative amounts represent a loss.

(2)Represents the change in the liability (excluding NPR) for our variable annuities living benefit guarantees which is measured utilizing a valuation methodology that is required under U.S. GAAP. This liability includes such items as risk margins which are required by U.S. GAAP but not included in our best estimate of the liability.

(3)Represents the change in fair value of the derivatives utilized to hedge potential claims associated with our variable annuity living benefit guarantees.

(4)Represents the changes in fair value of equity derivatives of the capital hedge program intended to protect a portion of the overall capital position of the variable annuities business against its exposure to the equity markets.

(5)Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability.

(6)Excludes amounts from the change in unrealized gains and losses on fixed income instruments recorded in OCI (versus net income) of $(185) million, and $(1,870) million for the three months ended March 31, 2022 and 2021, respectively.

For the three months ended March 31, 2022, the gain of $287 million was driven by a favorable NPR adjustment largely due to widening credit spreads, gains associated with our capital hedge program driven by declining equity markets as well as favorable impact related to the U.S. GAAP liability before NPR, net of the change in fair value of hedge assets (excluding capital hedges) largely due to higher interest rates, partially offset by unfavorable hedge breakage. This was partially offset by charges related to the amortization of DAC and other costs, as well as unfavorable market experience updates resulting from unfavorable equity market performance, net of the impact from higher interest rates.

Product Specific Risks and Risk Mitigants

As noted above, the risks associated with our products are mitigated through product design features, including automatic rebalancing, as well as through our ALM strategy and external reinsurance. The following table sets forth the risk management profile of our living benefit guarantees and guaranteed minimum death benefit (“GMDB”) features as of the periods indicated:


	March 31, 2022				December 31, 2021				March 31, 2021
	Account Value		% of Total		Account Value		% of Total		Account Value		% of Total
	($ in millions)
Living benefit/GMDB features(1):
Both ALM strategy and automatic rebalancing(2)(3)	$	103,276	64	%	$	112,543	64	%	$	111,948	66	%
ALM strategy only(3)	6,649		4	%	7,278		4	%	7,362		4	%
Automatic rebalancing only	529		0	%	567		0	%	617		1	%
External reinsurance(4)	3,068		2	%	3,303		2	%	3,201		2	%
PDI	14,931		9	%	16,909		10	%	17,122		10	%
Other products	2,202		1	%	2,444		1	%	2,487		1	%
Total living benefit/GMDB features	$	130,655			$	143,044			$	142,737
GMDB features and other(5)	32,281		20	%	33,395		19	%	27,893		16	%
Total variable annuity account value(6)	$	162,936			$	176,439			$	170,630

(1)All contracts with living benefit guarantees also contain GMDB features, which cover the same insured contract.

(2)Contracts with living benefits that are included in our ALM strategy and that have an automatic rebalancing feature.

(3)Excludes PDI which is presented separately within this table.

(4)Represents contracts subject to a reinsurance transaction with an external counterparty covering certain Highest Daily Lifetime Income (“HDI”) v.3.0 business for the period April 1, 2015 through December 31, 2016. These contracts with living benefits also have an automatic rebalancing feature.

(5)Includes contracts that have a GMDB feature and do not have an automatic rebalancing feature.

(6)Includes approximately $30 billion of account values that are classified as “held-for-sale” as of March 31, 2022 in relation to the PALAC sale, as discussed above.

Individual Life

Operating Results

The following table sets forth Individual Life’s operating results for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in millions)
Operating results:
Revenues		$	1,757	$	1,635
Benefits and expenses		1,706		1,679
Adjusted operating income		51		(44)
Realized investment gains (losses), net, and related adjustments		(474)		(152)
Charges related to realized investment gains (losses), net		43		158
Market experience updates		96		131

Income (loss) before income taxes and equity in earnings of operating joint ventures		$	(284)	$	93

Adjusted Operating Income

Adjusted operating income increased $95 million, primarily reflecting less unfavorable underwriting results, driven by the impact from mortality experience, net of reinsurance, primarily attributable to lower COVID-19 related claims, and higher net investment spread results, driven by business growth and higher income on non-coupon investments.

Revenues, Benefits and Expenses

Revenues increased $122 million, primarily driven by higher premiums due to lower ceded reinsurance, which was mostly offset in policyholders’ benefits below, higher policy charges and fee income due to account value growth, and higher net investment income from higher income on non-coupon investments and higher average invested assets.

Benefits and expenses increased $27 million, reflecting higher policyholders’ benefits driven by the absence of favorable reserve changes in the prior year period, and lower ceded reinsurance, as described above, partially offset by a favorable comparative impact from mortality experience, net of reinsurance, primarily attributable to COVID-19 related claims. The increase also reflected higher interest credited to policyholders’ account balances due to business growth.

Sales Results

The following table sets forth Individual Life’s annualized new business premiums, as defined under “—Results of Operations—Segment Measures” above, by distribution channel and product, for the periods indicated:


	Three Months Ended March 31, 2022				Three Months Ended March 31, 2021
	Prudential Advisors		Third- Party		Total		Prudential Advisors		Third- Party		Total
	(in millions)
Variable Life	$	29	$	75	$	104	$	28	$	118	$	146
Term Life	4		20		24		6		25		31
Universal Life(1)	2		20		22		2		25		27
Total	$	35	$	115	$	150	$	36	$	168	$	204

(1)Prior period amounts have been updated to conform to current period presentation.

Total annualized new business premiums for the first quarter of 2022 decreased $54 million compared to the prior year period primarily from lower third-party sales across variable life, term life and universal life products, primarily due to pricing and product actions impacting the prior year period.

Assurance IQ

Operating Results

The following table sets forth Assurance IQ’s operating results for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in millions)
Operating results:
Revenues		$	107	$	108
Expenses		144		147
Adjusted operating income		(37)		(39)
Other adjustments(1)		(5)		(13)
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	(42)	$	(52)

(1)Includes certain components of the consideration for the Assurance IQ acquisition, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of associated contingent consideration. For additional information regarding contingent consideration, see Note 14 to the Unaudited Interim Consolidated Financial Statements.

Adjusted Operating Income

Adjusted operating income was relatively flat in comparison to the prior year period, primarily driven by an increase in the Medicare line mostly offset by a decrease in the Health Under 65 line.

Revenues and Expenses

Revenues decreased $1 million, primarily reflecting decreases in commission revenue from the Health Under 65 and Life lines. These decreases were mostly offset by higher commission revenue from the Medicare line, driven by business growth and a strategic shift by the business to emphasize Medicare products, partially offset by updated persistency experience and assumptions.

Expenses decreased $3 million, driven by lower variable expenses from the Health Under 65 and Life lines, mostly offset by higher variable expenses primarily from the Medicare line, as well as higher general and administrative operating expenses supporting business growth.

International Businesses

Business Update

In March 2022, the Company announced its agreement to acquire (through a private equity limited partnership managed by LeapFrog Investments) a minority interest in Alexander Forbes Group Holdings Limited, a leading provider of financial advice, retirement, investment and holistic wealth management services in South Africa. This investment is consistent with the Company’s strategic focus internationally on higher-growth emerging markets, and furthers the partnership’s specific objective to identify and make strategic investments in high quality financial services companies in selected African geographies.

Operating Results

The results of our International Businesses’ operations are translated on the basis of weighted average monthly exchange rates, inclusive of the effects of the intercompany arrangement discussed in “—Results of Operations—Impact of Foreign Currency Exchange Rates” above. To provide a better understanding of operating performance within the International Businesses, where indicated below, we have analyzed our results of operations excluding the effect of the year over year change in foreign currency exchange rates. Our results of operations, excluding the effect of foreign currency fluctuations, were derived by translating foreign currencies to USD at uniform exchange rates for all periods presented, including for constant dollar information discussed below. For our Japan operations, we used an exchange rate of 104 yen per USD, which was determined in connection with the foreign currency income hedging program discussed in “—Results of Operations—Impact of Foreign Currency Exchange Rates” above. In addition, for constant dollar information discussed below, activity denominated in USD is generally reported based on the amounts as transacted in USD. Annualized new business premiums presented on a constant exchange rate basis in the “Sales Results” section below reflect translation based on these same uniform exchange rates.

The following table sets forth the International Businesses’ operating results for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in millions)
Operating results:
Revenues:
Life Planner		$	2,924	$	2,930
Gibraltar Life and Other		2,802		3,001
Total revenues		5,726		5,931
Benefits and expenses:
Life Planner		2,446		2,466
Gibraltar Life and Other		2,479		2,594
Total benefits and expenses		4,925		5,060
Adjusted operating income:
Life Planner		478		464
Gibraltar Life and Other		323		407
Total adjusted operating income		801		871
Realized investment gains (losses), net, and related adjustments		(757)		(789)
Charges related to realized investment gains (losses), net		(2)		(14)
Market experience updates		0		0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		(6)		(22)
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	36	$	46

Adjusted Operating Income

Adjusted operating income from our Life Planner operations increased $14 million, including a net unfavorable impact of $6 million from currency fluctuations, inclusive of the currency hedging program discussed above. Excluding this item, adjusted operating income from our Life Planner operations increased $20 million primarily reflecting higher underwriting results driven by the growth of business in force in our Japan and Brazil operations and more favorable underwriting experience, including lower COVID-19 claims in Brazil, partially offset by higher expenses and lower net investment spread results reflecting lower reinvestment yields.

Adjusted operating income from our Gibraltar Life and Other operations decreased $84 million, including a net favorable impact of $2 million from currency fluctuations, inclusive of the currency hedging program discussed above. Excluding this item, adjusted operating income from our Gibraltar Life and Other operations decreased $86 million primarily reflecting lower net investment spread results driven by lower reinvestment yields and lower income on non-coupon investments. Also contributing to the decrease were unfavorable underwriting experience and lower earnings from our joint venture investments.

Revenues, Benefits and Expenses

Revenues from our Life Planner operations decreased $6 million, including a net unfavorable impact of $104 million from currency fluctuations. Excluding this item, revenues increased $98 million, primarily reflecting higher premiums and policy charges and fee income, and higher net investment income, driven by the growth of business in force.

Benefits and expenses of our Life Planner operations decreased $20 million, including a net favorable impact of $98 million from currency fluctuations. Excluding this item, benefits and expenses increased $78 million, primarily reflecting higher policyholders’ benefits, including changes in reserves, driven by the growth of business in force, and higher operating expenses.

Revenues from our Gibraltar Life and Other operations decreased $199 million, including a net unfavorable impact of $125 million from currency fluctuations. Excluding this item, revenues decreased $74 million, primarily reflecting lower premiums and policy charges and fee income due to the decline of business in force, and lower other income from a decline in earnings from our joint venture investments.

Benefits and expenses of our Gibraltar Life and Other operations decreased $115 million, including a net favorable impact of $127 million from currency fluctuations. Excluding this item, benefits and expenses increased $12 million, primarily driven by higher policyholders’ benefits, including changes in reserves, reflecting unfavorable underwriting experience, partially offset by lower expenses primarily due to the absence of certain costs associated with COVID-19 incurred in the prior year period.

Sales Results

The following table sets forth annualized new business premiums, as defined under “—Results of Operations—Segment Measures” above, on an actual and constant exchange rate basis for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	(in millions)
Annualized new business premiums:
On an actual exchange rate basis:
Life Planner	$	256	$	248
Gibraltar Life and Other	205		258
Total	$	461	$	506
On a constant exchange rate basis:
Life Planner	$	265	$	251
Gibraltar Life and Other	207		259
Total	$	472	$	510

The amount of annualized new business premiums and the sales mix in terms of types and currency denomination of products for any given period can be significantly impacted by several factors, including but not limited to: the addition of new products, discontinuation of existing products, changes in credited interest rates for certain products and other product modifications, changes in premium rates, changes in interest rates or fluctuations in currency markets, changes in tax laws, changes in life insurance regulations or changes in the competitive environment. Sales volume may increase or decrease prior to certain of these changes becoming effective, and then fluctuate in the other direction following such changes.

Our diverse product portfolio in Japan, in terms of currency mix and premium payment structure, allows us to adapt to changing market and competitive dynamics, including the extremely low interest rate environment. We regularly examine our product offerings and their related profitability and, as a result, we have repriced or discontinued sales of certain products that do not meet our profit expectations. The impact of these actions, coupled with the introduction of certain new products, has generally resulted in an increase in sales of products denominated in USD relative to products denominated in other currencies.

The table below presents annualized new business premiums on a constant exchange rate basis, by product category and distribution channel, for the periods indicated:


	Three Months Ended March 31, 2022										Three Months Ended March 31, 2021
	Life		Accident & Health		Retirement(1)		Annuity		Total		Life		Accident & Health		Retirement(1)		Annuity		Total
	(in millions)
Life Planner	$	145	$	16	$	102	$	2	$	265	$	135	$	17	$	99	$	0	$	251
Gibraltar Life and Other:
Life Consultants	$	60	$	7	$	10	$	24	$	101	$	73	$	7	$	9	$	16	$	105
Banks(2)	35		0		2		15		52		100		0		2		16		118
Independent Agency	21		1		32		0		54		18		1		17		0		36
Subtotal	116		8		44		39		207		191		8		28		32		259
Total	$	261	$	24	$	146	$	41	$	472	$	326	$	25	$	127	$	32	$	510

(1)Includes retirement income, endowment and savings variable universal life.

(2)Single pay life annualized new business premiums, which include 10% of first year premiums, and 3-year limited pay annualized new business premiums, which include 100% of new business premiums, represented 0% and 59%, respectively, of total Japanese bank distribution channel annualized new business premiums, excluding annuity products, for the three months ended March 31, 2022, and 8% and 67%, respectively, of total Japanese bank distribution channel annualized new business premiums, excluding annuity products, for the three months ended March 31, 2021.

Annualized new business premiums, on a constant exchange rate basis, from our Life Planner operations increased $14 million, primarily driven by higher life product sales in Brazil and Argentina.

Annualized new business premiums, on a constant exchange rate basis, from our Gibraltar Life and Other operations decreased $52 million. Bank channel and Life Consultants sales decreased $66 million and $4 million, respectively, reflecting continued impacts from COVID-19 and lower USD-denominated life sales in the bank channel. Independent Agency sales increased $18 million, primarily driven by USD-denominated endowment products.

Corporate and Other

Corporate and Other includes corporate operations, after allocations to our business segments, and Divested and Run-off Businesses other than those that qualify for “discontinued operations” accounting treatment under U.S. GAAP.


	Three Months Ended March 31,
		2022		2021(1)
		(in millions)
Operating results:
Interest expense on debt		$	(198)	$	(208)
Investment income		27		36
Pension and employee benefits		80		62
Other corporate activities		(275)		(212)
Adjusted operating income		(366)		(322)
Realized investment gains (losses), net, and related adjustments		34		166
Charges related to realized investment gains (losses), net		7		11
Market experience updates		(2)		(3)
Divested and Run-off Businesses		(299)		45
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		(24)		(4)
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	(650)	$	(107)

(1)Effective third quarter of 2020, the results of the Prudential Life Insurance Company of Taiwan Inc. (“POT”) and the impact of its sale are excluded from the International Businesses and are included herein. Effective third quarter of 2021, the results of the Full Service Retirement business are excluded from the Retirement segment and are included in Divested and Run-off Businesses. Prior period amounts have been updated to conform to current period presentation. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information regarding these dispositions.

The loss from Corporate and Other operations, on an adjusted operating income basis, increased $44 million. Net charges from other corporate activities increased $63 million primarily driven by higher expenses, including an increase in advertising and other corporate costs. Also contributing to the increased loss was lower investment income of $9 million, primarily reflecting a decrease in income on non-coupon investments. These impacts were partially offset by favorable results of $18 million from pension and employee benefits, primarily driven by higher earnings from our qualified pension plan as a result of higher expected returns on plan assets, and a favorable impact from design changes to the Company’s Retiree Medical Savings Account plan, as well as a $10 million decrease in interest expense on debt, primarily reflecting lower average debt balances.

Divested and Run-off Businesses

Divested and Run-off Businesses Included in Corporate and Other

Income from our Divested and Run-off Businesses includes results from several 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 results of these Divested and Run-off Businesses are reflected in our Corporate and Other operations, but are excluded from adjusted operating income. A summary of the results of the Divested and Run-off Businesses reflected in our Corporate and Other operations is as follows for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	(in millions)
Long-Term Care	$	(110)	$	3
Other(1)	(189)		42
Total Divested and Run-off Businesses income (loss) excluded from adjusted operating income	$	(299)	$	45

(1)Effective third quarter of 2020, the results of POT and the impact of its sale are excluded from the International Businesses and are included herein. Effective third quarter of 2021, the results of the Full Service Retirement business are excluded from the Retirement segment and are included herein. Prior period amounts have been updated to conform to current period presentation. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information about these divestitures.

Long-Term Care

Results decreased $113 million compared to the prior year period primarily driven by an unfavorable impact from changes in the market value of equity securities, partially offset by a less unfavorable impact from changes in the market value of derivatives used for duration management.

Other Divested and Run-off Businesses

Results decreased $231 million compared to the prior year period primarily from losses related to the Full Service Retirement business in the current quarter, largely driven by the impact of rising interest rates on the market value of assets supporting experience-rated contractholder liabilities. For more information, see “—Experience-Rated Contractholder Liabilities, Assets Supporting Experience-Rated Contractholder Liabilities and Other Related Investments.”

Closed Block Division

The Closed Block division includes certain in-force traditional domestic participating life insurance and annuity products and assets that are used for the payment of benefits and policyholder dividends on these policies (collectively the “Closed Block”), as well as certain related assets and liabilities. We no longer offer these traditional domestic participating policies. See Note 7 to the Unaudited Interim Consolidated Financial Statements for additional information.

Each year, the Board of Directors of The Prudential Insurance Company of America (“PICA”) determines the dividends payable on participating policies for the following year based on the experience of the Closed Block, including investment income, net realized and unrealized investment gains (losses), mortality experience and other factors. Although the Closed Block experience for dividend action decisions is based upon statutory results, at the time the Closed Block was established, we developed, as required by U.S. GAAP, an actuarial calculation of the timing of the maximum future earnings from the policies included in the Closed Block. If actual cumulative earnings in any given period are greater than the cumulative earnings we expected, we record this excess as a policyholder dividend obligation. We will subsequently pay this excess to Closed Block policyholders as an additional dividend unless it is otherwise offset by future Closed Block performance that is less favorable than we originally expected. The policyholder dividends we charge to expense within the Closed Block division will include any change in our policyholder dividend obligation that we recognize for the excess of actual cumulative earnings in any given period over the cumulative earnings we expected in addition to the actual policyholder dividends declared by the Board of Directors of PICA.

As of March 31, 2022, the excess of actual cumulative earnings over the expected cumulative earnings was $4,283 million, which was recorded as a policyholder dividend obligation. Actual cumulative earnings, as required by U.S. GAAP, reflect the recognition of realized investment gains and losses in the current period, as well as changes in assets and related liabilities that support the Closed Block policies. Additionally, the accumulation of net unrealized investment gains that have arisen subsequent to the establishment of the Closed Block has been reflected as a policyholder dividend obligation of $582 million at March 31, 2022, to be paid to Closed Block policyholders unless offset by future experience, with a corresponding amount reported in AOCI.

Operating Results

The following table sets forth the Closed Block division’s results for the periods indicated:


	Three Months Ended March 31,
		2022		2021
		(in millions)
U.S. GAAP results:
Revenues		$	965	$	1,365
Benefits and expenses		942		1,331
Income (loss) before income taxes and equity in earnings of operating joint ventures		$	23	$	34

Income (loss) Before Income Taxes and Equity in Earnings of Operating Joint Ventures

Income (loss) before income taxes and equity in earnings of operating joint ventures decreased $11 million. Net investment activity results decreased primarily reflecting lower other income driven by unfavorable changes in the value of equity securities, and lower net investment income on coupon investments, partially offset by an increase in realized investment gains driven by net favorable changes in the fair value of derivatives used in risk management activities. Net insurance activity results reflected an unfavorable comparative change driven by lower premiums due to the runoff of policies in force, partially offset by a favorable comparative change in claims experience. As a result of the above and other variances, a $104 million reduction in the policyholder dividend obligation was recorded in the first three months of 2022, compared to a $246 million increase in the first three months of 2021. If actual cumulative earnings fall below expected cumulative earnings in future periods, earnings volatility in the Closed Block division, which is primarily due to changes in investment results, may not be offset by changes in the cumulative earnings policyholder dividend obligation. For a discussion of the Closed Block division’s realized investment gains (losses), net, see “—General Account Investments.”

Revenues, Benefits and Expenses

Revenues decreased $400 million primarily driven by a decrease in other income, net investment income and lower premiums, as discussed above, partially offset by an increase in net realized investment gains.

Benefits and expenses decreased $389 million primarily driven by a decrease in dividends to policyholders, reflecting a reduction in the policyholder dividend obligation expense due to changes in cumulative earnings, as discussed above.

Income Taxes

For information regarding income taxes, see Note 8 to the Unaudited Interim Consolidated Financial Statements.

Experience-Rated Contractholder Liabilities,

Assets Supporting Experience-Rated Contractholder Liabilities and Other Related Investments

Certain products included in our International Businesses and our Full Service Retirement business are experience-rated in that investment results associated with these products are expected to ultimately accrue to contractholders. The majority of investments supporting these experience-rated products are carried at fair value.

International Businesses. In our International Businesses, the experience-rated products are fully participating. As a result, the entire return on the underlying investments is passed back to policyholders through a corresponding adjustment to the related liability. These investments are reflected on the Unaudited Interim Consolidated Statements of Financial Position as “Assets supporting experience-rated contractholder liabilities, at fair value.” Realized and unrealized gains (losses) for these investments are reported in “Other income (loss)” while interest and dividend income are reported in “Net investment income.” As these experience-rated products are fully participating, the entire return on the underlying investments is passed back to policyholders through a corresponding adjustment to the related liability, primarily classified in the Unaudited Interim Consolidated Statements of Financial Position as “Policyholders’ account balances.”

Adjusted operating income excludes net investment gains (losses) on assets supporting experience-rated contractholder liabilities. This is consistent with the exclusion of realized investment gains (losses) with respect to other investments supporting insurance liabilities managed on a consistent basis. In addition, to be consistent with the historical treatment of charges related to realized investment gains (losses) on investments, adjusted operating income also excludes the change in contractholder liabilities due to asset value changes in the pool of investments supporting these experience-rated contracts,

which are reflected in “Interest credited to policyholders’ account balances.” The result of this approach is that adjusted operating income for these products includes net fee revenue and interest spread we earn on these experience-rated contracts, and excludes changes in fair value of the pool of investments, both realized and unrealized, that we expect will ultimately accrue to the contractholders.

Full Service Retirement Business. Our Full Service Retirement business has two types of experience-rated products that are supported by assets supporting experience-rated contractholder liabilities and other related investments. Fully participating products are those for which the entire return on underlying investments is passed back to the policyholders. Partially participating products are those for which only a portion of the return on underlying investments is passed back to the policyholders over time through changes to the contractual crediting rates. The crediting rates are typically reset semiannually, often subject to a minimum crediting rate, and returns are required to be passed back within ten years.

Beginning in the third quarter of 2021, in connection with the announced sale to Great-West, the Company reported the assets and liabilities of the Full Service Retirement business as “held-for-sale,” and transferred the results of this business from the Retirement segment to the Divested and Run-off Businesses within Corporate & Other operations, which are excluded from adjusted operating income. See Note 1 to the Consolidated Financial Statements for additional information regarding this transaction.

As a result of this “held-for-sale” classification, the assets and liabilities associated with these products for the current reporting period are included in the Unaudited Interim Consolidated Statements of Financial Position as “Assets held-for-sale” and “Liabilities held-for-sale,” respectively; however, for prior periods, the assets and liabilities associated with these products are presented similar to how they are described in “International Businesses” above.

The following table sets forth the impact on results for the periods indicated of these items that are excluded from adjusted operating income:


	Three Months Ended March 31,
		2022		2021
		(in millions)
International Businesses:
Investment gains (losses) on assets supporting experience-rated contractholder liabilities, net		$	(44)	$	180
Change in experience-rated contractholder liabilities due to asset value changes		44		(180)
Gains (losses), net, on experienced rated contracts		$	0	$	0
Divested and Run-off Businesses:
Investment gains (losses) on assets supporting experience-rated contractholder liabilities, net		$	(950)	$	(435)
Change in experience-rated contractholder liabilities due to asset value changes		818		438
Gains (losses), net, on experienced rated contracts(1)(2)		$	(132)	$	3
Total:
Investment gains (losses) on assets supporting experience-rated contractholder liabilities, net		$	(994)	$	(255)
Change in experience-rated contractholder liabilities due to asset value changes		862		258
Gains (losses), net, on experienced rated contracts(1)(2)		$	(132)	$	3

(1)Decreases to contractholder liabilities due to asset value changes are limited by certain floors and therefore do not reflect cumulative declines in recorded asset values of $422 million and $3 million as of March 31, 2022 and 2021, respectively.

(2)Included in the amounts above related to the change in the liability to contractholders as a result of commercial mortgage and other loans are a decrease of $87 million and an increase of $11 million for the three months ended March 31, 2022 and 2021, respectively. As prescribed by U.S. GAAP, changes in the fair value of commercial mortgage and other loans held for investment in our general account, other than when associated with impairments, are not recognized in income in the current period, while the impact of these changes in fair value are reflected as a change in the liability to fully participating contractholders in the current period.

For our Full Service Retirement business reported within Divested and Run-off Businesses, the net impact of changes in experience-rated contractholder liabilities and investment gains (losses) on assets supporting experience-rated contractholder liabilities and other related investments reflects timing differences between the recognition of the mark-to-market adjustments and the recognition of the recovery of these adjustments in future periods through subsequent increases in asset values or reductions in crediting rates on contractholder liabilities for partially participating products. This includes certain assets that are designated as available-for-sale where mark-to-market adjustments are recorded as unrealized gains (losses) in “Other

comprehensive income”. These impacts also reflect the difference between the fair value of underlying commercial mortgages and other loans and the amortized cost, less any valuation allowance, of these loans.

Valuation of Assets and Liabilities

Fair Value of Assets and Liabilities

The authoritative guidance related to fair value measurement establishes a framework that includes a three-level hierarchy used to classify the inputs used in measuring fair value. The level in the hierarchy within which the fair value falls is determined based on the lowest level input that is significant to the measurement. The fair values of assets and liabilities classified as Level 3 include at least one significant unobservable input in the measurement. See Note 6 to the Unaudited Interim Consolidated Financial Statements for an additional description of the valuation hierarchy levels as well as for the balances of assets and liabilities measured at fair value on a recurring basis by hierarchy level presented on a consolidated basis.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis, as of the periods indicated, and the portion of such assets and liabilities that are classified in Level 3 of the valuation hierarchy. The table also provides details about these assets and liabilities excluding those held in the Closed Block division. We believe the amounts excluding the Closed Block division are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial because substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies only. See Note 7 to the Unaudited Interim Consolidated Financial Statements for additional information on the Closed Block.


	As of March 31, 2022(1)								As of December 31, 2021
	PFI excluding Closed Block Division				Closed Block Division				PFI excluding Closed Block Division				Closed Block Division
	Total at Fair Value		Total Level 3(2)		Total at Fair Value		Total Level 3(2)		Total at Fair Value		Total Level 3(2)		Total at Fair Value		Total Level 3(2)
	(in millions)
Fixed maturities, available-for- sale	$	309,477	$	5,388	$	35,480	$	1,387	$	334,006	$	5,810	$	38,404	$	1,510
Assets supporting experience-rated contractholder liabilities:
Fixed maturities	1,030		0		0		0		1,057		0		0		0
Equity securities	2,154		0		0		0		2,271		0		0		0
All other(3)	0		0		0		0		20		0		0		0
Subtotal	3,184		0		0		0		3,348		0		0		0
Fixed maturities, trading	6,712		363		1,012		15		7,686		403		1,137		18
Equity securities	5,020		657		2,173		115		6,089		699		2,288		100
Commercial mortgage and other loans	241		0		0		0		1,263		0		0		0
Other invested assets(4)	3,108		499		5		5		3,749		489		7		4
Short-term investments	3,353		188		198		25		5,186		268		457		62
Cash equivalents	5,722		2		545		0		4,857		48		402		22
Other assets	207		207		0		0		164		164		0		0
Separate account assets	203,286		1,254		0		0		219,971		1,283		0		0
Total assets	$	540,310	$	8,558	$	39,413	$	1,547	$	586,319	$	9,164	$	42,695	$	1,716
Future policy benefits	$	6,982	$	6,982	$	0	$	0	$	9,068	$	9,068	$	0	$	0
Policyholders’ account balances	1,402		1,402		0		0		1,436		1,436		0		0
Other liabilities(4)	1,038		0		5		0		1,860		0		0		0

Total liabilities	$	9,422	$	8,384	$	5	$	0	$	12,364	$	10,504	$	0	$	0

(1)Excludes amounts for financial instruments reclassified to “Assets held-for-sale” of $118,458 million and “Liabilities held-for-sale” of $5,381 million. Assets held-for-sale and liabilities held-for-sale are valued on a basis consistent with similar instruments described herein. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information.

(2)Level 3 assets expressed as a percentage of total assets measured at fair value on a recurring basis for PFI excluding the Closed Block division and for the Closed Block division totaled 1.6% and 3.9%, respectively, as of March 31, 2022, and 1.6% and 4.0%, respectively, as of December 31, 2021.

(3)“All other” represents cash equivalents and short-term investments.

(4)“Other invested assets” and “Other liabilities” primarily include derivatives. The amounts include the impact of netting subject to master netting agreements.

The determination of fair value, which for certain assets and liabilities is dependent on the application of estimates and assumptions, can have a significant impact on our results of operations and may require the application of a greater degree of judgment depending on market conditions, as the ability to value assets and liabilities can be significantly impacted by a decrease in market activity or a lack of transactions executed in an orderly manner. The continued impact of the COVID-19 pandemic on the global economy may have adverse effects on the valuation of assets and liabilities. Due to the highly uncertain nature of these conditions, it is not possible to estimate the overall impacts at this time.

Fixed maturity securities included in Level 3 in our fair value hierarchy are generally priced based on internally-developed valuations or indicative broker quotes. For certain private fixed maturity and equity securities, the internal valuation models use significant unobservable inputs and, accordingly, such securities are included in Level 3 in our fair value hierarchy. Level 3 fixed maturity securities for PFI excluding the Closed Block division included approximately $1.9 billion of public fixed maturities as of March 31, 2022, with values primarily based on indicative broker quotes, and approximately $4.4 billion of private fixed maturities, with values primarily based on internally-developed models. Significant unobservable inputs used in their valuation included: issue specific spread adjustments, material non-public financial information, management judgment, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. Separate account assets included in Level 3 in our fair value hierarchy primarily include corporate securities and commercial mortgage loans.

Embedded derivatives reported in “Future policy benefits” and “Policyholders’ account balances” that are included in Level 3 of our fair value hierarchy represent general account liabilities pertaining to living benefit features of the Company’s variable annuity contracts and the index-linked interest credited features on certain life and annuity products. These are carried at fair value with changes in fair value included in “Realized investment gains (losses), net.” These embedded derivatives are valued using internally-developed models that require significant estimates and assumptions developed by management. Changes in these estimates and assumptions can have a significant impact on the results of our operations.

For additional information about the valuation techniques and the key estimates and assumptions used in our determination of fair value, see Note 6 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

General Account Investments

Portfolio Composition

Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, policy loans and non-coupon investments, which include equity securities and other invested assets such as limited partnerships and limited liability companies (“LPs/LLCs”), real estate held through direct ownership, derivative instruments and seed money investments in separate accounts. The composition of our general account reflects, within the discipline provided by our risk management approach, our need for competitive results and the selection of diverse investment alternatives available primarily through our PGIM segment. The size of our portfolio enables us to invest in asset classes that may be unavailable to the typical investor.

The following tables set forth the composition of our general account investment portfolio apportioned between PFI excluding the Closed Block division and the Closed Block division, as of the dates indicated:


	March 31, 2022
	PFI Excluding Closed Block Division(1)				Closed Block Division		Total
	($ in millions)
Fixed maturities:
Public, available-for-sale, at fair value	$	254,672	63.8	%	$	25,843	$	280,515
Public, held-to-maturity, at amortized cost, net of allowance	1,340		0.3		0		1,340
Private, available-for-sale, at fair value	54,346		13.6		9,637		63,983
Private, held-to-maturity, at amortized cost, net of allowance	92		0.1		0		92
Fixed maturities, trading, at fair value	6,528		1.6		1,012		7,540
Assets supporting experience-rated contractholder liabilities, at fair value	3,184		0.8		0		3,184
Equity securities, at fair value	4,568		1.1		2,173		6,741
Commercial mortgage and other loans, at book value, net of allowance	50,900		12.8		8,147		59,047
Policy loans, at outstanding balance	6,471		1.6		3,736		10,207
Other invested assets, net of allowance(2)	12,660		3.2		4,423		17,083
Short-term investments, net of allowance	4,270		1.1		293		4,563
Total general account investments	399,031		100.0	%	55,264		454,295
Invested assets of other entities and operations(3)	6,042				0		6,042
Total investments	$	405,073			$	55,264	$	460,337


	December 31, 2021
	PFI Excluding Closed Block Division(1)				Closed Block Division		Total
	($ in millions)
Fixed maturities:
Public, available-for-sale, at fair value	$	276,868	65.0	%	$	28,167	$	305,035
Public, held-to-maturity, at amortized cost, net of allowance	1,413		0.3		0		1,413
Private, available-for-sale, at fair value	56,660		13.3		10,237		66,897
Private, held-to-maturity, at amortized cost, net of allowance	101		0.1		0		101
Fixed maturities, trading, at fair value	7,473		1.8		1,137		8,610
Assets supporting experience-rated contractholder liabilities, at fair value	3,358		0.8		0		3,358
Equity securities, at fair value	5,587		1.3		2,288		7,875
Commercial mortgage and other loans, at book value, net of allowance	49,146		11.6		8,241		57,387
Policy loans, at outstanding balance	6,571		1.5		3,815		10,386
Other invested assets, net of allowance(2)	12,485		2.9		4,358		16,843
Short-term investments, net of allowance	6,043		1.4		557		6,600
Total general account investments	425,705		100.0	%	58,800		484,505
Invested assets of other entities and operations(3)	7,694				0		7,694
Total investments	$	433,399			$	58,800	$	492,199

(1) Excludes “Assets held-for-sale” of $36,701 million and $40,669 million as of March 31, 2022 and December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Statements for additional information.

(2)Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments. For additional information regarding these investments, see “—Other Invested Assets” below.

(3)Includes invested assets of our investment management and derivative operations. Excludes assets of our investment management operations that are managed for third-parties and those assets classified as “Separate account assets” on our balance sheet. For additional information regarding these investments, see “—Invested Assets of Other Entities and Operations” below.

The decrease in general account investments attributable to PFI excluding the Closed Block division in the first three months of 2022 was primarily due to an increase in U.S. interest rates and the translation impact of the U.S. dollar strengthening against the yen, partially offset by the reinvestment of net investment income and net business inflows. For

information regarding the methodology used in determining the fair value of our fixed maturities, see Note 6 to the Unaudited Interim Consolidated Financial Statements.

As of both March 31, 2022 and December 31, 2021, 48% of our general account investments attributable to PFI excluding the Closed Block division related to our Japanese insurance operations. The following table sets forth the composition of the investments of our Japanese insurance operations’ general account, as of the dates indicated:


	March 31, 2022		December 31, 2021
	(in millions)
Fixed maturities:
Public, available-for-sale, at fair value	$	135,391	$	146,600
Public, held-to-maturity, at amortized cost, net of allowance	1,340		1,413
Private, available-for-sale, at fair value	19,977		21,079
Private, held-to-maturity, at amortized cost, net of allowance	92		101
Fixed maturities, trading, at fair value	760		839
Assets supporting experience-rated contractholder liabilities, at fair value	3,184		3,328
Equity securities, at fair value	2,033		2,187
Commercial mortgage and other loans, at book value, net of allowance	19,754		19,969
Policy loans, at outstanding balance	2,654		2,726
Other invested assets(1)	4,471		4,203
Short-term investments, net of allowance	194		692
Total Japanese general account investments	$	189,850	$	203,137

(1)Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments.

The decrease in general account investments related to our Japanese insurance operations in the first three months of 2022 was primarily due to an increase in U.S. interest rates and the translation impact of the U.S. dollar strengthening against the yen, partially offset by net business inflows and the reinvestment of net investment income.

As of March 31, 2022, our Japanese insurance operations had $88.1 billion, at carrying value, of investments denominated in U.S. dollars, including $2.1 billion that were hedged to yen through third-party derivative contracts and $75.6 billion that support liabilities denominated in U.S. dollars, with the remainder constituting part of the hedging of foreign currency exchange rate exposure to U.S. dollar-equivalent equity. As of December 31, 2021, our Japanese insurance operations had $92.5 billion, at carrying value, of investments denominated in U.S. dollars, including $2.1 billion that were hedged to yen through third-party derivative contracts and $80.2 billion that support liabilities denominated in U.S. dollars, with the remainder constituting part of the hedging of foreign currency exchange rate exposure of U.S. dollar-equivalent equity. The $4.4 billion decrease in the carrying value of U.S. dollar-denominated investments from December 31, 2021 was primarily attributable to an increase in U.S. interest rates partially offset by reinvestment of net investment income and portfolio growth as a result of net business inflows.

Our Japanese insurance operations had $7.6 billion and $8.0 billion, at carrying value, of investments denominated in Australian dollars that support liabilities denominated in Australian dollars as of March 31, 2022 and December 31, 2021, respectively. The $0.4 billion decrease in the carrying value of Australian dollar-denominated investments from December 31, 2021 was primarily attributable to run-off of the portfolio and an increase in Australian government bond rates. For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations and a discussion of our yen hedging strategy, see “—Results of Operations by Segment—Impact of Foreign Currency Exchange Rates” above.

Investment Results

The following tables set forth the investment results of our general account apportioned between PFI excluding the Closed Block division, and the Closed Block division, for the periods indicated. The yields are based on net investment income as reported under U.S. GAAP and as such do not include certain interest-related items, such as settlements of duration management swaps which are included in “Realized investment gains (losses), net.”


	Three Months Ended March 31, 2022
	PFI Excluding Closed Block Division and Japanese Operations(6)				Japanese Insurance Operations				PFI Excluding Closed Block Division(6)				Closed Block Division		Total(5)
	Yield(1)		Amount		Yield(1)		Amount		Yield(1)		Amount		Amount		Amount
	($ in millions)
Fixed maturities(2)	4.47	%	$	1,782	2.67	%	$	966	3.61	%	$	2,748	$	337	$	3,085
Assets supporting experience-rated contractholder liabilities	2.67		123		1.07		9		2.43		132		0		132
Equity securities	1.23		10		0.81		4		1.07		14		11		25
Commercial mortgage and other loans	3.65		327		3.61		178		3.64		505		80		585
Policy loans	4.76		46		3.95		26		4.42		72		54		126
Short-term investments and cash equivalents	0.51		15		2.11		3		0.58		18		1		19
Gross investment income	3.96		2,303		2.74		1,186		3.44		3,489		483		3,972
Investment expenses	(0.14)		(71)		(0.14)		(60)		(0.14)		(131)		(30)		(161)
Investment income after investment expenses	3.82	%	2,232		2.60	%	1,126		3.30	%	3,358		453		3,811
Other invested assets(3)			379				74				453		101		554
Investment results of other entities and operations(4)			(7)				0				(7)		0		(7)
Total investment income			$	2,604			$	1,200			$	3,804	$	554	$	4,358


	Three Months Ended March 31, 2021
	PFI Excluding Closed Block Division and Japanese Operations				Japanese Insurance Operations				PFI Excluding Closed Block Division				Closed Block Division		Total(5)
	Yield(1)		Amount		Yield(1)		Amount		Yield(1)		Amount		Amount		Amount
	($ in millions)
Fixed maturities(2)	4.51	%	$	1,787	2.67	%	$	969	3.63	%	$	2,756	$	364	$	3,120
Assets supporting experience-rated contractholder liabilities	2.84		148		1.14		9		2.61		157		0		157
Equity securities	0.87		7		0.80		4		0.84		11		12		23
Commercial mortgage and other loans	3.84		342		3.73		186		3.80		528		85		613
Policy loans	4.95		51		4.76		35		4.87		86		58		144
Short-term investments and cash equivalents	0.30		8		0.34		1		0.30		9		0		9
Gross investment income	4.02		2,343		2.76		1,204		3.48		3,547		519		4,066
Investment expenses	(0.14)		(70)		(0.13)		(56)		(0.13)		(126)		(31)		(157)
Investment income after investment expenses	3.88	%	2,273		2.63	%	1,148		3.35	%	3,421		488		3,909
Other invested assets(3)			256				93				349		98		447
Investment results of other entities and operations(4)			26				0				26		0		26
Total investment income			$	2,555			$	1,241			$	3,796	$	586	$	4,382

(1)For interim periods, yields are annualized. The denominator in the yield percentage is based on quarterly average carrying values for all asset types except for fixed maturities which are based on amortized cost, net of allowance. Amounts for fixed maturities, short-term investments and cash equivalents are also netted for securities lending activity (i.e., income netted for rebate expenses and asset values netted for securities lending liabilities). A yield is not presented for other invested assets as it is not considered a meaningful measure of investment performance. Yields exclude investment income and assets related to other invested assets.

(2)Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading, which are included in other invested assets.

(3)Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments, fixed maturities classified as trading and other miscellaneous investments.

(4)Includes net investment income of our investment management operations.

(5)The total yield was 3.36% and 3.42% for the three months ended March 31, 2022 and 2021, respectively.

(6)The denominator in the yield percentage includes “Assets held-for-sale”. See Note 1 of the Unaudited Interim Consolidated Statement for additional information.

The decrease in investment income after investment expenses yield attributable to our general account investments, excluding both the Closed Block division and the Japanese insurance operations’ portfolio, for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, was primarily the result of fixed income reinvestment rates remaining lower than the portfolio yield.

The decrease in investment income after investment expenses yield attributable to the Japanese insurance operations’ portfolio, for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, was primarily the result of fixed income reinvestment rates remaining lower than the portfolio yield.

Both the U.S. dollar-denominated and Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts provide a yield that is substantially higher than the yield on comparable yen-denominated fixed maturities. The average amortized cost of U.S. dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was approximately $61.3 billion and $57.4 billion for the three months ended March 31, 2022 and 2021, respectively. The majority of U.S. dollar-denominated fixed maturities support liabilities that are denominated in U.S. dollars. The average amortized cost of Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was approximately $7.1 billion and $8.5 billion for the three months ended March 31, 2022 and 2021, respectively. The majority of Australian dollar-denominated fixed maturities support liabilities that are denominated in Australian dollars. For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations, see “—Results of Operations by Segment—Impact of Foreign Currency Exchange Rates” above.

Realized Investment Gains and Losses

The following table sets forth “Realized investment gains (losses), net” of our general account apportioned between PFI excluding Closed Block division, and the Closed Block division, by investment type as well as “Related adjustments” and “Charges related to realized investment gains (losses), net” for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	(in millions)
PFI excluding Closed Block Division:
Realized investment gains (losses), net:
(Addition to) release of allowance for credit losses on fixed maturities	$	(42)	$	11
Write-downs on fixed maturities(1)	(1)		0
Net gains (losses) on sales and maturities	(336)		1,050
Fixed maturity securities(2)	(379)		1,061
(Addition to) release of allowance for credit losses on loans	3		9
Net gains (losses) on sales and maturities	0		1
Commercial mortgage and other loans	3		10
Derivatives	(109)		842
OTTI losses on other invested assets recognized in earnings	0		(9)
(Addition to) release of allowance for credit losses on other invested assets	(2)		(1)
Other net gains (losses)	3		65
Other	1		55
Subtotal	(484)		1,968
Investment results of other entities and operations(3)	68		39
Total — PFI excluding Closed Block Division	(416)		2,007
Related adjustments(4)	(605)		(713)
Realized investment gains (losses), net, and related adjustments	(1,021)		1,294
Charges related to realized investment gains (losses), net	(339)		(239)
Realized investment gains (losses), net, and charges related to realized investment gains (losses), net and adjustments	$	(1,360)	$	1,055
Closed Block Division:
Realized investment gains (losses), net:
(Addition to) release of allowance for credit losses on fixed maturities	$	(35)	$	(7)
Write-downs on fixed maturities(1)	(5)		0
Net gains (losses) on sales and maturities	8		161
Fixed maturity securities(2)	(32)		154
(Addition to) release of allowance for credit losses on loans	1		1
Net gains (losses) on sales and maturities	0		0
Commercial mortgage and other loans	1		1
Derivatives	140		(82)


Other net gains (losses)	(9)		(1)
Other	(9)		(1)
Subtotal — Closed Block Division	100		72
Consolidated PFI realized investment gains (losses), net	$	(316)	$	2,079

(1)Amounts represent securities actively marketed for sale.

(2)Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading.

(3)Includes “realized investment gains (losses), net” of our investment management operations.

(4)Prior period amount has been updated to conform to current period presentation.

Net losses on sales and maturities of fixed maturity securities were $336 million for the first quarter of 2022 primarily driven by relative value trading in a higher interest rate environment, partially offset by the impact of foreign currency exchange rate movements on U.S. and Australian dollar-denominated securities that matured or were sold within our International Businesses segment. Net gains on sales and maturities of fixed maturity securities were $1,050 million for the first quarter of 2021 primarily driven by sales of U.S. treasuries acquired in a higher interest-rate environment within our domestic segments.

Net realized losses on derivative instruments of $109 million, for the first quarter of 2022 primarily included:

$1,425 million of losses on interest rate derivatives due to an increase in the swap and U.S. Treasury rates;
$113 million of losses on foreign currency hedges due to Japanese yen depreciation versus the U.S. dollar; and
$18 million of losses on credit default swaps due to spreads widening.

Partially offsetting these losses were:

$1,350 million of gains on product-related embedded derivatives and related hedge positions associated with certain variable annuity contracts; and
$124 million of gains on capital hedges due to decreases in equity indices.

Net realized gains on derivative instruments of $842 million, for the first quarter of 2021 primarily included:

$2,874 million of gains on product-related embedded derivatives and related hedge positions associated with certain variable annuity contracts.

Partially offsetting these gains were:

$1,727 million of losses on interest rate derivatives due to increases in the swap and U.S. Treasury rates; and
$331 million of losses on capital hedges due to increase in equity indices.

For a discussion of living benefit guarantees and related hedge positions in our Individual Annuities segment, see “—Results of Operations by Segment—U.S. Businesses—Individual Annuities” above.

Included in the table above are “Related adjustments,” which include the portions of “Realized investment gains (losses), net” that are either (1) included in adjusted operating income or (2) included in other reconciling line items to adjusted operating income, such as “Market experience updates” and “Divested and Run-off Businesses.” “Related adjustments” also includes the portions of “Other income (loss)” and “Net investment income” that are excluded from adjusted operating income. These adjustments are made to arrive at “Realized investment gains (losses), net, and related adjustments” which is excluded from adjusted operating income. See Note 13 for additional details on adjusted operating income and its reconciliation to “Income (loss) before income taxes and equity in earnings of operating joint ventures.” Results for the first quarter of 2022 and 2021 reflect net related adjustments of $(605) million and $(713) million, respectively. Both periods include changes in the fair value of equity securities and fixed income securities that are designated as trading, as well as settlements and changes in the value of derivatives.

Also included in the table above are “Charges related to realized investment gains (losses), net,” which are excluded from adjusted operating income and which may be reflected as either a net charge or net benefit. Results for the first quarter of 2022 and 2021 reflect net charges of $339 million and $239 million, respectively, and were primarily driven by the impact of derivative activity on the amortization of DAC and other costs, and certain policyholder reserves.

Credit Losses

The level of credit losses generally reflects current and expected economic conditions and is expected to increase when economic conditions worsen and to decrease when economic conditions improve. Historically, the causes of credit losses have been specific to each individual issuer and have not directly resulted in credit losses to other securities within the same industry or geographic region. We may also realize additional credit and interest rate-related losses through sales of investments pursuant to our credit risk and portfolio management objectives.

We maintain separate monitoring processes for public and private fixed maturities and create watch lists to highlight securities that require special scrutiny and management. For private placements, our credit and portfolio management processes help ensure prudent controls over valuation and management. We have separate pricing and authorization processes to establish “checks and balances” for new investments. We apply consistent standards of credit analysis and due diligence for all transactions, whether they originate through our own in-house staff or through agents. Our regional offices closely monitor the portfolios in their regions. We set all valuation standards centrally, and we assess the fair value of all investments quarterly. Our public and private fixed maturity investment managers formally review all public and private fixed maturity holdings on a quarterly basis and more frequently when necessary to identify potential credit deterioration whether due to ratings downgrades, unexpected price variances and/or company or industry-specific concerns.

For LPs/LLCs accounted for using the equity method and for wholly-owned investment real estate, 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. For additional information regarding our OTTI policies, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

COVID-19

We believe our investment portfolio has been diligently constructed with a strong focus on ALM discipline, risk management, and capital preservation. Throughout the COVID-19 pandemic, our portfolio has remained resilient, bolstered by our portfolio construction, investment strategy and our experience in managing highly specialized asset classes throughout credit cycles. The economy continues to recover and remains on a path to re-opening. Credit migration and defaults were low in 2021 and have remained limited in 2022. The sectors most impacted from COVID-19 have started to recover but could be influenced by periods of volatility due to variants emerging. We continue to monitor our portfolio for potential credit issues and opportunities as part of our overall portfolio and risk management process.

Russia and Ukraine Exposure

As of March 31, 2022, our consolidated direct investment exposure in Russia and Ukraine was approximately $58 million and $0 million, respectively, based on amortized cost. In April 2022, we divested all of our holdings in Russian sovereign and state-owned enterprises and have no direct investment exposure in either country as of the date of this filing.

General Account Investments of PFI excluding Closed Block Division

In the following sections, we provide details about our investment portfolio, excluding investments held in the Closed Block division. We believe the details of the composition of our investment portfolio excluding the Closed Block division are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial, Inc. because substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies only. See Note 7 to the Unaudited Interim Consolidated Financial Statements for additional information on the Closed Block.

Fixed Maturity Securities

In the following sections, we provide details about our fixed maturity securities portfolio, which excludes fixed maturity securities classified as assets supporting experience-rated contractholder liabilities and classified as trading.

Fixed Maturity Securities by Industry

The following table sets forth the composition of the portion of our fixed maturity, available-for-sale portfolio by industry category attributable to PFI excluding the Closed Block division and the associated gross unrealized gains and losses, as well as the allowance for credit losses (“ACL”), as of the dates indicated:


	March 31, 2022										December 31, 2021
Industry(1)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		ACL		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		ACL		Fair Value
	(in millions)
Corporate securities:
Finance	$	38,023	$	1,081	$	1,197	$	1	$	37,906	$	37,669	$	3,362	$	175	$	1	$	40,855
Consumer non-cyclical	30,897		1,529		1,161		1		31,264		30,345		3,675		182		0		33,838
Utility	24,104		1,138		712		26		24,504		23,617		3,076		114		21		26,558
Capital goods	15,257		569		625		10		15,191		14,556		1,352		85		9		15,814
Consumer cyclical	10,656		493		313		0		10,836		10,504		1,049		52		0		11,501
Foreign agencies	5,115		304		101		11		5,307		5,204		603		21		0		5,786
Energy	11,275		619		255		0		11,639		11,487		1,336		60		0		12,763
Communications	6,597		542		231		55		6,853		6,524		1,041		53		39		7,473
Basic industry	6,589		316		232		2		6,671		6,385		662		41		1		7,005
Transportation	9,487		460		316		19		9,612		9,532		997		69		19		10,441
Technology	4,845		110		209		3		4,743		4,723		274		41		3		4,953
Industrial other	4,457		180		230		0		4,407		4,340		540		35		0		4,845
Total corporate securities	167,302		7,341		5,582		128		168,933		164,886		17,967		928		93		181,832
Foreign government(2)	79,635		8,656		1,313		8		86,970		82,752		11,741		521		1		93,971
Residential mortgage-backed(3)	2,403		56		56		0		2,403		2,451		117		13		0		2,555
Asset-backed	8,645		111		68		0		8,688		8,678		114		10		0		8,782
Commercial mortgage-backed	8,365		87		135		0		8,317		8,434		459		15		0		8,878
U.S. Government	20,327		2,997		448		0		22,876		20,747		5,133		21		0		25,859
State & Municipal	10,194		787		150		0		10,831		9,992		1,667		8		0		11,651
Total fixed maturities, available-for-sale(4)	$	296,871	$	20,035	$	7,752	$	136	$	309,018	$	297,940	$	37,198	$	1,516	$	94	$	333,528

(1)Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.

(2)As of March 31, 2022 and December 31, 2021, based on amortized cost, 88% and 89%, respectively, represent Japanese government bonds held by our Japanese insurance operations with no other individual country representing more than 4% of the balance, respectively.

(3)As of both March 31, 2022 and December 31, 2021, based on amortized cost, 97% were rated A or higher.

(4)Excluded from the table above are securities held outside the general account in other entities and operations. For additional information regarding investments held outside the general account, see “—Invested Assets of Other Entities and Operations” below. Also excludes “Assets held-for-sale” of $12,761 million (amortized cost of $13,142 million) as of March 31, 2022 and $13,569 million (amortized cost of $13,145 million) as of December 31, 2021, respectively. Unrealized gains of $143 million and $572 million, unrealized losses of $523 million and $147 million and the allowance for credit losses of $1 million and $1 million as of March 31, 2022 and December 31, 2021, respectively, related to these held for sale assets are also excluded from the presentation. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

The decrease in net unrealized gains from December 31, 2021 to March 31, 2022 was primarily due to an increase in U.S. interest rates.

The following table sets forth the composition of the portion of our fixed maturity, held-to-maturity portfolio by industry category attributable to PFI excluding the Closed Block division and the associated gross unrealized gains and losses, as well as the allowance for credit losses, as of the dates indicated:


	March 31, 2022										December 31, 2021
Industry(1)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
	(in millions)
Corporate securities:
Finance	$	464	$	41	$	0	$	505	$	4	$	486	$	49	$	0	$	535	$	5







Basic industry	8		0		0		8		0		9		0		0		9		0



Total corporate securities	472		41		0		513		4		495		49		0		544		5
Foreign government(2)	789		191		0		980		0		833		221		0		1,054		0
Residential mortgage-backed(3)	175		11		0		186		0		191		14		0		205		0




Total fixed maturities, held-to-maturity	$	1,436	$	243	$	0	$	1,679	$	4	$	1,519	$	284	$	0	$	1,803	$	5

(1)Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.

(2)As of both March 31, 2022 and December 31, 2021, based on amortized cost, 97% represent Japanese government bonds held by our Japanese insurance operations.

(3)As of both March 31, 2022 and December 31, 2021, based on amortized cost, all were rated A or higher.

Fixed Maturity Securities Credit Quality

The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the investments of insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called “NAIC Designations.” In general, NAIC Designations of “1” highest quality, or “2” high quality, include fixed maturities considered investment grade, which include securities rated Baa3 or higher by Moody’s Investor Service, Inc. (“Moody’s”) or BBB- or higher by Standard & Poor’s Rating Services (“S&P”). NAIC Designations of “3” through “6” generally include fixed maturities referred to as below investment grade, which include securities rated Ba1 or lower by Moody’s and BB+ or lower by S&P. The NAIC Designations for commercial mortgage-backed securities and non-agency residential mortgage-backed securities, including our asset-backed securities collateralized by sub-prime mortgages, are based on security level expected losses as modeled by an independent third-party (engaged by the NAIC) and the statutory carrying value of the security, including any purchase discounts or impairment charges previously recognized.

As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the fixed maturity portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date. Pending receipt of SVO designations, the categorization of these securities by NAIC Designation is based on the expected ratings indicated by internal analysis.

Investments of our international insurance companies are not subject to NAIC guidelines. Investments of our Japanese insurance operations are regulated locally by the Financial Services Agency (“FSA”), an agency of the Japanese government. The FSA has its own investment quality criteria and risk control standards. Our Japanese insurance companies comply with the FSA’s credit quality review and risk monitoring guidelines. The credit quality ratings of the investments of our Japanese insurance companies are based on ratings assigned by nationally recognized credit rating agencies, including Moody’s and S&P, or rating equivalents based on ratings assigned by Japanese credit ratings agencies.

The following table sets forth our fixed maturity, available-for-sale portfolio by NAIC Designation or equivalent rating attributable to PFI excluding the Closed Block division, as of the dates indicated:


	March 31, 2022										December 31, 2021
NAIC Designation(1) (2)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses(3)		ACL		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses(3)		ACL		Fair Value
	(in millions)
1	$	204,995	$	16,546	$	4,221	$	0	$	217,320	$	207,926	$	28,904	$	666	$	0	$	236,164
2	72,347		2,970		2,635		0		72,682		70,437		7,283		408		0		77,312
Subtotal High or Highest Quality Securities(4)	277,342		19,516		6,856		0		290,002		278,363		36,187		1,074		0		313,476
3	12,772		305		566		0		12,511		12,279		716		235		0		12,760
4	4,812		142		222		11		4,721		5,475		194		140		9		5,520
5	1,514		47		82		40		1,439		1,389		68		47		27		1,383
6	431		25		26		85		345		434		33		20		58		389
Subtotal Other Securities(5) (6)	19,529		519		896		136		19,016		19,577		1,011		442		94		20,052
Total fixed maturities, available-for-sale(7)	$	296,871	$	20,035	$	7,752	$	136	$	309,018	$	297,940	$	37,198	$	1,516	$	94	$	333,528

(1)Reflects equivalent ratings for investments of the international insurance operations.

(2)Includes, as of March 31, 2022 and December 31, 2021, 698 securities with amortized cost of $5,798 million (fair value, $5,457 million) and 617 securities with amortized cost of $4,547 million (fair value, $4,596 million), respectively, that have been categorized based on expected NAIC Designations pending receipt of SVO ratings.

(3)As of March 31, 2022, includes gross unrealized losses of $577 million on public fixed maturities and $319 million on private fixed maturities considered to be other than high or highest quality and, as of December 31, 2021, includes gross unrealized losses of $295 million on public fixed maturities and $147 million on private fixed maturities considered to be other than high or highest quality.

(4)On an amortized cost basis, as of March 31, 2022, includes $231,318 million of public fixed maturities and $46,024 million of private fixed maturities and, as of December 31, 2021, includes $234,323 million of public fixed maturities and $44,040 million of private fixed maturities.

(5)On an amortized cost basis, as of March 31, 2022, includes $10,276 million of public fixed maturities and $9,253 million of private fixed maturities and, as of December 31, 2021, includes $9,824 million of public fixed maturities and $9,753 million of private fixed maturities.

(6)On an amortized cost basis, as of March 31, 2022, securities considered below investment grade based on low issue composite ratings total $16,463 million, or 6% of the total fixed maturities, and include securities considered high or highest quality by the NAIC based on the rules described above.

(7)Excludes “Assets held-for-sale” of $12,761 million and $13,569 million at fair value as of March 31, 2022 and December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

The following table sets forth our fixed maturity, held-to-maturity portfolio by NAIC Designation or equivalent rating attributable to PFI excluding the Closed Block division, as of the dates indicated:


	March 31, 2022										December 31, 2021
NAIC Designation(1)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses(2)		Fair Value		ACL		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses(2)		Fair Value		ACL
	(in millions)
1	$	1,350	$	235	$	0	$	1,585	$	3	$	1,428	$	276	$	0	$	1,704	$	3
2	86		8		0		94		1		91		8		0		99		2
Subtotal High or Highest Quality Securities(3)	1,436		243		0		1,679		4		1,519		284		0		1,803		5
3	0		0		0		0		0		0		0		0		0		0
4	0		0		0		0		0		0		0		0		0		0
5	0		0		0		0		0		0		0		0		0		0
6	0		0		0		0		0		0		0		0		0		0
Subtotal Other Securities	0		0		0		0		0		0		0		0		0		0
Total fixed maturities, held-to-maturity	$	1,436	$	243	$	0	$	1,679	$	4	$	1,519	$	284	$	0	$	1,803	$	5

(1)Reflects equivalent ratings for investments of the international insurance operations.

(2)As of both March 31, 2022 and December 31, 2021, there were no gross unrealized losses on public fixed maturities and private fixed maturities considered to be other than high or highest quality.

(3)On an amortized cost basis, as of March 31, 2022, includes $1,344 million of public fixed maturities and $92 million of private fixed maturities and, as of December 31, 2021, includes $1,418 million of public fixed maturities and $101 million of private fixed maturities.

Asset-Backed and Commercial Mortgage-Backed Securities

The following table sets forth the amortized cost and fair value of asset-backed and commercial mortgage-backed securities within our fixed maturity available-for-sale portfolio attributable to PFI excluding the Closed Block division by credit quality, as of the dates indicated:


	March 31, 2022								December 31, 2021
	Asset-Backed Securities(2)				Commercial Mortgage-Backed Securities(3)				Asset-Backed Securities(2)				Commercial Mortgage-Backed Securities(3)
Low Issue Composite Rating(1)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in millions)
AAA	$	6,836	$	6,847	$	8,354	$	8,307	$	7,180	$	7,225	$	8,423	$	8,867
AA	1,706		1,683		0		0		1,395		1,395		0		0
A	13		13		2		2		12		12		2		2
BBB	21		21		9		8		18		20		9		9
BB and below	69		124		0		0		73		130		0		0
Total(4)	$	8,645	$	8,688	$	8,365	$	8,317	$	8,678	$	8,782	$	8,434	$	8,878

(1)The table above provides ratings as assigned by nationally recognized rating agencies as of March 31, 2022, including S&P, Moody’s, Fitch Ratings, Inc. (“Fitch”) and Morningstar, Inc. (“Morningstar”). Low issue composite rating uses ratings from the major credit rating agencies or if these are not available an equivalent internal rating. For securities where the ratings assigned are not equivalent, the second lowest rating is utilized.

(2)Includes collateralized loan obligations (“CLOs”), credit-tranched securities collateralized by home equity and other asset types.

(3)As of both March 31, 2022 and December 31, 2021, based on amortized cost, more than 99%, were securities with vintages of 2013 or later.

(4)Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading,” as well as securities held outside the general account in other entities and operations. Also excludes “Assets held-for-sale” of $1,323 million and $921 million at fair value of asset-backed securities and commercial mortgage-backed securities, as of March 31, 2022, and $1,391 million and $1,024 million at fair value of asset-backed securities and commercial mortgage-backed securities, as of December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

Included in “Asset-backed securities” above are investments in CLOs. The following table sets forth information pertaining to these investments in CLOs within our fixed maturity available-for-sale portfolio attributable to PFI excluding the Closed Block division, as of the dates indicated:


	March 31, 2022				December 31, 2021
	Collateralized Loan Obligations
Low Issue Composite Rating(1)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in millions)
AAA	$	6,106	$	6,117	$	6,361	$	6,388
AA	1,606		1,584		1,295		1,292
A	12		12		10		10
BBB	13		13		10		10
BB and below	12		12		8		8
Total(2)(3)	$	7,749	$	7,738	$	7,684	$	7,708

(1)The table above provides ratings as assigned by nationally recognized rating agencies as of March 31, 2022, including S&P, Moody’s, Fitch and Morningstar. Low issue composite rating uses ratings from the major credit rating agencies or if these are not available an equivalent internal rating. For securities where the ratings assigned are not equivalent, the second lowest rating is utilized.

(2)There was no allowance for credit losses as of both March 31, 2022 and December 31, 2021.

(3)Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading,” as well as securities held outside the general account in other entities and operations. Also excludes “Assets held-for-sale” of $1,216 million and $1,277 million at fair value as of March 31, 2022 and December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

Assets Supporting Experience-Rated Contractholder Liabilities

For information regarding the composition of “Assets supporting experience-rated contractholder liabilities,” see Note 3 to the Unaudited Interim Consolidated Financial Statements.

Commercial Mortgage and Other Loans

Investment Mix

The following table sets forth the composition of our commercial mortgage and other loans portfolio attributable to PFI excluding the Closed Block division, as of the dates indicated:


	March 31, 2022		December 31, 2021
	(in millions)
Commercial mortgage and agricultural property loans	$	50,295	$	48,550
Uncollateralized loans	534		561
Residential property loans	59		67
Other collateralized loans	117		70
Total recorded investment gross of allowance(1)	51,005		49,248
Allowance for credit losses	(105)		(102)
Total net commercial mortgage and other loans(2)	$	50,900	$	49,146

(1)As a percentage of recorded investment gross of allowance, more than 99% of these assets were current as of both March 31, 2022 and December 31, 2021, respectively.

(2)Excluded from the table above are commercial mortgage and other loans held outside the general account in other entities and operations. For additional information regarding commercial mortgage and other loans held outside the general account, see “—Invested Assets of Other Entities and Operations” below. Also excluded are “Assets held-for-sale” of $4,871 million net of allowance for credit losses of $10 million as of March 31, 2022, and $6,565 million net of allowance for credit losses of $15 million as of December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

We originate commercial mortgage and agricultural property loans using a dedicated sales and underwriting staff through our various regional offices in the U.S. and international offices primarily in London and Tokyo. All loans are underwritten consistently to our standards using a proprietary quality rating system that has been developed from our industry experience in real estate and mortgage lending.

Uncollateralized loans primarily represent corporate loans held by the Company’s international insurance operations.

Residential property loans primarily include Japanese recourse loans. To the extent there is a default on these recourse loans, we can make a claim against the personal assets of the property owner, in addition to the mortgaged property. These loans are also backed by third-party guarantors.

Other collateralized loans include mezzanine real estate debt investments and consumer loans.

Composition of Commercial Mortgage and Agricultural Property Loans

Our commercial mortgage and agricultural property loan portfolio strategy emphasizes diversification by property type and geographic location. The following tables set forth the breakdown of the gross carrying values of commercial mortgage and agricultural property loans attributable to PFI excluding the Closed Block division by geographic region and property type, as of the dates indicated:


	March 31, 2022				December 31, 2021
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
	($ in millions)
Commercial mortgage and agricultural property loans by region:
U.S. Regions(1):
Pacific	$	18,332	36.4	%	$	17,744	36.5	%
South Atlantic	7,728		15.4		7,570		15.6
Middle Atlantic	5,508		11.0		5,179		10.7
East North Central	2,486		4.9		2,490		5.1
West South Central	5,347		10.6		4,965		10.2
Mountain	2,192		4.4		2,203		4.5
New England	1,416		2.8		1,409		2.9
West North Central	462		0.9		468		1.0
East South Central	1,209		2.4		1,099		2.3
Subtotal-U.S.	44,680		88.8		43,127		88.8
Europe	3,476		6.9		3,308		6.8
Asia	895		1.8		919		1.9
Other	1,244		2.5		1,196		2.5
Total commercial mortgage and agricultural property loans(2)	$	50,295	100.0	%	$	48,550	100.0	%

(1)Regions as defined by the United States Census Bureau.

(2)Excludes “Assets held-for-sale” of $4,881 million and $6,580 million as of March 31, 2022 and December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.


	March 31, 2022				December 31, 2021
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
	($ in millions)
Commercial mortgage and agricultural property loans by property type:
Industrial	$	12,508	24.9	%	$	11,773	24.3	%
Retail	5,118		10.2		5,294		10.9
Office	8,621		17.1		8,454		17.4
Apartments/Multi-Family	14,254		28.3		13,734		28.3
Agricultural properties	4,784		9.6		4,375		9.0
Hospitality	1,566		3.1		1,601		3.3
Other	3,444		6.8		3,319		6.8
Total commercial mortgage and agricultural property loans(1)	$	50,295	100.0	%	$	48,550	100.0	%

(1)Excludes “Assets held-for-sale” of $4,881 million and $6,580 million as of March 31, 2022 and December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

Loan-to-value and debt service coverage ratios are measures commonly used to assess the quality of commercial mortgage and agricultural property loans. The loan-to-value ratio compares the amount of the loan to the fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. The debt service coverage ratio compares a property’s net operating income to its debt service payments. Debt service coverage ratios less than 1.0 times indicate 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 times indicates an excess of net operating income over the debt service payments.

As of March 31, 2022, our commercial mortgage and agricultural property loans attributable to PFI excluding the Closed Block division had a weighted-average debt service coverage ratio of 2.46 times and a weighted-average loan-to-value ratio of 57%. As of March 31, 2022, 95% of commercial mortgage and agricultural property loans were fixed rate loans. For those commercial mortgage and agricultural property loans that were originated in 2022, the weighted-average debt service coverage ratio was 2.71 times, and the weighted-average loan-to-value ratio was 65%.

The values utilized in calculating these loan-to-value ratios are developed as part of our periodic review of the commercial mortgage and agricultural property loan portfolio, which includes an internal evaluation of the underlying collateral value. Our periodic review also includes a credit quality re-rating process, whereby we update the internal quality rating originally assigned at underwriting based on the proprietary quality rating system mentioned above. As discussed below, the internal credit quality rating is a key input in determining our allowance for credit losses.

For loans with collateral under construction, renovation or lease-up, a stabilized value and projected net operating income are used in the calculation of the loan-to-value and debt service coverage ratios. Our commercial mortgage and agricultural property loan portfolio included $2.8 billion and $2.3 billion of such loans as of March 31, 2022 and December 31, 2021, respectively. All else being equal, these loans are inherently riskier than those collateralized by properties that have already stabilized. As of both March 31, 2022 and December 31, 2021, there were less than $1 million, respectively, of allowance related to these loans. In addition, these unstabilized loans are included in the calculation of our portfolio reserve, as discussed below.

The following table sets forth the gross carrying value of our commercial mortgage and agricultural property loans attributable to PFI excluding the Closed Block division by loan-to-value and debt service coverage ratios, as of the date indicated:


	March 31, 2022
	Debt Service Coverage Ratio
	> 1.2x		1.0x to < 1.2x		< 1.0x		Total Commercial Mortgage and Agricultural Property Loans
Loan-to-Value Ratio	(in millions)
0%-59.99%	$	22,956	$	968	$	1,316	$	25,240
60%-69.99%	14,922		1,496		531		16,949
70%-79.99%	6,519		542		486		7,547
80% or greater	186		228		145		559
Total commercial mortgage and agricultural property loans(1)	$	44,583	$	3,234	$	2,478	$	50,295

(1)Excludes “Assets held-for-sale” of $4,881 million. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

The following table sets forth the breakdown of our commercial mortgage and agricultural property loans attributable to PFI excluding the Closed Block division by year of origination, as of the date indicated:


	March 31, 2022
	Gross Carrying Value		% of Total
Year of Origination	($ in millions)
2022	$	1,187	2.4	%
2021	7,727		15.4
2020	4,109		8.2
2019	7,803		15.5
2018	7,408		14.7
2017	5,013		10.0
2016	4,768		9.4
2015 & Prior	12,244		24.3
Revolving Loans	36		0.1
Total commercial mortgage and agricultural property loans(1)	$	50,295	100.0	%

(1)Excludes “Assets held-for-sale” of $4,881 million. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

Commercial Mortgage and Other Loans Quality

The commercial mortgage and other loans portfolio is monitored on an ongoing basis. If certain criteria are met, loans are assigned to either of the following “watch list” categories:

(1) “Closely Monitored,” which includes a variety of considerations, such as when loan metrics fall below acceptable levels, the borrower is not cooperative or has requested a material modification, or the portfolio manager has directed a change in category; or

(2) “Not in Good Standing,” which includes loans in default or with a high probability of loss of principal, such as when the loan is in the process of foreclosure or the borrower is in bankruptcy.

Our workout and special servicing professionals manage the loans on the watch list.

The current expected credit loss (“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 is calculated separately for commercial mortgage loans, agricultural mortgage loans, uncollateralized loans, other collateralized loans and residential property loans.

For commercial mortgage and agricultural mortgage loans, the allowance is calculated using an internally developed CECL model.

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.

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 for other collateralized and uncollateralized 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.

The following table sets forth the change in allowance for credit losses for our commercial mortgage and other loans portfolio, as of the dates indicated:


	March 31, 2022		December 31, 2021
	(in millions)
Allowance, beginning of year	$	102	$	207

Addition to (release of) allowance for credit losses	(3)		(87)



Reclassified (to) from “Assets held-for-sale”(1)	6		(15)
Other	0		(3)
Allowance, end of period	$	105	$	102

(1)See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

The allowance for credit losses as of March 31, 2022 was relatively unchanged compared to December 31, 2021.

Equity Securities

The equity securities attributable to PFI excluding the Closed Block division consist principally of investments in Common and Preferred Stock of publicly-traded companies, as well as mutual fund shares. The following table sets forth the composition of our equity securities portfolio and the associated gross unrealized gains and losses, as of the dates indicated:


	March 31, 2022								December 31, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
Mutual funds	$	847	$	618	$	2	$	1,463	$	1,158	$	699	$	0	$	1,857
Other Common Stocks	1,961		1,054		55		2,960		2,553		1,073		34		3,592
Non-redeemable Preferred Stocks	103		50		8		145		97		49		8		138
Total equity securities, at fair value(1)	$	2,911	$	1,722	$	65	$	4,568	$	3,808	$	1,821	$	42	$	5,587

(1)Amounts presented exclude investments in private equity and hedge funds and other investments which are reported in “Other invested assets”. Excludes “Assets held-for-sale” of $201 million and $322 million at fair value as of March 31, 2022 and December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

The net change in unrealized gains (losses) from equity securities attributable to PFI excluding Closed Block division, including “Assets held-for-sale” still held at period end, recorded within “Other income (loss),” was $(145) million and $230 million during the three months ended March 31, 2022 and 2021, respectively.

Other Invested Assets

The following table sets forth the composition of “Other invested assets” attributable to PFI excluding the Closed Block division, as of the dates indicated:


	March 31, 2022		December 31, 2021
	(in millions)
LPs/LLCs:
Equity method:
Private equity	$	5,561	$	5,163
Hedge funds	2,076		2,044
Real estate-related	1,608		1,487
Subtotal equity method	9,245		8,694
Fair value:
Private equity	1,068		1,124
Hedge funds	1,053		1,078
Real estate-related	35		34
Subtotal fair value	2,156		2,236
Total LPs/LLCs	11,401		10,930
Real estate held through direct ownership(1)	927		889
Derivative instruments	97		337
Other(2)	235		329
Total other invested assets(3)	$	12,660	$	12,485

(1)As of March 31, 2022 and December 31, 2021, real estate held through direct ownership had mortgage debt of $303 million and $274 million, respectively.

(2)Primarily includes leveraged leases and member and activity stock held in the Federal Home Loan Banks of New York and Boston. For additional information regarding our holdings in the Federal Home Loan Banks of New York and Boston, see Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

(3)Excludes “Assets held-for-sale” of $122 million and $104 million as of March 31, 2022 and December 31, 2021, respectively. See Note 1 of the Unaudited Interim Consolidated Financial Statements for additional information.

Invested Assets of Other Entities and Operations

“Invested Assets of Other Entities and Operations” presented below includes investments held outside the general account and primarily represents investments associated with our investment management operations and derivative operations. Our derivative operations act on behalf of affiliates primarily to manage interest rate, foreign currency, credit and equity exposures. Assets within our investment management operations that are managed for third-parties and those assets classified as “Separate account assets” on our balance sheet are not included.


	March 31, 2022		December 31, 2021
	(in millions)
Fixed maturities:
Public, available-for-sale, at fair value(1)	$	459	$	478

Fixed maturities, trading, at fair value(1)	184		213
Equity securities, at fair value	656		699
Commercial mortgage and other loans, at book value(2)	257		1,279
Other invested assets	4,457		4,990
Short-term investments	29		35
Total investments	$	6,042	$	7,694

(1)As of March 31, 2022 and December 31, 2021, balances include investments in CLOs with fair value of $308 million and $329 million, respectively.

(2)Book value is generally based on unpaid principal balance, net of any allowance for credit losses, or at fair value, when the fair value option has been elected.

Fixed Maturities, Trading

“Fixed maturities, trading, at fair value” are primarily related to assets associated with consolidated VIEs for which the Company is the investment manager. The assets of the consolidated VIEs are generally offset by liabilities for which the fair value option has been elected. For further information on these consolidated VIEs, see Note 4 to the Unaudited Interim Consolidated Financial Statements.

Commercial Mortgage and Other Loans

Our investment management operations include our commercial mortgage operations, which provide mortgage origination, investment management and servicing for our general account, institutional clients, the Federal Housing Administration and government-sponsored entities such as Fannie Mae and Freddie Mac.

The mortgage loans of our commercial mortgage operations are included in “Commercial mortgage and other loans.” Derivatives and other hedging instruments related to our commercial mortgage operations are primarily included in “Other invested assets.”

Other Invested Assets

“Other invested assets” primarily include assets of our derivative operations used to manage interest rate, foreign currency, credit, and equity exposures.

Furthermore, other invested assets include strategic investments made as part of our investment management operations. We make these strategic investments in real estate, as well as fixed income, public equity and real estate securities, including controlling interests. Certain of these investments are made primarily for purposes of co-investment in our managed funds and structured products. Other strategic investments are made with the intention to sell or syndicate to investors, including our general account, or for placement in funds and structured products that we offer and manage (seed investments). As part of our investment management operations, we also make loans to our managed funds that are secured by equity commitments from investors or assets of the funds. “Other invested assets” also include certain assets in consolidated investment funds where the Company is deemed to exercise control over the funds.

Liquidity and Capital Resources

Overview

Liquidity refers to the ability to generate sufficient cash resources to meet the payment obligations of the Company. Capital refers to the long-term financial resources available to support the operations of our businesses, fund business growth, and provide a cushion to withstand adverse circumstances. Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of our businesses, general economic conditions and our access to the capital markets and the alternate sources of liquidity and capital described herein.

Effective and prudent liquidity and capital management is a priority across the organization. Management monitors the liquidity of Prudential Financial and its subsidiaries on a daily basis and projects borrowing and capital needs over a multi-year time horizon. We use a Risk Appetite Framework (“RAF”) to ensure that all risks taken across the Company align with our capacity and willingness to take those risks. The RAF provides a dynamic assessment of capital and liquidity stress impacts, including scenarios similar to, and more severe than, those occurring due to COVID-19, and is intended to ensure that sufficient resources are available to absorb those impacts. We believe that our capital and liquidity resources are sufficient to satisfy the capital and liquidity requirements of Prudential Financial and its subsidiaries.

Our businesses are subject to comprehensive regulation and supervision by domestic and international regulators. These regulations currently include requirements (many of which are the subject of ongoing rule-making) relating to capital and liquidity management. For information on these regulatory initiatives and their potential impact on us, see “Business—Regulation” and “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

From the beginning of 2022 through the date of this report, we took the following significant actions that have impacted, or are expected to impact, our liquidity and capital positions:

In February, we issued $1.0 billion of junior subordinated notes. We intend to use these proceeds for general corporate purposes, which may include the redemption or repurchase of our $1.0 billion of junior subordinated notes due in 2042.
In April, we completed the sale of our Full Service Retirement business and generated a transaction value of approximately $2.8 billion, subject to customary post-closing adjustments, which included cash consideration received for the sale of PRIAC, ceding commission for the reinsured business and capital available to be released from PICA. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information.
In April, we completed the sale of a portion of our in-force traditional variable annuities block of business through the sale of all the equity interests in PALAC and generated a transaction value of approximately $2.6 billion, subject to customary post-closing adjustments, which included cash consideration received, net capital released and a tax benefit. See Note 1 to the Unaudited Interim Consolidated Financial Statements for additional information.

Capital

The primary components of the Company’s capitalization consist of equity and outstanding capital debt, including junior subordinated debt. As shown in the table below, as of March 31, 2022, the Company had $53.4 billion in capital, all of which was available to support the aggregate capital requirements of its businesses and its Corporate and Other operations. Based on our assessment of these businesses and operations, we believe this level of capital is consistent with our ratings targets.


	March 31, 2022		December 31, 2021
	(in millions)
Equity(1)	$	39,773	$	40,552
Junior subordinated debt (including hybrid securities)	8,607		7,619
Other capital debt	4,978		5,073
Total capital	$	53,358	$	53,244

(1)Amounts attributable to Prudential Financial, excluding AOCI.

We manage PICA, The Prudential Life Insurance Company, Ltd. (“Prudential of Japan”), Gibraltar Life, and other significant insurance subsidiaries to regulatory capital levels consistent with our “AA” ratings targets. We utilize the risk-based capital (“RBC”) ratio as a primary measure of the capital adequacy of our domestic insurance subsidiaries and the solvency margin ratio as a primary measure of the capital adequacy of our Japanese insurance subsidiaries.

The table below presents the RBC ratios of our most significant domestic insurance subsidiaries as of December 31, 2021, the most recent statutory fiscal year-end and RBC reporting date for these subsidiaries.


	Ratio(1)
PICA(2)	456	%
Prudential Annuities Life Assurance Corporation (“PALAC”)	506	%
Composite Major U.S. Insurance Subsidiaries(3)	458	%

(1)The RBC ratio calculations are intended to assist insurance regulators in measuring an insurer’s solvency and ability to pay future claims. The reporting of RBC measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities, but is available to the public.

(2)Includes Prudential Retirement Insurance and Annuity Company (“PRIAC”), Pruco Life Insurance Company (“Pruco Life”), Pruco Life Insurance Company of New Jersey (“PLNJ”), which is a subsidiary of Pruco Life, and Prudential Legacy Insurance Company of New Jersey (“PLIC”).

(3)Includes PICA and its subsidiaries, as noted above, and PALAC. Composite RBC is not reported to regulators and is based on the summation of total adjusted capital and risk charges for the included companies as determined under statutory accounting and RBC guidance to calculate a composite numerator and denominator, respectively, for purposes of calculating the composite ratio.

Similar to the RBC ratios that are employed by U.S. insurance regulators, regulatory authorities in the international jurisdictions in which we operate generally establish some form of minimum solvency margin requirements for insurance companies based on local statutory accounting practices. These solvency margins are a primary measure of the capital adequacy of our international insurance operations. Maintenance of our solvency margins at certain levels is also important to our competitive positioning, as in certain jurisdictions, such as Japan, these solvency margins are required to be disclosed to the public and therefore impact the public perception of an insurer’s financial strength.

The table below presents the solvency margin ratios of our most significant international insurance subsidiaries as of December 31, 2021, the most recent date for which this information is available.


	Ratio
Prudential of Japan consolidated(1)	840	%
Gibraltar Life consolidated(2)	977	%

(1)Includes Prudential Trust Co., Ltd., a subsidiary of Prudential of Japan.

(2)Includes Prudential Gibraltar Financial Life Insurance Co., Ltd. (“PGFL”), a subsidiary of Gibraltar Life.

All of our domestic and significant international insurance subsidiaries have capital levels that substantially exceed the minimum level required by applicable insurance regulations; however, market conditions could negatively impact the statutory capital of our insurance companies and constrain our overall capital flexibility. Our regulatory capital levels also may be affected in the future by changes to the applicable regulations, proposals for which are currently under consideration by both domestic and international insurance regulators. For additional information on the calculation of RBC and solvency margin ratios, as well as regulatory minimums, see Note 19 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Captive Reinsurance Companies

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital—Captive Reinsurance Companies” included in our Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of our use of captive reinsurance companies.

Shareholder Distributions

Share Repurchase Program and Shareholder Dividends

In November 2021, Prudential Financial’s Board of Directors authorized the Company to repurchase, at management’s discretion, up to $1.5 billion of its outstanding Common Stock during the period from January 1, 2022 through December 31, 2022.

In general, the timing and amount of share repurchases are determined by management based on market conditions and other considerations, including compliance with applicable laws and any increased capital needs of our businesses due to, among other things, credit migration and losses in our investment portfolio, changes in regulatory capital requirements and opportunities for growth and acquisitions. Repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934.

The following table sets forth information about declarations of Common Stock dividends, as well as repurchases of shares of Prudential Financial’s Common Stock, for the three months ended March 31, 2022.


	Dividend Amount				Shares Repurchased
Three months ended:	Per Share		Aggregate		Shares	Total Cost
	(in millions, except per share data)
March 31, 2022	$	1.20	$	462	3.3	$	375

Liquidity

Liquidity management and stress testing are performed on a legal entity basis as the ability to transfer funds between subsidiaries is limited due in part to regulatory restrictions. Liquidity needs are determined through daily and quarterly cash flow forecasting at the holding company and within our operating subsidiaries. We seek to maintain a minimum balance of highly liquid assets to ensure that adequate liquidity is available at Prudential Financial to cover fixed expenses in the event that we experience reduced cash flows from our operating subsidiaries at a time when access to capital markets is also not available.

We seek to mitigate the risk of having limited or no access to financing due to stressed market conditions by generally pre-funding debt in advance of maturity. We mitigate the refinancing risk associated with our debt that is used to fund operating needs by matching the term of debt with the assets financed. To ensure adequate liquidity in stress scenarios, stress testing is performed for our major operating subsidiaries. We seek to further mitigate liquidity risk by maintaining our access to alternative sources of liquidity, as discussed below.

Liquidity of Prudential Financial

The principal sources of funds available to Prudential Financial, the parent holding company, are dividends, returns of capital and loans from subsidiaries, and proceeds from debt issuances and certain stock-based compensation activity. These sources of funds may be supplemented by Prudential Financial’s access to the capital markets as well as the “—Alternative Sources of Liquidity” described below.

The primary uses of funds at Prudential Financial include servicing debt, making capital contributions and loans to subsidiaries, making acquisitions, paying declared shareholder dividends and repurchasing outstanding shares of Common Stock executed under authority from the Board.

As of March 31, 2022, Prudential Financial had highly liquid assets with a carrying value totaling $4,645 million, an increase of $419 million from December 31, 2021. Highly liquid assets predominantly include cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds. We maintain an intercompany liquidity account that is designed to optimize the use of cash by facilitating the lending and borrowing of funds between Prudential Financial and its subsidiaries on a daily basis. Excluding the net borrowings from this intercompany liquidity account, Prudential Financial had highly liquid assets of $3,596 million as of March 31, 2022, an increase of $43 million from December 31, 2021.

The following table sets forth Prudential Financial’s principal sources and uses of highly liquid assets, excluding net borrowings from our intercompany liquidity account, for the periods indicated.


	Three Months Ended March 31,
	2022		2021
	(in millions)
Highly Liquid Assets, beginning of period	$	3,553	$	5,560

Dividends and/or returns of capital from subsidiaries(1)	431		508
Affiliated (borrowings)/loans - (capital activities)	394		0
Capital contributions to subsidiaries(2)	(882)		(26)
Total Business Capital Activity	(57)		482

Share repurchases(3)	(364)		(359)
Common stock dividends(4)	(466)		(471)
Business dispositions	0		0
Total Share Repurchases, Dividends and Business Disposition Activity	(830)		(830)

Proceeds from the issuance of debt	990		0
Repayments of debt	0		0




Total Debt Activity	990		0
Proceeds from stock-based compensation and exercise of stock options	109		86
Net income tax receipts & payments	433		16
Interest paid on external debt	(206)		(210)
Affiliated (borrowings)/loans - (operating activities)(5)	(159)		(34)



Swap terminations	(22)		(19)
Other, net	(215)		(125)
Total Other Activity	(60)		(286)

Net increase/(decrease) in highly liquid assets	43		(634)

Highly Liquid Assets, end of period	$	3,596	$	4,926

(1)2022 includes $338 million from Prudential Annuities Holding Company, $89 million from PGIM subsidiaries, and $5 million from other subsidiaries. 2021 includes $210 million from Prudential Annuities Holding Company, $186 million from PGIM subsidiaries, and $112 million from international insurance and investment subsidiaries.

(2)2022 includes capital contributions of $780 million to an international reinsurance subsidiary and $102 million to international insurance subsidiaries. The majority of the capital contribution to our international reinsurance subsidiary was to fund the payment of ceding commissions to our domestic insurance subsidiaries. 2021 includes $17 million to international insurance subsidiaries and $9 million to PGIM subsidiaries.

(3)Excludes cash payments made on trades that settled in the subsequent period.

(4)Includes cash payments made on dividends declared in prior periods.

(5)Represent loans to and from subsidiaries to support business operating needs.

Dividends and Returns of Capital from Subsidiaries

Domestic insurance subsidiaries. During the first three months of 2022, Prudential Financial received dividends of $338 million from Prudential Annuities Holding Company, of which $306 million was from PALAC. In addition to paying Common Stock dividends, our domestic insurance operations may return capital to Prudential Financial by other means, such as affiliated lending, and reinsurance with Bermuda-based affiliates.

International insurance subsidiaries. During the first three months of 2022, Prudential Financial did not receive dividends from its international insurance subsidiaries. In addition to paying Common Stock dividends, our international insurance operations may return capital to Prudential Financial 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.

Other subsidiaries. During the first three months of 2022, Prudential Financial received dividends and returns of capital of $89 million from PGIM subsidiaries and dividends of $5 million from other subsidiaries.

Restriction on dividends and returns of capital from subsidiaries. Our insurance companies are subject to limitations on the payment of dividends and other transfers of funds to Prudential Financial and other affiliates under applicable insurance law and regulation. Further, market conditions could negatively impact capital positions of our insurance companies, which could further restrict their ability to pay dividends. More generally, the payment of dividends by any of our subsidiaries is subject to declaration by their Board of Directors and can be affected by market conditions and other factors.

With respect to our domestic insurance subsidiaries, PICA is permitted to pay ordinary dividends based on calculations specified under New Jersey insurance law, subject to prior notification to the New Jersey Department of Banking and Insurance (“NJDOBI”). Any distributions above this amount in any twelve-month period are considered to be “extraordinary” dividends, and the approval of the NJDOBI is required prior to payment. The laws regulating dividends of the states where our other domestic insurance companies are domiciled are similar, but not identical, to those of New Jersey.

Capital redeployment from our international insurance subsidiaries is subject to local regulatory requirements in the international jurisdictions in which they operate. Our most significant international insurance subsidiaries, Prudential of Japan and Gibraltar Life, are permitted to pay common stock dividends based on calculations specified by Japanese insurance law, subject to prior notification to the FSA. Dividends in excess of these amounts and other forms of capital distribution require the prior approval of the FSA. The regulatory fiscal year end for both Prudential of Japan and Gibraltar Life is March 31, after which time the common stock dividend amount permitted to be paid without prior approval from the FSA can be determined.

The ability of our PGIM subsidiaries and the majority of our other operating subsidiaries to pay dividends is largely unrestricted from a regulatory standpoint.

See Note 19 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for information on specific dividend restrictions.

Liquidity of Insurance Subsidiaries

We manage the liquidity of our insurance operations to ensure stable, reliable and cost-effective sources of cash flows to meet all of our obligations. Liquidity within each of our insurance subsidiaries is provided by a variety of sources, including portfolios of liquid assets. The investment portfolios of our subsidiaries are integral to the overall liquidity of our insurance operations. We segment our investment portfolios and employ an asset/liability management approach specific to the requirements of each of our product lines. This enhances the discipline applied in managing the liquidity, as well as the interest rate and credit risk profiles, of each portfolio in a manner consistent with the unique characteristics of the product liabilities.

Liquidity is measured against internally-developed benchmarks that take into account the characteristics of both the asset portfolio and the liabilities that they support. We consider attributes of the various categories of liquid assets (for example, type of asset and credit quality) in calculating internal liquidity measures to evaluate our insurance operations’ liquidity under various stress scenarios, including company-specific and market-wide events. We continue to believe that cash generated by ongoing operations and the profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios for each of our insurance subsidiaries.

The principal sources of liquidity for our insurance subsidiaries are premiums, investment and fee income, investment maturities, sales of investments, and sales associated with our insurance and annuity operations, as well as internal and external borrowings. The principal uses of liquidity include benefits, claims and dividends paid to policyholders, and payments to policyholders and contractholders in connection with surrenders, withdrawals and net policy loan activity. Other uses of liquidity may include commissions, general and administrative expenses, purchases of investments, the payment of dividends to the parent holding company, hedging and reinsurance activity and payments in connection with financing activities.

The following table sets forth the fair value of certain of our domestic insurance operations’ portfolio of liquid assets, as of the dates indicated.


	March 31, 2022
	Prudential Insurance(1)		PLIC		PRIAC(2)		PALAC(2)		Pruco Life		Total		December 31, 2021
	(in billions)
Cash and short-term investments	$	5.4	$	1.0	$	0.2	$	1.7	$	1.9	$	10.2	$	14.0
Fixed maturity investments(3):
High or highest quality	124.4		31.9		21.7		8.0		14.4		200.4		214.9
Other than high or highest quality	8.7		3.3		0.9		0.6		1.3		14.8		16.2
Subtotal	133.1		35.2		22.6		8.6		15.7		215.2		231.1
Public equity securities, at fair value	0.5		2.1		0.3		0.2		0.0		3.1		4.2
Total	$	139.0	$	38.3	$	23.1	$	10.5	$	17.6	$	228.5	$	249.3

(1)Represents legal entity view and as such includes both domestic and international activity.

(2)In April 2022, the Company completed the sale of its equity interests in both PRIAC and PALAC. See Note 1 to the Unaudited Consolidated Financial Statements for more information about these dispositions.

(3)Excludes fixed maturities designated as held-to-maturity. Credit quality is based on NAIC or equivalent rating.

The following table sets forth the fair value of our international insurance operations’ portfolio of liquid assets, as of the dates indicated.


	March 31, 2022
	Prudential of Japan		Gibraltar Life(1)		All Other(2)		Total		December 31, 2021
	(in billions)
Cash and short-term investments	$	1.0	$	2.4	$	1.5	$	4.9	$	4.9
Fixed maturity investments(3):
High or highest quality(4)	38.0		80.4		9.4		127.8		138.0
Other than high or highest quality	0.8		2.1		2.5		5.4		5.0
Subtotal	38.8		82.5		11.9		133.2		143.0
Public equity securities	2.3		1.9		0.2		4.4		4.5
Total	$	42.1	$	86.8	$	13.6	$	142.5	$	152.4

(1)Includes PGFL.

(2)Represents our international insurance operations, excluding Japan.

(3)Excludes fixed maturities designated as held-to-maturity. Credit quality is based on NAIC or equivalent rating.

(4)As of March 31, 2022, $95.3 billion, or 75%, were invested in government or government agency bonds.

Liquidity associated with other activities

Hedging activities associated with Individual Annuities

For the portion of our Individual Annuities’ ALM strategy executed through hedging, as well as the capital hedge program, we enter into a range of exchange-traded, cleared and other OTC equity and interest rate derivatives in order to hedge certain capital market risks related to more severe market conditions. For a full discussion of our Individual Annuities’ risk management strategy, see “—Results of Operations by Segment—U.S. Businesses—Individual Annuities.” This portion of our Individual Annuities’ ALM strategy and capital hedge program requires access to liquidity to meet payment obligations relating

to these derivatives, such as payments for periodic settlements, purchases, maturities and terminations. These liquidity needs can vary materially due to, among other items, changes in interest rates, equity markets, mortality and policyholder behavior.

The hedging portion of our Individual Annuities’ ALM strategy and capital hedge program may also result in derivative related collateral postings to (when we are in a net post position) or from (when we are in a net receive position) counterparties. The net collateral position depends on changes in interest rates and equity markets related to the amount of the exposures hedged. Depending on market conditions, the collateral posting requirements can result in material liquidity needs when we are in a net post position. As of March 31, 2022, the derivatives comprising the hedging portion of our Individual Annuities’ ALM strategy and capital hedge program were in a net post position of $6.9 billion compared to a net post position of $5.5 billion as of December 31, 2021. The change in collateral position was primarily driven by the impact of increasing interest rates partially offset by equity market depreciation.

Foreign exchange hedging activities

We employ various hedging strategies to manage potential exposure to foreign currency exchange rate movements, particularly those associated with the yen. Our overall yen hedging strategy calibrates the hedge level to preserve the relative contribution of our yen-based business to the Company’s overall return on equity on a leverage neutral basis. The hedging strategy includes two primary components:

Income Hedges—We hedge a portion of our prospective yen-based earnings streams by entering into external forward currency derivative contracts that effectively fix the currency exchange rates for that portion of earnings, thereby reducing volatility from foreign currency exchange rate movements.

Equity Hedges—We hold both internal and external hedges primarily to hedge our USD-equivalent equity. These hedges also mitigate volatility in the solvency margins of yen-based subsidiaries resulting from changes in the market value of their USD-denominated investments hedging our USD-equivalent equity attributable to changes in the yen-USD exchange rate.

For additional information on our hedging strategy, see “—Results of Operations—Impact of Foreign Currency Exchange Rates.”

Cash settlements from these hedging activities result in cash flows between subsidiaries of Prudential Financial and either international-based subsidiaries or external parties. The cash flows are dependent on changes in foreign currency exchange rates and the notional amount of the exposures hedged. For example, a significant yen depreciation over an extended period of time could result in net cash inflows, while a significant yen appreciation could result in net cash outflows. The following tables set forth information about net cash settlements and the net asset or liability resulting from these hedging activities related to the yen and other currencies for the periods indicated.


	Three Months Ended March 31,
Cash Settlements: Received (Paid)	2022		2021
	(in millions)
Income Hedges (External)(1)	$	11	$	8
Equity Hedges:
Internal(2)	161		100
External	(131)		7
Total Equity Hedges	30		107
Total Cash Settlements	$	41	$	115

Assets (Liabilities):	March 31, 2022		December 31, 2021
	(in millions)
Income Hedges (External)(3)	$	(27)	$	47
Equity Hedges:
Internal(2)	1,047		955
External	75		(20)
Total Equity Hedges(4)	1,122		935
Total Assets (Liabilities)	$	1,095	$	982

__________

(1)Includes non-yen related cash settlements of $3 million, primarily denominated in Chilean Peso, Brazilian real, and Australian dollar, and $5 million, primarily denominated in Brazilian real, Australian dollar, and Chilean Peso for the three months ended March 31, 2022 and 2021, respectively.

(2)Represents internal transactions between international-based and U.S.-based entities. Amounts noted are from the U.S.-based entities’ perspectives.

(3)Includes non-yen related liabilities of $(38) million, primarily denominated in Brazilian real, Australian dollar and Chilean Peso as of March 31, 2022 and assets of $28 million, primarily denominated in Brazilian real, Chilean peso and Australian dollar, as of December 31, 2021.

(4)As of March 31, 2022, approximately $198 million, $581 million, $237 million and $106 million of the net market values are scheduled to settle in 2022, 2023, 2024, and thereafter, respectively. The net market value of the assets (liabilities) will vary with changing market conditions to the extent there are no corresponding offsetting positions.

PGIM operations

The principal sources of liquidity for our fee-based PGIM businesses include asset management fees, commercial mortgage origination and servicing fees, and internal and external funding facilities. The principal uses of liquidity include general and administrative expenses, facilitating our commercial mortgage loan business, and distributions of dividends and returns of capital to Prudential Financial. The primary liquidity risks for our fee-based PGIM businesses relate to their profitability, which is impacted by market conditions, our investment management performance and client redemptions. We believe the cash flows from our fee-based PGIM businesses are adequate to satisfy the current liquidity requirements of these operations, as well as requirements that could arise under reasonably foreseeable stress scenarios, which are monitored through the use of internal measures.

The principal sources of liquidity for our seed and co-investments held in our PGIM businesses are cash flows from investments, borrowing lines from internal sources, including Prudential Financial and Prudential Funding, LLC (“Prudential Funding”), a wholly-owned subsidiary of PICA, and external sources, including PGIM’s limited-recourse credit facility. The principal uses of liquidity for our seed and co-investments include making investments to support business growth and paying interest expense from the internal and external borrowings used to fund those investments. The primary liquidity risks include the inability to sell assets in a timely manner, declines in the value of assets and credit defaults. There have been no material changes to the liquidity position of our PGIM operations since December 31, 2021.

Alternative Sources of Liquidity

In addition to asset-based financing as discussed below, Prudential Financial and certain subsidiaries have access to other sources of liquidity, including syndicated, unsecured committed credit facilities, membership in the Federal Home Loan Banks, commercial paper programs, and contingent financing facilities in the form of a put option agreement and facility agreement. For more information on these sources of liquidity, see Note 9 to the Unaudited Interim Consolidated Financial Statements contained herein and Note 17 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2021.

Asset-based Financing

We conduct asset-based or secured financing within our insurance and other subsidiaries, including transactions such as securities lending, repurchase agreements and mortgage dollar rolls, to earn spread income, to borrow funds, or to facilitate trading activity. These programs are primarily driven by portfolio holdings of securities that are lendable based on counterparty demand for these securities in the marketplace. The collateral received in connection with these programs is primarily used to purchase securities in the short-term spread portfolios of our insurance entities. Investments held in the short-term spread portfolios include cash and cash equivalents, short-term investments (primarily corporate bonds), mortgage loans and fixed maturities (primarily collateralized loan obligations and other structured securities), with a weighted average life at time of purchase by the short-term portfolios of four years or less. Floating rate assets comprise the majority of our short-term spread portfolio. These short-term portfolios are subject to specific investment policy statements, which among other things, do not allow for significant asset/liability interest rate duration mismatch.

The following table sets forth our liabilities under asset-based or secured financing programs as of the dates indicated.


	March 31, 2022						December 31, 2021
	PFI Excluding Closed Block Division		Closed Block Division		Consolidated		PFI Excluding Closed Block Division		Closed Block Division		Consolidated
	($ in millions)
Securities sold under agreements to repurchase	$	6,235	$	2,850	$	9,085	$	7,393	$	2,792	$	10,185
Cash collateral for loaned securities(1)	4,698		73		4,771		4,168		82		4,250
Securities sold but not yet purchased	2		0		2		3		0		3
Total(2)(3)	$	10,935	$	2,923	$	13,858	$	11,564	$	2,874	$	14,438
Portion of above securities that may be returned to the Company overnight requiring immediate return of the cash collateral	$	10,113	$	2,923	$	13,036	$	10,637	$	2,874	$	13,511
Weighted average maturity, in days(4)	18		N/A				31		N/A

(1)Excludes “Liabilities held-for-sale” of $205 million and $0 million as of March 31, 2022 and December 31, 2021, respectively.

(2)The daily weighted average outstanding balance for the three months ended March 31, 2022 was $11,052 million for PFI excluding the Closed Block division, and $3,051 million for the Closed Block division.

(3)Includes utilization of external funding facilities for PGIM’s commercial mortgage origination business.

(4)Excludes securities that may be returned to the Company overnight. “N/A” reflects that all outstanding balances may be returned to the Company overnight.

As of March 31, 2022, our domestic insurance entities had assets eligible for the asset-based or secured financing programs of $124.3 billion, of which $13.5 billion were on loan. Taking into account market conditions and outstanding loan balances as of March 31, 2022, we believe approximately $14.5 billion of the remaining eligible assets are readily lendable, including approximately $10.1 billion relating to PFI excluding the Closed Block division, of which $2.8 billion relates to certain separate accounts and may only be used for financing activities related to those accounts, and the remaining $4.4 billion relating to the Closed Block division.

Financing Activities

As of March 31, 2022, total short-term and long-term debt of the Company on a consolidated basis was $20.2 billion, an increase of $0.9 billion from December 31, 2021. The following table sets forth total consolidated borrowings of the Company as of the dates indicated. We may, from time to time, seek to redeem or repurchase our outstanding debt securities through open market purchases, individually negotiated transactions or otherwise. Any such actions will depend on prevailing market conditions, our liquidity position, and other factors.


	March 31, 2022						December 31, 2021
Borrowings:	Prudential Financial		Subsidiaries		Consolidated		Prudential Financial		Subsidiaries		Consolidated
	(in millions)
General obligation short-term debt:
Commercial paper	$	25	$	364	$	389	$	25	$	395	$	420
Current portion of long-term debt	0		0		0		0		0		0
Other short-term debt	0		0		0		0		98		98
Subtotal	25		364		389		25		493		518
General obligation long-term debt:
Senior debt	10,112		173		10,285		10,109		173		10,282
Junior subordinated debt	8,556		51		8,607		7,564		54		7,618
Surplus notes(1)	0		344		344		0		344		344
Subtotal	18,668		568		19,236		17,673		571		18,244
Total general obligations	18,693		932		19,625		17,698		1,064		18,762
Limited and non-recourse borrowings(2):
Short-term debt	0		5		5		0		7		7
Current portion of long-term debt	0		150		150		0		197		197
Long-term debt	0		453		453		0		378		378
Total limited and non-recourse borrowings	0		608		608		0		582		582
Total borrowings	$	18,693	$	1,540	$	20,233	$	17,698	$	1,646	$	19,344

(1)Amounts are net of assets under set-off arrangements of $10,791 million and $10,691 million as of March 31, 2022 and December 31, 2021, respectively.

(2)Limited and non-recourse borrowing primarily represents mortgage debt of our subsidiaries that has recourse only to real estate investment property of $303 million and $274 million as of March 31, 2022 and December 31, 2021, respectively, and a $300 million draw on a credit facility that has recourse only to collateral pledged by the Company as of both March 31, 2022 and December 31, 2021.

As of March 31, 2022, and December 31, 2021, the Company was in compliance with all debt covenants related to the borrowings in the table above. For additional information on the Company’s short- and long-term debt obligations, see Note 9 to the Unaudited Interim Consolidated Financial Statements contained herein and Note 17 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2021.

Prudential Financial’s consolidated borrowings increased $889 million from December 31, 2021, primarily driven by a $995 million increase in Prudential Financial borrowings and a $106 million decrease in subsidiary borrowings. On February 28, 2022, the Company issued $1 billion in aggregate principal amount of 5.125% junior subordinated notes due in March 2052.

Term and Universal Life Reserve Financing

We use captive reinsurance subsidiaries to finance the portion of the statutory reserves required to be held by our domestic life insurance companies under Regulation XXX and Guideline AXXX that we consider to be non-economic. The financing arrangements involve the reinsurance of term and universal life business to our captive reinsurers and the issuance of surplus notes by those captives that are treated as capital for statutory purposes. These surplus notes are subordinated to policyholder obligations, and the payment of principal and interest on the surplus notes can only be made with prior insurance regulatory approval.

We have entered into agreements with external counterparties providing for the issuance of surplus notes by our captive reinsurers in return for the receipt of credit-linked notes (“Credit-Linked Note Structures”). As of March 31, 2022, we had Credit-Linked Note Structures with an aggregate issuance capacity of $14,600 million, of which $12,821 million was outstanding, as compared to an aggregate issuance capacity of $14,600 million, of which $12,721 million was outstanding, as of December 31, 2021. Under the agreements, the captive receives in exchange for the surplus notes one or more credit-linked notes issued by a special-purpose affiliate of the Company with an aggregate principal amount equal to the surplus notes outstanding. The captive holds the credit-linked notes as assets supporting Regulation XXX or Guideline AXXX non-economic reserves, as applicable. For more information on our Credit-Linked Note Structures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities” in our Annual Report on Form 10-K for the year ended December 31, 2021.

The following table summarizes our Credit-Linked Note Structures, which are reported on a net basis, as of March 31, 2022.


	Surplus Notes		Outstanding as of March 31, 2022
Credit-Linked Note Structures:	Original Issue Dates	Maturity Dates			Facility Size
	($ in millions)
XXX	2012-2021	2022-2036	$	1,600	(1)	$	1,750
AXXX	2013	2033	3,500			3,500
XXX	2014-2018	2022-2034	2,130		(2)	2,150
XXX	2014-2017	2024-2037	2,330			2,400
AXXX	2017	2037	1,466			2,000
XXX	2018	2038	920			1,600
AXXX	2020	2032	875			1,200
Total Credit-Linked Note Structures			$	12,821		$	14,600

(1)Prudential Financial has agreed to reimburse amounts paid under the credit-linked notes issued in this structure up to $500 million.

(2)The $2,130 million of surplus notes represents an intercompany transaction that eliminates upon consolidation. Prudential Financial has agreed to reimburse amounts paid under credit-linked notes issued in this structure up to $1,000 million.

As of March 31, 2022, we also had outstanding an aggregate of $3,025 million of debt issued for the purpose of financing Regulation XXX and Guideline AXXX non-economic reserves, of which $1,125 million relates to Regulation XXX reserves and $1,900 million relates to Guideline AXXX reserves. In addition, as of March 31, 2022, for purposes of financing Guideline AXXX reserves, one of our captives had $3,982 million of surplus notes outstanding that were issued to affiliates.

The Company has introduced updated versions of its individual life products in conjunction with the requirement to adopt principle-based reserving by January 1, 2020. These updated products are currently priced to support the principle-based statutory reserve level without the need for reserve financing.

Off-Balance Sheet Arrangements

See additional information on off-balance sheet arrangements in Note 9 and other commitments in Note 14 to the Unaudited Interim Consolidated Financial Statements.

In 2014, Prudential Financial entered into financing transactions, pursuant to which it issued $500 million of limited-recourse notes and, in return, obtained $500 million of asset-backed notes from a Delaware master trust and ultimately contributed the asset-backed notes to its subsidiary, PRIAC. As of March 31, 2022, no principal payments have been received or are currently due on the asset-backed notes and, as a result, there was no payment obligation under the limited-recourse notes. Accordingly, none of the notes are reflected in the Company’s Unaudited Interim Consolidated Financial Statements as of that date. As a result of the Company’s sale of its Full Service Retirement business to Great-West, which included the sale of all of the outstanding equity interests of PRIAC, the $500 million of limited-recourse notes were canceled as of April 1, 2022.

We do not have retained or contingent interests in assets transferred to unconsolidated entities, or variable interests in unconsolidated entities or other similar transactions, arrangements or relationships that serve as credit, liquidity or market risk support, that we believe are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or our access to or requirements for capital resources. In addition, we do not have relationships with any unconsolidated entities that are contractually limited to narrow activities that facilitate our transfer of or access to associated assets.

Ratings

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Ratings” in our Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of our financial strength and credit ratings and their impact on our business.

There have been no significant changes or actions in ratings or ratings outlooks for the Company that have occurred since the filing of our Form 10-K for the year ended December 31, 2021. On April 1, 2022 Prudential completed the previously announced sales of PALAC to Fortitude Group Holdings, LLC and PRIAC to Great-West Life & Annuity Insurance Company. As a result, PALAC and PRIAC will no longer fall under Prudential Financial’s group ratings.

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