Item 1. Financial Statements

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Item 1. Financial Statements

PRUDENTIAL FINANCIAL, INC.

Unaudited Interim Consolidated Statements of Financial Position

June 30, 2023 and December 31, 2022 (in millions, except share amounts)


	June 30, 2023		December 31, 2022
ASSETS
Fixed maturities, available-for-sale, at fair value (allowance for credit losses: 2023-$276; 2022-$138) (amortized cost: 2023-$333,311; 2022-$335,447)(1)	$	312,230	$	307,719
Fixed maturities, held-to-maturity, at amortized cost, net of allowance for credit losses (allowance for credit losses: 2023-$2; 2022-$2) (fair value: 2023-$1,329; 2022-$1,455)(1)	1,171		1,296
Fixed maturities, trading, at fair value (amortized cost: 2023-$7,596; 2022-$7,303)(1)	6,349		5,951
Assets supporting experience-rated contractholder liabilities, at fair value	3,019		2,844
Equity securities, at fair value (cost: 2023-$5,939; 2022-$5,306)(1)	8,359		7,150
Commercial mortgage and other loans (net of $241 and $203 allowance for credit losses; includes $323 and $137 of loans measured at fair value under the fair value option at June 30, 2023 and December 31, 2022, respectively)(1)	57,689		56,745
Policy loans	9,983		10,046
Other invested assets (net of $1 and $1 allowance for credit losses; includes $5,902 and $5,682 of assets measured at fair value at June 30, 2023 and December 31, 2022, respectively)(1)	21,473		21,099
Short-term investments (net of allowance for credit losses: 2023-$7; 2022-$6)	5,059		4,591
Total investments	425,332		417,441
Cash and cash equivalents(1)	14,652		17,251
Accrued investment income(1)	3,142		3,012
Deferred policy acquisition costs(2)	20,320		20,546
Value of business acquired(2)	542		621
Income tax assets	803		0

Market risk benefit assets(2)	1,951		800
Other assets (net of allowance for credit losses: 2023-$25; 2022-$26)(1)(2)	29,691		31,679
Separate account assets	200,871		197,679
TOTAL ASSETS	$	697,304	$	689,029
LIABILITIES AND EQUITY
LIABILITIES
Future policy benefits(2)	$	268,649	$	261,773
Policyholders’ account balances(2)	138,743		135,624
Market risk benefit liabilities(2)	5,462		5,864
Policyholders’ dividends	1,058		694
Securities sold under agreements to repurchase	6,097		6,589
Cash collateral for loaned securities	5,207		6,100
Income tax liabilities(2)	0		277
Short-term debt	763		775
Long-term debt	18,876		19,908

Other liabilities (including allowance for credit losses: 2023-$16; 2022-$18 )(1)(2)	21,721		21,824
Notes issued by consolidated variable interest entities(1)	402		374
Separate account liabilities	200,871		197,679
Total liabilities	667,849		657,481
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 20)
EQUITY
Preferred Stock ($0.01 par value; 10,000,000 shares authorized; none issued)	0		0
Common Stock ($0.01 par value; 1,500,000,000 shares authorized; 666,305,189 shares issued as of both June 30, 2023 and December 31, 2022)	6		6
Additional paid-in capital	25,676		25,747
Common Stock held in treasury, at cost (302,857,740 and 300,342,458 shares at June 30, 2023 and December 31, 2022, respectively)	(23,355)		(23,068)
Accumulated other comprehensive income (loss)(2)	(6,649)		(3,806)
Retained earnings(2)	32,756		31,714
Total Prudential Financial, Inc. equity	28,434		30,593
Noncontrolling interests	1,021		955
Total equity	29,455		31,548
TOTAL LIABILITIES AND EQUITY	$	697,304	$	689,029

(1)See Note 4 for details of balances associated with variable interest entities.

(2)Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

See Notes to Unaudited Interim Consolidated Financial Statements

PRUDENTIAL FINANCIAL, INC.

Unaudited Interim Consolidated Statements of Operations

Three and Six Months Ended June 30, 2023 and 2022 (in millions, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
REVENUES
Premiums (includes 2023-$275 and 2022-$(448) for gain (loss) from changes in estimates on deferred profit liability amortization)(1)	$	6,909	$	6,477	$	16,272	$	14,166
Policy charges and fee income(1)	1,073		975		2,207		2,274
Net investment income	4,476		3,938		8,796		8,296
Asset management and service fees	918		987		1,835		2,120
Other income (loss)(1)	1,044		1,361		2,063		51
Realized investment gains (losses), net(1)	(938)		(1,636)		(721)		(2,680)
Change in value of market risk benefits, net of related hedging gains (losses)(1)	16		(710)		91		(980)
Total revenues	13,498		11,392		30,543		23,247
BENEFITS AND EXPENSES
Policyholders’ benefits(1)	7,661		7,958		17,965		16,733
Change in estimates of liability for future policy benefits(1)	255		777		280		632
Interest credited to policyholders’ account balances(1)	1,149		644		2,130		704
Dividends to policyholders	303		(207)		622		28
Amortization of deferred policy acquisition costs(1)	366		358		731		729

General and administrative expenses(1)	3,143		2,930		6,347		6,147
Total benefits and expenses	12,877		12,460		28,075		24,973
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	621		(1,068)		2,468		(1,726)
Total income tax expense (benefit)(1)	123		(119)		505		(263)
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	498		(949)		1,963		(1,463)
Equity in earnings of operating joint ventures, net of taxes	(2)		(68)		10		(60)


NET INCOME (LOSS)	496		(1,017)		1,973		(1,523)
Less: Income (loss) attributable to noncontrolling interests	(15)		(7)		0		(20)
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.	$	511	$	(1,010)	$	1,973	$	(1,503)
EARNINGS PER SHARE
Basic earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.	$	1.38	$	(2.71)	$	5.33	$	(4.04)
Diluted earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.	$	1.38	$	(2.71)	$	5.31	$	(4.04)

(1)Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

See Notes to Unaudited Interim Consolidated Financial Statements

PRUDENTIAL FINANCIAL, INC.

Unaudited Interim Consolidated Statements of Comprehensive Income

Three and Six Months Ended June 30, 2023 and 2022 (in millions)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
NET INCOME (LOSS)	$	496	$	(1,017)	$	1,973	$	(1,523)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments for the period(1)	(371)		(912)		(358)		(1,301)
Net unrealized investment gains (losses)(1)	(2,814)		(19,154)		5,565		(41,987)
Interest rate remeasurement of future policy benefits(1)	(196)		25,029		(8,901)		48,618
Gain (loss) from changes in non-performance risk on market risk benefits(1)	(263)		200		(77)		1,307
Defined benefit pension and postretirement unrecognized periodic benefit (cost)	26		388		45		453
Total	(3,618)		5,551		(3,726)		7,090
Less: Income tax expense (benefit) related to other comprehensive income (loss)(1)	(793)		1,701		(883)		2,301
Other comprehensive income (loss), net of taxes	(2,825)		3,850		(2,843)		4,789
Comprehensive income (loss)	(2,329)		2,833		(870)		3,266
Less: Comprehensive income (loss) attributable to noncontrolling interests	(16)		(7)		0		(21)
Comprehensive income (loss) attributable to Prudential Financial, Inc.	$	(2,313)	$	2,840	$	(870)	$	3,287

(1)Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

See Notes to Unaudited Interim Consolidated Financial Statements

PRUDENTIAL FINANCIAL, INC.

Unaudited Interim Consolidated Statements of Equity

Three and Six Months Ended June 30, 2023 (in millions)


	Prudential Financial, Inc. Equity
	Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held In Treasury		Accumulated Other Comprehensive Income (Loss)		Total Prudential Financial, Inc. Equity		Noncontrolling Interests		Total Equity
Balance, December 31, 2022(1)	$	6	$	25,747	$	31,714	$	(23,068)	$	(3,806)	$	30,593	$	955	$	31,548

Common Stock acquired							(250)				(250)				(250)

Contributions from noncontrolling interests													93		93
Distributions to noncontrolling interests													(2)		(2)

Stock-based compensation programs			(104)				171				67				67
Dividends declared on Common Stock					(468)						(468)				(468)
Comprehensive income:
Net income (loss)					1,462						1,462		15		1,477
Other comprehensive income (loss), net of tax									(19)		(19)		1		(18)
Total comprehensive income (loss)											1,443		16		1,459
Balance, March 31, 2023	6		25,643		32,708		(23,147)		(3,825)		31,385		1,062		32,447

Common Stock acquired							(252)				(252)				(252)

Contributions from noncontrolling interests													30		30
Distributions to noncontrolling interests													(19)		(19)
Consolidations (deconsolidations) of noncontrolling interests													(36)		(36)
Stock-based compensation programs			33				44				77				77
Dividends declared on Common Stock					(463)						(463)				(463)
Comprehensive income:
Net income (loss)					511						511		(15)		496
Other comprehensive income (loss), net of tax									(2,824)		(2,824)		(1)		(2,825)
Total comprehensive income (loss)											(2,313)		(16)		(2,329)
Balance, June 30, 2023	$	6	$	25,676	$	32,756	$	(23,355)	$	(6,649)	$	28,434	$	1,021	$	29,455

(1)Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

PRUDENTIAL FINANCIAL, INC.

Unaudited Interim Consolidated Statements of Equity—Continued

Three and Six Months Ended June 30, 2022 (in millions)






	Prudential Financial, Inc. Equity
	Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held In Treasury		Accumulated Other Comprehensive Income (Loss)		Total Prudential Financial, Inc. Equity		Noncontrolling Interests		Total Equity
Balance, December 31, 2021(1)	$	6	$	25,732	$	35,183	$	(21,838)	$	(9,493)	$	29,590	$	732	$	30,322

Common Stock acquired							(375)				(375)				(375)

Contributions from noncontrolling interests													3		3
Distributions to noncontrolling interests													(21)		(21)

Stock-based compensation programs			(73)				162				89				89
Dividends declared on Common Stock					(462)						(462)				(462)
Comprehensive income:
Net income (loss)					(493)						(493)		(13)		(506)
Other comprehensive income (loss), net of tax									940		940		(1)		939
Total comprehensive income (loss)											447		(14)		433
Balance, March 31, 2022(1)	6		25,659		34,228		(22,051)		(8,553)		29,289		700		29,989

Common Stock acquired							(375)				(375)				(375)

Contributions from noncontrolling interests													26		26
Distributions to noncontrolling interests													(36)		(36)

Stock-based compensation programs			2				35				37				37
Dividends declared on Common Stock					(457)						(457)				(457)
Comprehensive income:
Net income (loss)					(1,010)						(1,010)		(7)		(1,017)
Other comprehensive income (loss), net of tax									3,850		3,850		0		3,850
Total comprehensive income (loss)											2,840		(7)		2,833
Balance, June 30, 2022(1)	$	6	$	25,661	$	32,761	$	(22,391)	$	(4,703)	$	31,334	$	683	$	32,017

(1)Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

See Notes to Unaudited Interim Consolidated Financial Statements

PRUDENTIAL FINANCIAL, INC.

Unaudited Interim Consolidated Statements of Cash Flows

Six Months Ended June 30, 2023 and 2022 (in millions)


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)(1)	$	1,973	$	(1,523)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Realized investment (gains) losses, net(1)	721		2,680
Change in value of market risk benefits, net of related hedging (gains) losses(1)	(91)		980
Policy charges and fee income(1)	(1,073)		(1,104)
Interest credited to policyholders’ account balances(1)	2,130		704
Depreciation and amortization(1)	46		182
(Gains) losses on assets supporting experience-rated contractholder liabilities, net	(422)		1,080
Change in:
Deferred policy acquisition costs(1)	(385)		(357)
Future policy benefits and other insurance liabilities(1)	2,738		4,092
Income taxes(1)	(196)		(1,576)
Derivatives, net(1)	(333)		(1,969)
Other, net(1)	(2,541)		(1,687)
Cash flows from (used in) operating activities	2,567		1,502
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	22,234		28,636
Fixed maturities, held-to-maturity	17		17
Fixed maturities, trading	344		1,206
Assets supporting experience-rated contractholder liabilities	1,256		10,235
Equity securities	1,192		2,535
Commercial mortgage and other loans	1,685		3,004
Policy loans	880		869
Other invested assets	532		1,155
Short-term investments	15,065		20,616
Payments for the purchase/origination of:
Fixed maturities, available-for-sale	(25,467)		(33,244)

Fixed maturities, trading	(583)		(225)
Assets supporting experience-rated contractholder liabilities	(1,283)		(10,592)
Equity securities	(1,524)		(1,361)
Commercial mortgage and other loans	(2,457)		(2,778)
Policy loans	(780)		(593)
Other invested assets	(1,044)		(1,320)
Short-term investments	(15,380)		(20,079)

Dispositions, net of cash disposed	0		422
Derivatives, net	(700)		(1,802)
Other, net	(130)		59
Cash flows from (used in) investing activities	(6,143)		(3,240)
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholders’ account deposits	13,402		13,969
Policyholders’ account withdrawals	(8,791)		(12,764)
Net change in securities sold under agreements to repurchase and cash collateral for loaned securities	(1,384)		(483)
Cash dividends paid on Common Stock	(933)		(921)
Net change in financing arrangements (maturities 90 days or less)	3		(258)
Common Stock acquired	(504)		(738)
Common Stock reissued for exercise of stock options	63		99
Proceeds from the issuance of debt (maturities longer than 90 days)	495		1,024
Repayments of debt (maturities longer than 90 days)	(1,604)		(124)
Proceeds from notes issued by consolidated VIEs	67		0
Repayments of notes issued by consolidated VIEs	(18)		0

Other, net	318		1,660
Cash flows from (used in) financing activities	1,114		1,464
Effect of foreign exchange rate changes on cash balances	(143)		(317)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS INCLUDING BALANCES CLASSIFIED AS HELD-FOR-SALE	(2,605)		(591)
NET CHANGE IN CASH BALANCES CLASSIFIED AS HELD-FOR-SALE(2)	0		(2,071)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS	(2,605)		1,480
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR	17,299		12,934
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD	$	14,694	$	14,414

PRUDENTIAL FINANCIAL, INC.

Unaudited Interim Consolidated Statements of Cash Flows

Six Months Ended June 30, 2023 and 2022 (in millions)


	Six Months Ended June 30,
	2023		2022
HELD-FOR-SALE CLASSIFICATION(1)(2)
Change in assets classified as held-for-sale	$	0	$	(153,935)
Change in liabilities classified as held-for-sale	0		(151,508)
Change in net assets classified as held-for-sale	$	0	$	(2,427)

NON-CASH TRANSACTIONS DURING THE PERIOD
Treasury Stock shares issued for stock-based compensation programs	$	272	$	229
Novation of annuity contracts(3)	$	343	$	0
Significant Pension Risk Transfer transactions:
Assets received, excluding cash and cash equivalents	$	1,506	$	502
Liabilities assumed	2,409		505
Net cash received	$	903	$	3





RECONCILIATION TO THE UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Cash and cash equivalents	$	14,652	$	14,359
Restricted cash and restricted cash equivalents (included in “Other assets”)	42		55
Total cash, cash equivalents, restricted cash and restricted cash equivalents	$	14,694	$	14,414

(1)Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

(2)See Note 1 for additional information regarding the dispositions.

(3)“Cash flows from (used in) operating activities” and “Cash flows from (used in) investing activities” exclude certain non-cash activities related to the novation of certain, previously reinsured, annuity products, from Fortitude Group Holdings, LLC to the Company. See Note 1 for additional information.

See Notes to Unaudited Interim Consolidated Financial Statements

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements

1. BUSINESS AND BASIS OF PRESENTATION

Prudential Financial, Inc. (“Prudential Financial”) and its subsidiaries (collectively, “Prudential” or the “Company”) provide a wide range of insurance, investment management, and other financial products and services to both individual and institutional customers throughout the United States and in many other countries. Principal products and services provided include life insurance, annuities, retirement solutions, mutual funds and investment management.

Effective January 1, 2023, the Company made the following segment reporting changes, which do not impact the Company’s consolidated financial statements:

Based on the write-down of Assurance IQ’s (“AIQ”) goodwill asset, and that its financial results and operations are not considered significant, AIQ no longer represents a separately reportable segment and is now included within the Company’s Corporate and Other operations.
Since Prudential Advisors, the Company’s proprietary nationwide distribution business, is no longer managed through the Individual Life segment and its financial results and operations are not considered significant, it is now included within the Company’s Corporate and Other operations.

Historical segment results have been updated to conform to the current period presentation.

The Company’s principal operations consist of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the Retirement Strategies, Group Insurance and Individual Life businesses), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included within Corporate and Other operations. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under U.S. GAAP. The Company’s Corporate and Other operations include corporate items and initiatives that are not allocated to business segments, as well as the Divested and Run-off Businesses described above.

Basis of Presentation

On January 1, 2023, the Company adopted Accounting Standard Update (“ASU”) 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, which provided new authoritative guidance impacting the accounting and disclosure requirements for long-duration insurance and investment contracts issued by the Company. See “Adoption of ASU 2018-12” below for additional information regarding this adoption, including the impacts to the Company’s 2022 financial statements from implementing the new accounting standard as well as the transition impacts recorded as of January 1, 2021. See Note 2 for additional details regarding the key policy changes effected by this ASU and updated accounting policies resulting from the adoption of this ASU for all periods presented in the Unaudited Interim Consolidated Financial Statements.

The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). The Unaudited Interim Consolidated Financial Statements include the accounts of Prudential Financial, entities over which the Company exercises control, including majority-owned subsidiaries and minority-owned entities such as limited partnerships in which the Company is the general partner, and variable interest entities (“VIEs”) in which the Company is considered the primary beneficiary. See Note 4 for additional information regarding the Company’s consolidated variable interest entities. Intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Adoption of ASU 2018-12

In August 2018, the FASB issued ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts which provides new authoritative guidance impacting the accounting and disclosure requirements for long-duration insurance and investment contracts issued by the Company. The Company adopted this guidance, effective January 1, 2023, using the modified retrospective transition method, where permitted, for changes to the liability for future policy benefits and deferred policy acquisition costs (“DAC”) and related balances, and using the retrospective transition method, as required, for market risk benefits. The Company applied the guidance as of the transition date of January 1, 2021 and retrospectively adjusted prior period amounts shown in the 2023 financial statements to reflect the new guidance.

The following tables present amounts as previously reported in 2022, the effect upon those amounts from the adoption of the new guidance under ASU 2018-12, and the adjusted amounts that are reflected in the Unaudited Interim Consolidated Financial Statements included herein.

Unaudited Interim Consolidated Statements of Financial Position:


	December 31, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in millions)
Deferred policy acquisition costs	$	19,537	$	1,009	$	20,546
Value of business acquired	595		26		621
Income tax assets	4,214		(4,214)		0
Market risk benefit assets	0		800		800
Other assets	30,188		1,491		31,679
TOTAL ASSETS	689,917		(888)		689,029

Future policy benefits	284,452		(22,679)		261,773
Policyholders' account balances	135,602		22		135,624
Market risk benefit liabilities	0		5,864		5,864
Income taxes	0		277		277
Other liabilities	20,536		1,288		21,824
Total liabilities	672,709		(15,228)		657,481

Accumulated other comprehensive income (loss)	(19,827)		16,021		(3,806)
Retained earnings	33,392		(1,678)		31,714
Total Prudential Financial, Inc. equity	16,250		14,343		30,593
Noncontrolling interests	958		(3)		955
Total equity	17,208		14,340		31,548
TOTAL LIABILITIES AND EQUITY	$	689,917	$	(888)	$	689,029

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Unaudited Interim Consolidated Statements of Operations:


	Three Months Ended June 30, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in millions, except per share amounts)
REVENUES
Premiums	$	7,112	$	(635)	$	6,477
Policy charges and fee income	1,551		(576)		975
Other income (loss)	580		781		1,361
Realized investment gains (losses), net	(1,147)		(489)		(1,636)
Change in value of market risk benefits, net of related hedging gain	0		(710)		(710)
Total revenues	13,021		(1,629)		11,392
BENEFITS AND EXPENSES
Policyholders' benefits	9,612		(1,654)		7,958
Change in estimates of liability for future policy benefits	0		777		777
Interest credited to policyholders' account balances	665		(21)		644
Amortization of deferred policy acquisition costs	581		(223)		358
General and administrative expenses	2,881		49		2,930
Total benefits and expenses	13,532		(1,072)		12,460
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	(511)		(557)		(1,068)
Total income tax expense (benefit)	11		(130)		(119)
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	(522)		(427)		(949)
Equity in earnings of operating joint ventures, net of taxes	(50)		(18)		(68)
NET INCOME (LOSS)	(572)		(445)		(1,017)
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.	$	(565)	$	(445)	$	(1,010)

EARNINGS PER SHARE
Basic earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.	$	(1.53)	$	(1.18)	$	(2.71)
Diluted earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.	$	(1.53)	$	(1.18)	$	(2.71)

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in millions, except per share amounts)
REVENUES
Premiums	$	15,064	$	(898)	$	14,166
Policy charges and fee income	3,010		(736)		2,274
Other income (loss)	(791)		842		51
Realized investment gains (losses), net	(1,463)		(1,217)		(2,680)
Change in value of market risk benefits, net of related hedging gain	0		(980)		(980)
Total revenues	26,236		(2,989)		23,247
BENEFITS AND EXPENSES
Policyholders' benefits	18,480		(1,747)		16,733
Change in estimates of liability for future policy benefits	0		632		632
Interest credited to policyholders' account balances	834		(130)		704
Amortization of deferred policy acquisition costs	1,428		(699)		729
General and administrative expenses	6,092		55		6,147
Total benefits and expenses	26,862		(1,889)		24,973
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	(626)		(1,100)		(1,726)
Total income tax expense (benefit)	(58)		(205)		(263)
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	(568)		(895)		(1,463)
Equity in earnings of operating joint ventures, net of taxes	(48)		(12)		(60)
NET INCOME (LOSS)	(616)		(907)		(1,523)
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.	$	(596)	$	(907)	$	(1,503)

EARNINGS PER SHARE
Basic earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.	$	(1.62)	$	(2.42)	$	(4.04)
Diluted earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.	$	(1.62)	$	(2.42)	$	(4.04)

Unaudited Interim Consolidated Statements of Comprehensive Income:


	Three Months Ended June 30, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in millions)
NET INCOME (LOSS)	$	(572)	$	(445)	$	(1,017)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments for the period	(984)		72		(912)
Net unrealized investment gains (losses)	(17,740)		(1,414)		(19,154)
Interest rate remeasurement of future policy benefits	0		25,029		25,029
Gain (loss) from changes in non-performance risk on market risk benefits	0		200		200
Total	(18,336)		23,887		5,551
Less: Income tax expense (benefit) related to other comprehensive income (loss)	(3,953)		5,654		1,701
Other comprehensive income (loss), net of taxes	(14,383)		18,233		3,850
Comprehensive income (loss)	(14,955)		17,788		2,833
Comprehensive income (loss) attributable to Prudential Financial, Inc.	$	(14,948)	$	17,788	$	2,840

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in millions)
NET INCOME (LOSS)	$	(616)	$	(907)	$	(1,523)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments for the period	(1,336)		35		(1,301)
Net unrealized investment gains (losses)	(39,510)		(2,477)		(41,987)
Interest rate remeasurement of future policy benefits	0		48,618		48,618
Gain (loss) from changes in non-performance risk on market risk benefits	0		1,307		1,307
Total	(40,393)		47,483		7,090
Less: Income tax expense (benefit) related to other comprehensive income (loss)	(8,890)		11,191		2,301
Other comprehensive income (loss), net of taxes	(31,503)		36,292		4,789
Comprehensive income (loss)	(32,119)		35,385		3,266
Comprehensive income (loss) attributable to Prudential Financial, Inc.	$	(32,098)	$	35,385	$	3,287

Unaudited Interim Consolidated Statements of Cash Flows:


	Six Months Ended June 30, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(616)	$	(907)	$	(1,523)
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment (gains) losses, net	1,463		1,217		2,680
Change in value of market risk benefits, net of related hedging (gain) loss	0		980		980
Policy charges and fee income	(1,334)		230		(1,104)
Interest credited to policyholders' account balances	834		(130)		704
Depreciation and amortization	188		(6)		182
Change in:
Deferred policy acquisition costs	324		(681)		(357)
Future policy benefits and other insurance liabilities	4,094		(2)		4,092
Income taxes	(1,371)		(205)		(1,576)
Derivatives, net	(2,301)		332		(1,969)
Other, net	(859)		(828)		(1,687)
Cash flows from (used in) operating activities	$	1,502	$	0	$	1,502

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The following tables detail the January 1, 2021 transition adjustments by providing a rollforward of the ending reported balances as of December 31, 2020 to the opening balances as of January 1, 2021 for retained earnings, accumulated other comprehensive income (“AOCI”) and the impacted insurance-related balances.


	January 1, 2021
	Retained Earnings
	(in millions)
Balance after-tax, prior to transition	$	30,749
Reclassification of market risk benefits non-performance risk to AOCI(1)	(1,588)
Updates to certain universal life contract liabilities(2)	(1,025)
Change in non-participating traditional and limited-payment contract liabilities(3)	(543)
Other	(271)
Total pre-tax adjustments	(3,427)
Tax impacts	815
Balance after-tax, after transition	$	28,137

(1)Reflects the cumulative impact of changes in the fair value of market risk benefits (“MRB”) non-performance risk (“NPR”) from the date of contract issuance to January 1, 2021. These amounts were previously recorded in retained earnings but are now reflected in AOCI under the new guidance.

(2)Reflects the impact on additional insurance reserves (“AIR”) and other related balances primarily related to the no-lapse guarantee features on certain universal life contracts in the Individual Life segment. For additional information, see Note 2.

(3)Reflects the impact on in-force contract liabilities where expected benefits exceed expected gross premiums and/or exhausts any deferred profit liabilities at any issue-year cohort level as a result of updating to current best estimate cash flow assumptions as of transition date, as well as the impact of flooring the liability for future policy benefits at zero at the issue-year cohort level as of transition date.

At transition, there was a pre-tax charge to retained earnings of $402 million for certain issue-year cohorts related to non-participating traditional and limited-payment products where the expected benefits exceeded the expected gross premiums and/or exhausted any deferred profit liabilities. The charge is primarily driven by the loss of the aggregation benefit as sufficiencies in issue-year cohorts cannot offset issue-year cohorts with deficiencies. For additional information regarding the liability for future policy benefits, see Note 2.


	January 1, 2021
	Accumulated Other Comprehensive Income
	(in millions)
Balance after-tax, prior to transition	$	30,738
Unwinding amounts related to unrealized investment gains and losses(1)	5,534
Reclassification of MRB NPR to AOCI(2)	1,588
Interest rate remeasurement of future policy benefits(3)	(62,711)
Change in operating joint ventures	(12)

Total pre-tax adjustments	(55,601)
Tax impacts	13,205
Balance after-tax, after transition	$	(11,658)

(1)Primarily reflects i) the removal of amounts related to the impact of unrealized investment gains and losses on premium deficiency reserves for non-participating traditional and limited-payment contracts and ii) amounts related to DAC and other balances as unrealized investment gains or losses no longer impact the amortization pattern of such balances under the new guidance. Also includes the impacts from updates to reserves and other related balances for certain universal life contracts. For additional information, see Note 2.

(2)Reflects the cumulative impact of changes in NPR on the fair value of market risk benefits from the date of contract issuance to January 1, 2021. These amounts were previously recorded in retained earnings but are now reflected in AOCI under the new guidance.

(3)Reflects the impact of remeasuring in-force non-participating traditional and limited-payment contract liabilities using current upper-medium grade fixed income instrument yields. This adjustment largely reflects the difference between discount rates locked-in at contract inception versus current discount rates as of January 1, 2021.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	January 1, 2021
	Deferred Policy Acquisition Costs
	Retirement Strategies		Individual Life				International Businesses				Other Businesses		Total
	Individual Variable		Term Life		Variable/ Universal Life		Life Planner		Gibraltar Life and Other
	(in millions)
Balance prior to transition	$	4,643	$	2,417	$	3,779	$	4,278	$	3,390	$	520	$	19,027
Unwinding amounts related to unrealized investment gains and losses and other activity	273		0		450		337		570		106		1,736

Balance after transition	$	4,916	$	2,417	$	4,229	$	4,615	$	3,960	$	626	$	20,763


	January 1, 2021
	Deferred Sales Inducements(1)
	Retirement Strategies		Other Businesses		Total
	Individual Variable
	(in millions)
Balance prior to transition	$	781	$	39	$	820
Unwinding amounts related to unrealized investment gains and losses	85		2		87
Balance after transition	$	866	$	41	$	907

(1)Deferred sales inducements (“DSI”) are included in “Other assets”.


	January 1, 2021
	Value of Business Acquired
	International Businesses		Other Businesses(1)		Total
	Gibraltar Life and Other
	(in millions)
Balance prior to transition	$	852	$	251	$	1,103
Unwinding amounts related to unrealized investment gains and losses and other activity	59		1		60
Balance after transition	$	911	$	252	$	1,163

(1)Primarily represents value of business acquired (“VOBA”) for the Full Service Retirement business.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	January 1, 2021
	Benefit Reserves(1)
	Retirement Strategies		Individual Life		International Businesses				Corporate and Other		Other Businesses(2)		Total
	Institutional		Term Life		Life Planner		Gibraltar Life and Other		Long- Term Care
	(in millions)
Balance prior to transition	$	65,383	$	7,887	$	51,607	$	69,542	$	7,975	$	6,624	$	209,018
Changes in cash flow assumptions and other activity	(3,805)		0		10		(523)		(18)		1		(4,335)
Balance after transition, at original discount rate	61,578		7,887		51,617		69,019		7,957		6,625		204,683
Cumulative changes in discount rate assumptions and other activity	13,548		2,662		22,590		13,784		4,905		5,381		62,870
Balance after transition, at current discount rate	75,126		10,549		74,207		82,803		12,862		12,006		267,553
Less: Reinsurance recoverable	0		799		160		307		0		13		1,279
Balance after transition, net of reinsurance recoverable	$	75,126	$	9,750	$	74,047	$	82,496	$	12,862	$	11,993	$	266,274

(1)Benefit reserves, excluding amounts for reinsurance recoverable, are included in "Future policy benefits." For additional information regarding the liability for future policy benefits, see Note 9.

(2)Primarily represents benefit reserves related to the Prudential of Taiwan business that was sold in the second quarter of 2021. The Company did not choose to apply ASU 2022-05 to this disposal transaction. See Note 2 for additional information.


	January 1, 2021
	Deferred Profit Liability(1)
	Retirement Strategies		International Businesses				Other Businesses		Total
	Institutional		Life Planner		Gibraltar Life and Other
	(in millions)
Balance prior to transition	$	1,315	$	1,964	$	3,746	$	349	$	7,374
Changes in benefit reserves	3,801		110		730		148		4,789
Balance after transition	5,116		2,074		4,476		497		12,163
Less: Reinsurance recoverable	0		7		15		0		22
Balance after transition, net of reinsurance recoverable	$	5,116	$	2,067	$	4,461	$	497	$	12,141

(1)Deferred profit liability (“DPL”), excluding amounts for reinsurance recoverable, is included in "Future policy benefits." For additional information regarding the liability for future policy benefits, see Note 9.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	January 1, 2021
	Additional Insurance Reserves(1)
	Retirement Strategies		Individual Life		Other Businesses		Total
	Individual Variable		Variable/ Universal Life
	(in millions)
Balance prior to transition	$	889	$	9,415	$	483	$	10,787
Unwinding amounts related to unrealized investment gains and losses	(65)		(1,444)		(106)		(1,615)
Balance prior to transition, excluding amounts related to unrealized investment gains and losses	824		7,971		377		9,172
Reclassification of future policy benefits AIR to MRB	(824)		0		(92)		(916)
Reclassification of policyholders’ account balances AIR to MRB	0		0		(48)		(48)
Updates to certain universal life contract liabilities(2)	0		1,772		7		1,779
Change in discount rate for annuitization benefits	0		0		116		116
Balance after transition, excluding amounts related to unrealized investment gains and losses	0		9,743		360		10,103
Amounts related to unrealized investment gains and losses after transition	0		1,186		0		1,186
Balance after transition	0		10,929		360		11,289
Less: Reinsurance recoverable	0		4,387		0		4,387
Balance after transition, net of reinsurance recoverable	$	0	$	6,542	$	360	$	6,902

(1)Additional insurance reserves (“AIR”), excluding amounts for reinsurance recoverable, are included in “Future policy benefits”. For additional information regarding the liability for future policy benefits, see Note 9.

(2)For additional information regarding updates to reserves and other related balances for certain universal life contracts, see Note 2.


	January 1, 2021
	Universal Life Loss Recognition Reserves/Profit Followed by Losses Liability(1)
	Individual Life		Other Businesses
			Total
	(in millions)
Balance prior to transition	$	1,823	$	6	$	1,829
Unwinding amounts related to unrealized investment gains and losses	(1,149)		0		(1,149)
Balance prior to transition, excluding amounts related to unrealized investment gains and losses	674		6		680
Derecognizing LRR & PFL	(674)		0		(674)
Balance after transition, excluding amounts related to unrealized investment gains and losses	0		6		6
Amounts related to unrealized investment gains and losses after transition	1,018		0		1,018
Balance after transition	$	1,018	$	6	$	1,024

(1)Universal life loss recognition reserves (“LRR”) / profit followed by losses liability (“PFL”) are included in “Future policy benefits”. For additional information regarding the liability for future policy benefits, see Note 9.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	January 1, 2021
	Non-Participating Traditional and Limited-Payment Loss Recognition Reserves/Profit Followed by Losses Liability(1)
	Retirement Strategies		International Businesses				Corporate and Other		Other Businesses		Total
	Institutional		Life Planner		Gibraltar Life and Other		Long- Term Care
	(in millions)
Balance prior to transition	$	1,985	$	181	$	670	$	734	$	145	$	3,715
Unwinding amounts related to unrealized investment gains and losses	(1,985)		(169)		(670)		(734)		(105)		(3,663)
Balance prior to transition, excluding amounts related to unrealized investment gains and losses	0		12		0		0		40		52
Derecognizing LRR & PFL	0		(12)		0		0		(40)		(52)
Balance after transition	$	0	$	0	$	0	$	0	$	0	$	0

(1)Prior to the adoption of ASU 2018-12, non-participating traditional and limited-payment loss recognition reserves / profit followed by losses liabilities were included in “Future policy benefits”.


	January 1, 2021
	Terminal Dividend Liability(1)
	Individual Life				Closed Block Division		Total
	Variable/ Universal Life		Term Life
	(in millions)
Balance prior to transition	$	212	$	4	$	375	$	591
Unwinding amounts related to unrealized investment gains and losses and other activity	(11)		0		0		(11)
Balance after transition	201		4		375		580
Less: Reinsurance recoverable	0		0		0		0
Balance after transition, net of reinsurance recoverable	$	201	$	4	$	375	$	580

(1)Terminal dividend liability is included in “Future policy benefits”.


	January 1, 2021
	Unearned Revenue Reserves(1)
		Individual Life		International Businesses
		Variable/Universal Life		Life Planner		Gibraltar Life and Other		Corporate and Other		Other Businesses		Total
	(in millions)
Balance prior to transition		$	2,204	$	161	$	45	$	152	$	30	$	2,592
Unwinding amounts related to unrealized investment gains and losses and other activity		539		2		5		38		0		584
Balance after transition		2,743		163		50		190		30		3,176
Less: Reinsurance recoverable		0		0		0		0		0		0
Balance after transition, net of reinsurance recoverable		$	2,743	$	163	$	50	$	190	$	30	$	3,176

(1)Unearned revenue reserves (“URR”) are included in “Policyholders' account balances”.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	January 1, 2021
	Market Risk Benefits(1)
	Retirement Strategies		Other Businesses		Total
	Individual Variable
	(in millions)
Liability for guaranteed benefits recorded at fair value, prior to transition	$	18,731	$	148	$	18,879
AIR to be reclassified to MRB, prior to transition, excluding amounts related to unrealized investment gains and losses	824		140		964
Total liability prior to transition	19,555		288		19,843
Change in reserve basis to MRB framework	122		98		220
MRB after transition, at current NPR value	19,677		386		20,063
Less: Reinsured MRB	204		7		211
MRB after transition, net of reinsurance	19,473		379		19,852

MRB after transition, at contract inception NPR value	21,259		392		21,651
Cumulative change in NPR	1,582		6		1,588
MRB after transition, at current NPR value	$	19,677	$	386	$	20,063

(1)For additional information regarding market risk benefits, see Note 11.


	January 1, 2021
	Cost of Reinsurance(1)
	Individual Life
	Variable/Universal Life
	(in millions)
Balance prior to transition	$	3,058
Unwinding amounts related to unrealized investment gains and losses	(659)
Balance prior to transition, excluding amounts related to unrealized investment gains and losses	2,399
Impact from updates to certain universal life contract liabilities(2)	860
Balance after transition, excluding amounts related to unrealized investment gains and losses	3,259
Amounts related to unrealized investment gains and losses after transition	580
Balance after transition	$	3,839

(1)Cost of reinsurance is included in “Other liabilities.”

(2)For additional information regarding updates to reserves and other related balances for certain universal life contracts, see Note 2.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining future policy benefits; policyholders’ account balances related to the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products; market risk benefits; the measurement of goodwill and any related impairment; the valuation of investments including derivatives, the measurement of allowance for credit losses, and the recognition of other-than-temporary impairments (“OTTI”); pension and other postretirement benefits; any provision for income taxes and valuation of deferred tax assets; and accruals for contingent liabilities, including estimates for losses in connection with unresolved legal and regulatory matters.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Reclassifications

Certain amounts in prior periods have been reclassified for reasons unrelated to the adoption of ASU 2018-12 to conform to the current period presentation.

Business Dispositions

Prudential Annuities Life Assurance Corporation, Representing a Portion of Individual Annuities’ Traditional Variable Annuity Block of Business

On April 1, 2022, the Company completed the sale of Prudential Annuities Life Assurance Corporation (“PALAC”), a wholly owned subsidiary, representing a portion of its in-force traditional variable annuity block of business, to Fortitude Group Holdings, LLC (“Fortitude”). The PALAC block primarily consisted of non-New York traditional variable annuities with guaranteed living benefits that were issued prior to 2011, which constituted approximately $30 billion of Prudential’s total in-force individual annuity account values at the closing of the transaction. The Company, through co-insurance and modified co-insurance agreements, has retained the economics of certain variable annuities, indexed annuities, and fixed annuities with a guaranteed lifetime withdrawal income feature issued by PALAC.

The Company recognized a pre-tax gain on sale of $1,448 million within “Other income”, which is included in adjusted operating income within the Retirement Strategies segment.

Full Service Retirement Business

On April 1, 2022, the Company completed the sale of its Full Service Retirement business to Great-West Life & Annuity Insurance Company (“Great-West”), primarily through a combination of (i) the sale of all of the outstanding equity interests of certain legal entities, including Prudential Retirement Insurance and Annuity Company (“PRIAC”); (ii) the ceding of certain insurance policies through reinsurance; and (iii) the sale, transfer and/or novation of certain in-scope contracts and brokerage accounts.

The Company recognized a net pre-tax gain on sale of $650 million, composed of (i) an $850 million gain recorded in “Other income”; (ii) $150 million of realized losses recorded in “Realized investment gains (losses), net”, related to assets transferred as part of the reinsurance of certain retained policies to Great-West; and (iii) $50 million of indirect expenses and charges recorded in “General and administrative expenses” on the Consolidated Statements of Operations. These amounts reflect certain post-closing adjustments in accordance with the terms of the transaction agreement. The net gain was excluded from adjusted operating income and reported within Divested Businesses as part of Corporate and Other operations. In addition, the Company recognized a deferred gain of approximately $400 million, including a post-closing true-up, for the ceding of certain insurance policies through reinsurance to Great-West. This deferred reinsurance gain will be recognized in income over the term of the ceded policies.

Excluding the gain on sale, the Full Service Retirement business generated pre-tax income/(loss) of $0 million and $(218) million for the three and six months ended June 30, 2022, respectively. This amount excludes the impact of overhead costs retained in the Company’s Corporate and Other operations and not transferred to Great-West.

2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of ASUs to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. ASUs listed below include those that have been adopted during the current fiscal year and/or those that have been issued but not yet adopted as of June 30, 2023, and as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Adoption of ASU 2018-12

Effective January 1, 2023, the Company adopted ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. Adoption of this ASU impacted, at least to some extent, the accounting and disclosure requirements for all long-duration insurance and investment contracts issued by the Company and had a significant financial impact on the Consolidated Financial Statements and disclosures. See Note 1 for additional information.

As of the January 1, 2021 transition date, the adoption of the standard resulted in a decrease to “Retained earnings” of $2.6 billion primarily from reclassifying the cumulative effect of changes in non-performance risk on market risk benefits from “Retained earnings” to “Accumulated other comprehensive income” (“AOCI”) as well as from a net increase in additional insurance reserves and other related balances primarily related to the no-lapse guarantee features on certain universal life contracts. AOCI decreased $42.4 billion as of the January 1, 2021 transition date largely from remeasuring in-force contract liabilities using upper-medium grade fixed income instrument yields as of the transition date. As of the January 1, 2023 adoption date, the impacts amounted to a decrease to “Retained earnings” of $1.7 billion and an increase to AOCI of $16.0 billion. The changes in the impacts from January 1, 2021 to January 1, 2023 primarily reflect the increase in interest rates during 2021 and 2022.

Outlined below are: (1) key accounting policy changes effected by the ASU and (2) updated accounting policies for all of the periods presented in the Unaudited Interim Consolidated Financial Statements.

(1) Key Accounting Policy Changes


Area of Change	Description	Method of adoption	Effect on the financial statements or other significant matters

Cash flow assumptions used to measure the liability for future policy benefits for non-participating traditional and limited-payment insurance products	Requires an entity to review and, if necessary, update the cash flow assumptions used to measure the liability for future policy benefits, for both changes in future assumptions and actual experience, at least annually using a retrospective update method with a cumulative catch-up adjustment recorded in a separate line item in the Consolidated Statements of Operations.	Effective January 1, 2023 using the modified retrospective transition method, which includes a cumulative effect adjustment to the balance sheet as of January 1, 2021 (the “transition date”). Under this method, the amendments to contracts in force were applied as of January 1, 2021 on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI.	The impact upon transition reflects the impact on in-force contract liabilities in instances where expected net premiums exceeded expected gross premiums at an issue-year cohort level as a result of updating to current best estimate cash flow assumptions as of the transition date. As a result of the modified retrospective transition method, the vast majority of the impact of updating cash flow assumptions to best estimates as of the transition date will be reflected in the pattern of earnings in subsequent periods. See Note 1 for additional information regarding the effect on the financial statements. Adoption of the standard also resulted in additional required disclosures. See Note 9 for additional information.

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


Discount rate assumption used to measure the liability for future policy benefits for non-participating traditional and limited-payment insurance products	Requires discount rate assumptions to be based on upper-medium grade fixed income instrument yields, which will be updated each quarter with the impact recorded through OCI. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the discount rate assumptions.	As noted above, the guidance for the liability for future policy benefits was adopted effective January 1, 2023 using the modified retrospective transition method, which includes a cumulative effect adjustment to the balance sheet as of January 1, 2021. Under this method, for balance sheet remeasurement purposes, the liability for future policy benefits is remeasured using discount rates as of January 1, 2021 with the impact recorded as a cumulative effect adjustment to AOCI.	Adoption of the ASU resulted in a significant impact to AOCI as a result of remeasuring in-force contract liabilities using current upper-medium grade fixed income instrument yields. This adjustment largely reflects the difference between discount rates locked-in at contract inception versus current discount rates. See Note 1 for additional information regarding the effect on the financial statements. Adoption of the standard also resulted in additional required disclosures. See Note 9 for additional information.
Amortization of deferred acquisition costs (“DAC”) and other balances	Requires DAC and other balances, such as unearned revenue reserves and DSI, to be amortized on a constant level basis over the expected term of the related contract, independent of expected profitability.	Effective January 1, 2023 using the modified retrospective transition method, which includes a cumulative effect adjustment to the balance sheet as of January 1, 2021. Under this method, the amendments to contracts in force were applied as of January 1, 2021 on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI.	Adoption of the ASU did not have a significant impact on DAC and other balances upon transition, other than the impact of the removal of any related amounts in AOCI. See Note 1 for additional information regarding the effect on the financial statements. Adoption of the standard also resulted in additional required disclosures. See Note 7 for additional information.
Market Risk Benefits (“MRB”)	Requires an entity to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value, and record MRB assets and liabilities separately on the Consolidated Statements of Financial Position. Changes in the fair value of market risk benefits are recorded in net income, except for the portion attributable to changes in an entity’s NPR, which is recognized in OCI. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the balance of the market risk benefits upon adoption.	Effective January 1, 2023 using the retrospective transition method, which includes a cumulative effect adjustment to the balance sheet as of January 1, 2021.	Adoption of the ASU resulted in an adjustment to retained earnings for the difference between the fair value and carrying value of benefits not measured at fair value prior to the adoption of the ASU (e.g., guaranteed minimum death benefits on variable annuities) and a reclass of the cumulative effect of changes in NPR from retained earnings to AOCI. See Note 1 for additional information regarding the effect on the financial statements. Adoption of the standard also resulted in additional required disclosures. See Note 11 for additional information.

In addition to the significant key accounting changes noted above, ASU 2018-12 also clarified the definition of assessments used to accrue additional insurance reserves and other related balances, primarily for no-lapse guarantee features on certain universal life contracts in the Individual Life segment. Application of the new guidance changed the pattern of

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

reserve recognition for these guarantees and resulted in an increase to the net contract liabilities related to these products at transition. See Note 1 for additional information regarding the effect on the financial statements.

ASU 2022-05, Financial Services – Insurance (Topic 944) Transition for Sold Contracts was issued on December 15, 2022, to amend the transition guidance in ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The amendment allows an insurance entity to make an accounting policy election to not apply ASU 2018-12 to contracts or legal entities sold or disposed of before the effective date, and in which the insurance entity has no significant continuing involvement with the derecognized contracts. An insurance entity is permitted to apply the policy election on a transaction by transaction basis to each sale or disposal transaction. An insurance entity is required to disclose whether it has chosen to apply this accounting policy election and provide a qualitative description of the sale or disposal transactions to which the accounting policy election is applied. The Company did not choose to apply this accounting policy election to any of its eligible sale or disposal transactions.

(2) Updated Accounting Policies

This section includes the updated accounting policies resulting from the adoption of ASU 2018-12, which are applicable to all of the periods presented in the Unaudited Interim Consolidated Financial Statements. This section is meant to serve as an update to, and should be read in conjunction with, Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

ASSETS

Deferred policy acquisition costs (“DAC”) represents costs directly related to the successful acquisition of new and renewal insurance and annuity business. Such DAC primarily includes commissions, costs of policy issuance and underwriting, and certain other expenses that are directly related to successfully acquired contracts. In each reporting period, previously capitalized DAC is amortized and included in “Amortization of deferred policy acquisition costs”, and the carrying amount of DAC is not subject to recoverability testing upon adoption of ASU 2018-12.

DAC is amortized on a constant-level basis at a grouped contract level over the expected life of the underlying insurance contracts. Contracts are grouped consistent with the groupings used to estimate the liability for future policy benefits (or other related balances) for the corresponding contracts. Since contracts within a grouping may be of different sizes, contracts within a group are weighted to achieve appropriate amortization and to ensure that DAC is derecognized when a policy is no longer in force. The constant-level basis used to weight contracts within a grouping and amortize DAC is generally defined as follows:

Life insurance contracts – DAC associated with life insurance contracts is generally amortized in proportion to the initial face amount of life insurance in force. This is applicable to traditional and universal life insurance products in the Individual Life and International Insurance segments and Closed Block division, and group corporate- and bank-owned life insurance contracts in the Group Insurance segment.
Payout annuity contracts – DAC associated with payout annuity contracts in the Retirement Strategies segment is amortized in proportion to annual benefit payments.
Deferred annuity contracts – DAC associated with fixed and variable deferred annuity contracts in the Retirement Strategies and International Insurance segments is amortized in proportion to deposits.
Health contracts – DAC associated with health contracts in the International Insurance segment is generally amortized in proportion to maximum lifetime benefits.

For funding agreement note contracts, single premium structured settlement contracts without life contingencies, and single premium immediate annuities without life contingencies, acquisition expenses are deferred and amortized over the expected life of the contracts using the interest method. For other group life and disability insurance contracts and guaranteed investment contracts (“GICs”), acquisition costs are expensed as incurred.

Current period DAC amortization reflects the impact of changes in actual insurance in force during the period and changes in future assumptions effected as of the end of the quarter, where applicable. The Company typically updates actuarial assumptions annually in the second quarter (see “Annual Assumptions Review” below), unless a material change is observed in an interim period that is indicative of a long-term trend. Generally, the Company does not expect trends to change significantly

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

in the short-term and, to the extent these trends may change, the Company expects such changes to be gradual over the long-term.

Assumptions used for DAC are consistent with those used in estimating the liability for future policy benefits (or any other related balance) for the corresponding contract. Determining the level of aggregation and actuarial assumptions used in projecting in-force terminations requires judgment. Internal criteria are developed to determine the level of aggregation by considering both qualitative and quantitative materiality thresholds.

The assumptions used in projecting in-force terminations are mortality, mortality improvement, and lapse assumptions. These assumptions are generally based on the Company’s experience, industry experience and/or other factors, as applicable. For variable deferred annuity contracts, lapse rates are adjusted at the contract level based on the in-the-moneyness of the living benefits and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates are also generally assumed to be lower for the period where surrender charges apply.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. If policyholders surrender traditional life insurance policies in exchange for life insurance policies that do not have fixed and guaranteed terms, the Company immediately charges to expense the remaining unamortized DAC on the surrendered policies. For other internal replacement transactions, except those that involve the addition of a non-integrated contract feature that does not change the existing base contract, the unamortized DAC is immediately charged to expense if the terms of the new policies are not substantially similar to those of the former policies. If the new terms are substantially similar to those of the earlier policies, the DAC is retained with respect to the new policies and amortized over the expected life of the new policies. See Note 7 for additional information regarding DAC.

Value of business acquired (“VOBA”) represents identifiable intangible assets to which a portion of the purchase price in a business acquisition is attributed under the application of purchase accounting. VOBA represents an adjustment to the stated value of in-force insurance contract liabilities to present them at fair value, determined as of the acquisition date. VOBA balances are subject to recoverability testing in the manner in which they were acquired. The Company has established a VOBA asset primarily for its acquired life insurance products and accident and health products with fixed benefits. As of June 30, 2023, the majority of the VOBA balance relates to the 2011 acquisition of AIG Star Life Insurance Co., Ltd, AIG Edison Life Insurance Company, AIG Financial Assurance Japan K.K. and AIG Edison Service Co., Ltd. (collectively, the “Star and Edison Businesses”). The Company records amortization of VOBA in “General and administrative expenses” and amortizes it over the anticipated life of the acquired contracts using the same methodology, factors, and assumptions used to amortize DAC and deferred sales inducements (“DSI”). See Note 7 for additional information regarding VOBA.

Market risk benefits assets represents market risk benefits (“MRBs”) in an asset position and are presented separately from MRBs in a liability position. See “Market risk benefit liabilities” below. MRB assets also reflect ceded MRBs resulting from reinsurance of the Company’s Prudential Defined Income (“PDI”) traditional variable annuity contracts. See Note 12 for additional information regarding the reinsurance of PDI.

Other assets consists primarily of prepaid pension benefit costs, certain restricted assets (e.g., cash and cash equivalents), trade receivables, goodwill and other intangible assets, “right-of-use” lease assets (see “Other liabilities” below), DSI, the Company’s investments in operating joint ventures, property and equipment, reinsurance recoverables (see “Reinsurance” below), and receivables resulting from sales of securities that had not yet settled at the balance sheet date.

Deferred Sales Inducements are amounts that are credited to a policyholders’ account balance primarily as an inducement to purchase fixed and/or variable deferred annuity contracts. The Company defers sales inducements and amortizes them over the expected life of the policy using the same methodology, factors and assumptions used to amortize DAC. The Company records amortization of DSI in “Interest credited to policyholders’ account balances.” Unlike DAC, DSI are considered contractual cash flows and, as a result, are subject to periodic recoverability testing. See Note 7 for additional information regarding DSI.

Separate account assets represents segregated funds that are invested for certain policyholders, pension funds and other customers. The assets consist primarily of equity securities, fixed maturities, real estate-related investments, real estate mortgage loans, short-term investments and derivative instruments and are reported at fair value. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

respect to certain accounts. The investment income and realized investment gains or losses from separate account assets generally accrue to the policyholders and are not included in the Company’s results of operations. Mortality, policy administration and surrender charges assessed against the accounts are included in “Policy charges and fee income.” Asset management fees charged to the accounts are included in “Asset management and service fees.” Seed money that the Company invests in separate accounts is reported in the appropriate general account asset line. Investment income and realized investment gains or losses from seed money invested in separate accounts accrue to the Company and are included in the Company’s results of operations. See Note 8 for additional information regarding separate account arrangements with contractual guarantees. See also “Separate account liabilities” below.

LIABILITIES

Future policy benefits is primarily comprised of the present value of expected future payments to or on behalf of policyholders, where the timing and amount of such payments depend on policyholder mortality or morbidity, less the present value of expected future net premiums (where net premiums are gross premiums multiplied by the Net-To-Gross (“NTG”) ratio discussed below). The liability for future policy benefits is accrued over time as premium revenue is recognized. See Note 9 for additional information regarding future policy benefits.

The reserving methodology used for non-participating traditional and limited-payment contracts include the following:

Cash Flow Assumptions. In measuring the liability for future policy benefits, the net premium valuation methodology is utilized. Under this methodology, a liability for future policy benefits is established using current best estimate insurance assumptions and interest rate assumptions locked-in at contract issuance date. The NTG ratio is calculated as the ratio of the present value of expected policy benefits and non-level claim settlement expenses divided by the present value of expected gross premiums. The NTG ratio is applied to gross premiums, as premium revenue is recognized, to determine net premiums. The liability is then determined as the present value of expected future policy benefits and non-level claim settlement expenses less the present value of expected future net premiums. For purposes of liability measurement, contracts are grouped into cohorts based primarily on issue year, reportable segment and major product line.

The NTG ratio is generally updated quarterly for actual experience and annually for future cash flow assumption updates during the Company’s annual assumptions review process in the second quarter of each year unless a material change is observed in an interim period that is indicative of a long-term trend (see “Annual Assumptions Review” below), with the exception of claim settlement expense assumptions which the Company has made an entity-wide election to lock-in as of contract issuance. The NTG ratio is subject to a retrospective unlocking method whereby the Company updates its best estimate of cash flows expected over the life of the cohort using actual historical experience and updated future cash flow assumptions. These updated cash flows are used to calculate the revised NTG ratio, which is used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted at the original contract issuance discount rate. The updated liability for future policy benefit amount as of the beginning of the quarter is then compared to the carrying amount of the liability as of that same date, before the updates for actual experience or future cash flow assumptions, to determine the current period change in liability estimate. This current period change in the liability is the liability remeasurement gain or loss that is recorded through current period earnings in “Change in estimates of liability for future policy benefits.” In subsequent periods, the revised NTG ratio is used to measure the liability for future policy benefits, subject to future revisions.

If a cohort is in a loss position where the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for expected future policy benefits and non-level claim settlement expenses, the NTG ratio is capped at 100%. In these instances, all changes in expected benefits resulting from both actual experience deviations and changes in future assumptions are recognized immediately. While the liability for future policy benefits cannot be less than zero (i.e., a contra-liability) at the cohort level and thus the balance is floored at zero (i.e., “flooring”), the NTG ratio may be negative. This would be the case whereby conditions have improved such that the present value of future net premiums plus the existing liability for future policy benefits as of the valuation date exceed the present value of expected future policy benefits and non-level claim settlement expenses. In this case, the negative NTG ratio would be applied going forward to gross premiums received, effectively amortizing the gain into income and reducing the liability over time.

In addition, for limited-payment contracts, the liability for future policy benefits also includes a Deferred Profit Liability (“DPL”) representing gross premiums received in excess of net premiums and is generally recognized in

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

revenue in a constant relationship with insurance in force for life contracts or with the amount of expected future benefit payments for annuity contracts. The DPL is subject to a retrospective unlocking adjustment consistent with the liability for future policy benefits discussed above. The DPL cannot be less than zero (i.e., a contra-liability) at the cohort level and thus the balance is floored at zero (i.e., “flooring”).

For contracts issued prior to January 1, 2021, the modified retrospective transition method was used to transition to ASU 2018-12. Under this method, the transition date of January 1, 2021 serves as the new issue date of the contracts in force for purposes of retrospectively unlocking the NTG ratio and DPL, as described above.

Discount Rate Assumption. The locked-in discount rate is generally based on expected investment returns at contract inception for contracts issued prior to January 1, 2021 and the upper medium grade fixed income corporate instrument yield (i.e., global single A) at contract inception for contracts issued after January 1, 2021. The discount rate in effect at contract inception is locked-in for the calculation of the NTG ratio and accretion of interest cost on the liability through net income. However, for balance sheet remeasurement purposes, the discount rate is updated using the current single A rate at each reporting period, with the effect on the liability resulting from such update recorded in “Interest rate remeasurement of future policy benefits” in OCI.

The methodology used in constructing the single A discount rate curve for discounting cash flows used to calculate the liability for future policy benefits is intended to be reflective of the characteristics of the applicable insurance liabilities. The single A discount rate curve is developed by reference to upper medium grade (low credit risk) fixed income instrument yields that reflect the duration characteristics of the applicable insurance liabilities. The single A discount curve for the United States and foreign economies, such as Japan, with observable corporate A spreads, is developed using government bond rates, plus globally equivalent public corporate A spreads in the observable periods. The definition of upper medium grade is based on Moody’s definition which includes the spectrum of A (i.e., A- to A+). The rate used in foreign operations (with the exception of certain emerging markets, as discussed below) is based on the equivalent of a single A rate from a global rating agency for corporate bonds issued in the same currency and country in which the insurance contract is written. Liquidity is considered in defining the observable period and linear extrapolation is performed to the Company’s ultimate long-term economic assumptions. See “Annual Assumptions Review” below for further discussion regarding the Company’s long-term economic assumption setting process.

The Company has foreign currency denominated insurance obligations to policyholders in certain emerging markets where there is limited or no observable market data on upper medium grade (low credit risk) fixed income instrument yields. As a proxy for the upper medium grade fixed income instrument yield, the Company estimates an equivalent global single A yield in the currency of the emerging economy by converting a global single A U.S. dollar bond yield curve based on the relationship between market observable U.S. Treasury and foreign sovereign yield curves of similar duration as the insurance liability cash flows. The derived global single A curves in the foreign currency are evaluated against available evidence of observable global single A corporate bond rates in similar emerging economies. The Company uses interpolation and extrapolation techniques to complete the discount rate construction for the duration of the insurance liabilities to calculate the liability for future policy benefits denominated in the local currencies.

The Company’s liability for future policy benefits also includes net liabilities for guaranteed benefits related to certain long-duration life contracts, such as no-lapse guarantee contract features (Additional Insurance Reserves or “AIR” liability), for which a liability is established when associated assessments are recognized (which include investment margin on policyholders’ account balances in the general account and all policy charges including charges for administration, mortality, expense, surrender and other charges). This liability is established using current best estimate assumptions and is based on the ratio of the present value of total expected excess payments (i.e., payments in excess of account value) over the life of the contract divided by the present value of total expected assessments (i.e., benefit ratio).

For universal life type contracts and participating contracts, the Company performs premium deficiency tests using best estimate assumptions as of the testing date. If the liabilities determined based on these best estimate assumptions are greater than the net reserves (i.e., GAAP reserves including URR, net of reinsurance, and any DSI or VOBA asset), the existing net reserves are adjusted by first reducing these assets by the amount of the deficiency or to zero through a charge to current period earnings. If the deficiency is more than these asset balances for insurance contracts, the net reserves are increased by the excess through a charge to current period earnings included in “policyholders’ benefits”. Since investment yields are used as the discount rate, the premium deficiency test is also performed using a discount rate based on the market yield (i.e., assuming what would be the impact if any unrealized gains (losses) were realized as of the testing date). In the event that by using the market yield a deficiency occurs, an adjustment is established for the deficiency and is included in AOCI.

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

In certain instances, for universal life type contracts and participating contracts, the policyholder liability for a particular line of business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional liability (Profits Followed by Losses or “PFL” liability) be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years. Historically, PFL liabilities have been predominately associated with certain universal life contracts that measure GAAP reserves using a dynamic approach, and accordingly, are updated each quarter, using current in-force and market data, and as part of the annual assumption update, such that the liability as of each measurement date represents the Company’s current estimate of the present value of the amount necessary to offset anticipated future losses.

The Company’s liability for future policy benefits also includes a liability for unpaid claims and claim adjustment expenses. The Company does not establish claim liabilities until a loss has been incurred. However, unpaid claims and claim adjustment expenses include estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date.

Policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is primarily associated with the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance, as applicable. These policyholders’ account balances also include provision for benefits under non-life contingent payout annuities and certain unearned revenues. The unearned revenue liability represents policy charges for services to be provided in future periods. The charges are deferred as incurred and are generally amortized over the expected life of the contract using the same methodology, factors, and assumption used to amortize DAC. See Note 10 for additional information regarding policyholders’ account balances. Policyholders’ account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. For additional information regarding the valuation of these embedded derivatives, see Note 6.

Market risk benefit liabilities represents contracts or contract features that provide protection to the contractholder and exposes the Company to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits in the Retirement Strategies segment including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”). The benefits are accounted for using a fair value measurement framework. If a contract contains multiple market risk benefits, the benefits are bundled together and accounted for as a single compound market risk benefit. Market risk benefits in an asset position are presented separately from those in a liability position as there is no legal right of offset between contracts. The fair value of market risk benefits is calculated as the present value of expected future benefit payments to contractholders less the present value of expected future rider fees attributable to the market risk benefit. The fair value of market risk benefits is based on assumptions a market participant would use in valuing market risk benefits. For additional information regarding the valuation of market risk benefits, see Note 6. On a quarterly basis, changes in the fair value of market risk benefits are recorded in net income, net of related hedges, in “Change in value of market risk benefits, net of related hedging gains (losses)”, except for the portion of the change attributable to changes in the Company’s NPR which is recorded in OCI. See Note 11 for additional information regarding market risk benefits. See “Reinsurance” below for information regarding the reinsurance of MRBs.

Policyholders’ dividends includes dividends payable to policyholders and the policyholder dividend obligation associated with the participating policies included in the Closed Block. The dividends payable for participating policies included in the Closed Block are determined at the end of each year for the following year by the Board of Directors of The Prudential Insurance Company of America (“PICA”) based on its statutory results, capital position, ratings, and the emerging experience of the Closed Block. The policyholder dividend obligation represents amounts expected to be paid to Closed Block policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance. Any adjustments to the policyholder dividend obligation related to net unrealized gains (losses) on securities classified as available-for-sale are included in AOCI. For additional information regarding the policyholder dividend obligation, see Note 13. The dividends payable for policies other than the participating policies included in the Closed Block include dividends payable in accordance with certain group and individual insurance policies.

Separate account liabilities primarily represents the contractholders’ account balances in separate account assets and to a lesser extent borrowings of the separate account, and will be equal and offsetting to total separate account assets. See also “Separate account assets” above.

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

REVENUES, BENEFITS AND EXPENSES

Insurance Revenue and Expense Recognition

Premiums from individual life products, other than universal and variable life contracts, and health insurance and long-term care products are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium (i.e., the portion of the gross premium required to provide for all expected future policy benefits and non-level claim settlement expenses) is generally deferred and recognized into revenue in a constant relationship to insurance in force. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized as described in “Future policy benefits” above.

Premiums from non-participating group annuities with life contingencies, single premium structured settlements with life contingencies and single premium immediate annuities with life contingencies are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium is generally deferred and recognized into revenue based on expected future benefit payments. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized as described in “Future policy benefits” above.

Certain individual annuity contracts provide the contractholder a guarantee that the benefit received upon death or annuitization will be no less than a minimum prescribed amount. These benefits are generally accounted for as market risk benefits (see “Market risk benefits” above).

Amounts received from policyholders as payment for universal or variable group and individual life contracts, deferred fixed or variable annuities, structured settlements and other contracts without life contingencies, and participating group annuities are reported as deposits to “Policyholders’ account balances” and/or “Separate account liabilities.” Revenues from these contracts are reflected in “Policy charges and fee income” consisting primarily of fees assessed during the period against the policyholders’ account balances for mortality and other benefit charges, policy administration charges and surrender charges. In addition to fees, the Company earns investment income from the investment of deposits in the Company’s general account portfolio. Fees assessed that represent compensation to the Company for services to be provided in future periods and certain other fees are generally deferred and amortized into revenue over the life of the related contracts using the same methodology, factors, and assumption used to amortize DAC as described above. Benefits and expenses for these products include claims in excess of related account balances, expenses of contract administration, interest credited to policyholders’ account balances and amortization of DAC, DSI and VOBA.

Policyholders’ account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products where changes in the value of the embedded derivatives are recorded through “Realized investment gains (losses), net”. For additional information regarding the valuation of these embedded derivatives, see Note 6.

For group life, other than universal and variable group life contracts, and disability insurance, premiums are generally recognized over the period to which the premiums relate in proportion to the amount of insurance protection provided. Claim and claim adjustment expenses are recognized when incurred.

OTHER ACCOUNTING POLICIES

Reinsurance

For each of its reinsurance contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject, or features that delay the timely reimbursement of claims.

The Company participates in reinsurance arrangements in various capacities as either the ceding entity or as the reinsurer (i.e., assuming entity). See Note 12 for additional information regarding the Company’s reinsurance arrangements. Reinsurance assumed business is generally accounted for consistent with direct business. Amounts currently recoverable under reinsurance agreements are included in “Other assets” and amounts payable are included in “Other liabilities.” “Other assets” also includes

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Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

recoverables from assumed modified coinsurance arrangements which generally reflect the fair value of the invested assets retained by the cedant and contain an embedded derivative that is bifurcated and accounted for at fair value separately from the host contract. Revenues and benefits and expenses include amounts assumed under reinsurance agreements and are reflected net of reinsurance ceded.

Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. Reinsurance recoverables are reported net of the CECL allowance. The CECL allowance considers the credit quality of the reinsurance counterparty and is generally determined based on the probability of default and loss given default assumptions, after considering any applicable collateral arrangements. Additions to or releases of the allowance are reported in “Policyholders’ benefits”. Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured long-duration contracts under coinsurance arrangements are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. For reinsurance of in- force blocks of non-participating traditional and limited-payment contracts, the current value of the direct liability as of inception of the reinsurance agreement is used to calculate the reinsurance recoverable and cost of reinsurance such that there is no immediate other comprehensive income or loss from recognition of the reinsurance recoverable at inception. Consistent with the direct liability, the reinsurance recoverable for non-participating traditional and limited-payment contracts is remeasured each period using current single A rates with the effect on the liability resulting from such updates recorded in “Interest rate remeasurement of future policy benefits” in OCI.

Consistent with direct contracts, reinsurance arrangements may also include features that meet the definition of an MRB and, if so, are accounted for at fair value. The fair value of direct or assumed MRBs reflects the Company’s NPR, while the fair value of ceded MRBs reflects the counterparty credit risk of the reinsurer. Changes in the fair value of ceded MRBs, including the impact of changes in counterparty credit risk, are recorded in net income in “Change in value of market risk benefits, net of related hedging gains (losses)”.

Coinsurance arrangements contrast with the Company’s yearly renewable term arrangements, where only mortality risk is transferred to the reinsurer and premiums are paid to the reinsurer to reinsure that risk. The mortality risk that is reinsured under yearly renewable term arrangements represents the difference between the stated death benefits in the underlying reinsured contracts and the corresponding reserves or account value carried by the Company on those same contracts. The premiums paid to the reinsurer are based upon negotiated amounts, not on the actual premiums paid by the underlying contractholders to the Company. As yearly renewable term arrangements are usually entered into by the Company with the expectation that the contracts will be in force for the lives of the underlying policies, they are considered to be long-duration reinsurance contracts. The cost of reinsurance for universal life products is generally recognized based on the gross assessments of the underlying direct policies. The cost of reinsurance for term insurance products is generally recognized in proportion to direct premiums over the life of the underlying policies. The cost of reinsurance related to short-duration reinsurance contracts is accounted for over the reinsurance contract period.

If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Deposits received are included in “Other liabilities” and deposits made are included in “Other assets”. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as “Net investment income” or “General and administrative expenses,” as appropriate.

Annual Assumptions Review

Annually, the Company performs a comprehensive review of the assumptions set for purposes of estimating future premiums, benefits, and other cash flows. Assumptions include those that are economic and those that are insurance related. Insurance related assumptions are based on the Company’s best estimates of future rates of mortality, morbidity, lapse, surrender, annuitization, expenses and other items. The Company generally looks to relevant Company experience as the primary basis for these assumptions. If relevant Company experience is not available or does not have sufficient credibility, the Company may look to experience of similar blocks of business, either in the Company or the industry. Mortality rate assumptions are generally based on Company experience, sometimes blending Company experience with an industry table where the Company experience alone is not sufficiently credible. The Company sets mortality and morbidity assumptions that vary by major type of business. Within type of business, rates vary by age and gender. The Company applies an adjustment for future mortality improvement, consistent with observed long-term trends of population mortality over time. Lapse and

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

surrender assumptions are based on Company and industry experience, where available. The Company sets rates that vary by product type, taking into account features specific to the product.

As part of this review, the Company may update these assumptions and make refinements to its models based upon emerging experience, future expectations and other data, including any observable market data it feels is indicative of a long-term trend. These assumptions are generally updated annually, unless a material change is observed in an interim period that the Company feels is also indicative of a long-term trend. Generally, the Company does not expect trends to change significantly in the short-term and, to the extent these trends may change, it expects such changes to be gradual over the long-term.

The Company also performs a comprehensive review of the economic assumptions, including long-term interest rate assumptions and equity return assumptions, that impact reserve calculations. The Company generally utilizes relevant economic outlook information and industry surveys as the primary basis for these assumptions.

Other ASUs adopted during the six months ended June 30, 2023

The Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure, effective January 1, 2023, on a prospective basis. This ASU eliminates the accounting guidance for Troubled Debt Restructurings (“TDR”) for creditors and adds enhanced disclosure requirements. Following adoption of the ASU, all loan refinancings and restructurings are subject to the modification guidance in ASC 310-20. Specific to the accounting policy for commercial mortgage and other loans, adoption of the ASU resulted in the elimination of TDRs such that, on a prospective basis, all modifications are evaluated under the existing modification guidance in ASC 310-20 to determine whether a modification results in a new financial instrument or a continuation of the existing financial instrument. Furthermore, for modifications of loans that have a CECL allowance and result in a continuation of the existing loan, the CECL allowance of the loan is remeasured using the modified terms and the post-modification effective yield. Prior to the adoption of the ASU, if a loan modification was a TDR, the CECL allowance of the loan was remeasured using the modified terms and the loan’s original effective yield. Adoption of the ASU did not have a significant impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

3. INVESTMENTS

Fixed Maturity Securities

The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	27,215	$	1,122	$	3,795	$	0	$	24,542
Obligations of U.S. states and their political subdivisions	10,205		256		575		0		9,886
Foreign government bonds	70,205		5,149		3,090		56		72,208
U.S. public corporate securities	103,794		1,492		12,068		78		93,140
U.S. private corporate securities(1)	40,327		686		3,295		45		37,673
Foreign public corporate securities	21,345		407		1,659		56		20,037
Foreign private corporate securities	33,390		261		4,602		40		29,009
Asset-backed securities(2)	13,301		216		204		1		13,312
Commercial mortgage-backed securities	11,029		5		909		0		10,125
Residential mortgage-backed securities(3)	2,500		18		220		0		2,298
Total fixed maturities, available-for-sale(1)	$	333,311	$	9,612	$	30,417	$	276	$	312,230

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Amortized Cost, Net of Allowance
	(in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds	$	661	$	129	$	0	$	790	$	0	$	661
Foreign public corporate securities	395		21		0		416		2		393
Residential mortgage-backed securities(3)	117		6		0		123		0		117
Total fixed maturities, held-to-maturity(4)	$	1,173	$	156	$	0	$	1,329	$	2	$	1,171

(1)Excludes notes with amortized cost of $8,290 million (fair value, $8,290 million), which have been offset with the associated debt under a netting agreement.

(2)Includes credit-tranched securities collateralized by loan obligations, auto loans, education loans, home equity loans and other asset types.

(3)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(4)Excludes notes with amortized cost of $4,000 million (fair value, $4,000 million), which have been offset with the associated debt under a netting agreement.


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	29,372	$	1,110	$	4,413	$	0	$	26,069
Obligations of U.S. states and their political subdivisions	10,179		238		728		0		9,689
Foreign government bonds	74,103		4,503		5,379		1		73,226
U.S. public corporate securities	99,854		1,311		13,563		16		87,586
U.S. private corporate securities(1)	39,867		507		3,438		57		36,879
Foreign public corporate securities	22,235		416		1,945		19		20,687
Foreign private corporate securities	32,755		150		5,201		44		27,660
Asset-backed securities(2)	12,972		166		286		1		12,851
Commercial mortgage-backed securities	11,497		19		861		0		10,655
Residential mortgage-backed securities(3)	2,613		29		225		0		2,417
Total fixed maturities, available-for-sale(1)	$	335,447	$	8,449	$	36,039	$	138	$	307,719


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Amortized Cost, Net of Allowance
	(in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds	$	725	$	128	$	0	$	853	$	0	$	725
Foreign public corporate securities	430		24		0		454		2		428
Residential mortgage-backed securities(3)	143		5		0		148		0		143
Total fixed maturities, held-to-maturity(4)	$	1,298	$	157	$	0	$	1,455	$	2	$	1,296

(1)Excludes notes with amortized cost of $8,040 million (fair value, $8,040 million), which have been offset with the associated debt under a netting agreement.

(2)Includes credit-tranched securities collateralized loan obligations, education loans, auto loans, home equity loans and other asset types.

(3)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(4)Excludes notes with amortized cost of $4,250 million (fair value, $4,250 million), which have been offset with the associated debt under a netting agreement.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The following tables set forth the fair value and gross unrealized losses on available-for-sale fixed maturity securities without an allowance for credit losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the dates indicated:


	June 30, 2023
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	6,904	$	344	$	10,618	$	3,451	$	17,522	$	3,795
Obligations of U.S. states and their political subdivisions	2,585		77		3,382		498		5,967		575
Foreign government bonds	2,866		75		20,263		3,011		23,129		3,086
U.S. public corporate securities	23,856		1,046		51,160		11,015		75,016		12,061
U.S. private corporate securities	9,775		459		22,094		2,836		31,869		3,295
Foreign public corporate securities	4,938		138		9,496		1,504		14,434		1,642
Foreign private corporate securities	4,701		370		20,340		4,229		25,041		4,599
Asset-backed securities	1,663		31		7,730		173		9,393		204
Commercial mortgage-backed securities	1,898		84		8,136		825		10,034		909
Residential mortgage-backed securities	558		32		1,198		188		1,756		220
Total fixed maturities, available-for-sale	$	59,744	$	2,656	$	154,417	$	27,730	$	214,161	$	30,386


	December 31, 2022
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	18,009	$	3,143	$	2,563	$	1,270	$	20,572	$	4,413
Obligations of U.S. states and their political subdivisions	5,510		526		558		202		6,068		728
Foreign government bonds	16,932		2,384		9,877		2,971		26,809		5,355
U.S. public corporate securities	58,816		7,790		15,780		5,726		74,596		13,516
U.S. private corporate securities	24,610		2,065		6,705		1,373		31,315		3,438
Foreign public corporate securities	10,168		932		4,098		993		14,266		1,925
Foreign private corporate securities	16,909		2,521		8,196		2,678		25,105		5,199
Asset-backed securities	5,385		130		5,059		156		10,444		286
Commercial mortgage-backed securities	9,289		655		1,080		206		10,369		861
Residential mortgage-backed securities	1,322		130		402		93		1,724		223
Total fixed maturities, available-for-sale	$	166,950	$	20,276	$	54,318	$	15,668	$	221,268	$	35,944

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

As of June 30, 2023 and December 31, 2022, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of $28,952 million and $33,778 million, respectively, related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $1,434 million and $2,166 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of June 30, 2023, the $27,730 million of gross unrealized losses of twelve months or more were concentrated in the finance, consumer non-cyclical and utility sectors within corporate securities and foreign government securities. As of December 31, 2022, the $15,668 million of gross unrealized losses of twelve months or more were concentrated in consumer non-cyclical, finance and utility sectors within corporate securities and foreign government securities.

In accordance with its policy described in Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at June 30, 2023. This conclusion was based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to increases in interest rates, general credit spread widening, foreign currency exchange rate movements and the financial condition or near-term prospects of the issuer. As of June 30, 2023, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost basis.

The following table sets forth the amortized cost or amortized cost, net of allowance and fair value of fixed maturities by contractual maturities, as of the date indicated:


	June 30, 2023
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost, Net of Allowance		Fair Value
	(in millions)
Fixed maturities:
Due in one year or less	$	11,902	$	11,900	$	0	$	0
Due after one year through five years	51,624		50,214		393		416
Due after five years through ten years	61,584		59,818		14		15
Due after ten years(1)	181,371		164,563		647		775
Asset-backed securities	13,301		13,312		0		0
Commercial mortgage-backed securities	11,029		10,125		0		0
Residential mortgage-backed securities	2,500		2,298		117		123
Total	$	333,311	$	312,230	$	1,171	$	1,329

(1)Excludes available-for-sale notes with amortized cost of $8,290 million (fair value, $8,290 million) and held-to-maturity notes with amortized cost of $4,000 million (fair value, $4,000 million), which have been offset with the associated debt under a netting agreement.

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on write-downs and the allowance for credit losses of fixed maturities, for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	6,773	$	9,995	$	14,123	$	19,078
Proceeds from maturities/prepayments	4,053		4,301		8,041		9,606
Gross investment gains from sales and maturities	139		374		429		615
Gross investment losses from sales and maturities	(397)		(1,017)		(702)		(1,587)
Write-downs recognized in earnings(2)	(1)		(86)		(10)		(92)
(Addition to) release of allowance for credit losses	(7)		82		(138)		5
Fixed maturities, held-to-maturity:
Proceeds from maturities/prepayments(3)	$	10	$	8	$	17	$	17
(Addition to) release of allowance for credit losses	0		1		0		2

(1)Excludes activity from non-cash related proceeds due to the timing of trade settlements of $70 million and $(48) million for the six months ended June 30, 2023 and 2022, respectively.

(2)Amounts represent write-downs on credit adverse securities and securities actively marketed for sale.

(3)Excludes activity from non-cash related proceeds due to the timing of trade settlements of less than $1 million for both the six months ended June 30, 2023 and 2022.

The following tables set forth the activity in the allowance for credit losses for fixed maturity securities, as of the dates indicated:


	Three Months Ended June 30, 2023
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	62	$	206	$	1	$	0	$	0	$	269
Additions to allowance for credit losses not previously recorded	0		0		3		0		0		0		3
Reductions for securities sold during the period	0		0		(5)		0		0		0		(5)
Additions (reductions) on securities with previous allowance	0		(6)		15		0		0		0		9
Balance, end of period	$	0	$	56	$	219	$	1	$	0	$	0	$	276

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Three Months Ended June 30, 2022
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	12	$	180	$	0	$	0	$	0	$	192
Additions to allowance for credit losses not previously recorded	0		1		11		1		0		0		13
Reductions for securities sold during the period	0		0		(25)		0		0		0		(25)
Reductions for securities with intent to sell	0		(9)		(67)		0		0		0		(76)
Additions (reductions) on securities with previous allowance	0		2		4		0		0		0		6
Reclassified to / (from) “Assets held-for-sale”(1)	0		0		(1)		0		0		0		(1)
Balance, end of period	$	0	$	6	$	102	$	1	$	0	$	0	$	109

(1) See Note 1 for additional information.


	Six Months Ended June 30, 2023
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	1	$	136	$	1	$	0	$	0	$	138
Additions to allowance for credit losses not previously recorded	0		62		78		0		0		0		140
Reductions for securities sold during the period	0		0		(45)		0		0		0		(45)
Additions (reductions) on securities with previous allowance	0		(7)		50		0		0		0		43
Balance, end of period	$	0	$	56	$	219	$	1	$	0	$	0	$	276

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	7	$	107	$	0	$	0	$	0	$	114
Additions to allowance for credit losses not previously recorded	0		11		73		1		0		0		85
Reductions for securities sold during the period	0		(2)		(53)		0		0		0		(55)
Reductions for securities with intent to sell	0		(13)		(67)		0		0		0		(80)
Additions (reductions) on securities with previous allowance	0		3		42		0		0		0		45
Reclassified to / (from) “Assets held-for-sale”(1)	0		0		0		0		0		0		0
Balance, end of period	$	0	$	6	$	102	$	1	$	0	$	0	$	109

(1) See Note 1 for additional information.


	Three Months Ended June 30, 2023
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period	$	0	$	0	$	2	$	0	$	0	$	0	$	2
Current period provision for expected losses	0		0		0		0		0		0		0
Change in foreign exchange	0		0		0		0		0		0		0
Balance, end of period	$	0	$	0	$	2	$	0	$	0	$	0	$	2


	Three Months Ended June 30, 2022
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period	$	0	$	0	$	4	$	0	$	0	$	0	$	4
Current period provision for expected losses	0		0		(1)		0		0		0		(1)
Change in foreign exchange	0		0		0		0		0		0		0
Balance, end of period	$	0	$	0	$	3	$	0	$	0	$	0	$	3

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2023
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period	$	0	$	0	$	2	$	0	$	0	$	0	$	2
Current period provision for expected losses	0		0		0		0		0		0		0
Change in foreign exchange	0		0		0		0		0		0		0
Balance, end of period	$	0	$	0	$	2	$	0	$	0	$	0	$	2


	Six Months Ended June 30, 2022
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period	$	0	$	0	$	5	$	0	$	0	$	0	$	5
Current period provision for expected losses	0		0		(1)		0		0		0		(1)
Change in foreign exchange	0		0		(1)		0		0		0		(1)
Balance, end of period	$	0	$	0	$	3	$	0	$	0	$	0	$	3

For additional information regarding the Company’s methodology for developing its allowance and expected losses, 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, 2022.

For the three months ended June 30, 2023, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the basic industry and technology sectors within corporate securities due to adverse projected cash flows. Partially offsetting the additions was a net release within the consumer non-cyclical sector within corporate securities as well as foreign government securities. For the three months ended June 30, 2022, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to net reductions in the communications, foreign agencies and utility sectors within corporate securities, partially offset by a net addition within the capital goods sector.

For the six months ended June 30, 2023, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the communications and technology sectors within corporate securities as well as foreign government securities due to adverse projected cash flows. Partially offsetting the additions was a net release within the utility and capital goods sectors within corporate securities. For the six months ended June 30, 2022, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to net reductions in the communications and transportation sectors within corporate securities, partially offset by net additions in the capital goods and utility sectors.

The Company did not have any fixed maturity securities purchased with credit deterioration, as of June 30, 2023 or December 31, 2022.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Assets Supporting Experience-Rated Contractholder Liabilities

The following table sets forth the composition of “Assets supporting experience-rated contractholder liabilities,” as of the dates indicated:


	June 30, 2023				December 31, 2022
	Amortized Cost or Cost		Fair Value		Amortized Cost or Cost		Fair Value
	(in millions)
Fixed maturities:
Corporate securities	$	80	$	79	$	91	$	88
Foreign government bonds	638		640		705		668
U.S. government authorities and agencies and obligations of U.S. states	191		206		188		189
Total fixed maturities(1)	909		925		984		945
Equity securities	1,510		2,094		1,628		1,899
Total assets supporting experience-rated contractholder liabilities(2)	$	2,419	$	3,019	$	2,612	$	2,844

(1)As a percentage of amortized cost, 99% and 98% of the portfolio was considered high or highest quality based on NAIC or equivalent ratings, as of both June 30, 2023 and December 31, 2022, respectively.

(2)As a percentage of amortized cost 100% of the portfolio consisted of public securities, as of both June 30, 2023 and December 31, 2022.

The net change in unrealized gains (losses) from assets supporting experience-rated contractholder liabilities still held at period end, recorded within “Other income (loss),” was $234 million and $281 million during the three months ended June 30, 2023 and 2022, respectively and $368 and $(691) million during the six months ended June 30, 2023 and 2022, respectively.

Fixed Maturities, Trading

The net change in unrealized gains (losses) from fixed maturities, trading still held at period end, recorded within “Other income (loss),” was $(89) million and $(524) million during the three months ended June 30, 2023 and 2022, respectively and $105 and $(1,157) million during the six months ended June 30, 2023 and 2022, respectively.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $279 million and $(601) million during the three months ended June 30, 2023 and 2022, respectively and $576 and $(858) million during the six months ended June 30, 2023 and 2022, respectively.

Concentrations of Financial Instruments

The Company monitors its concentrations of financial instruments and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any single issuer.

As of the dates indicated, the Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s equity included securities of the U.S. government and certain U.S. government agencies and securities guaranteed by the U.S. government, as well as the securities disclosed below:

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	June 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in millions)
Investments in Japanese government and government agency securities:
Fixed maturities, available-for-sale	$	60,842	$	63,235	$	65,198	$	64,959
Fixed maturities, held-to-maturity	643		770		706		831
Fixed maturities, trading	18		18		20		19
Assets supporting experience-rated contractholder liabilities	548		547		613		587
Total	$	62,051	$	64,570	$	66,537	$	66,396


	June 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in millions)
Investments in Brazil government and government agency securities:
Fixed maturities, available-for-sale	$	2,933	$	2,881	$	2,264	$	2,010
Short-term investments	1		1		60		61
Cash equivalents	326		326		210		210
Total	$	3,260	$	3,208	$	2,534	$	2,281

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Commercial Mortgage and Other Loans

The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:


	June 30, 2023				December 31, 2022
	Amount (in millions)		% of Total		Amount (in millions)		% of Total
Commercial mortgage and agricultural property loans by property type:
Office	$	8,681	15.1	%	$	9,096	16.2	%
Retail	6,018		10.5		6,103		10.8
Apartments/Multi-Family	15,955		27.8		15,381		27.3
Industrial	13,812		24.1		13,079		23.2
Hospitality	2,161		3.8		2,027		3.6
Other	3,860		6.7		3,791		6.7
Total commercial mortgage loans	50,487		88.0		49,477		87.8
Agricultural property loans	6,884		12.0		6,857		12.2
Total commercial mortgage and agricultural property loans	57,371		100.0	%	56,334		100.0	%
Allowance for credit losses	(240)				(201)
Total net commercial mortgage and agricultural property loans	57,131				56,133
Other loans:
Uncollateralized loans	421				463
Residential property loans	34				43
Other collateralized loans	104				108
Total other loans	559				614
Allowance for credit losses	(1)				(2)
Total net other loans	558				612
Total net commercial mortgage and other loans(1)	$	57,689			$	56,745

(1)Includes loans which are carried at fair value under the fair value option and are collateralized primarily by apartment complexes. As of June 30, 2023 and December 31, 2022, the net carrying value of these loans were $323 million and $137 million, respectively.

As of June 30, 2023, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States with the largest concentrations in California (30%), Texas (8%) and New York (6%), and included loans secured by properties in Europe (6%), Asia (1%), Mexico (1%) and Australia (1%).

The following tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:


	Three Months Ended June 30, 2023
	Commercial Mortgage Loans		Agricultural Property Loans		Residential Property Loans		Other Collateralized Loans		Uncollateralized Loans		Total
	(in millions)
Allowance, beginning of period	$	205	$	15	$	0	$	0	$	1	$	221
Addition to (release of) allowance for expected losses	18		1		0		0		0		19
Reduction for loans sold during the period	0		0		0		0		0		0
Change in foreign exchange	1		0		0		0		0		1
Allowance, end of period	$	224	$	16	$	0	$	0	$	1	$	241

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Three Months Ended June 30, 2022
	Commercial Mortgage Loans		Agricultural Property Loans		Residential Property Loans		Other Collateralized Loans		Uncollateralized Loans		Total
	(in millions)
Allowance, beginning of period	$	113	$	4	$	0	$	0	$	4	$	121
Addition to (release of) allowance for expected losses	44		4		0		0		28		76
Reclassified (to) from “Assets held-for-sale”(1)	0		0		0		0		0		0
Other	(1)		0		0		0		0		(1)
Allowance, end of period	$	156	$	8	$	0	$	0	$	32	$	196


	Six Months Ended June 30, 2023
	Commercial Mortgage Loans		Agricultural Property Loans		Residential Property Loans		Other Collateralized Loans		Uncollateralized Loans		Total
	(in millions)
Allowance, beginning of period	$	188	$	13	$	0	$	0	$	2	$	203
Addition to (release of) allowance for expected losses	35		3		0		0		0		38
Reduction for loans sold during the period	0		0		0		0		(1)		(1)
Change in foreign exchange	1		0		0		0		0		1
Allowance, end of period	$	224	$	16	$	0	$	0	$	1	$	241


	Six Months Ended June 30, 2022
	Commercial Mortgage Loans		Agricultural Property Loans		Residential Property Loans		Other Collateralized Loans		Uncollateralized Loans		Total
	(in millions)
Allowance, beginning of period	$	111	$	4	$	0	$	0	$	4	$	119
Addition to (release of) allowance for expected losses	40		4		0		0		28		72
Reclassified (to) from “Assets held-for-sale”(1)	6		0		0		0		0		6
Other	(1)		0		0		0		0		(1)
Allowance, end of period	$	156	$	8	$	0	$	0	$	32	$	196

(1)See Note 1 for additional information.

For the three months ended June 30, 2023, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to an increase in loan-specific reserves. For the three months ended June 30, 2022, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to increases in loan-specific reserves, as well as increases to reserves to reflect current market conditions.

For the six months ended June 30, 2023, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to an increase in loan-specific reserves and increases to reserves to reflect declining market conditions. For the six months ended June 30, 2022, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to increases in loan-specific reserves as well as increases to reserves to reflect current market conditions.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The following tables set forth key credit quality indicators based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:


	June 30, 2023
	Amortized Cost by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
	(in millions)
Commercial mortgage loans
Loan-to-Value Ratio:
0%-59.99%	$	774	$	672	$	1,693	$	1,336	$	3,114	$	18,602	$	0	$	26,191
60%-69.99%	1,021		2,040		3,533		1,467		2,247		5,791		0		16,099
70%-79.99%	562		1,037		1,073		493		1,268		1,745		0		6,178
80% or greater	77		36		24		7		118		1,757		0		2,019
Total	$	2,434	$	3,785	$	6,323	$	3,303	$	6,747	$	27,895	$	0	$	50,487
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	2,110	$	3,242	$	6,118	$	3,126	$	5,977	$	24,297	$	0	$	44,870
1.0 - 1.2x	97		366		134		72		428		2,037		0		3,134
Less than 1.0x	227		177		71		105		342		1,561		0		2,483
Total	$	2,434	$	3,785	$	6,323	$	3,303	$	6,747	$	27,895	$	0	$	50,487
Agricultural property loans
Loan-to-Value Ratio:
0%-59.99%	$	131	$	901	$	2,005	$	768	$	456	$	1,563	$	86	$	5,910
60%-69.99%	69		671		63		76		27		53		0		959
70%-79.99%	0		0		0		0		15		0		0		15
80% or greater	0		0		0		0		0		0		0		0
Total	$	200	$	1,572	$	2,068	$	844	$	498	$	1,616	$	86	$	6,884
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	195	$	1,559	$	2,025	$	813	$	497	$	1,528	$	86	$	6,703
1.0 - 1.2x	0		5		43		31		0		75		0		154
Less than 1.0x	5		8		0		0		1		13		0		27
Total	$	200	$	1,572	$	2,068	$	844	$	498	$	1,616	$	86	$	6,884

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	December 31, 2022
	Amortized Cost by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
	(in millions)
Commercial mortgage loans
Loan-to-Value Ratio:
0%-59.99%	$	971	$	1,747	$	1,282	$	2,831	$	4,697	$	15,111	$	0	$	26,639
60%-69.99%	1,997		3,502		1,553		2,804		1,732		3,780		0		15,368
70%-79.99%	865		1,127		519		1,025		645		1,445		0		5,626
80% or greater	2		26		7		119		24		1,666		0		1,844
Total	$	3,835	$	6,402	$	3,361	$	6,779	$	7,098	$	22,002	$	0	$	49,477
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	3,249	$	6,135	$	3,013	$	5,749	$	6,505	$	18,318	$	0	$	42,969
1.0 - 1.2x	586		252		164		454		383		2,183		0		4,022
Less than 1.0x	0		15		184		576		210		1,501		0		2,486
Total	$	3,835	$	6,402	$	3,361	$	6,779	$	7,098	$	22,002	$	0	$	49,477
Agricultural property loans
Loan-to-Value Ratio:
0%-59.99%	$	931	$	1,994	$	853	$	461	$	326	$	1,348	$	74	$	5,987
60%-69.99%	675		85		8		47		8		0		0		823
70%-79.99%	0		0		0		0		0		0		0		0
80% or greater	0		0		0		0		13		34		0		47
Total	$	1,606	$	2,079	$	861	$	508	$	347	$	1,382	$	74	$	6,857
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	1,593	$	2,035	$	781	$	507	$	323	$	1,272	$	74	$	6,585
1.0 - 1.2x	5		44		80		0		6		68		0		203
Less than 1.0x	8		0		0		1		18		42		0		69
Total	$	1,606	$	2,079	$	861	$	508	$	347	$	1,382	$	74	$	6,857

For additional information regarding the Company’s commercial mortgage and other loans credit quality monitoring process, 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, 2022.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:


	June 30, 2023
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)(2)		Total Past Due		Total Loans		Non-Accrual Status(3)
	(in millions)
Commercial mortgage loans	$	50,418	$	0	$	0	$	69	$	69	$	50,487	$	72
Agricultural property loans	6,884		0		0		0		0		6,884		25
Residential property loans	34		0		0		0		0		34		0
Other collateralized loans	104		0		0		0		0		104		0
Uncollateralized loans	421		0		0		0		0		421		25
Total	$	57,861	$	0	$	0	$	69	$	69	$	57,930	$	122

(1)As of June 30, 2023, there were no loans in this category accruing interest.

(2)Primarily includes loans for which no credit losses are expected due to U.S. agency guarantees.

(3)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.


	December 31, 2022
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Past Due		Total Loans		Non-Accrual Status(2)
	(in millions)
Commercial mortgage loans	$	49,465	$	0	$	3	$	9	$	12	$	49,477	$	11
Agricultural property loans	6,844		0		11		2		13		6,857		17
Residential property loans	43		0		0		0		0		43		0
Other collateralized loans	108		0		0		0		0		108		0
Uncollateralized loans	463		0		0		0		0		463		0
Total	$	56,923	$	0	$	14	$	11	$	25	$	56,948	$	28

(1)As of December 31, 2022, there were no loans in this category accruing interest.

(2)For additional information regarding the Company’s policies for accruing interest on loans, 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, 2022.

Loans on non-accrual status recognized interest of less than $1 million for both the three months ended June 30, 2023 and 2022 and less than $1 million for both the six months ended June 30, 2023 and 2022. Loans on non-accrual status that did not have a related allowance for credit losses were $120 million and $27 million as of June 30, 2023 and December 31, 2022, respectively.

The Company did not have any significant losses on commercial mortgage and other loans purchased with credit deterioration as of both June 30, 2023 and December 31, 2022.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Other Invested Assets

The following table sets forth the composition of “Other invested assets,” as of the dates indicated:


	June 30, 2023		December 31, 2022
	(in millions)
LPs/LLCs:
Equity method:
Private equity	$	7,881	$	7,215
Hedge funds	3,133		3,220
Real estate-related	2,544		2,793
Subtotal equity method	13,558		13,228
Fair value:
Private equity	1,412		1,476
Hedge funds	2,099		1,908
Real estate-related	280		305
Subtotal fair value	3,791		3,689
Total LPs/LLCs	17,349		16,917
Real estate held through direct ownership(1)	1,843		1,617
Derivative instruments	1,248		1,457
Other(2)	1,033		1,108
Total other invested assets	$	21,473	$	21,099

(1)As of June 30, 2023 and December 31, 2022, real estate held through direct ownership had mortgage debt of $181 million and $208 million, respectively.

(2)Primarily includes equity investments accounted for under the measurement alternative, strategic investments made by investment management operations, leveraged leases and member and activity stock held in the Federal Home Loan Bank of New York. For additional information regarding the Company’s holdings in the Federal Home Loan Bank of New York, see Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Accrued Investment Income

The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:


	June 30, 2023		December 31, 2022
	(in millions)
Fixed maturities	$	2,636	$	2,517
Equity securities	5		6
Commercial mortgage and other loans	196		190
Policy loans	246		253
Other invested assets	17		18
Short-term investments and cash equivalents	42		28
Total accrued investment income	$	3,142	$	3,012

Write-downs on accrued investment income were less than $1 million for both the three months ended June 30, 2023 and 2022, and less than $1 million for both the six months ended June 30, 2023 and 2022.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Net Investment Income

The following table sets forth “Net investment income” by investment type, for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Fixed maturities, available-for-sale(1)	$	3,296	$	2,861	$	6,531	$	5,830
Fixed maturities, held-to-maturity(1)	50		54		100		108
Fixed maturities, trading	57		53		112		115
Assets supporting experience-rated contractholder liabilities	12		9		25		144
Equity securities	64		50		104		76
Commercial mortgage and other loans	560		525		1,103		1,113
Policy loans	124		126		248		251
Other invested assets(2)	384		377		694		932
Short-term investments and cash equivalents	222		58		460		75
Gross investment income	4,769		4,113		9,377		8,644
Less: investment expenses(2)	(293)		(175)		(581)		(348)
Net investment income	$	4,476	$	3,938	$	8,796	$	8,296

(1)Includes income on credit-linked notes which are reported on the same financial statement line items as related surplus notes, as conditions are met for right to offset.

(2)Prior period amounts reclassified to conform to current period presentation.

Realized Investment Gains (Losses), Net

The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Fixed maturities(1)	$	(266)	$	(646)	$	(421)	$	(1,057)
Commercial mortgage and other loans	(14)		(81)		(26)		(66)
Investment real estate	(5)		84		27		90
LPs/LLCs	(1)		6		(17)		(6)
Derivatives	(663)		(1,005)		(305)		(1,643)
Other	11		6		21		2
Realized investment gains (losses), net	$	(938)	$	(1,636)	$	(721)	$	(2,680)

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

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:


	June 30, 2023		December 31, 2022
	(in millions)
Fixed maturity securities, available-for-sale with an allowance	$	(68)	$	(45)
Fixed maturity securities, available-for-sale without an allowance	(20,737)		(27,545)
Derivatives designated as cash flow hedges(1)	2,097		2,616
Derivatives designated as fair value hedges(1)	(149)		(54)
Other investments(2)	40		2
Net unrealized gains (losses) on investments	$	(18,817)	$	(25,026)

(1)For additional information regarding cash flow and fair value hedges, see Note 5.

(2)As of June 30, 2023 there were no net unrealized losses on held-to-maturity securities that were previously transferred from available-for-sale. Includes net unrealized gains on certain joint ventures that are strategic in nature and are included in “Other assets.”

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. The following table sets forth the composition of “Securities sold under agreements to repurchase,” as of the dates indicated:


	June 30, 2023								December 31, 2022
	Remaining Contractual Maturities of the Agreements								Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		30 to 90 Days		Total		Overnight & Continuous		Up to 30 Days		30 to 90 Days		Total
	(in millions)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	5,977	$	0	$	0	$	5,977	$	6,179	$	200	$	200	$	6,579
Commercial mortgage-backed securities	120		0		0		120		0		0		0		0
Residential mortgage-backed securities	0		0		0		0		10		0		0		10
Total securities sold under agreements to repurchase	$	6,097	$	0	$	0	$	6,097	$	6,189	$	200	$	200	$	6,589

The following table sets forth the composition of “Cash collateral for loaned securities” which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	June 30, 2023						December 31, 2022
	Remaining Contractual Maturities of the Agreements						Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		Total		Overnight & Continuous		Up to 30 Days		Total
	(in millions)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	1	$	0	$	1	$	1	$	0	$	1
Obligations of U.S. states and their political subdivisions	46		0		46		61		0		61
Foreign government bonds	308		18		326		285		14		299
U.S. public corporate securities	3,422		464		3,886		4,109		395		4,504
Foreign public corporate securities	597		102		699		806		69		875
Equity securities	249		0		249		360		0		360
Total cash collateral for loaned securities(1)	$	4,623	$	584	$	5,207	$	5,622	$	478	$	6,100

(1)The Company did not have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.

4. VARIABLE INTEREST ENTITIES

In the normal course of its activities, the Company enters into relationships with various special-purpose entities and other entities that are deemed to be variable interest entities (“VIEs”). For additional information, see Note 4 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Consolidated Variable Interest Entities

The table below reflects the carrying amount and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported. The liabilities primarily comprise obligations under debt instruments issued by the VIEs. The creditors of these VIEs do not have recourse to the Company in excess of the assets contained within the VIEs.


	Consolidated VIEs for which the Company is the Investment Manager(1)				Other Consolidated VIEs(1)
	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
	(in millions)
Fixed maturities, available-for-sale	$	443	$	398	$	84	$	90
Fixed maturities, held-to-maturity	0		0		629		689
Fixed maturities, trading	171		164		0		0
Equity securities	80		85		0		0
Commercial mortgage and other loans	692		784		0		0
Other invested assets	3,875		3,397		97		68
Cash and cash equivalents	165		375		0		0
Accrued investment income	3		2		3		3
Other assets	398		352		657		706
Total assets of consolidated VIEs	$	5,827	$	5,557	$	1,470	$	1,556
Other liabilities	$	497	$	389	$	0	$	0
Notes issued by consolidated VIEs(2)	402		374		0		0
Total liabilities of consolidated VIEs	$	899	$	763	$	0	$	0

(1)Total assets of consolidated VIEs reflect $3,491 million and $3,403 million as of June 30, 2023 and December 31, 2022, respectively, related to VIEs whose beneficial interests are wholly-owned by consolidated subsidiaries.

(2)Recourse is limited to the assets of the respective VIE and does not extend to the general credit of the Company. As of June 30, 2023, the maturities of these obligations were between 1 and 10 years.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Unconsolidated Variable Interest Entities

The Company has determined that it is not the primary beneficiary of certain VIEs for which it is the investment manager. The Company’s maximum exposure to loss resulting from its relationship with unconsolidated VIEs for which it is the investment manager is limited to its investment in the VIEs, which was $836 million and $950 million as of June 30, 2023 and December 31, 2022, respectively. These investments are reflected in “Fixed maturities, available-for-sale,” “Fixed maturities, trading,” “Equity securities” and “Other invested assets.” There are no liabilities associated with these unconsolidated VIEs on the Company’s Unaudited Interim Consolidated Statements of Financial Position.

In the normal course of its activities, the Company will invest in limited partnerships and limited liability companies (“LPs/LLCs”), which include hedge funds, private equity funds and real estate-related funds and may or may not be VIEs. The Company’s maximum exposure to loss on these investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company classifies these investments as “Other invested assets” and its maximum exposure to loss associated with these entities was $17,349 million and $16,917 million as of June 30, 2023 and December 31, 2022, respectively.

In addition, in the normal course of its activities, the Company will invest in structured investments including VIEs for which it is not the investment manager. These structured investments typically invest in fixed income investments and are managed by third-parties and include asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Company’s maximum exposure to loss on these structured investments, both VIEs and non-VIEs, is limited to the amount of its investment. See Note 3 for details regarding the carrying amounts and classification of these assets. The Company has not provided material financial or other support that was not contractually required to these structures. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not control these entities.

5. DERIVATIVES AND HEDGING

Types of Derivative and Hedging Instruments

The Company utilizes various derivatives and hedging instruments to manage certain of its risks. Commonly used derivative and non-derivative hedging instruments include, but are not necessarily limited to:

Interest rate contracts: futures, swaps, forwards, options, caps and floors
Equity contracts: futures, options and total return swaps
Foreign exchange contracts: futures, options, forwards, swaps, and foreign currency debt instruments
Credit contracts: single and index reference credit default swaps

Other types of financial contracts that the Company accounts for as derivatives are:

To-be-announced (“TBA”) forward contracts, loan commitments, embedded derivatives and synthetic guaranteed investment contracts (“GICs”).

For detailed information regarding these contracts and the related strategies, see Note 5 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Primary Risks Managed by Derivatives

The table below provides a summary of the gross notional amount and fair value of derivative contracts by the primary underlying risks they are utilized to manage, excluding embedded derivatives. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account the netting effects of master netting agreements and cash collateral. These netting impacts resulted in total derivative assets of $1,248 million and $1,455 million as of June 30, 2023 and December 31, 2022, respectively, and total derivative liabilities of $3,065 million and $3,055 million as of June 30, 2023 and December 31, 2022, respectively, reflected in the Unaudited Interim Consolidated Statements of Financial Position.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


Primary Underlying Risk /Instrument Type	June 30, 2023									December 31, 2022
			Fair Value									Fair Value
Gross Notional			Assets			Liabilities			Gross Notional			Assets			Liabilities
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps	$	3,742		$	60		$	(249)		$	3,627		$	66		$	(245)
Interest Rate Forwards	150			0			(29)			398			0			(85)
Foreign Currency
Foreign Currency Forwards	4,767			129			(239)			4,830			155			(262)
Currency/Interest Rate
Foreign Currency Swaps	26,294			2,855			(386)			25,636			3,469			(333)
Total Derivatives Designated as Hedge Accounting Instruments	$	34,953		$	3,044		$	(903)		$	34,491		$	3,690		$	(925)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps	$	306,146		$	8,517		$	(21,132)		$	212,934		$	9,097		$	(21,154)
Interest Rate Futures	9,535			66			(9)			18,080			13			(24)
Interest Rate Options	26,428			221			(814)			9,778			224			(280)
Interest Rate Forwards	3,067			14			(18)			2,354			21			(42)
Foreign Currency
Foreign Currency Forwards	30,713			2,212			(2,430)			31,317			1,556			(1,924)
Foreign Currency Options	0			0			0			0			0			0
Currency/Interest Rate
Foreign Currency Swaps	8,377			707			(155)			8,410			813			(170)
Credit
Credit Default Swaps	5,133			35			(21)			6,351			27			(57)
Equity
Equity Futures	996			7			(1)			1,372			1			(2)
Equity Options	45,804			1,325			(1,469)			38,323			708			(1,590)
Total Return Swaps	10,149			38			(290)			11,806			106			(184)
Other
Other(1)	1,250			0			0			1,250			0			0
Synthetic GICs	82,181			1			(1)			84,338			1			(1)
Total Derivatives Not Qualifying as Hedge Accounting Instruments	$	529,779		$	13,143		$	(26,340)		$	426,313		$	12,567		$	(25,428)
Total Derivatives(2)(3)	$	564,732		$	16,187		$	(27,243)		$	460,804		$	16,257		$	(26,353)

(1)“Other” primarily includes derivative contracts used to improve the balance of the Company’s tail longevity and mortality risk. Under these contracts, the Company’s gains (losses) are capped at the notional amount.

(2)Excludes embedded derivatives which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $5,004 million and $2,997 million as of June 30, 2023 and December 31, 2022, respectively, primarily included in "Policyholder account balances."

(3)Recorded in “Other invested assets” and “Other liabilities” on the Unaudited Interim Consolidated Statements of Financial Position.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

As of June 30, 2023, the following amounts were recorded on the Unaudited Interim Consolidated Statements of Financial Position related to the carrying amount of the hedged assets (liabilities) and cumulative basis adjustments included in the carrying amount for fair value hedges.


	June 30, 2023				December 31, 2022
Balance Sheet Line Item in which Hedged Item is Recorded	Carrying Amount of the Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1)		Carrying Amount of the Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1)

	(in millions)
Fixed maturities, available-for-sale, at fair value	$	229	$	19	$	297	$	27
Commercial mortgage and other loans	$	0	$	0	$	0	$	0
Policyholders’ account balances	$	(793)	$	217	$	(966)	$	217
Future policy benefits	$	(2,455)	$	289	$	(2,354)	$	391

(1)There were no material fair value hedging adjustments for hedged assets and liabilities for which hedge accounting has been discontinued.

Most of the Company’s derivatives do not qualify for hedge accounting for various reasons. For example: (i) derivatives that economically hedge embedded derivatives do not qualify for hedge accounting because changes in the fair value of the embedded derivatives are already recorded in net income; (ii) derivatives that are utilized as macro hedges of the Company’s exposure to various risks typically do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedge accounting rules; and (iii) synthetic GICs, which are product standalone derivatives, do not qualify as hedging instruments under hedge accounting rules.

Offsetting Assets and Liabilities

The following tables present recognized derivative instruments (excluding embedded derivatives), and repurchase and reverse repurchase agreements that are offset in the Unaudited Interim Consolidated Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Unaudited Interim Consolidated Statements of Financial Position.


	June 30, 2023
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position		Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives	$	16,083	$	(14,939)	$	1,144	$	(249)	$	895
Securities purchased under agreement to resell	22		0		22		(22)		0
Total assets	$	16,105	$	(14,939)	$	1,166	$	(271)	$	895
Offsetting of Financial Liabilities:
Derivatives	$	27,244	$	(24,178)	$	3,066	$	(3,051)	$	15
Securities sold under agreement to repurchase	6,097		0		6,097		(5,977)		120
Total liabilities	$	33,341	$	(24,178)	$	9,163	$	(9,028)	$	135

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	December 31, 2022
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position		Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives	$	16,178	$	(14,802)	$	1,376	$	(702)	$	674
Securities purchased under agreement to resell	385		0		385		(385)		0
Total assets	$	16,563	$	(14,802)	$	1,761	$	(1,087)	$	674
Offsetting of Financial Liabilities:
Derivatives	$	26,352	$	(23,298)	$	3,054	$	(3,054)	$	0
Securities sold under agreement to repurchase	6,589		0		6,589		(6,589)		0
Total liabilities	$	32,941	$	(23,298)	$	9,643	$	(9,643)	$	0

(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.

For information regarding the rights of offset associated with the derivative assets and liabilities in the table above, see “—Counterparty Credit Risk” below. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information regarding the Company’s accounting policy for securities repurchase and resale agreements, see Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2022.

Cash Flow, Fair Value and Net Investment Hedges

The primary derivative and non-derivative instruments used by the Company in its fair value, cash flow and net investment hedge accounting relationships are interest rate swaps, currency swaps, currency forwards, and foreign currency denominated debts. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit, or equity derivatives in any of its fair value, cash flow or net investment hedge accounting relationships.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The following tables provide the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, including the offset of the hedged item in fair value hedge relationships.


	Three Months Ended June 30, 2023
	Realized Investment Gains (Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)		Net Investment Income		Other Income (Loss)		Interest Expense		Interest Credited to Policyholders’ Account Balances		Policyholders’ Benefits		Change in AOCI(1)
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	5	$	0	$	0	$	0	$	0	$	(53)	$	(58)	$	0
Currency	(1)		0		0		0		0		0		50		0
Total gains (losses) on derivatives designated as hedge instruments	4		0		0		0		0		(53)		(8)		0
Gains (losses) on the hedged item:
Interest Rate	(5)		0		3		0		0		38		44		0
Currency	1		0		1		0		0		0		(50)		0
Total gains (losses) on hedged item	(4)		0		4		0		0		38		(6)		0
Amortization for gains (losses) excluded from assessment of the effectiveness

Currency	0		0		0		0		0		0		(2)		(75)
Total Amortization for gain (loss) excluded from assessment of the effectiveness	0		0		0		0		0		0		(2)		(75)
Total gains (losses) on fair value hedges net of hedged item	0		0		4		0		0		(15)		(16)		(75)
Cash flow hedges
Interest Rate	0		0		(6)		0		0		0		0		(12)
Currency	3		0		0		0		0		0		0		(1)
Currency/Interest Rate	13		0		80		(66)		0		0		0		(233)
Total gains (losses) on cash flow hedges	16		0		74		(66)		0		0		0		(246)
Net investment hedges
Currency	0		0		0		0		0		0		0		17
Currency/Interest Rate	0		0		0		0		0		0		0		0
Total gains (losses) on net investment hedges	0		0		0		0		0		0		0		17
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(322)		(1,022)		0		0		0		0		0		0
Currency	(349)		0		0		4		0		0		0		0
Currency/Interest Rate	(35)		0		0		(1)		0		0		0		0
Credit	38		0		0		0		0		0		0		0
Equity	961		(440)		0		0		0		0		0		0
Other	0		0		0		0		0		0		0		0
Embedded Derivatives	(970)		0		0		0		0		0		0		0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	(677)		(1,462)		0		3		0		0		0		0
Total	$	(661)	$	(1,462)	$	78	$	(63)	$	0	$	(15)	$	(16)	$	(304)

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2023
	Realized Investment Gains (Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)		Net Investment Income		Other Income (Loss)		Interest Expense		Interest Credited to Policyholders’ Account Balances		Policyholders’ Benefits		Change in AOCI(1)
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	1	$	0	$	0	$	0	$	0	$	(16)	$	(14)	$	0
Currency	(1)		0		(1)		0		0		0		99		0
Total gains (losses) on derivatives designated as hedge instruments	0		0		(1)		0		0		(16)		85		0
Gains (losses) on the hedged item:
Interest Rate	(1)		0		6		0		0		1		(4)		0
Currency	1		0		1		0		0		0		(97)		0
Total gains (losses) on hedged item	0		0		7		0		0		1		(101)		0
Amortization for gains (losses) excluded from assessment of the effectiveness

Currency	0		0		0		0		0		0		(4)		(95)
Total Amortization for gain (loss) excluded from assessment of the effectiveness	0		0		0		0		0		0		(4)		(95)
Total gains (losses) on fair value hedges net of hedged item	0		0		6		0		0		(15)		(20)		(95)
Cash flow hedges
Interest Rate	(22)		0		(7)		0		0		0		0		32
Currency	8		0		0		0		0		0		0		(40)
Currency/Interest Rate	48		0		163		(146)		0		0		0		(511)
Total gains (losses) on cash flow hedges	34		0		156		(146)		0		0		0		(519)
Net investment hedges
Currency	0		0		0		0		0		0		0		16
Currency/Interest Rate	0		0		0		0		0		0		0		0
Total gains (losses) on net investment hedges	0		0		0		0		0		0		0		16
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	225		(755)		0		0		0		0		0		0
Currency	(510)		0		0		5		0		0		0		0
Currency/Interest Rate	(63)		0		0		(3)		0		0		0		0
Credit	85		0		0		0		0		0		0		0
Equity	1,150		(678)		0		0		0		0		0		0
Other	0		0		0		0		0		0		0		0
Embedded Derivatives	(1,215)		0		0		0		0		0		0		0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	(328)		(1,433)		0		2		0		0		0		0
Total	$	(294)	$	(1,433)	$	162	$	(144)	$	0	$	(15)	$	(20)	$	(598)

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Three Months Ended June 30, 2022(2)
	Realized Investment Gains (Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)		Net Investment Income		Other Income (Loss)		Interest Expense		Interest Credited to Policyholders’ Account Balances		Policyholders’ Benefits		Change in AOCI(1)
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	13	$	0	$	(1)	$	0	$	0	$	(126)	$	(159)	$	0
Currency	(5)		0		0		0		0		0		(151)		0
Total gains (losses) on derivatives designated as hedge instruments	8		0		(1)		0		0		(126)		(310)		0
Gains (losses) on the hedged item:
Interest Rate	(13)		0		3		0		0		138		173		0
Currency	7		0		3		0		0		0		151		0
Total gains (losses) on hedged item	(6)		0		6		0		0		138		324		0

Amortization for gains (losses) excluded from assessment of the effectiveness
Currency	0		0		0		0		0		0		0		52
Total amortization for gain (loss) excluded from assessment of the effectiveness	0		0		0		0		0		0		0		52
Total gains (losses) on fair value hedges net of hedged item	2		0		5		0		0		12		14		52
Cash flow hedges
Interest Rate	0		0		(1)		0		0		0		0		(76)
Currency	4		0		0		0		0		0		0		114
Currency/Interest Rate	44		0		68		391		0		0		0		1,253
Total gains (losses) on cash flow hedges	48		0		67		391		0		0		0		1,291
Net investment hedges
Currency	0		0		0		0		0		0		0		22
Currency/Interest Rate	0		0		0		0		0		0		0		0
Total gains (losses) on net investment hedges	0		0		0		0		0		0		0		22
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(1,481)		(2,159)		0		0		0		0		0		0
Currency	(162)		0		0		0		0		0		0		0
Currency/Interest Rate	646		0		0		3		0		0		0		0
Credit	(126)		0		0		0		0		0		0		0
Equity	22		1,156		0		0		0		0		0		0
Other	1		0		0		0		0		0		0		0
Embedded Derivatives	48		0		0		0		0		0		0		0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	(1,052)		(1,003)		0		3		0		0		0		0
Total	$	(1,002)	$	(1,003)	$	72	$	394	$	0	$	12	$	14	$	1,365

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022(2)
	Realized Investment Gains (Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)		Net Investment Income		Other Income (Loss)		Interest Expense		Interest Credited to Policyholders’ Account Balances		Policyholders’ Benefits		Change in AOCI(1)
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	27	$	0	$	(3)	$	0	$	0	$	(267)	$	(317)	$	0
Currency	(30)		0		(1)		0		0		0		(207)		0
Total gains (losses) on derivatives designated as hedge instruments	(3)		0		(4)		0		0		(267)		(524)		0
Gains (losses) on the hedged item:
Interest Rate	(27)		0		7		0		0		285		332		0
Currency	32		0		3		0		0		0		204		0
Total gains (losses) on hedged item	5		0		10		0		0		285		536		0

Amortization for gains (losses) excluded from assessment of the effectiveness
Currency	0		0		0		0		0		0		(2)		63
Total amortization for gain (loss) excluded from assessment of the effectiveness	0		0		0		0		0		0		(2)		63
Total gains (losses) on fair value hedges net of hedged item	2		0		6		0		0		18		10		63
Cash flow hedges
Interest Rate	(5)		0		0		0		0		0		0		(134)
Currency	4		0		0		0		0		0		0		144
Currency/Interest Rate	49		0		137		471		0		0		0		1,417
Total gains (losses) on cash flow hedges	48		0		137		471		0		0		0		1,427
Net investment hedges
Currency	0		0		0		0		0		0		0		10
Currency/Interest Rate	0		0		0		0		0		0		0		0
Total gains (losses) on net investment hedges	0		0		0		0		0		0		0		10
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(2,387)		(4,859)		0		0		0		0		0		0
Currency	(371)		0		0		(1)		0		0		0		0
Currency/Interest Rate	786		0		0		4		0		0		0		0
Credit	(163)		0		0		0		0		0		0		0
Equity	133		1,521		0		0		0		0		0		0
Other	2		0		0		0		0		0		0		0
Embedded Derivatives	311		0		0		0		0		0		0		0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	(1,689)		(3,338)		0		3		0		0		0		0
Total	$	(1,639)	$	(3,338)	$	143	$	474	$	0	$	18	$	10	$	1,500

(1)Excluding changes related to net investment hedges using non-derivative instruments of $46 million and $45 million for the three months ended and six months ended June 30, 2023, and $102 million and $131 million for three months ended and six months ended June 30, 2022, respectively

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

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Presented below is a rollforward of current period cash flow hedges in AOCI before taxes:


	(in millions)
Balance, December 31, 2022	$	2,616
Amount recorded in AOCI:
Interest Rate	3
Currency	(32)
Currency/Interest Rate	(446)
Total amount recorded in AOCI	(475)
Amount reclassified from AOCI to income:
Interest Rate	29
Currency	(8)
Currency/Interest Rate	(65)
Total amount reclassified from AOCI to income	(44)
Balance, June 30, 2023	$	2,097

The changes in fair value of cash flow hedges are deferred in AOCI and are included in “Net unrealized investment gains (losses)” in the Unaudited Interim Consolidated Statements of Comprehensive Income; these amounts are then reclassified to earnings when the hedged item affects earnings. Using June 30, 2023 values, it is estimated that a pre-tax gain of approximately $274 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending June 30, 2024.

The exposures the Company is hedging with these qualifying cash flow hedges include the variability of future cash flows from forecasted transactions denominated in foreign currencies, the purchases of invested assets, and the receipt or payment of variable interest on existing financial instruments. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is 28 years.

There were no material amounts reclassified from AOCI into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging. In addition, there were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.

For net investment hedges, in addition to derivatives, the Company uses foreign currency denominated debt to hedge the risk of change in the net investment in a foreign subsidiary due to changes in exchange rates. For effective net investment hedges, the amounts, before applicable taxes, recorded in the cumulative translation adjustment within AOCI were $63 million and $61 million for the three and six months ended June 30, 2023, respectively, and $123 million and $141 million for the three and six months ended June 30, 2022, respectively.

Credit Derivatives

The following tables provide a summary of the notional and fair value of written credit protection, presented as assets (liabilities). The Company’s maximum amount at risk under these credit derivatives, assuming the value of the underlying referenced securities become worthless, is equal to the notional amounts. These credit derivatives have maturities of less than 24 years for index reference.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	June 30, 2023
	NAIC Rating Designation of Underlying Credit Obligation(1)
	NAIC 1				NAIC 2				NAIC 3				NAIC 4				NAIC 5				NAIC 6				Total
	Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value
	(in millions)
Single name reference(2)	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Index reference(2)	28		0		0		0		4,330		5		0		0		0		0		457		15		4,815		20
Total	$	28	$	0	$	0	$	0	$	4,330	$	5	$	0	$	0	$	0	$	0	$	457	$	15	$	4,815	$	20


	December 31, 2022
	NAIC Rating Designation of Underlying Credit Obligation(1)
	NAIC 1				NAIC 2				NAIC 3				NAIC 4				NAIC 5				NAIC 6				Total
	Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value
	(in millions)
Single name reference(2)	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Index reference(2)	48		0		0		0		5,197		(46)		0		0		0		0		782		15		6,027		(31)
Total	$	48	$	0	$	0	$	0	$	5,197	$	(46)	$	0	$	0	$	0	$	0	$	782	$	15	$	6,027	$	(31)

(1)The NAIC rating designations are based on availability and the lowest ratings among Moody's Investors Service, Inc. ("Moody's"), Standard & Poor’s Rating Services (“S&P”) and Fitch Ratings Inc. (“Fitch”). If no rating is available from a rating agency, a NAIC 6 rating is used.

(2)Single name credit default swaps may make reference to the credit of corporate debt, sovereign debt, and structured finance. Index references NAIC designations are based on the lowest rated single name reference included in the index.

In addition to writing credit protection, the Company has purchased credit protection using credit derivatives in order to hedge specific credit exposures in the Company’s investment portfolio. As of June 30, 2023 and December 31, 2022, the Company had $318 million and $324 million of outstanding notional amounts and reported at fair value as a liability of $6 million and an asset of $1 million, respectively.

Counterparty Credit Risk

The Company is exposed to losses in the event of non-performance by counterparties to financial derivative transactions with a positive fair value. The Company manages credit risk by: (i) entering into derivative transactions with highly rated major financial institutions and other creditworthy counterparties governed by master netting agreements, as applicable; (ii) trading through central clearing and over-the-counter (“OTC”) parties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.

Substantially all of the Company’s derivative agreements have zero thresholds which require daily full collateralization by the party in a liability position. In addition, certain of the Company’s derivative agreements contain credit-risk related contingent features; if the credit rating of one of the parties to the derivative agreement is to fall below a certain level, the party with positive fair value could request termination at the then fair value or demand immediate full collateralization from the party whose credit rating fell and is in a net liability position.

As of June 30, 2023, there were no net liability derivative positions with counterparties with credit risk-related contingent features. All derivatives have been appropriately collateralized by the Company or the counterparty in accordance with the terms of the derivative agreements.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

6. FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Measurement—Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1—Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities.

Level 2—Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs.

Level 3—Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value.

For a discussion of Company’s valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, 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, 2022.

As a result of the adoption of ASU 2018-12 in the first quarter of 2023, the Company is required to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value. Market risk benefit liabilities (or assets) represent contracts or contract features that provide protection to the contractholder and expose the insurance entity to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits in the Retirement Strategies segment including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”). The benefits are bundled together and accounted for as single compound market risk benefits using a fair value measurement framework.

The fair value of these market risk benefits is calculated as the present value of expected future benefit payments to contractholders less the present value of expected future rider fees attributable to the market risk benefit. The fair value of these benefit features is based on assumptions a market participant would use in valuing market risk benefits. This methodology could result in either a liability or asset balance, given changing capital market conditions and various actuarial assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally-developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The determination of these risk premiums requires the use of management’s judgment.

The significant inputs to the valuation models for these market risk benefits include capital market assumptions, such as interest rate levels and volatility assumptions, the Company’s market-perceived NPR, as well as actuarially determined assumptions, including contractholder behavior, such as lapse rates, benefit utilization rates, withdrawal rates, and mortality rates. Since many of these assumptions are unobservable and are considered to be significant inputs to the valuations, the assets and liabilities included in market risk benefits have been reflected within Level 3 in the fair value hierarchy.

Capital market inputs and actual policyholders’ account values are updated each quarter based on capital market conditions as of the end of the quarter, including interest rates, equity markets and volatility. In the risk neutral valuation, the initial swap curve drives the total return used to grow the policyholders’ account values. The Company’s discount rate assumption is based on the SOFR swap curve adjusted for an additional spread relative to SOFR to reflect the Company’s market-perceived NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with the Company issued funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Actuarial assumptions, including contractholder behavior and mortality, are reviewed at least annually, and updated based upon company emerging experience and industry studies, future expectations and other data, including any observable market data. These assumptions are generally updated annually unless a material change that the Company feels is indicative of a long-term trend is observed in an interim period. See “—Annual Assumptions Review” in Note 2 for additional information.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Assets and Liabilities by Hierarchy Level—The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated.


	As of June 30, 2023
	Level 1		Level 2		Level 3		Netting(1)		Total
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	24,542	$	0	$		$	24,542
Obligations of U.S. states and their political subdivisions	0		9,879		7				9,886
Foreign government bonds	0		72,200		8				72,208
U.S. corporate public securities	0		93,077		63				93,140
U.S. corporate private securities(2)	0		35,003		2,670				37,673
Foreign corporate public securities	0		19,969		68				20,037
Foreign corporate private securities	0		27,349		1,660				29,009
Asset-backed securities(3)	0		13,025		287				13,312
Commercial mortgage-backed securities	0		9,157		968				10,125
Residential mortgage-backed securities	0		2,289		9				2,298
Subtotal	0		306,490		5,740				312,230
Assets supporting experience-rated contractholder liabilities:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	0		206		0				206
Obligations of U.S. states and their political subdivisions	0		0		0				0
Foreign government bonds	0		640		0				640
Corporate securities	0		79		0				79
Asset-backed securities(3)	0		0		0				0
Commercial mortgage-backed securities	0		0		0				0
Residential mortgage-backed securities	0		0		0				0
Equity securities	891		1,203		0				2,094
All other(4)	0		0		0				0
Subtotal	891		2,128		0				3,019
Market risk benefit assets	0		0		1,951				1,951
Fixed maturities, trading	0		6,047		302				6,349
Equity securities	4,686		2,900		773				8,359
Commercial mortgage and other loans	0		323		0				323
Other invested assets(5)	162		16,023		865		(14,939)		2,111
Short-term investments	473		3,550		25				4,048
Cash equivalents	1,430		5,947		0				7,377
Other assets	0		382		229				611
Separate account assets(6)(7)	9,035		161,467		1,175				171,677
Total assets	$	16,677	$	505,257	$	11,060	$	(14,939)	$	518,055
Market risk benefit liabilities	$	0	$	0	$	5,462	$		$	5,462
Policyholders’ account balances	0		0		5,629				5,629
Other liabilities	10		27,186		1		(24,178)		3,019

Total liabilities	$	10	$	27,186	$	11,092	$	(24,178)	$	14,110

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	As of December 31, 2022
	Level 1		Level 2		Level 3		Netting(1)		Total
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	26,069	$	0	$		$	26,069
Obligations of U.S. states and their political subdivisions	0		9,682		7				9,689
Foreign government bonds	0		73,218		8				73,226
U.S. corporate public securities	0		87,521		65				87,586
U.S. corporate private securities(2)	0		34,487		2,392				36,879
Foreign corporate public securities	0		20,621		66				20,687
Foreign corporate private securities	0		26,325		1,335				27,660
Asset-backed securities(3)	0		12,582		269				12,851
Commercial mortgage-backed securities	0		9,644		1,011				10,655
Residential mortgage-backed securities	0		2,408		9				2,417
Subtotal	0		302,557		5,162				307,719
Assets supporting experience-rated contractholder liabilities:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	0		189		0				189
Obligations of U.S. states and their political subdivisions	0		0		0				0
Foreign government bonds	0		668		0				668
Corporate securities	0		88		0				88
Asset-backed securities(3)	0		0		0				0
Commercial mortgage-backed securities	0		0		0				0
Residential mortgage-backed securities	0		0		0				0
Equity securities	780		1,119		0				1,899
All other(4)	0		0		0				0
Subtotal	780		2,064		0				2,844
Market risk benefit assets	0		0		800				800
Fixed maturities, trading	0		5,647		304				5,951
Equity securities	4,338		2,185		627				7,150
Commercial mortgage and other loans	0		137		0				137
Other invested assets(5)	15		16,241		539		(14,802)		1,993
Short-term investments	341		3,428		18				3,787
Cash equivalents	544		6,930		0				7,474
Other assets	0		0		152				152
Separate account assets(6)(7)	8,310		162,414		1,081				171,805
Total assets	$	14,328	$	501,603	$	8,683	$	(14,802)	$	509,812
Market risk benefit liabilities	$	0	$	0	$	5,864	$		$	5,864
Policyholders’ account balances	0		0		3,492				3,492
Other liabilities	26		25,953		1		(23,298)		2,682

Total liabilities	$	26	$	25,953	$	9,357	$	(23,298)	$	12,038

(1)“Netting” amounts represent cash collateral of $(9,239) million and $(8,496) million as of June 30, 2023 and December 31, 2022, respectively.

(2)Excludes notes with fair value of $8,290 million (carrying amount of $8,290 million) and $8,040 million (carrying amount of $8,040 million) as of June 30, 2023 and December 31, 2022, respectively, which have been offset with the associated payables under a netting agreement.

(3)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.

(4)All other represents cash equivalents and short-term investments.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

(5)Other invested assets excluded from the fair value hierarchy include certain hedge funds, private equity funds and other funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. As of June 30, 2023 and December 31, 2022, the fair values of such investments were $3,791 million and $3,689 million, respectively.

(6)Separate account assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate, hedge funds and other invested assets. As of June 30, 2023 and December 31, 2022, the fair value of such investments were $29,194 million and $25,874 million, respectively.

(7)Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Unaudited Interim Consolidated Statements of Financial Position.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Quantitative Information Regarding Internally-Priced Level 3 Assets and Liabilities—The tables below present quantitative information regarding significant internally-priced Level 3 assets and liabilities.


	As of June 30, 2023
	Fair Value		Valuation Techniques	Unobservable Inputs	Minimum	Maximum	Weighted Average	Impact of Increase in Input on Fair Value(1)
	(in millions)
Assets:
Corporate securities(2)(3)	$	3,706	Discounted cash flow	Discount rate	0.45%	20%	8.32%	Decrease
			Market comparables	EBITDA multiples(4)	1.3X	1.7X	1.5X	Increase
			Liquidation	Liquidation value	8.98%	64.71%	57.36%	Increase
Commercial mortgage-backed securities	$	968	Discounted cash flow	Liquidity premium	0.60%	0.75%	0.70%	Decrease
Market risk benefit assets(7)	$	1,951	Discounted cash flow	Lapse rate(9)	1%	20%		Increase
				Spread over SOFR(10)	0.57%	2.26%		Increase
				Utilization rate(11)	38%	95%		Decrease
				Withdrawal rate	See table footnote (12) below.
				Mortality rate(13)	0%	15%		Increase
				Equity volatility curve	15%	25%		Decrease
Equity securities	$	251	Discounted cash flow(5)	Discount rate	0.16%	20%		Decrease
			Market comparables	EBITDA multiples(4)	1.0X	7.5X	5.9X	Increase
			Net Asset Value	Share price	$1	$1,714	$525	Increase
Liabilities:
Market risk benefit liabilities(7)	$	5,462	Discounted cash flow	Lapse rate(9)	1%	20%		Decrease
				Spread over SOFR(10)	0.57%	2.26%		Decrease
				Utilization rate(11)	38%	95%		Increase
				Withdrawal rate	See table footnote (12) below.
				Mortality rate(13)	0%	15%		Decrease
				Equity volatility curve	15%	25%		Increase
Policyholders’ account balances(8)	$	5,629	Discounted cash flow	Lapse rate(9)	1%	80%		Decrease
				Spread over SOFR(10)	0.57%	2.32%		Decrease
				Mortality rate(13)	0%	23%		Decrease
				Equity volatility curve	6%	27%		Increase
				Option Budget(14)	(1)%	6%		Increase

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	As of December 31, 2022
	Fair Value		Valuation Techniques	Unobservable Inputs	Minimum	Maximum	Weighted Average	Impact of Increase in Input on Fair Value(1)
	(in millions)
Assets:
Corporate securities(2)(3)	$	3,128	Discounted cash flow	Discount rate	0.61%	20%	8.09%	Decrease
			Market comparables	EBITDA multiples(4)	2.2X	23.5X	8.3X	Increase
			Liquidation	Liquidation value	8.16%	8.25%	8.21%	Increase
Market risk benefit assets(7)	$	800	Discounted cash flow	Lapse rate(9)	1%	20%		Increase
				Spread over SOFR(10)	0.50%	2.20%		Increase
				Utilization rate(11)	38%	95%		Decrease
				Withdrawal rate	See table footnote (12) below.
				Mortality rate(13)	0%	15%		Increase
				Equity volatility curve	18%	26%		Decrease
Equity securities	$	290	Discounted cash flow(5)	Discount rate	0.16%	20%		Decrease
			Market comparables	EBITDA multiples(4)	1.0X	7.5X	4.0X	Increase
			Net Asset Value	Share price	$6	$1,708	$22	Increase
Separate account assets-commercial mortgage loans(6)	$	74	Discounted cash flow	Spread	1.25%	2.10%	1.44%	Decrease
Liabilities:
Market risk benefit liabilities(7)	$	5,864	Discounted cash flow	Lapse rate(9)	1%	20%		Decrease
				Spread over SOFR(10)	0.50%	2.20%		Decrease
				Utilization rate(11)	38%	95%		Increase
				Withdrawal rate	See table footnote (12) below.
				Mortality rate(13)	0%	15%		Decrease
				Equity volatility curve	18%	26%		Increase
Policyholders’ account balances(8)	$	3,492	Discounted cash flow	Lapse rate(9)	1%	80%		Decrease
				Spread over SOFR(10)	0.17%	1.93%		Decrease
				Mortality rate(13)	0%	23%		Decrease
				Equity volatility curve	6%	30%		Increase
				Option Budget(14)	(2)%	6%		Increase

(1)Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table.

(2)Includes assets classified as fixed maturities available-for-sale, assets supporting experience-rated contractholder liabilities and fixed maturities trading.

(3)Excludes notes which have been offset with the associated payables under a netting agreement.

(4)Represents multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”), and are amounts used when the Company has determined that market participants would use such multiples when valuing the investments.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

(5)For these investments, a range of discount rates is typically used (10% to 20%) and is therefore a more meaningful representation of the unobservable inputs used in the valuation rather than weighted average.

(6)Changes in the fair value of separate account assets are borne by customers and thus are offset by changes in separate account liabilities on the Company’s Unaudited Interim Consolidated Statements of Financial Position. As a result, changes in value associated with these investments are not reflected in the Company’s Unaudited Interim Consolidated Statements of Operations.

(7)Market risk benefits primarily represent fair value for all living benefit guarantees including accommodation, withdrawal and income benefits. Since the valuation methodology for these assets and liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(8)Policyholders’ account balances primarily represent general account liabilities for the index-linked interest credited on certain of the Company’s life and annuity products that are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(9)Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. For any given contract, lapse rates vary throughout the period over which cash flows are projected for the purposes of valuing these embedded derivatives.

(10)The spread over the Secured Overnight Financing Rate (“SOFR”) swap curve and the London Inter-Bank Offered Rate (“LIBOR”) swap curve represents the premium added to the proxy for the risk-free rate (SOFR or LIBOR, as applicable) to reflect the Company’s estimates of rates that a market participant would use to value the living benefits in both the accumulation and payout phases and index-linked interest crediting guarantees as of June 30, 2023 and December 31, 2022, respectively. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt. Effective April 2023, the Company entered into an agreement with The Ohio National Life Insurance Company (“Ohio National”), an affiliate of Constellation Insurance Holdings, Inc., to reinsure approximately $10 billion of account values of Prudential Defined Income (“PDI”) traditional variable annuity contracts with guaranteed living benefits. See Note 12 for additional information regarding this transaction. As a result of this transaction, a ceded MRB asset balance was established to fair value the reinsurance reimbursements to the Company. The establishment of the fair value also required an estimate of NPR for Ohio National, which may differ from that of the Company’s; however, the NPR spreads for Ohio National were developed using a methodology similar to that of the Company.

(11)The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.

(12)The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of June 30, 2023 and December 31, 2022, the minimum withdrawal rate assumption is 81% and 77% respectively. As of June 30, 2023 and December 31, 2022, the maximum withdrawal rate assumption may be greater than 100%.The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.

(13)The range reflects the mortality rates for the vast majority of business with living benefits and other contracts, with policyholders ranging from 50 to 90 years old. While the majority of living benefits have a minimum age requirement, certain other contracts do not have an age restriction. This results in contractholders with mortality rates approaching 0% for certain benefits. Mortality rates may vary by product, age, and duration. A mortality improvement assumption is also incorporated into the overall mortality table.

(14)Option budget estimates the expected long-term cost of options used to hedge exposures associated with equity price and interest rate changes. The level of option budgets determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives.

Interrelationships Between Unobservable Inputs*—*In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another or multiple inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows:

*Corporate Securities—*The rate used to discount future cash flows reflects current risk-free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term, and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors. During weaker economic cycles, as the expectations of default increases, credit spreads widen, which results in a decrease in fair value.

*Commercial Mortgage-backed Securities—*Interrelationships may exist between the prepayment rate, the default rate and/or loss severity, depending on specific market conditions. In stronger economic cycles, prepayment rates are generally driven by underlying property appreciation and subsequent cash-out refinances, while default rates and loss severity may be lower. During weaker economic cycles, prepayment rates may decline, while default rates and loss severity increase. Generally, a change in the assumption used for the probability of default would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates. The impact of these factors on average life and economics varies with the deal structure and tranche subordination.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Market Risk Benefits—The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is generally highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other contractholder behavior assumptions. To the extent more efficient contractholder behavior results in greater in-the-moneyness at the contract level, lapse rates may decline for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, lapse rates may decline as contracts become more in-the-money.

Changes in Level 3 Assets and Liabilities—The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods (excluding MRBs disclosed in Note 11). When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate.


	Three Months Ended June 30, 2023(8)(9)
	Fair Value, beginning of period		Total realized and unrealized gains (losses)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:

U.S. states	$	7	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	7	$	0
Foreign government	9		0		0		0		0		(1)		0		0		0		8		0
Corporate securities(3)	3,941		26		737		(47)		0		(177)		(18)		18		(19)		4,461		18
Structured securities(4)	1,438		6		(1)		(4)		0		(13)		0		0		(162)		1,264		(1)






Other assets:
Fixed maturities, trading	339		(2)		33		0		0		(9)		0		0		(59)		302		(3)
Equity securities	801		(23)		2		(8)		0		0		1		0		0		773		(10)
Other invested assets	803		(20)		84		(2)		0		0		0		0		0		865		(20)
Short-term investments	16		1		28		0		0		(20)		0		0		0		25		0
Cash equivalents	0		0		0		0		0		0		0		0		0		0		0
Other assets	167		26		39		0		0		(3)		0		0		0		229		20
Separate account assets(5)	1,169		49		166		(130)		0		(40)		0		3		(42)		1,175		50
Liabilities:
Policyholders’ account balances(6)	(4,244)		(1,020)		0		0		(438)		0		73		0		0		(5,629)		(153)
Other liabilities	(1)		0		0		0		0		0		0		0		0		(1)		0

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Three Months Ended June 30, 2023(8)
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (loss)		Net investment income		Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)(7)
	(in millions)
Fixed maturities, available-for-sale	$	(13)	$	0	$	0	$	43	$	2	$	(10)	$	0	$	0	$	26

Other assets:
Fixed maturities, trading	0		(2)		0		0		0		0		(3)		0		0
Equity securities	(1)		(22)		0		0		0		0		(10)		0		0
Other invested assets	(1)		(19)		0		0		0		(1)		(19)		0		0
Short-term investments	0		0		0		0		1		0		0		0		0
Cash equivalents	0		0		0		0		0		0		0		0		0
Other assets	26		0		0		0		0		20		0		0		0
Separate account assets(5)	0		0		49		0		0		0		0		50		0
Liabilities:
Policyholders’ account balances	(1,020)		0		0		0		0		(153)		0		0		0
Other liabilities	0		0		0		0		0		0		0		0		0

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2023(8)(9)
	Fair Value, beginning of period		Total realized and unrealized gains (losses)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:

U.S. states	$	7	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	7	$	0
Foreign government	8		0		0		0		0		0		0		0		0		8		0
Corporate securities(3)	3,858		35		1,264		(175)		0		(500)		(20)		18		(19)		4,461		39
Structured securities(4)	1,289		(29)		239		(5)		0		(25)		0		37		(242)		1,264		(37)






Other assets:
Fixed maturities, trading	304		3		66		0		0		(13)		1		0		(59)		302		1
Equity securities	627		(6)		9		(67)		0		(6)		216		1		(1)		773		(10)
Other invested assets	539		(19)		354		(9)		0		0		0		0		0		865		(18)
Short-term investments	18		3		31		0		0		(27)		0		0		0		25		0
Cash equivalents	0		0		0		0		0		0		0		0		0		0		0
Other assets	152		8		74		0		0		(5)		0		0		0		229		3
Separate account assets(5)	1,081		88		309		(197)		0		(66)		0		3		(43)		1,175		87
Liabilities:
Policyholders’ account balances(6)	(3,492)		(1,271)		0		0		(839)		0		(27)		0		0		(5,629)		(262)
Other liabilities	(1)		0		0		0		0		0		0		0		0		(1)		0


	Six Months Ended June 30, 2023(8)
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (loss)		Net investment income		Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)(7)
	(in millions)
Fixed maturities, available-for-sale	$	(16)	$	0	$	0	$	19	$	3	$	(3)	$	0	$	0	$	5

Other assets:
Fixed maturities, trading	0		2		0		0		1		0		1		0		0
Equity securities	(1)		(5)		0		0		0		0		(10)		0		0
Other invested assets	(1)		(18)		0		0		0		(1)		(17)		0		0
Short-term investments	2		0		0		0		1		0		0		0		0
Cash equivalents	0		0		0		0		0		0		0		0		0
Other assets	8		0		0		0		0		3		0		0		0
Separate account assets(5)	0		0		88		0		0		0		0		87		0
Liabilities:
Policyholders’ account balances	(1,271)		0		0		0		0		(262)		0		0		0
Other liabilities	0		0		0		0		0		0		0		0		0

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Three Months Ended June 30, 2022(8)(9)
	Fair Value, beginning of period		Total realized and unrealized gains (losses)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:

U.S. states	$	8	$	(1)	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	7	$	(1)
Foreign government	10		(1)		0		0		0		0		0		0		0		9		0
Corporate securities(3)	5,005		(84)		556		(59)		9		(318)		(17)		8		(1,561)		3,539		(95)
Structured securities(4)	1,752		(133)		116		(5)		0		(201)		(6)		0		(41)		1,482		(133)






Other assets:
Fixed maturities, trading	378		(16)		23		(1)		0		(24)		2		0		(15)		347		(17)
Equity securities	772		6		20		(23)		0		(2)		(7)		0		0		766		1
Other invested assets	504		3		16		(21)		0		(2)		(1)		0		0		499		3
Short-term investments	213		0		3		0		0		(12)		0		0		0		204		0
Cash equivalents	2		1		0		0		0		0		(3)		0		0		0		0
Other assets	139		67		(4)		0		0		(1)		1		0		0		202		1
Separate account assets(5)	1,254		(146)		12		(5)		0		(4)		0		0		(71)		1,040		(129)
Liabilities:
Policyholders’ account balances(6)	(1,402)		113		0		0		(251)		0		(2,004)		0		0		(3,544)		532
Other liabilities	0		0		0		0		0		0		0		(1)		0		(1)		0


	Three Months Ended June 30, 2022(8)
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (loss)		Net investment income		Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)(7)
	(in millions)
Fixed maturities, available-for-sale	$	8	$	0	$	0	$	(225)	$	(2)	$	(3)	$	0	$	0	$	(226)

Other assets:
Fixed maturities, trading	0		(18)		0		0		2		0		(17)		0		0
Equity securities	0		6		0		0		0		0		1		0		0
Other invested assets	(2)		5		0		0		0		(2)		5		0		0
Short-term investments	0		0		0		0		0		0		0		0		0
Cash equivalents	1		0		0		0		0		0		0		0		0
Other assets	0		0		0		67		0		1		0		0		0
Separate account assets(5)	0		0		(145)		0		(1)		0		0		(129)		0
Liabilities:
Policyholders’ account balances	113		0		0		0		0		532		0		0		0
Other liabilities	0		0		0		0		0		0		0		0		0

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022(8)(9)
	Fair Value, beginning of period		Total realized and unrealized gains (losses)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:

U.S. states	$	8	$	(1)	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	7	$	(1)
Foreign government	10		(1)		0		0		0		0		0		0		0		9		(1)
Corporate securities(3)	5,316		(466)		800		(83)		9		(465)		(27)		16		(1,561)		3,539		(467)
Structured securities(4)	1,986		(278)		201		(22)		0		(221)		(9)		6		(181)		1,482		(279)






Other assets:
Fixed maturities, trading	421		(28)		33		(30)		0		(40)		6		0		(15)		347		(29)
Equity securities	799		28		31		(145)		0		(4)		(16)		73		0		766		5
Other invested assets	493		10		37		(38)		0		(2)		(1)		0		0		499		10
Short-term investments	330		0		4		0		0		(130)		0		0		0		204		0
Cash equivalents	70		(1)		7		0		0		(73)		(3)		0		0		0		(2)
Other assets	54		74		0		0		0		(3)		77		0		0		202		10
Separate account assets(5)	1,283		(192)		44		(16)		0		(7)		(1)		0		(71)		1,040		(189)
Liabilities:
Policyholders’ account balances(6)	(1,436)		280		0		0		(384)		0		(2,004)		0		0		(3,544)		767
Other liabilities	0		0		0		0		0		0		0		(1)		0		(1)		0


	Six Months Ended June 30, 2022(8)
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (loss)		Net investment income		Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)(7)
	(in millions)
Fixed maturities, available-for-sale	$	(68)	$	0	$	0	$	(678)	$	0	$	(82)	$	0	$	0	$	(666)

Other assets:
Fixed maturities, trading	0		(30)		0		0		2		0		(29)		0		0
Equity securities	0		28		0		0		0		0		5		0		0
Other invested assets	(5)		15		0		0		0		(5)		15		0		0
Short-term investments	0		0		0		0		0		0		0		0		0
Cash equivalents	(1)		0		0		0		0		(2)		0		0		0
Other assets	7		0		0		67		0		10		0		0		0
Separate account assets(5)	0		0		(192)		0		0		0		0		(189)		0
Liabilities:
Policyholders’ account balances	280		0		0		0		0		767		0		0		0
Other liabilities	0		0		0		0		0		0		0		0		0

(1)“Other” includes additional activity not allocated to the specific categories within the rollforward of Level 3 Assets and Liabilities.

(2)Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

(3)Includes U.S. corporate public, U.S. corporate private, foreign corporate public and foreign corporate private securities.

(4)Includes asset-backed, commercial mortgage-backed and residential mortgage-backed securities.

(5)Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Unaudited Interim Consolidated Statements of Financial Position.

(6)Issuances and settlements for Policyholders’ account balances are presented net in the rollforward.

(7)Effective January 1, 2020, the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period were added prospectively due to adoption of ASU 2018-13.

(8)Effective January 1, 2021, Future policy benefits and Reinsurance recoverables previously included in “changes in level 3 assets and liabilities” are reported in Note 11 Market Risk Benefits.

(9)Excludes MRB assets of $1,951 million and $869 million and MRB liabilities of $5,462 million and $7,293 million for period ending June 30, 2023 and 2022, respectively. See Note 11 Market Risk Benefits for additional information.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Derivative Fair Value Information

The following tables present the balances of certain derivative assets and liabilities measured at fair value on a recurring basis, as of the date indicated, by the primary underlying risks they are used to manage. These tables include NPR and exclude embedded derivatives and associated reinsurance recoverables. The derivative assets and liabilities shown below are included in “Other invested assets” or “Other liabilities” in the tables contained within the sections “—Assets and Liabilities by Hierarchy Level” and “—Changes in Level 3 Assets and Liabilities,” above.


	As of June 30, 2023
	Level 1		Level 2		Level 3		Netting(1)		Total
	(in millions)
Derivative Assets:
Interest Rate	$	66	$	8,812	$	1	$		$	8,879
Currency	0		2,341		0				2,341
Credit	0		35		0				35
Currency/Interest Rate	0		3,562		0				3,562
Equity	96		1,274		0				1,370
Other	0		0		0				0
Netting(1)							(14,939)		(14,939)
Total derivative assets	$	162	$	16,024	$	1	$	(14,939)	$	1,248
Derivative Liabilities:
Interest Rate	$	9	$	22,242	$	1	$		$	22,252
Currency	0		2,669		0				2,669
Credit	0		21		0				21
Currency/Interest Rate	0		541		0				541
Equity	1		1,759		0				1,760
Other	0		0		0				0
Netting(1)							(24,178)		(24,178)
Total derivative liabilities	$	10	$	27,232	$	1	$	(24,178)	$	3,065


	As of December 31, 2022
	Level 1		Level 2		Level 3		Netting(1)		Total
	(in millions)
Derivative Assets:
Interest Rate	$	13	$	9,408	$	1	$		$	9,422
Currency	0		1,711		0				1,711
Credit	0		27		0				27
Currency/Interest Rate	0		4,282		0				4,282
Equity	1		814		0				815
Other	0		0		0				0
Netting(1)							(14,802)		(14,802)
Total derivative assets	$	14	$	16,242	$	1	$	(14,802)	$	1,455
Derivative Liabilities:
Interest Rate	$	24	$	21,806	$	1	$		$	21,831
Currency	0		2,186		0				2,186
Credit	0		57		0				57
Currency/Interest Rate	0		503		0				503
Equity	2		1,774		0				1,776
Other	0		0		0				0
Netting(1)							(23,298)		(23,298)
Total derivative liabilities	$	26	$	26,326	$	1	$	(23,298)	$	3,055

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

(1)“Netting” amounts represent cash collateral and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting agreement.

Changes in Level 3 derivative assets and liabilities—The following tables provide a summary of the changes in fair value of Level 3 derivative assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income, attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods.


	Three Months Ended June 30, 2023
	Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3(2)		Transfers out of Level 3(2)		Fair Value, end of period		Unrealized gains (losses) for assets still held(1)
	(in millions)
Net Derivative - Equity	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	0		0		0		0		0		0		0		0		0		0		0


	Six Months Ended June 30, 2023
	Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3(2)		Transfers out of Level 3(2)		Fair Value, end of period		Unrealized gains (losses) for assets still held(1)
	(in millions)
Net Derivative - Equity	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	0		0		0		0		0		0		0		0		0		0		0


	Three Months Ended June 30, 2022
	Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3(2)		Transfers out of Level 3(2)		Fair Value, end of period		Unrealized gains (losses) for assets still held(1)
	(in millions)
Net Derivative - Equity	$	2	$	0	$	0	$	(2)	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	1		0		0		0		0		0		0		(1)		0		0		0


	Six Months Ended June 30, 2022
	Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3(2)		Transfers out of Level 3(2)		Fair Value, end of period		Unrealized gains (losses) for assets still held(1)
	(in millions)
Net Derivative - Equity	$	1	$	1	$	0	$	(2)	$	0	$	0	$	0	$	0	$	0	$	0	$	1
Net Derivative - Interest Rate	1		0		0		0		0		0		0		(1)		0		0		0

(1)Total realized and unrealized gains (losses) as well as unrealized gains (losses) for assets still held at the end of the period are recorded in “Realized investment gains (losses), net.”

(2)Transfers into or out of Level 3 are generally reported at the value as of the beginning of the quarter in which the transfers occur for any such positions still held at the end of the quarter.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Nonrecurring Fair Value Measurements—The following tables represent information for assets measured at fair value on a nonrecurring basis. The fair value measurement is nonrecurring as these assets are measured at fair value only when there is a triggering event (e.g., an evidence of impairment). Assets included in the table are those that were impaired during the respective reporting periods and that are still held as of the reporting date. The estimated fair values for these amounts were determined using significant unobservable inputs (Level 3).


	Three Months Ended June 30,			Six Months Ended June 30,
		2023		2022		2023		2022
		(in millions)
Gains (Losses):

Mortgage servicing rights(1)		$	0	$	(1)	$	0	$	2
Investment real estate		$	(17)	$	(5)	$	(17)	$	(6)
Investment in JV/LP		$	(37)	$	(75)	$	(54)	$	(75)


	June 30, 2023		December 31, 2022
	(in millions)
Carrying value after measurement as of period end:

Mortgage servicing rights(1)	$	0	$	77
Investment real estate(2)	$	114	$	112
Investment in JV/LP(2)	$	71	$	64
Goodwill(3)	$	0	$	177

(1)Mortgage servicing rights are valued using a discounted cash flow model. The model incorporates assumptions for servicing revenues, which are adjusted for expected prepayments, delinquency rates, escrow deposit income and estimated loan servicing expenses. The discount rates incorporated into the model are determined based on the estimated returns a market participant would require for this business including a liquidity and risk premium. This estimate includes available relevant data from any active market sales of mortgage servicing rights.

(2)Reported carrying values for 2022 include values as of the measurement periods of June 30, 2022 and September 30, 2022 for “Investment real estate” and June 30, 2022 for “Investment in JV/LP”.

(3)The Company recognized a goodwill impairment charge for Assurance IQ in 2022. The fair value was determined using weighting of an income approach based on discounted cash flow valuation techniques and a market approach based on forward sales multiple of comparable publicly traded companies. The valuation as of December 31, 2022 included unobservable inputs such as forecasted cash flows, discount rate applied, expected synergies and business growth rate assumptions under the income approach and forward market multiples of comparable peer companies and an implied control premium under the market approach. The inputs and assumptions applied are consistent with how a market participant would value Assurance IQ and the related goodwill. See Note 10 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for additional information.

Fair Value Option

The fair value option allows the Company to elect fair value as an alternative measurement for selected financial assets and financial liabilities not otherwise reported at fair value. Such elections have been made by the Company to help mitigate volatility in earnings that result from different measurement attributes. Electing the fair value option also allows the Company to achieve consistent accounting for certain assets and liabilities. Changes in fair value are reflected in “Realized investment gains (losses), net” for commercial mortgage and other loans and “Other income (loss)” for other assets. Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Interest income on commercial mortgage and other loans is included in “Net investment income.” Interest income on these loans is recorded based on the effective interest rate as determined at the closing of the loan.

The following tables present information regarding assets and liabilities where the fair value option has been elected.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Commercial mortgage and other loans:
Interest income	$	3	$	2	$	4	$	6


	June 30, 2023		December 31, 2022
	(in millions)
Commercial mortgage and other loans(1):
Fair value as of period end	$	323	$	137
Aggregate contractual principal as of period end	$	319	$	136


Other assets:
Fair value as of period end	$	11	$	11

(1)As of June 30, 2023, for loans for which the fair value option has been elected, there were no loans in non-accrual status and none of the loans were more than 90 days past due and still accruing.

Fair Value of Financial Instruments

The tables below present the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Unaudited Interim Consolidated Statements of Financial Position. In some cases, as described below, the carrying amount equals or approximates fair value.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	June 30, 2023
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in millions)
Assets:
Fixed maturities, held-to-maturity(2)	$	0	$	1,329	$	0	$	1,329	$	1,171
Assets supporting experience-rated contractholder liabilities	0		0		0		0		0
Commercial mortgage and other loans	0		43		53,059		53,102		57,366
Policy loans	7		0		9,976		9,983		9,983
Other invested assets	0		97		0		97		97
Short-term investments	995		16		0		1,011		1,011
Cash and cash equivalents	7,250		25		0		7,275		7,275
Accrued investment income	0		3,142		0		3,142		3,142
Other assets	43		2,623		1,227		3,893		3,892
Total assets	$	8,295	$	7,275	$	64,262	$	79,832	$	83,937
Liabilities:
Policyholders’ account balances—investment contracts	$	0	$	31,330	$	34,148	$	65,478	$	69,576
Securities sold under agreements to repurchase	0		6,097		0		6,097		6,097
Cash collateral for loaned securities	0		5,207		0		5,207		5,207
Short-term debt	0		667		96		763		763
Long-term debt(3)	564		16,423		755		17,742		18,876
Notes issued by consolidated VIEs	0		0		402		402		402
Other liabilities	0		7,273		17		7,290		7,290
Separate account liabilities—investment contracts	0		26,626		23,684		50,310		50,310
Total liabilities	$	564	$	93,623	$	59,102	$	153,289	$	158,521

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	December 31, 2022
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in millions)
Assets:
Fixed maturities, held-to-maturity(2)	$	0	$	1,455	$	0	$	1,455	$	1,296
Assets supporting experience-rated contractholder liabilities	0		0		0		0		0
Commercial mortgage and other loans	0		46		52,296		52,342		56,608
Policy loans	5		0		10,041		10,046		10,046
Other invested assets	0		102		0		102		102
Short-term investments	715		89		0		804		804
Cash and cash equivalents	9,388		389		0		9,777		9,777
Accrued investment income	0		3,012		0		3,012		3,012
Other assets	48		2,929		754		3,731		3,731
Total assets	$	10,156	$	8,022	$	63,091	$	81,269	$	85,376
Liabilities:
Policyholders’ account balances—investment contracts	$	0	$	31,665	$	34,937	$	66,602	$	70,722
Securities sold under agreements to repurchase	0		6,589		0		6,589		6,589
Cash collateral for loaned securities	0		6,100		0		6,100		6,100
Short-term debt	0		613		164		777		775
Long-term debt(3)	550		17,324		790		18,664		19,908
Notes issued by consolidated VIEs	0		0		374		374		374
Other liabilities	0		7,970		11		7,981		7,981
Separate account liabilities—investment contracts	0		27,735		25,270		53,005		53,005
Total liabilities	$	550	$	97,996	$	61,546	$	160,092	$	165,454

(1)Carrying values presented herein differ from those in the Company’s Unaudited Interim Consolidated Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments.

(2)Excludes notes with fair value of $4,000 million (carrying amount of $4,000 million) and $4,250 million (carrying amount of $4,250 million) as of June 30, 2023 and December 31, 2022, respectively, which have been offset with the associated payables under a netting agreement.

(3)Includes notes with fair value of $12,290 million (carrying amount of $12,290 million) as of both June 30, 2023 and December 31, 2022, which have been offset with the associated receivables under a netting agreement.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

7. DEFERRED POLICY ACQUISITION COSTS, DEFERRED SALES INDUCEMENTS AND VALUE OF BUSINESS ACQUIRED

Deferred Policy Acquisition Costs

The following tables show a rollforward for the lines of business that contain material DAC balances, along with a reconciliation to the Company’s total DAC balance:


	Six Months Ended June 30, 2023
	Retirement Strategies		Individual Life				International Businesses				Total
	Individual Variable		Term Life		Variable/ Universal Life		Life Planner		Gibraltar Life and Other
	(in millions)
Balance, BOP	$	4,171	$	2,288	$	5,000	$	4,710	$	4,231	$	20,400
Capitalization	124		72		291		300		294		1,081
Amortization expense	(186)		(107)		(121)		(163)		(156)		(733)
Other adjustments(1)	(393)		0		0		9		0		(384)
Foreign currency adjustment	0		0		0		(124)		(117)		(241)
Balance, EOP	$	3,716	$	2,253	$	5,170	$	4,732	$	4,252	20,123
Other businesses											197
Total DAC balance											$	20,320

(1)Includes the impact of the reinsurance transaction with Ohio National in Individual Retirement Strategies. See Note 12 for additional information.


	Six Months Ended June 30, 2022
	Retirement Strategies		Individual Life				International Businesses				Total
	Individual Variable		Term Life		Variable/ Universal Life		Life Planner		Gibraltar Life and Other
	(in millions)
Balance, BOP	$	4,872	$	2,372	$	4,679	$	4,685	$	4,135	$	20,743
Capitalization	159		66		275		305		293		1,098
Amortization expense	(205)		(105)		(119)		(162)		(151)		(742)
Other adjustments(1)	(584)		0		0		10		0		(574)
Foreign currency adjustment	0		0		0		(313)		(238)		(551)
Balance, EOP	$	4,242	$	2,333	$	4,835	$	4,525	$	4,039	19,974
Other businesses											118
Total DAC balance											$	20,092

(1)Includes $584 million in Individual Retirement Strategies related to the sale of PALAC. See Note 1 for additional information.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Deferred Sales Inducements

The following table shows a rollforward of DSI balances for variable annuity products within Individual Retirement Strategies, which is the only line of business that contains a material DSI balance, along with a reconciliation to the Company’s total DSI balance:


	Six Months Ended June 30,
	2023		2022
	(in millions)
Balance, BOP	$	446	$	799
Capitalization	2		1
Amortization expense	(20)		(27)
Other adjustments(1)	0		(308)

Balance, EOP	428		465
Other businesses	34		36
Total DSI balance	$	462	$	501

(1)The 2022 amount relates to the sale of PALAC. See Note 1 for additional information.

Value of Business Acquired

The following table shows a rollforward of VOBA balances for Gibraltar Life and Other, which is the only line of business that contains a material VOBA balance, along with a reconciliation to the Company’s total VOBA balance:


	Six Months Ended June 30,
	2023		2022
	(in millions)
Balance, BOP	$	597	$	746

Amortization expense	(26)		(32)

Foreign currency adjustment	(48)		(106)
Balance, EOP	523		608
Other businesses	19		(18)
Total VOBA balance	$	542	$	590

The following table provides VOBA balances for the applicable businesses for the period ended June 30:


	2023
	(in millions)
Gibraltar Life	$	523
Aoba Life	19
Total	$	542

The following table provides estimated future amortization for the periods indicated:


	2023 (July-December)		2024		2025		2026		2027		Thereafter		Total
	(in millions)
Estimated future VOBA amortization	$	25	$	46	$	42	$	38	$	35	$	356	$	542

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

8. SEPARATE ACCOUNTS

The Company issues variable annuity and variable life insurance contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. Most variable annuity and variable life insurance contracts are offered with both separate and general account options. See Note 10 for additional information.

The assets supporting the variable portion of variable annuity and variable life insurance contracts are carried at fair value and reported as “Separate account assets” with an equivalent amount reported as “Separate account liabilities.” The liabilities related to the net amount at risk are reflected within future policy benefits or market risk benefits. Amounts assessed against the contractholders for mortality, administration, and other services are included within revenue in “Policy charges and fee income” and changes in liabilities for minimum guarantees are generally included in “Policyholders’ benefits” or “Realized investment gains (losses), net.”

Separate Account Assets

The aggregate fair value of assets, by major investment asset category, supporting separate accounts is as follows:


	June 30, 2023		December 31, 2022
	(in millions)
Asset Type:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	4,942	$	5,208
Obligations of U.S. states and their political subdivisions	2,108		2,006
Foreign government bonds	121		120
U.S. corporate securities	13,042		13,135
Foreign corporate securities	3,229		3,261
Asset-backed securities	1,292		1,131
Mortgage-backed securities	15,023		14,653
Mutual funds:
Equity	86,619		82,781
Fixed Income	37,875		38,109
Other	5,597		3,797
Equity securities	5,298		5,177
Commercial mortgage and other loans	69		74
Other invested assets	22,478		24,590
Short-term investments	1,265		1,306
Cash and cash equivalents	1,913		2,331
Total	$	200,871	$	197,679

For the periods ended June 30, 2023 and December 31, 2022, there were no transfers of assets, other than cash, from the general account to a separate account; therefore, no gains or losses were recorded.

Separate Account Liabilities

The balances of and changes in separate account liabilities as of and for the periods ended are as follows:

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2023
			Retirement Strategies
	PGIM		Institutional		Individual		Group Insurance		Individual Life		Total
	(in millions)
Balance, BOP	$	40,056	$	11,428	$	93,395	$	23,513	$	32,930	$	201,322
Deposits	2,928		175		204		11		1,489		4,807
Investment performance	(99)		523		7,420		896		4,026		12,766

Policy charges	(42)		(6)		(1,181)		(139)		(528)		(1,896)
Surrenders and withdrawals	(2,828)		(226)		(4,667)		(14)		(409)		(8,144)
Benefit payments	(1,728)		(278)		(56)		(138)		(166)		(2,366)
Net transfers (to) from general account	(351)		(35)		(6)		0		(1,130)		(1,522)
Other	(709)		(182)		5		(382)		52		(1,216)

Balance, EOP	$	37,227	$	11,399	$	95,114	$	23,747	$	36,264	203,751
Other businesses(1)											(2,880)
Total separate account liabilities											$	200,871

Cash surrender value(2)	$	37,227	$	11,399	$	93,745	$	23,630	$	33,157	$	199,158

(1)Primarily represents Divested and Run-off Businesses, partially offset with the impact of intercompany eliminations. There are no associated cash surrender charges.

(2)"Cash surrender value" represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges. There are no cash surrender charges for the PGIM and Institutional Retirement Strategies segments.


	Six Months Ended June 30, 2022
			Retirement Strategies
	PGIM		Institutional		Individual		Group Insurance		Individual Life		Total
	(in millions)
Balance, BOP	$	42,020	$	14,064	$	158,546	$	27,097	$	39,789	$	281,516
Deposits	4,048		511		460		63		1,268		6,350
Investment performance	1,080		(1,948)		(26,996)		(3,395)		(7,362)		(38,621)

Policy charges	(43)		(9)		(1,611)		(144)		(501)		(2,308)
Surrenders and withdrawals	(3,866)		(3,056)		(6,136)		(11)		(371)		(13,440)
Benefit payments	(1,644)		(298)		(70)		(157)		(212)		(2,381)
Net transfers (to) from general account	(11)		2,809		(256)		17		(243)		2,316
Other(1)	290		(262)		(25,084)		302		56		(24,698)

Balance, EOP	$	41,874	$	11,811	$	98,853	$	23,772	$	32,424	208,734
Other businesses(2)											(3,121)
Total separate account liabilities											$	205,613

Cash surrender value(3)	$	41,874	$	11,811	$	97,083	$	23,646	$	29,591	$	204,005

(1)Activity for Individual Retirement Strategies primarily represents the sale of PALAC. See Note 1 for additional information.

(2)Primarily represents Divested and Run-off Businesses, partially offset with the impact of intercompany eliminations. There are no associated cash surrender charges.

(3)"Cash surrender value" represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges. There are no cash surrender charges for the PGIM and Institutional Retirement Strategies segments.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

9. LIABILITY FOR FUTURE POLICY BENEFITS

Liability for Future Policy Benefits primarily consists of the following sub-components, which are discussed in greater detail below:

Benefit Reserves;
Deferred Profit Liability; and
Additional Insurance Reserves

In 2023, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update for direct and assumed Benefit Reserves and Deferred Profit Liability, net of the impact of flooring these liabilities at zero for each issue year cohort. This net impact was primarily due to updates to lapse and claim incidence assumptions on Long-Term Care policies. Additionally, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update and other refinements for direct and assumed Additional Insurance Reserves, primarily due to unfavorable model refinements, partially offset by favorable updates to economic assumptions, including expected future rates of returns on investments on universal life policies with secondary guarantees.

In 2022, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update for direct and assumed Benefit Reserves and Deferred Profit Liability, net of the impact of flooring these liabilities at zero for each issue year cohort. This net impact was primarily due to updates to mortality assumptions on individual term life policies. Additionally, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update and other refinements for direct and assumed Additional Insurance Reserves, primarily due to updates to policyholder behavior assumptions on universal life policies with secondary guarantees.

Benefit Reserves

The balances of and changes in Benefit Reserves as of and for the periods indicated consist of the three tables presented below: Present Value of Expected Net Premiums rollforward, Present Value of Expected Future Policy Benefits rollforward, and Net Liability for Future Policy Benefits.


	Six Months Ended June 30, 2023
	Present Value of Expected Net Premiums
	Retirement Strategies		Individual Life		International Businesses				Corporate and Other
	Institutional		Term Life		Life Planner		Gibraltar Life and Other		Long-Term Care		Total
	(in millions)
Balance, BOP	$	52,620	$	11,282	$	30,689	$	28,951	$	2,932	$	126,474
Effect of cumulative changes in discount rate assumptions, BOP	14,349		572		1,354		1,326		103		17,704
Balance at original discount rate, BOP	66,969		11,854		32,043		30,277		3,035		144,178
Effect of assumption update	(1,117)		(1)		78		(175)		266		(949)
Effect of actual variances from expected experience and other activity	378		(81)		(417)		(332)		121		(331)
Adjusted balance, BOP	66,230		11,772		31,704		29,770		3,422		142,898
Issuances	5,783		338		1,253		865		0		8,239
Net premiums / considerations collected	(4,944)		(711)		(2,106)		(1,928)		(154)		(9,843)
Interest accrual	1,049		270		458		402		77		2,256
Foreign currency adjustment	3,816		0		(1,080)		(1,214)		0		1,522
Other adjustments	0		0		93		0		0		93
Balance at original discount rate, EOP	71,934		11,669		30,322		27,895		3,345		145,165
Effect of cumulative changes in discount rate assumptions, EOP	(18,002)		(497)		(594)		(614)		(89)		(19,796)
Balance, EOP	$	53,932	$	11,172	$	29,728	$	27,281	$	3,256	$	125,369
Other businesses, EOP											85
Total balance, EOP											$	125,454

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2023
	Present Value of Expected Future Policy Benefits
	Retirement Strategies		Individual Life		International Businesses				Corporate and Other
	Institutional		Term Life		Life Planner		Gibraltar Life and Other		Long-Term Care		Total
	(in millions)
Balance, BOP	$	117,754	$	19,288	$	78,639	$	80,331	$	10,685	$	306,697
Effect of cumulative changes in discount rate assumptions, BOP	20,170		1,012		3,719		11,266		1,216		37,383
Balance at original discount rate, BOP	137,924		20,300		82,358		91,597		11,901		344,080
Effect of assumption update	(1,289)		(1)		145		44		357		(744)
Effect of actual variances from expected experience and other activity	351		(96)		(381)		(323)		136		(313)
Adjusted balance, BOP	136,986		20,203		82,122		91,318		12,394		343,023
Issuances	5,783		338		1,253		865		0		8,239
Interest accrual	2,457		472		1,325		1,162		292		5,708
Benefit payments	(5,643)		(779)		(1,777)		(2,270)		(122)		(10,591)
Foreign currency adjustment	3,898		0		(3,243)		(4,355)		0		(3,700)
Other adjustments	4		(13)		179		(11)		0		159
Balance at original discount rate, EOP	143,485		20,221		79,859		86,709		12,564		342,838
Effect of cumulative changes in discount rate assumptions, EOP	(22,882)		(823)		715		(6,148)		(999)		(30,137)
Balance, EOP	$	120,603	$	19,398	$	80,574	$	80,561	$	11,565	$	312,701
Other businesses, EOP											1,707


Total balance, EOP											$	314,408


	Six Months Ended June 30, 2023
	Net Liability for Future Policy Benefits - Benefit Reserves
	Retirement Strategies		Individual Life		International Businesses				Corporate and Other
	Institutional		Term Life		Life Planner		Gibraltar Life and Other		Long-Term Care		Total
	(in millions)
Balance, EOP, pre-flooring	$	66,671	$	8,225	$	50,846	$	53,279	$	8,309	$	187,330
Flooring impact, EOP	1		0		17		2		0		20
Balance, EOP, post-flooring	66,672		8,225		50,863		53,281		8,309		187,350
Less: Reinsurance recoverable	0		707		104		211		0		1,022
Balance after reinsurance recoverable, EOP, post-flooring	$	66,672	$	7,518	$	50,759	$	53,070	$	8,309	$	186,328
Other businesses, EOP(1)											1,553


Total balance after reinsurance recoverable, EOP											$	187,881

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022
	Present Value of Expected Net Premiums
	Retirement Strategies		Individual Life		International Businesses				Corporate and Other
	Institutional		Term Life		Life Planner		Gibraltar Life and Other		Long-Term Care		Total
	(in millions)
Balance, BOP	$	68,791	$	12,971	$	39,517	$	37,815	$	3,585	$	162,679
Effect of cumulative changes in discount rate assumptions, BOP	(4,414)		(1,892)		(3,516)		(3,239)		(644)		(13,705)
Balance at original discount rate, BOP	64,377		11,079		36,001		34,576		2,941		148,974
Effect of assumption update	249		1,313		(76)		(176)		49		1,359
Effect of actual variances from expected experience and other activity	282		40		(719)		(274)		132		(539)
Adjusted balance, BOP	64,908		12,432		35,206		34,126		3,122		149,794
Issuances	2,436		204		1,831		1,429		0		5,900
Net premiums / considerations collected	(3,232)		(689)		(2,277)		(2,215)		(139)		(8,552)
Interest accrual	800		266		487		446		72		2,071
Foreign currency adjustment	(6,646)		0		(2,644)		(2,545)		0		(11,835)
Other adjustments	0		(8)		121		0		0		113
Balance at original discount rate, EOP	58,266		12,205		32,724		31,241		3,055		137,491
Effect of cumulative changes in discount rate assumptions, EOP	(8,098)		22		(6)		(23)		70		(8,035)
Balance, EOP	$	50,168	$	12,227	$	32,718	$	31,218	$	3,125	$	129,456
Other businesses, EOP											109
Total balance, EOP											$	129,565


	Six Months Ended June 30, 2022
	Present Value of Expected Future Policy Benefits
	Retirement Strategies		Individual Life		International Businesses				Corporate and Other
	Institutional		Term Life		Life Planner		Gibraltar Life and Other		Long-Term Care		Total
	(in millions)
Balance, BOP	$	142,593	$	22,768	$	109,562	$	114,846	$	15,810	$	405,579
Effect of cumulative changes in discount rate assumptions, BOP	(13,706)		(3,876)		(21,554)		(13,476)		(4,482)		(57,094)
Balance at original discount rate, BOP	128,887		18,892		88,008		101,370		11,328		348,485
Effect of assumption update	(187)		1,777		(115)		(164)		49		1,360
Effect of actual variances from expected experience and other activity	190		54		(795)		(235)		152		(634)
Adjusted balance, BOP	128,890		20,723		87,098		100,971		11,529		349,211
Issuances	2,436		204		1,831		1,429		0		5,900
Interest accrual	1,992		460		1,357		1,235		273		5,317
Benefit payments	(4,880)		(810)		(1,642)		(2,590)		(119)		(10,041)
Foreign currency adjustment	(6,842)		0		(7,250)		(8,921)		0		(23,013)
Other adjustments	(418)		(15)		243		(8)		0		(198)
Balance at original discount rate, EOP	121,178		20,562		81,637		92,116		11,683		327,176
Effect of cumulative changes in discount rate assumptions, EOP	(10,638)		161		2,708		(4,876)		(178)		(12,823)
Balance, EOP	$	110,540	$	20,723	$	84,345	$	87,240	$	11,505	$	314,353
Other businesses, EOP											2,043


Total balance, EOP											$	316,396

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022
	Net Liability for Future Policy Benefits - Benefit Reserves
	Retirement Strategies		Individual Life		International Businesses				Corporate and Other
	Institutional		Term Life		Life Planner		Gibraltar Life and Other		Long-Term Care		Total
	(in millions)
Balance, EOP, pre-flooring	$	60,372	$	8,497	$	51,627	$	56,021	$	8,380	$	184,897
Flooring impact, EOP	44		0		102		162		0		308
Balance, EOP, post-flooring	60,416		8,497		51,729		56,183		8,380		185,205
Less: Reinsurance recoverable	0		782		128		219		0		1,129
Balance after reinsurance recoverable, EOP, post-flooring	$	60,416	$	7,715	$	51,601	$	55,964	$	8,380	$	184,076
Other businesses, EOP(1)											1,852


Total balance after reinsurance recoverable, EOP											$	185,928

(1)Reflects balance after reinsurance recoverable of $71 million and $81 million at June 30, 2023 and 2022, respectively.

The following tables provide supplemental information related to the balances of and changes in Benefit Reserves included in the disaggregated tables above, on a gross (direct and assumed) basis, as of and for the period indicated:


	Six Months Ended June 30, 2023

	Retirement Strategies			Individual Life			International Businesses						Corporate and Other
	Institutional			Term Life			Life Planner			Gibraltar Life and Other			Long-Term Care
	($ in millions)
Undiscounted expected future gross premiums	$	114,545		$	23,200		$	70,654		$	57,912		$	6,972
Discounted expected future gross premiums (at original discount rate)	$	79,109		$	15,427		$	54,694		$	46,591		$	4,561
Discounted expected future gross premiums (at current discount rate)	$	59,307		$	14,789		$	54,132		$	45,778		$	4,444
Undiscounted expected future benefits and expenses	$	220,313		$	31,195		$	140,232		$	142,232		$	30,913
Interest accrual	$	1,408		$	202		$	867		$	760		$	215
Gross premiums	$	5,335		$	923		$	3,340		$	3,174		$	222
Weighted-average duration of the liability in years (at original discount rate)	8			10			20			19			18
Weighted-average duration of the liability in years (at current discount rate)	8			10			20			18			18
Weighted-average interest rate (at original discount rate)	4.39		%	5.18		%	3.45		%	2.57		%	4.91		%
Weighted-average interest rate (at current discount rate)	5.30		%	5.28		%	2.85		%	2.75		%	5.47		%


	Six Months Ended June 30, 2022

	Retirement Strategies			Individual Life			International Businesses						Corporate and Other
	Institutional			Term Life			Life Planner			Gibraltar Life and Other			Long-Term Care
	($ in millions)
Undiscounted expected future gross premiums	$	87,851		$	23,901		$	75,418		$	65,827		$	7,122
Discounted expected future gross premiums (at original discount rate)	$	63,647		$	15,877		$	58,628		$	52,470		$	4,605
Discounted expected future gross premiums (at current discount rate)	$	54,888		$	15,911		$	59,093		$	52,619		$	4,714
Undiscounted expected future benefits and expenses	$	182,241		$	31,885		$	148,659		$	157,157		$	29,554
Interest accrual	$	1,192		$	194		$	870		$	789		$	201
Gross premiums	$	3,437		$	947		$	3,656		$	3,631		$	218
Weighted-average duration of the liability in years (at original discount rate)	9			11			21			21			19
Weighted-average duration of the liability in years (at current discount rate)	8			10			20			18			19
Weighted-average interest rate (at original discount rate)	4.19		%	5.25		%	3.44		%	2.52		%	4.91		%
Weighted-average interest rate (at current discount rate)	4.68		%	4.63		%	2.61		%	2.48		%	5.02		%

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

For additional information regarding observable market information and the techniques used to determine the interest rate assumptions seen above, see Note 2.

For non-participating traditional and limited-payment products, if a cohort is in a loss position where the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for the present value of expected future policy benefits and non-level claim settlement expenses, then the liability for future policy benefits is adjusted at that time, and thereafter, such that all changes, both favorable and unfavorable, in expected benefits resulting from both actual experience deviations and changes in future assumptions are recognized immediately as a gain or loss respectively.

For the first six months of 2023, there was an immaterial impact to net income for non-participating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts.

For the first six months of 2022, there was a $206 million charge to net income for nonparticipating traditional and limited-pay business, where net premiums exceeded gross premiums for certain issue-year cohorts, partially offset by a $90 million gain reflecting the impact of ceded reinsurance on the affected cohorts. The unfavorable impact in the first six months of 2022 is primarily due to unfavorable assumption updates related to the term life business in Individual Life.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Deferred Profit Liability

The balances of and changes in Deferred Profit Liability as of and for the period indicated are as follows:


	Six Months Ended June 30, 2023
	Deferred Profit Liability
	Retirement Strategies		International Businesses
	Institutional		Life Planner		Gibraltar Life and Other		Total
	(in millions)
Balance, BOP	$	5,532	$	3,379	$	5,261	$	14,172
Flooring impact, BOP	0		0		1		1
Balance, BOP, pre-flooring	5,532		3,379		5,260		14,171
Effect of assumption update	35		(67)		(228)		(260)
Effect of actual variances from expected experience and other activity	19		(4)		(18)		(3)
Adjusted balance, BOP	5,586		3,308		5,014		13,908
Profits deferred	197		850		665		1,712
Interest accrual	113		71		76		260
Amortization	(282)		(579)		(512)		(1,373)
Foreign currency adjustment	14		(72)		(188)		(246)
Other adjustments	0		20		0		20
Balance, EOP, pre-flooring	5,628		3,598		5,055		14,281
Flooring impact, EOP	0		0		1		1
Balance, EOP	5,628		3,598		5,056		14,282
Less: Reinsurance recoverable	0		8		10		18
Balance after reinsurance recoverable	$	5,628	$	3,590	$	5,046	14,264
Other businesses(1)							149

Total balance after reinsurance recoverable							$	14,413


	Six Months Ended June 30, 2022
	Deferred Profit Liability
	Retirement Strategies		International Businesses
	Institutional		Life Planner		Gibraltar Life and Other		Total
	(in millions)
Balance, BOP	$	5,183	$	2,741	$	5,014	$	12,938
Flooring impact, BOP	0		0		1		1
Balance, BOP, pre-flooring	5,183		2,741		5,013		12,937
Effect of assumption update	382		28		(5)		405
Effect of actual variances from expected experience and other activity	96		3		(49)		50
Adjusted balance, BOP	5,661		2,772		4,959		13,392
Profits deferred	21		875		759		1,655
Interest accrual	104		60		71		235
Amortization	(272)		(573)		(526)		(1,371)
Foreign currency adjustment	(28)		(166)		(363)		(557)
Other adjustments	0		19		(1)		18
Balance, EOP, pre-flooring	5,486		2,987		4,899		13,372
Flooring impact, EOP	0		0		1		1
Balance, EOP	5,486		2,987		4,900		13,373
Less: Reinsurance recoverable	0		8		10		18
Balance after reinsurance recoverable	$	5,486	$	2,979	$	4,890	13,355
Other businesses(1)							189

Total balance after reinsurance recoverable							$	13,544

(1)Reflects balance after reinsurance recoverable of $0 million and $1 million at June 30, 2023 and 2022, respectively.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The following tables provide supplemental information related to the balances of and changes in Deferred Profit Liability, included in the disaggregated tables above, on a gross (direct and assumed) basis, as of and for the period indicated:


	Six Months Ended June 30, 2023

	Retirement Strategies		International Businesses
	Institutional		Life Planner		Gibraltar Life and Other
	(in millions)
Revenue(1)	$	(83)	$	(291)	$	18
Interest accrual	$	113	$	71	$	76


	Six Months Ended June 30, 2022

	Retirement Strategies		International Businesses
	Institutional		Life Planner		Gibraltar Life and Other
	(in millions)
Revenue(1)	$	(330)	$	(415)	$	(250)
Interest accrual	$	104	$	60	$	71

(1)Represents the gross premiums collected in changes in Deferred Profit Liability excluding impact of foreign currency adjustments.

Additional Insurance Reserves

AIR represents the additional liability for annuitization, death, or other insurance benefits, including GMDB and GMIB contract features, that are above and beyond the contractholder's account balance.

The following table shows a rollforward of AIR balances for variable and universal life products within Individual Life, which is the only line of business that contains a material AIR balance, for the period indicated, along with a reconciliation to the Company’s total AIR balance:


	Six Months Ended June 30,
	2023		2022
	(in millions)
Balance, including amounts in AOCI, BOP, post-flooring	$	12,684	$	11,708
Flooring impact and amounts in AOCI	1,285		(909)
Balance, excluding amounts in AOCI, BOP, pre-flooring	13,969		10,799
Effect of assumption update	23		2,200
Effect of actual variances from expected experience and other activity	26		(156)
Adjusted balance, BOP	14,018		12,843
Assessments collected(1)	518		453
Interest accrual	239		205
Benefits paid	(153)		(118)
Balance, excluding amounts in AOCI, EOP, pre-flooring	14,622		13,383
Flooring impact and amounts in AOCI	(1,109)		(869)
Balance, including amounts in AOCI, EOP, post-flooring	13,513		12,514
Less: Reinsurance recoverable	5,484		5,004
Balance after reinsurance recoverable, including amounts in AOCI, EOP	8,029		7,510
Other businesses	147		165
Total balance after reinsurance recoverable	$	8,176	$	7,675

(1)Represents the portion of gross assessments required to fund the future policy benefits.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30,
	2023			2022
	($ in millions)
Interest accrual	$	239		$	205
Gross assessments	$	1,547		$	1,230
Weighted-average duration of the liability in years (at original discount rate)	22			23
Weighted-average interest rate (at original discount rate)	3.39		%	3.72		%

Future Policy Benefits Reconciliation

The following table presents the reconciliation of the ending balances from above rollforwards, Benefit Reserves, Additional Insurance Reserves, and Deferred Profit Liability including other liabilities, gross of related reinsurance recoverable, to the total liability for Future Policy Benefits on the Company's Consolidated Statement of Financial Position as of the periods indicated:


	Six Months Ended June 30,
	2023		2022
	(in millions)
Benefit reserves, EOP, post-flooring	$	188,974	$	187,139
Deferred Profit Liability EOP, post-flooring	14,431		13,563
Additional insurance reserves, including amounts in AOCI, EOP, post-flooring	13,660		12,679
Subtotal of amounts disclosed above	217,065		213,381
Other Future Policy Benefits reserves(1)	51,584		52,709
Total Future Policy Benefits	$	268,649	$	266,090

(1)Represents balances for which disaggregated rollforward disclosures are not required, including Closed Block liabilities, unpaid claims and claims expenses, and incurred but not reported and in course of settlement claim liabilities.

Revenue and Interest Expense

The following tables present revenue and interest expense related to Benefit Reserves, Additional Insurance Reserves, and Deferred Profit Liability, as well as related revenue and interest expense not presented in the above supplemental tables, in the Company's Consolidated Statement of Operations as of the periods indicated:


	Six Months Ended June 30, 2023
	Revenues(1)
	Retirement Strategies		Individual Life				International Businesses
	Institutional		Term Life		Variable/Universal Life		Life Planner		Gibraltar Life and Other		Other Businesses(2)		Total
	(in millions)
Benefit reserves	$	5,335	$	923	$	0	$	3,340	$	3,174	$	273	$	13,045
Deferred profit liability	(83)		0		0		(291)		18		34		(322)
Additional insurance reserves	0		0		1,547		0		0		0		1,547
Total	$	5,252	$	923	$	1,547	$	3,049	$	3,192	$	307	$	14,270

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022
	Revenues(1)
	Retirement Strategies		Individual Life				International Businesses
	Institutional		Term Life		Variable/Universal Life		Life Planner		Gibraltar Life and Other		Other Businesses(2)		Total
	(in millions)
Benefit reserves	$	3,437	$	947	$	0	$	3,656	$	3,631	$	268	$	11,939
Deferred profit liability	(330)		0		0		(415)		(250)		36		(959)
Additional insurance reserves	0		0		1,230		0		0		1		1,231
Total	$	3,107	$	947	$	1,230	$	3,241	$	3,381	$	305	$	12,211


	Six Months Ended June 30, 2023
	Interest Expense
	Retirement Strategies		Individual Life				International Businesses
	Institutional		Term Life		Variable/Universal Life		Life Planner		Gibraltar Life and Other		Other Businesses(2)		Total
	(in millions)
Benefit reserves	$	1,408	$	202	$	0	$	867	$	760	$	242	$	3,479
Deferred profit liability	113		0		0		71		76		2		262
Additional insurance reserves	0		0		239		0		0		1		240
Total	$	1,521	$	202	$	239	$	938	$	836	$	245	$	3,981


	Six Months Ended June 30, 2022
	Interest Expense
	Retirement Strategies		Individual Life				International Businesses
	Institutional		Term Life		Variable/Universal Life		Life Planner		Gibraltar Life and Other		Other Businesses(2)		Total
	(in millions)
Benefit reserves	$	1,192	$	194	$	0	$	870	$	789	$	230	$	3,275
Deferred profit liability	104		0		0		60		71		3		238
Additional insurance reserves	0		0		205		0		0		2		207
Total	$	1,296	$	194	$	205	$	930	$	860	$	235	$	3,720

(1)Represents "Gross Premiums" for benefit reserves, "Revenue" for deferred profit liability and "Gross Assessments" for additional insurance reserves.

(2)Includes remaining balances disclosed above and balances for which disaggregated rollforward disclosures may not be presented above.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

10. POLICYHOLDERS’ ACCOUNT BALANCES

The balances of and changes in policyholders' account balances as of and for the periods ended are as follows:


	Six Months Ended June 30, 2023
	Group Insurance			Retirement Strategies									Individual Life			International Businesses						Total
	Life/Disability			Institutional			Individual Variable			Individual Fixed			Variable/Universal Life			Life Planner			Gibraltar Life and Other
	($ in millions)
Balance, beginning of period	$	5,839		$	17,376		$	17,524		$	4,643		$	26,502		$	11,168		$	35,325		$	118,377
Deposits	523			2,513			2,230			1,206			1,190			1,150			2,818			11,630
Interest credited	84			335			148			60			391			513			354			1,885
Acquisitions and dispositions	0			0			0			0			0			0			0			0
Policy charges	(161)			(11)			(11)			(3)			(1,024)			(150)			(87)			(1,447)
Surrenders and withdrawals	(826)			(2,295)			(332)			(196)			(859)			(96)			(582)			(5,186)
Benefit payments	0			(272)			(40)			(40)			(81)			(137)			(1,002)			(1,572)
Net transfers (to) from separate account	0			0			16			0			1,155			0			0			1,171
Change in market value and other adjustments(1)	0			0			1,052			70			148			14			(2)			1,282
Foreign currency adjustment	0			0			0			0			0			(798)			(888)			(1,686)
Balance, end of period	5,459			17,646			20,587			5,740			27,422			11,664			35,936			124,454
Less: Reinsurance and other recoverable(2)	0			0			0			0			11			1			20			32
Policyholders' account balance net of reinsurance and other recoverable	$	5,459		$	17,646		$	20,587		$	5,740		$	27,411		$	11,663		$	35,916		$	124,422
Closed Block Division																						4,543
Unearned revenue reserve, unearned expense credit, and additional interest reserve																						4,930
Other(3)																						4,816
Total Policyholders' account balance																						$	138,743
Weighted-average crediting rate	2.99		%	3.83		%	1.55		%	2.32		%	2.90		%	8.98		%	1.99		%	3.11		%
Net amount at risk(4)	$	72,764		$	0		$	0		$	0		$	373,992		$	17,126		$	6,472		$	470,354
Cash surrender value(5)	$	3,992		$	17,646		$	18,638		$	4,541		$	22,936		$	10,046		$	31,477		$	109,276

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30, 2022
	Group Insurance			Retirement Strategies									Individual Life			International Businesses						Total
	Life/Disability			Institutional			Individual Variable			Individual Fixed			Variable/Universal Life			Life Planner			Gibraltar Life and Other
	($ in millions)
Balance, beginning of period	$	6,273		$	16,391		$	14,125		$	4,652		$	26,859		$	11,555		$	37,615		$	117,470
Deposits	608			2,076			2,721			71			1,279			415			1,523			8,693
Interest credited	75			255			53			53			405			(9)			232			1,064
Acquisitions and dispositions	0			0			(1,406)			(440)			0			0			0			(1,846)
Policy charges	(162)			(11)			(1)			(2)			(1,018)			(100)			(53)			(1,347)
Surrenders and withdrawals	(700)			(2,240)			(150)			(67)			(848)			(100)			(1,504)			(5,609)
Benefit payments	0			(270)			(57)			(86)			(107)			(130)			(1,159)			(1,809)
Net transfers (to) from separate account	(17)			0			185			0			264			0			0			432
Change in market value and other adjustments(1)	0			0			72			(75)			(286)			16			(7)			(280)
Foreign currency adjustment	0			0			0			0			0			(1,525)			(1,990)			(3,515)
Balance, end of period	6,077			16,201			15,542			4,106			26,548			10,122			34,657			113,253
Less: Reinsurance and other recoverable(2)	0			0			0			0			12			1			22			35
Policyholders' account balance net of reinsurance and other recoverable	$	6,077		$	16,201		$	15,542		$	4,106		$	26,536		$	10,121		$	34,635		$	113,218
Closed Block Division																						4,664
Unearned revenue reserve, unearned expense credit, and additional interest reserve																						4,216
Other(3)																						8,275
Total Policyholders' account balance																						$	130,408
Weighted-average crediting rate	2.42		%	3.13		%	0.71		%	2.41		%	3.03		%	(0.17)		%	1.29		%	1.84		%
Net amount at risk(4)	$	71,162		$	0		$	0		$	0		$	360,368		$	14,518		$	7,285		$	453,333
Cash surrender value(5)	$	4,136		$	16,201		$	13,380		$	3,079		$	21,673		$	8,959		$	30,843		$	98,271

(1)Primarily relates to changes in the value of embedded derivative instruments associated with the indexed options of certain products.

(2)The amount of recoverable related to reinsurance agreements that reduce the risk of the policyholders' account balance gross liability.

(3)Includes $5,832 million and $8,242 million of Full Service account balances reinsured to Great-West as of June 30, 2023 and 2022, respectively. See Note 1 for additional information.

(4)The net amount at risk calculation includes both general account and separate account balances.

(5)Cash surrender value represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges. There are no cash surrender charges for the Institutional Retirement Strategies segment.

The Company issues variable life and universal life insurance contracts which may also include a “no-lapse guarantee” where the Company contractually guarantees to the contractholder a death benefit even when the account value drops to zero, as long as the “no-lapse guarantee” premium is paid.

The net amount at risk is generally defined as the current death benefit in excess of the current account balance at the balance sheet date. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including contractholder mortality, contract lapses, and premium pattern, as well as interest rate and equity market returns.

The Company also issues annuity contracts that provide certain death benefit and/or living benefit guarantees and are accounted for as MRBs. See Note 11 for additional information, including the net amount at risk associated with these guarantees.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums are as follows:


	June 30, 2023
Range of Guaranteed Minimum Crediting Rate (1)	At guaranteed minimum		1 - 50 bps above guaranteed minimum		51 - 150 bps above guaranteed minimum		Greater than 150 bps above guaranteed minimum		Total
	($ in millions)
Group Insurance
Less than 1.00%	$	0	$	0	$	0	$	1,342	$	1,342
1.00% - 1.99%	0		0		0		0		0
2.00% - 2.99%	55		0		0		0		55
3.00% - 4.00%	1,621		0		0		0		1,621
Greater than 4.00%	3		0		0		0		3
Total	$	1,679	$	0	$	0	$	1,342	$	3,021
Institutional
Less than 1.00%	$	401	$	0	$	0	$	0	$	401
1.00% - 1.99%	1,565		0		0		0		1,565
2.00% - 2.99%	557		0		0		0		557
3.00% - 4.00%	5,891		0		0		0		5,891
Greater than 4.00%	1,728		0		0		0		1,728
Total	$	10,142	$	0	$	0	$	0	$	10,142
Individual Variable
Less than 1.00%	$	973	$	834	$	18	$	0	$	1,825
1.00% - 1.99%	232		2		1		0		235
2.00% - 2.99%	30		5		0		0		35
3.00% - 4.00%	2,119		8		10		0		2,137
Greater than 4.00%	101		0		0		0		101
Total	$	3,455	$	849	$	29	$	0	$	4,333
Individual Fixed
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00% - 1.99%	559		136		245		84		1,024
2.00% - 2.99%	519		467		48		11		1,045
3.00% - 4.00%	355		8		0		0		363
Greater than 4.00%	100		0		0		0		100
Total	$	1,533	$	611	$	293	$	95	$	2,532
Variable & Universal Life
Less than 1.00%	$	0	$	0	$	0	$	36	$	36
1.00% - 1.99%	164		0		2,681		363		3,208
2.00% - 2.99%	23		1,724		2,826		287		4,860
3.00% - 4.00%	7,386		2,024		1,308		11		10,729
Greater than 4.00%	5,560		0		0		0		5,560
Total	$	13,133	$	3,748	$	6,815	$	697	$	24,393
Life Planner
Less than 1.00%	$	342	$	26	$	91	$	1,136	$	1,595
1.00% - 1.99%	2,915		24		0		0		2,939
2.00% - 2.99%	2,080		0		0		0		2,080
3.00% - 4.00%	333		0		0		0		333
Greater than 4.00%	388		0		0		0		388
Total	$	6,058	$	50	$	91	$	1,136	$	7,335
Gibraltar
Less than 1.00%	$	16,373	$	0	$	0	$	0	$	16,373
1.00% - 1.99%	9,143		68		0		0		9,211
2.00% - 2.99%	3,225		327		39		0		3,591
3.00% - 4.00%	3,943		0		0		0		3,943
Greater than 4.00%	2,612		0		0		0		2,612
Total	$	35,296	$	395	$	39	$	0	$	35,730

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	June 30, 2022
Range of Guaranteed Minimum Crediting Rate (1)	At guaranteed minimum		1 - 50 bps above guaranteed minimum		51 - 150 bps above guaranteed minimum		Greater than 150 bps above guaranteed minimum		Total
	($ in millions)
Group Insurance
Less than 1.00%	$	0	$	0	$	0	$	1,813	$	1,813
1.00% - 1.99%	7		0		0		0		7
2.00% - 2.99%	54		0		0		0		54
3.00% - 4.00%	1,681		0		0		0		1,681
Greater than 4.00%	3		0		0		0		3
Total	$	1,745	$	0	$	0	$	1,813	$	3,558
Institutional
Less than 1.00%	$	401	$	0	$	0	$	0	$	401
1.00% - 1.99%	1,573		0		0		0		1,573
2.00% - 2.99%	1,224		0		0		0		1,224
3.00% - 4.00%	4,676		0		0		0		4,676
Greater than 4.00%	989		0		0		0		989
Total	$	8,863	$	0	$	0	$	0	$	8,863
Individual Variable
Less than 1.00%	$	1,051	$	878	$	19	$	0	$	1,948
1.00% - 1.99%	255		2		0		0		257
2.00% - 2.99%	38		0		1		0		39
3.00% - 4.00%	2,393		6		10		0		2,409
Greater than 4.00%	114		0		0		0		114
Total	$	3,851	$	886	$	30	$	0	$	4,767
Individual Fixed
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00% - 1.99%	653		65		94		26		838
2.00% - 2.99%	477		0		0		0		477
3.00% - 4.00%	413		2		0		0		415
Greater than 4.00%	109		0		0		0		109
Total	$	1,652	$	67	$	94	$	26	$	1,839
Variable & Universal Life
Less than 1.00%	$	16	$	0	$	0	$	0	$	16
1.00% - 1.99%	343		0		695		1,978		3,016
2.00% - 2.99%	397		0		2,260		2,118		4,775
3.00% - 4.00%	7,773		13		2,515		157		10,458
Greater than 4.00%	5,566		0		0		0		5,566
Total	$	14,095	$	13	$	5,470	$	4,253	$	23,831
Life Planner
Less than 1.00%	$	359	$	28	$	97	$	28	$	512
1.00% - 1.99%	3,080		20		0		0		3,100
2.00% - 2.99%	2,228		0		0		0		2,228
3.00% - 4.00%	308		0		0		0		308
Greater than 4.00%	395		0		0		0		395
Total	$	6,370	$	48	$	97	$	28	$	6,543
Gibraltar
Less than 1.00%	$	18,839	$	0	$	0	$	0	$	18,839
1.00% - 1.99%	10,254		0		0		0		10,254
2.00% - 2.99%	3,466		326		49		0		3,841
3.00% - 4.00%	1,157		0		0		0		1,157
Greater than 4.00%	246		0		0		0		246
Total	$	33,962	$	326	$	49	$	0	$	34,337

(1) Excludes contracts without minimum guaranteed crediting rates, such as funds with indexed-linked crediting options and Japan variable products.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

11. MARKET RISK BENEFITS

The following table shows a rollforward of MRB balances for variable annuity products within Individual Retirement Strategies, which is the only line of business that contains a material MRB balance, along with a reconciliation to the Company’s total net MRB positions as of the following dates:


	Six Months Ended June 30,
	2023		2022
	(in millions)
Balance, BOP	$	4,987	$	13,392
Effect of cumulative changes in NPR	1,828		898
Balance, BOP, before effect of changes in NPR	6,815		14,290
Attributed fees collected	601		734
Claims paid	(59)		(33)
Interest accrual	173		31
Actual in force different from expected	36		61
Effect of changes in interest rates	(696)		(6,078)
Effect of changes in equity markets	(1,389)		3,669
Effect of assumption update	342		(152)
Issuances	5		0


Other adjustments(1)	(22)		(3,993)
Balance, EOP, before effect of changes in NPR	5,806		8,529
Effect of cumulative changes in NPR	(1,751)		(2,197)
Balance, EOP	4,055		6,332
Less: Reinsured MRB	637		41
Balance, EOP, net of reinsurance	3,418		6,291
Other businesses	93		133
Total net MRB balance	$	3,511	$	6,424

(1)2022 includes $4,061 million related to the sale of PALAC. See Note 1 for additional information.

In 2023, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update for direct and assumed MRBs, primarily due to updates to policyholder behavior assumptions on certain variable annuities. In 2022, the Company recognized a favorable impact to net income attributable to the actuarial assumption update for direct and assumed MRBs, primarily due to updates to mortality and policyholder behavior assumptions on certain variable annuities.

The Company issues certain variable annuity insurance contracts where the Company contractually guarantees to the contractholder a return of no less than (1) total deposits made to the contract adjusted for any partial withdrawals plus a minimum return, and/or (2) the highest anniversary contract value on a specified date adjusted for any withdrawals. These guarantees include benefits that are payable in the event of death, annuitization or at specified dates during the accumulation period and withdrawal and income benefits payable during specified periods.

The Company also issues indexed variable annuity contracts for which the return is tied to the return of specific indices where the Company contractually guarantees to the contractholder a return of no less than total deposits made to the contract adjusted for any partial withdrawals upon death. In certain of these indexed variable annuity contracts, the Company also contractually guarantees to the contractholder withdrawal benefits payable during specific periods.

For guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. The Company’s primary

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, timing of annuitization, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance.

For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, interest rates, market volatility and contractholder behavior.

The following table presents accompanying information to the rollforward table above.


	June 30, 2023		June 30, 2022
	($ in millions)
Net amount at risk(1)	$	10,885	$	11,538
Weighted-average attained age of contractholders	69		68

(1)For contracts with multiple benefit features, the highest net amount at risk for each contract is included.

The tables below reconcile MRB asset and liability positions as of the following dates:


	June 30, 2023
	Retirement Strategies
	Individual Variable		Other Businesses		Total
	(in millions)
MRB Assets	$	1,937	$	14	$	1,951
MRB Liabilities	5,355		107		5,462
Net Liability	$	3,418	$	93	$	3,511


	June 30, 2022
	Retirement Strategies
	Individual Variable		Other Businesses		Total
	(in millions)
MRB Assets	$	856	$	13	$	869
MRB Liabilities	7,147		146		7,293
Net Liability	$	6,291	$	133	$	6,424

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

12. REINSURANCE

The Company participates in reinsurance with third parties primarily to provide additional capacity for future growth, limit the maximum net loss potential arising from large risks and acquire or dispose of businesses.

Effective April 2023, the Company entered into an agreement with The Ohio National Life Insurance Company, an affiliate of Constellation Insurance Holdings, Inc., to reinsure approximately $10 billion of account values of Prudential Defined Income (“PDI”) traditional variable annuity contracts with guaranteed living benefits issued by Pruco Life Insurance Company (“Pruco Life”), a wholly-owned subsidiary of Prudential Financial. This block represents approximately 10% of the Company’s remaining legacy in-force traditional variable annuity block by account value. The Company ceded 100% of separate account liabilities under modified coinsurance and 100% of general account liabilities under coinsurance of its Pruco Life issued PDI traditional variable annuity contracts. The general account liabilities associated with PDI’s guaranteed living and death benefits and the corresponding reinsurance of those liabilities are accounted for as market risk benefits. As a result of the transaction, the Company recognized a $309 million deferred reinsurance gain that will be amortized into income over the estimated remaining life of the reinsured policies.

Effective April 2022, in connection with the sale of the Full Service Retirement business, the Company entered into separate agreements with external counterparties, Empower Annuity Insurance Company of America & Empower Life & Annuity Insurance Company of New York, to reinsure a portion of its Full Service Retirement business. The Company ceded 100% of separate account liabilities under modified coinsurance and 100% of general account liabilities under coinsurance of its Full Service Retirement business. The Company’s Full Service Retirement business consists of market value and stable value separate accounts as well as general account products, including stable value accumulation funds and a stable value wrap product known as a synthetic guaranteed investment contract. The majority of these products are considered investment contracts as they do not contain significant insurance risk; therefore, the reinsurance of such products are accounted for under deposit accounting. The reinsurance agreement offers the policyholders the opportunity to novate their contracts from the Company to Empower and any such novated contracts shall cease to be reinsured under this agreement.

Effective April 2022, in connection with the sale of the PALAC legal entity, now known as Fortitude Life Insurance and Annuity Company (“FLIAC”), the Company entered into a reinsurance agreement with FLIAC under which the Company assumed all of FLIAC’s indexed variable annuities. The reinsurance of the indexed variable annuities transfers all significant risks, including mortality risk, embedded in the reinsured contracts. As a result of the agreement, reinsurance recoverables includes the assumed modified coinsurance agreement, which reflects the value of the invested assets retained by FLIAC and the associated asset returns. The Company also assumed all of FLIAC’s fixed indexed annuities with a guaranteed lifetime withdrawal income feature, which are accounted for under deposit accounting. The reinsurance agreement offers the policyholders the opportunity to novate their contracts from FLIAC to the Company and any such novated contracts shall cease to be reinsured under this agreement.

Effective April 2015, the Company entered into an agreement with Union Hamilton Reinsurance, Ltd. (“Union Hamilton”) an external counterparty, to reinsure approximately 50% of the Prudential Premier® Retirement Variable Annuity with Highest Daily Lifetime Income (“HDI”) v.3.0 business, a guaranteed benefit feature. This reinsurance agreement covered most new HDI v.3.0 variable annuity business issued between April 1, 2015 and December 31, 2016 on a quota share basis, with Union Hamilton’s cumulative quota share amounting to $2.9 billion of new rider premiums as of December 31, 2016. Reinsurance on business subject to this agreement remains in force for the duration of the underlying annuity contracts. New sales subsequent to December 31, 2016 are not covered by this external reinsurance agreement. This reinsurance agreement is accounted for as an embedded derivative.

In January 2013, the Company acquired the Hartford Life Business through reinsurance transactions with three subsidiaries of Hartford Financial Services Group, Inc. (“Hartford Financial”). Under the related agreements, the Company provided reinsurance for approximately 700,000 life insurance policies with net retained face amount in force of approximately $141 billion. The Company acquired the general account business through a coinsurance arrangement and, for certain types of general account policies, a modified coinsurance arrangement. The Company acquired the separate account business through a modified coinsurance arrangement. In May 2018, Hartford Financial sold a group of operating subsidiaries, which included two of the Company’s counterparties to these reinsurance arrangements, to Talcott Resolution Life Insurance Company (“Talcott Resolution”). Talcott Resolution was acquired by Sixth Street in July 2021. There was no impact to the terms, rights or obligations of the Company, or operation of these reinsurance arrangements, as a result of these changes in control of such counterparties.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Since 2011, the Company has entered into a number of reinsurance agreements to assume pension liabilities in the United Kingdom. Under these arrangements, the Company assumes the longevity risk, and in some arrangements, also the investment risk associated with the pension benefits of certain specified beneficiaries.

In 2006, the Company acquired the variable annuity business of The Allstate Corporation (“Allstate”) through a reinsurance transaction. The reinsurance arrangements with Allstate include a coinsurance arrangement associated with the general account liabilities assumed and a modified coinsurance arrangement associated with the separate account liabilities assumed. The reinsurance payable, which represents the Company’s obligation under the modified coinsurance arrangement, is netted with the reinsurance receivable in the Consolidated Statements of Financial Position. During the fourth quarter of 2021, Allstate sold the two counterparties to the aforementioned variable annuity reinsurance transaction to third parties. There was no impact to the terms, rights or obligations of the Company, or operation of these reinsurance arrangements, as a result of this change in control of such counterparties.

For the domestic business, life and disability reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term, per person excess, excess of loss, and coinsurance. On policies sold since 2000, the Company has reinsured a significant portion of the individual life mortality risk. Placement of reinsurance is accomplished primarily on an automatic basis with some specific risks reinsured on a facultative basis. The Company is authorized and has historically retained up to $30 million per life, but reduced its operating retention limit to $20 million per life in 2013 and then down to $10 million per life for new business starting in 2020. Retention in excess of the operating limit is on an exception basis.

The international business primarily uses reinsurance to obtain experience with respect to certain new product offerings and to a lesser extent, to mitigate mortality risk for certain protection products and for capital management purposes.

Reinsurance amounts included in the Consolidated Statements of Operations for premiums, policy charges and fee income, change in value of market risk benefits, net of related hedging gains (losses), policyholders’ benefits and change in estimates of liability for future policy benefits, are as follows:

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30,
	2023		2022
	(in millions)
Direct premiums	$	14,989	$	13,294
Reinsurance assumed	2,422		2,072
Reinsurance ceded	(1,139)		(1,200)
Premiums	$	16,272	$	14,166

Direct policy charges and fee income	$	1,893	$	1,921
Reinsurance assumed	615		619
Reinsurance ceded	(301)		(266)
Policy charges and fee income	$	2,207	$	2,274

Direct change in value of market risk benefits, net of related hedging gains (losses)	$	88	$	(817)
Reinsurance assumed	83		(76)
Reinsurance ceded	(80)		(87)
Change in value of market risk benefits, net of related hedging gains (losses)	$	91	$	(980)

Direct policyholders’ benefits	$	15,858	$	15,164
Reinsurance assumed	3,787		3,203
Reinsurance ceded	(1,680)		(1,634)
Policyholders’ benefits	$	17,965	$	16,733

Direct change in estimates of liability for future policy benefits	$	429	$	1,501
Reinsurance assumed	(146)		470
Reinsurance ceded	(3)		(1,339)
Change in estimates of liability for future policy benefits	$	280	$	632

Reinsurance recoverables, are as follows:


	June 30, 2023		December 31, 2022
	(in millions)
Individual and group annuities(1)	$	1,728	$	2,078
Life insurance(2)	8,377		7,981
Other reinsurance	412		358
Total reinsurance recoverables(3)	$	10,517	$	10,417

(1)Primarily represents reinsurance recoverables established under the reinsurance agreement with FLIAC in which the Company assumed all of FLIAC’s indexed variable annuities of $1,673 million and $1,986 million as of June 30, 2023 and December 31, 2022, respectively.

(2)Includes reinsurance recoverables established under the reinsurance arrangements associated with the acquisition of the Hartford Life Business of $2,082 million and $2,041 million as of June 30, 2023 and December 31, 2022, respectively. The Company has also recorded reinsurance payables related to the Hartford Life Business acquisition of $1,330 million and $1,327 million as of June 30, 2023 and December 31, 2022, respectively.

(3)Net of $(17) million and $(15) million of loss allowance as of June 30, 2023 and December 31, 2022, respectively.

Excluding the reinsurance recoverables associated with the acquisition of the Hartford Life Business, four major reinsurance companies account for approximately 59% of the Company’s reinsurance recoverables as of June 30, 2023. The Company periodically reviews the financial condition of its reinsurers, amounts recoverable therefrom, and unearned reinsurance premium, in order to reduce its exposure to loss from reinsurer insolvencies. Any expected credit losses are reflected in the CECL allowance, after considering any collateral the Company obtained in the form of a trust, letter of credit, or funds withheld arrangement. See Note 2 for additional details regarding CECL. Under the Company’s international longevity reinsurance transactions, the Company obtains collateral from its counterparties to mitigate counterparty default risk.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

13. CLOSED BLOCK

On December 18, 2001, the date of demutualization, The Prudential Insurance Company of America (“PICA”) established a closed block for certain in-force participating insurance policies and annuity products, along with corresponding assets used for the payment of benefits and policyholders’ dividends on these products, (collectively the “Closed Block”), and ceased offering these participating products. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block division. For additional information regarding the Closed Block, see Note 15 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2022.

As of June 30, 2023, the Company recognized a policyholder dividend obligation of $3,145 million to Closed Block policyholders for the excess of actual cumulative earnings over expected cumulative earnings. Additionally, accumulated net unrealized investment gains (losses) were reflected as a policyholder dividend obligation of $(2,753) million at June 30, 2023 with a corresponding amount reported in AOCI. At December 31, 2022, the Company recognized a policyholder dividend obligation of $3,207 million to Closed Block policyholders for the excess of actual cumulative earnings over the expected cumulative earnings; however, due to accumulated net unrealized investment losses in excess of this amount, the policyholder dividend obligation balance as of December 31, 2022 was reduced to zero.

As of June 30, 2023, the Closed Block has sufficient funds to make guaranteed policy benefit payments and there is no expectation that assets outside of the Closed Block will be needed to fund future payments. The excess of Closed Block liabilities over Closed Block assets as of the end of the reporting period shown in the table below is a reasonable measure of the margin in the reported liabilities compared to best estimate liabilities assuming the current dividend scale. Closed Block liabilities and assets designated to the Closed Block, as well as maximum future earnings to be recognized from these liabilities and assets, are as follows:


	June 30, 2023		December 31, 2022
	(in millions)
Closed Block liabilities
Future policy benefits	$	43,884	$	44,414
Policyholders’ dividends payable	614		617
Policyholders’ dividend obligation	392		0
Policyholders’ account balances	4,543		4,607
Other Closed Block liabilities	3,292		3,499
Total Closed Block liabilities	52,725		53,137
Closed Block assets
Fixed maturities, available-for-sale, at fair value	29,923		29,898
Fixed maturities, trading, at fair value	851		900
Equity securities, at fair value	1,975		1,733
Commercial mortgage and other loans	7,716		7,926
Policy loans	3,548		3,637
Other invested assets	4,775		4,254
Short-term investments	323		337
Total investments	49,111		48,685
Cash and cash equivalents	621		1,307
Accrued investment income	410		402
Other Closed Block assets	128		162
Total Closed Block assets	50,270		50,556
Excess of reported Closed Block liabilities over Closed Block assets	2,455		2,581
Portion of above representing accumulated other comprehensive income (loss):
Net unrealized investment gains (losses)	(2,912)		(3,458)
Allocated to policyholder dividend obligation	2,753		3,207
Future earnings to be recognized from Closed Block assets and Closed Block liabilities	$	2,296	$	2,330

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Information regarding the policyholder dividend obligation is as follows:


	Six Months Ended June 30, 2023
	(in millions)
Balance, December 31, 2022	$	0

Impact from earnings allocable to policyholder dividend obligation	(62)
Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation	454
Balance, June 30, 2023	$	392

Closed Block revenues and benefits and expenses are as follows for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Revenues
Premiums	$	430	$	442	$	836	$	850
Net investment income	498		523		977		1,079
Realized investment gains (losses), net	(113)		(60)		(130)		40
Other income (loss)	140		(373)		240		(471)
Total Closed Block revenues	955		532		1,923		1,498
Benefits and Expenses
Policyholders’ benefits	610		637		1,182		1,261
Interest credited to policyholders’ account balances	29		30		59		60
Dividends to policyholders	292		(228)		594		(17)
General and administrative expenses	71		75		144		148
Total Closed Block benefits and expenses	1,002		514		1,979		1,452
Closed Block revenues, net of Closed Block benefits and expenses, before income taxes	(47)		18		(56)		46
Income tax expense (benefit)	(54)		(10)		(86)		(9)
Closed Block revenues, net of Closed Block benefits and expenses and income taxes	$	7	$	28	$	30	$	55

14. INCOME TAXES

The Company uses a full year projected effective tax rate approach to calculate year-to-date taxes. In determining the full year projected tax rate, the Company considers the realizability of deferred tax assets, including those associated with unrealized investment losses, and has determined based upon the weight of available evidence that no valuation allowance is necessary related to unrealized investment losses. In addition, certain items impacting total income tax expense are recorded in the periods in which they occur. The projected effective tax rate is the ratio of projected “Total income tax expense” divided by projected “Income before income taxes and equity in earnings of operating joint ventures.” Taxes attributable to operating joint ventures are recorded within “Equity in earnings of operating joint ventures, net of taxes.” The interim period tax expense (or benefit) is the difference between the year-to-date income tax provision and the amounts reported for the previous interim periods of the fiscal year.

The Company’s income tax provision, on a consolidated basis, amounted to an income tax expense of $505 million, or 20.5% of income (loss) before income taxes and equity in earnings of operating joint ventures, in the first six months of 2023, compared to an income tax benefit of $(263) million, or 15.2%, in the first six months of 2022. The Company’s current and prior effective tax rates differ from the U.S. statutory rate of 21% primarily due to non-taxable investment income, tax credits, foreign earnings taxed at higher rates than the U.S. statutory rate, and the items discussed below.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Foreign Tax Credit Regulations. The Treasury Department and the IRS published Final Regulations in the Federal Register on January 4, 2022, which affect the creditability of certain foreign taxes for U.S. federal income tax purposes. The Final Regulations create uncertainty as to whether a U.S. foreign tax credit may be claimed for taxes paid to Brazil. The ability to claim a foreign tax credit for taxes paid to Brazil impacts the benefit of the election made pursuant to Internal Revenue Code Section 952 to subject earnings from the Company’s insurance operations in Brazil to tax in the U.S. in the tax year earned, net of related foreign tax credits. As a result, a $18 million tax expense is reflected as part of the Company’s results for the first six months of 2022. The Final Regulations are complex and have broad application that may also impact the creditability of taxes paid to other foreign jurisdictions, and their full impact to the Company is still being evaluated.

GILTI High Tax Exclusion. On July 20, 2020, the U.S. Treasury and the Internal Revenue Service issued Final Regulations which allows an annual election to exclude from the U.S. tax return certain GILTI amounts when the taxes paid by a foreign affiliate exceed 18.9% (90% of U.S. statutory rate of 21%) of the GILTI amount for that foreign affiliate (the “high-tax exception”). These regulations are effective for the 2021 taxable year with an election to apply to any taxable year beginning after 2017. In many of the countries in which the Company operates, including Japan and Brazil, there are differences between local tax rules used to determine the tax base and the U.S. tax principles used to determine GILTI. Also, the Company’s Japan affiliates have a different tax year than the U.S. calendar tax year used to determine GILTI; therefore, while many of the countries, including Japan, have a statutory tax rate above the 18.9% threshold, separate affiliates may not meet the 18.9% threshold each year and, as such, may not qualify for this annual exclusion. The Company anticipates making the high-tax exception election for the 2022 and 2023 tax years and reflected the impact of the election in its full year projected effective tax rate used to calculate year-to-date taxes for the first six months of 2022 and 2023.

Inflation Reduction Act. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”). One of the most significant provisions of the Inflation Reduction Act is a 15% alternative minimum tax based on the Company’s GAAP income, with certain adjustments. This provision, which is applicable only to companies with average applicable financial statement income over $1 billion for any three-year period ending in 2022 or later, is effective in taxable years beginning after December 31, 2022. The impact of the book-income alternative minimum tax, if any, will vary from year to year based on the relationship of the Company’s GAAP income to the Company’s taxable income. Any tax paid pursuant to this provision is available as a tax credit in future years when the Company’s tax rate exceeds the 15% minimum tax threshold.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

15. SHORT-TERM AND LONG-TERM DEBT

Short-term Debt

The table below presents the Company’s short-term debt as of the dates indicated:


	June 30, 2023			December 31, 2022
	($ in millions)
Commercial paper:
Prudential Financial	$	25		$	25
Prudential Funding, LLC	469			413
Subtotal commercial paper	494			438

Current portion of long-term debt:
Senior Notes	173			173
Mortgage debt	83			155
Surplus notes subject to set-off arrangements(1)	500			500
Subtotal current portion of long-term debt	756			828
Other(2)	13			9
Subtotal	1,263			1,275
Less: assets under set-off arrangements(1)	500			500
Total short-term debt(3)	$	763		$	775
Supplemental short-term debt information:
Portion of commercial paper borrowings due overnight	$	80		$	130
Daily average commercial paper outstanding for the quarter ended	$	1,258		$	1,312
Weighted average maturity of outstanding commercial paper, in days	29			98
Weighted average interest rate on outstanding commercial paper	5.16		%	4.69		%

(1)The surplus notes have corresponding assets where rights to set-off exist, thereby reducing the amount of surplus notes included in short-term debt.

(2)Includes $13 million and $9 million drawn on a revolving line of credit held by a subsidiary at June 30, 2023 and December 31, 2022, respectively.

(3)Includes Prudential Financial debt of $25 million at both June 30, 2023 and December 31, 2022.

Prudential Financial and certain subsidiaries have access to external sources of liquidity, including membership in the Federal Home Loan Bank of New York (“FHLBNY”), commercial paper programs and contingent financing facilities in the form of a put option agreement and facility agreement. The Company also maintains syndicated, unsecured committed credit facilities as an alternative source of liquidity. At June 30, 2023, no amounts were drawn on these syndicated, unsecured committed credit facilities. For additional information regarding these sources of liquidity, 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, 2022.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Long-term Debt

The table below presents the Company’s long-term debt as of the dates indicated:


	June 30, 2023		December 31, 2022
	(in millions)
Fixed-rate obligations:
Surplus notes	$	345	$	345
Surplus notes subject to set-off arrangements(1)	9,460		9,460
Senior notes	10,113		10,115
Mortgage debt	25		25
Floating-rate obligations:
Line of credit	230		300
Surplus notes subject to set-off arrangements(1)	2,330		2,330

Mortgage debt(2)	74		29
Junior subordinated notes(3)	8,089		9,094
Subtotal	30,666		31,698
Less: assets under set-off arrangements(1)	11,790		11,790
Total long-term debt(4)	$	18,876	$	19,908

(1)The surplus notes have corresponding assets where rights to set-off exist, thereby reducing the amount of surplus notes included in long-term debt.

(2)Includes $27 million and $29 million of debt denominated in foreign currency at June 30, 2023 and December 31, 2022, respectively.

(3)Includes Prudential Financial debt of $8,046 million and $9,047 million at June 30, 2023 and December 31, 2022, respectively. Also includes subsidiary debt of $43 million and $47 million denominated in foreign currency at June 30, 2023 and December 31, 2022, respectively.

(4)Includes Prudential Financial debt of $18,159 million and $19,162 million at June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023 and December 31, 2022, the Company was in compliance with all debt covenants related to the borrowings in the table above.

Facility Agreements for Senior Debt Issuances

In March 2023, Prudential Financial entered into ten-year and thirty-year facility agreements with two Delaware trusts upon the completion of the sale of $1.5 billion of trust securities by the trusts in a Rule 144A private placement. The trusts invested the proceeds from the sale of the trust securities in portfolios of principal and/or interest strips of U.S. Treasury securities. The facility agreements provide Prudential Financial the right to issue and sell to the trusts from time to time up to $800 million of 5.791% senior notes due February 15, 2033, and $700 million of 5.997% senior notes due February 15, 2053, and receive in exchange a corresponding amount of the U.S. Treasury securities held by the trusts. In return, the Company agreed to pay semi-annual facility fees to the trusts at rates of 1.815% and 2.066% per annum for the ten-year and thirty-year facility, respectively, applied to the maximum amount of senior notes that the Company could issue and sell to the trusts.

The right to issue senior notes described above will be exercised automatically in full upon the Company’s failure to make certain payments to the trusts, such as paying the facility fee or reimbursing the trusts for their expenses, if the Company’s failure to pay is not cured within 30 days, and upon an event involving its bankruptcy. The Company is also required to exercise this issuance right if its consolidated stockholders’ equity, calculated in accordance with U.S. GAAP but excluding AOCI, falls below $9.0 billion, subject to adjustment in certain cases. Prior to any involuntary exercise of the issuance right, the Company has the right to repurchase any of its senior notes then held by the trusts in exchange for U.S. Treasury securities. Finally, Prudential Financial may redeem any outstanding senior notes, in whole or in part, prior to February 15, 2033 and February 15, 2053 for the ten-year and thirty-year facility, respectively, at a redemption price equal to the greater of par or a make-whole price, or thereafter, redeem the senior notes, in whole or in part, at par.

Junior Subordinated Notes

In February 2023, the Company issued $500 million in aggregate principal amount of 6.750% fixed-to-fixed reset rate junior subordinated notes due in March 2053. In June 2023, the Company redeemed $1.5 billion in aggregate principal amount of 5.625% fixed to floating rate junior subordinated notes due in 2043.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

16. EMPLOYEE BENEFIT PLANS

Pension and Other Postretirement Plans

The Company has funded and non-funded non-contributory defined benefit pension plans (“Pension Benefits”), which cover substantially all of its employees. For some employees, benefits are based on final average earnings and length of service (the “traditional formula”), while benefits for other employees are based on an account balance that takes into consideration age, length of service and earnings during their career (the “cash balance formula”).

The Company provides certain health care and life insurance benefits for its retired employees, their beneficiaries and covered dependents (“Other Postretirement Benefits”). The health care plan is contributory; the life insurance plan is non-contributory. Substantially all of the Company’s U.S. employees may become eligible to receive certain other postretirement benefits if they retire after age 55 with at least 10 years of service or under certain circumstances after age 50 with at least 20 years of continuous service.

Net periodic (benefit) cost included in “General and administrative expenses” includes the following components:


	Three Months Ended June 30,
	Pension Benefits				Other Postretirement Benefits
	2023		2022		2023		2022
	(in millions)
Components of net periodic (benefit) cost:
Service cost	$	52	$	66	$	3	$	3
Interest cost	138		112		18		15
Expected return on plan assets	(232)		(218)		(22)		(25)
Amortization of prior service cost	0		0		(2)		(2)
Amortization of actuarial (gain) loss, net	17		36		2		2
Settlements	1		0		0		0
Curtailments(1)	0		0		0		(8)
Special termination benefits(2)	0		3		0		4
Net periodic (benefit) cost	$	(24)	$	(1)	$	(1)	$	(11)

	Six Months Ended June 30,
	Pension Benefits				Other Postretirement Benefits
	2023		2022		2023		2022
	(in millions)
Components of net periodic (benefit) cost:
Service cost	$	103	$	146	$	5	$	7
Interest cost	276		209		36		27
Expected return on plan assets	(463)		(431)		(43)		(52)
Amortization of prior service cost	0		0		(4)		(4)
Amortization of actuarial (gain) loss, net	34		87		5		3
Settlements	1		1		0		0
Curtailments(1)	0		0		0		(8)
Special termination benefits(2)	0		4		0		4
Net periodic (benefit) cost	$	(49)	$	16	$	(1)	$	(23)

(1)For 2022, curtailments were recognized for other postretirement benefit plans as a result of the sale of the Full Service Retirement business.

(2)For 2022, certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of their involuntary termination while others were provided enhanced benefits due to the sale of the Full Service Retirement business.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

17. EQUITY

The changes in the number of shares of Common Stock issued, held in treasury and outstanding, are as follows for the periods indicated:


	Common Stock
	Issued	Held In Treasury	Outstanding
	(in millions)
Balance, December 31, 2022	666.3	300.3	366.0
Common Stock issued	0.0	0.0	0.0
Common Stock acquired	0.0	5.7	(5.7)
Stock-based compensation programs(1)	0.0	(3.2)	3.2
Balance, June 30, 2023	666.3	302.8	363.5

(1)Represents net shares issued from treasury pursuant to the Company’s stock-based compensation programs.

In February 2023, Prudential Financial’s Board of Directors (the “Board”) authorized the Company to repurchase at management’s discretion up to $1.0 billion of its outstanding Common Stock during the period from January 1, 2023 through December 31, 2023. As of June 30, 2023, 5.7 million shares of the Company’s Common Stock were repurchased under this authorization at a total cost of $500 million.

The timing and amount of share repurchases are determined by management based upon market conditions and other considerations, and repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through prearranged trading plans complying with Rule 10b5-1(c) under the Securities Exchange Act of 1934 (the “Exchange Act”). Numerous factors could affect the timing and amount of any future repurchases under the share repurchase authorization, including, but not limited to: compliance with laws, increased capital needs of the Company due to changes in regulatory capital requirements, opportunities for growth and acquisitions, and the effect of adverse market conditions.

Dividends declared per share of Common Stock are as follows for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Dividends declared per share of Common Stock	$	1.25	$	1.20	$	2.50	$	2.40

Accumulated Other Comprehensive Income (Loss)

AOCI represents the cumulative OCI items that are reported separate from net income and detailed on the Unaudited Interim Consolidated Statements of Comprehensive Income. The balance of and changes in each component of AOCI as of and for the six months ended June 30, 2023 and 2022, are as follows:


	Accumulated Other Comprehensive Income (Loss) Attributable to Prudential Financial, Inc.
	Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Interest rate remeasurement of Liability for Future Policy Benefits		Gains (losses) from Changes in Non-performance Risk on Market Risk Benefits		Pension and Postretirement Unrecognized Net Periodic Benefit (Cost)		Total Accumulated Other Comprehensive Income (Loss)
	(in millions)
Balance, December 31, 2022	$	(2,274)	$	(16,195)	$	15,242	$	1,448	$	(2,027)	$	(3,806)
Change in OCI before reclassifications	(359)		5,184		(8,901)		(77)		10		(4,143)
Amounts reclassified from AOCI	1		381		0		0		35		417
Income tax benefit (expense)	(87)		(1,358)		2,324		16		(12)		883
Balance, June 30, 2023	$	(2,719)	$	(11,988)	$	8,665	$	1,387	$	(1,994)	$	(6,649)

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Accumulated Other Comprehensive Income (Loss) Attributable to Prudential Financial, Inc.
	Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Interest rate remeasurement of Liability for Future Policy Benefits		Gains (losses) from Changes in Non-performance Risk on Market Risk Benefits		Pension and Postretirement Unrecognized Net Periodic Benefit (Cost)		Total Accumulated Other Comprehensive Income (Loss)
	(in millions)
Balance, December 31, 2021	$	(1,107)	$	26,640	$	(33,220)	$	707	$	(2,513)	$	(9,493)
Change in OCI before reclassifications	(1,309)		(42,390)		48,618		1,307		367		6,593
Amounts reclassified from AOCI	9		403		0		0		86		498
Income tax benefit (expense)	(84)		9,670		(11,511)		(275)		(101)		(2,301)
Balance, June 30, 2022	$	(2,491)	$	(5,677)	$	3,887	$	1,739	$	(2,161)	$	(4,703)

(1)Includes cash flow hedges of $2,097 million and $2,616 million as of June 30, 2023 and December 31, 2022, respectively, and $2,446 million and $1,019 million as of June 30, 2022 and December 31, 2021, respectively, and fair value hedges of $(149) million and $(54) million as of June 30, 2023 and December 31, 2022, respectively, and $27 million and $(35) million as of June 30, 2022 and December 31, 2021, respectively.

Reclassifications out of Accumulated Other Comprehensive Income (Loss)


	Three Months Ended June 30,				Six Months Ended June 30,				Affected line item in Consolidated Statements of Operations
	2023		2022		2023		2022
	(in millions)
Amounts reclassified from AOCI(1)(2):
Foreign currency translation adjustment:
Foreign currency translation adjustments	$	(1)	$	1	$	(1)	$	(9)	Realized investment gains (losses), net


Net unrealized investment gains (losses):
Cash flow hedges—Interest rate	(6)		(1)		(29)		(5)		(3)
Cash flow hedges—Currency	3		3		8		4		(3)
Cash flow hedges—Currency/Interest rate	26		503		65		657		(3)
Fair value hedges—Currency	(2)		0		(4)		(2)		(3)
Net unrealized investment gains (losses) on available-for-sale securities	(266)		(646)		(421)		(1,057)		Realized investment gains (losses), net
Total net unrealized investment gains (losses)	(245)		(141)		(381)		(403)		(4)
Amortization of defined benefit items:
Prior service cost	2		2		4		4		(5)
Actuarial gain (loss)	(19)		(38)		(39)		(90)		(5)
Total amortization of defined benefit items	(17)		(36)		(35)		(86)
Total reclassifications for the period	$	(263)	$	(176)	$	(417)	$	(498)

(1)All amounts are shown before tax.

(2)Positive amounts indicate gains/benefits reclassified out of AOCI. Negative amounts indicate losses/costs reclassified out of AOCI.

(3)See Note 5 for additional information regarding cash flow and fair value hedges.

(4)See table below for additional information regarding unrealized investment gains (losses), including the impact on deferred policy acquisition and other costs, future policy benefits and policyholders’ dividends.

(5)See Note 16 for information regarding employee benefit plans.

Net Unrealized Investment Gains (Losses)

Net unrealized investment gains (losses) on available-for-sale fixed maturity securities and certain other invested assets and other assets are included in the Company’s Unaudited Interim Consolidated Statements of Financial Position as a component of AOCI. Changes in these amounts include reclassification adjustments to exclude from “Other comprehensive income (loss)” those items that are included as part of “Net income (loss)” for a period that had been part of “Other comprehensive income (loss)” in earlier periods. The amounts for the periods indicated below, split between amounts related to available-for-sale fixed maturity securities on which an allowance for credit losses has been recorded, and all other net unrealized investment gains (losses), are as follows:

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Net Unrealized Investment Gains (Losses) on Available-for-Sale Fixed Maturity Securities on Which an Allowance for Credit Losses has been Recorded		Net Unrealized Gains (Losses) on All Other Investments(1)		Reinsurance Recoverables		Future Policy Benefits, Policyholders’ Account Balances and Reinsurance Payables		Policyholders’ Dividends		Income Tax Benefit (Expense)		Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
	(in millions)
Balance, December 31, 2022	$	(45)	$	(24,959)	$	(703)	$	1,946	$	3,194	$	4,372	$	(16,195)
Net investment gains (losses) on investments arising during the period	33		5,773								(1,396)		4,410
Reclassification adjustment for (gains) losses included in net income	(13)		394								(92)		289
Reclassification due to allowance for credit losses recorded during the period	(43)		43								0		0
Impact of net unrealized investment (gains) losses					71		(252)		(441)		130		(492)
Balance, June 30, 2023	$	(68)	$	(18,749)	$	(632)	$	1,694	$	2,753	$	3,014	$	(11,988)

(1)Includes cash flow and fair value hedges. See Note 5 for additional information.

18. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the basic and diluted per share computations of Common Stock based on the consolidated earnings of Prudential Financial for the periods indicated is as follows:


	Three Months Ended June 30,
	2023					2022
	Income		Weighted Average Shares	Per Share Amount		Income		Weighted Average Shares	Per Share Amount
	(in millions, except per share amounts)
Basic earnings per share
Net income (loss)	$	496				$	(1,017)
Less: Income (loss) attributable to noncontrolling interests	(15)					(7)
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards	6					6
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	505	364.8	$	1.38	$	(1,016)	374.4	$	(2.71)
Effect of dilutive securities and compensation programs
Add: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Basic	$	6				$	6
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Diluted	6					6
Stock options			0.2					0.0
Deferred and long-term compensation programs			1.1					0.0
Diluted earnings per share(1)
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	505	366.1	$	1.38	$	(1,016)	374.4	$	(2.71)

(1)For the three months ended June 30, 2022, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because dilutive shares and dilutive earnings per share are not applicable when a net loss is reported. As a result of the net loss attributable to Prudential Financial available to holders of Common Stock for the three months ended June 30, 2022, all potential stock options and compensation programs were considered antidilutive.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Six Months Ended June 30,
	2023					2022
	Income		Weighted Average Shares	Per Share Amount		Income		Weighted Average Shares	Per Share Amount
	(in millions, except per share amounts)
Basic earnings per share
Net income (loss)	$	1,973				$	(1,523)
Less: Income (loss) attributable to noncontrolling interests	0					(20)
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards	24					13
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	1,949	365.7	$	5.33	$	(1,516)	375.3	$	(4.04)
Effect of dilutive securities and compensation programs
Add: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Basic	$	24				$	13
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Diluted	24					13
Stock options			0.2					0.0
Deferred and long-term compensation programs			1.0					0.0
Diluted earnings per share(1)
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	1,949	366.9	$	5.31	$	(1,516)	375.3	$	(4.04)

(1)For the six months ended June 30, 2022, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because dilutive shares and dilutive earnings per share are not applicable when a net loss is reported. As a result of the net loss attributable to Prudential Financial available to holders of Common Stock for the six months ended June 30, 2022, all potential stock options and compensation programs were considered antidilutive.

Unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and included in the computation of earnings per share pursuant to the two-class method. Under this method, earnings attributable to Prudential Financial are allocated between Common Stock and the participating awards, as if the awards were a second class of stock. During periods of net income available to holders of Common Stock, the calculation of earnings per share excludes the income attributable to participating securities in the numerator and the dilutive impact of these securities from the denominator. In the event of a net loss available to holders of Common Stock, undistributed earnings are not allocated to participating securities and the denominator excludes the dilutive impact of these securities as they do not share in the losses of the Company. Undistributed earnings allocated to participating unvested share-based payment awards for the three months ended June 30, 2023 and 2022, as applicable, were based on 4.1 million and 4.9 million of such awards, respectively, and for the six months ended June 30, 2023 and 2022, as applicable, were based on 4.1 million and 5.0 million of such awards, respectively, weighted for the period they were outstanding.

Stock options and shares related to deferred and long-term compensation programs that are considered antidilutive are excluded from the computation of diluted earnings per share. Stock options are considered antidilutive based on application of the treasury stock method or in the event of a net loss available to holders of Common Stock. Shares related to deferred and long-term compensation programs are considered antidilutive in the event of a net loss available to holders of Common Stock. For the periods indicated, the number of stock options and shares related to deferred and long-term compensation programs that were considered antidilutive and were excluded from the computation of diluted earnings per share, weighted for the portion of the period they were outstanding, are as follows:

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


	Three Months Ended June 30,
	2023			2022
	Shares	Exercise Price Per Share		Shares		Exercise Price Per Share
	(in millions, except per share amounts, based on weighted average)
Antidilutive stock options based on application of the treasury stock method	1.7	$	99.74	$	0.7	$	108.67
Antidilutive stock options due to net loss available to holders of Common Stock	0.0			0.4
Antidilutive shares based on application of the treasury stock method	0.3			0.2
Antidilutive shares due to net loss available to holders of Common Stock	0.0			2.3
Total antidilutive stock options and shares	2.0			3.6


	Six Months Ended June 30,
	2023			2022
	Shares	Exercise Price Per Share		Shares		Exercise Price Per Share
	(in millions, except per share amounts, based on weighted average)
Antidilutive stock options based on application of the treasury stock method	1.4	$	101.12	$	0.3	$	108.67
Antidilutive stock options due to net loss available to holders of Common Stock	0.0			0.6
Antidilutive shares based on application of the treasury stock method	0.2			0.2
Antidilutive shares due to net loss available to holders of Common Stock	0.0			2.2
Total antidilutive stock options and shares	1.6			3.3

19. SEGMENT INFORMATION

Segments

The Company’s principal operations consist of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the Retirement Strategies, Group Insurance and Individual Life businesses), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other operations. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under U.S. GAAP.

As discussed in Note 1, effective January 1, 2023, AIQ is now included within Corporate and Other operations. Also effective January 1, 2023, Prudential Advisors, which was previously part of the Individual Life segment, is now included within Corporate and Other operations. There are no impacts to the Company's consolidated financial statements from these reporting changes and historical segment results have been updated to conform to the current period presentation.

Adjusted Operating Income

The Company analyzes the operating performance of each segment using “adjusted operating income.” Adjusted operating income does not equate to “Income (loss) before income taxes and equity in earnings of operating joint ventures” or “Net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss used by the Company’s chief operating decision maker to evaluate segment performance and allocate resources, and consistent with authoritative guidance, is the measure of segment performance presented below. Adjusted operating income is calculated by adjusting each segment’s “Income (loss) before income taxes and equity in earnings of operating joint ventures” for the following items:

Realized investment gains (losses), net, and related adjustments;
Charges related to realized investment gains (losses), net;

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Change in value of market risk benefits, net of related hedging gains (losses);
Market experience updates;
Divested and Run-off Businesses;
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests; and
Other adjustments.

These items are important to an understanding of overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and the Company’s definition of adjusted operating income may differ from that used by other companies. The Company, however, believes that the presentation of adjusted operating income as measured for management purposes enhances the understanding of results of operations by highlighting the results from ongoing operations and the underlying profitability factors of its businesses. For additional information regarding these reconciling items, see Note 22 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

As a result of the adoption of ASU 2018-12 in the first quarter of 2023, the Company is required to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value. In order to enhance the understanding of our underlying performance trends, the Company excludes from adjusted operating income “Change in value of market risk benefits, net of related hedging gains (losses)”, which reflects the impact from changes in current market conditions. In addition, “Charges related to realized investment gains (losses)”, no longer includes the current period impact of net realized investment gains (losses) on the amortization of DAC and related balances, and “Market experience updates” no longer includes the immediate impact on DAC and related balances from changes in current market conditions on estimates of profitability. In both cases, the amortization of DAC and related balances is independent of these factors under ASU 2018-12. See Note 2 regarding additional information about the adoption of ASU 2018-12, including market risk benefits and the amortization of DAC and other balances.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Reconciliation of adjusted operating income to net income (loss)

The table below reconciles “Adjusted operating income before income taxes” to “Income (loss) before income taxes and equity in earnings of operating joint ventures”:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Adjusted operating income before income taxes by segment:
PGIM	$	179	$	206	$	330	$	394
U.S. Businesses:
Institutional Retirement Strategies	428		432		824		947
Individual Retirement Strategies	448		1,749		889		2,180
Retirement Strategies(1)	876		2,181		1,713		3,127
Group Insurance	139		54		164		(61)
Individual Life(1)	(59)		(1,662)		(161)		(1,680)
Total U.S. Businesses	956		573		1,716		1,386
International Businesses	784		692		1,624		1,643
Corporate and Other	(527)		(321)		(1,012)		(737)
Total segment adjusted operating income before income taxes	1,392		1,150		2,658		2,686
Reconciling items:
Realized investment gains (losses), net, and related adjustments	(853)		(2,216)		(535)		(3,853)
Charges related to realized investment gains (losses), net	88		(222)		139		(306)
Change in value of market risk benefits, net of related hedging gains (losses)	16		(710)		91		(1,014)
Market experience updates	(3)		371		45		492
Divested and Run-off Businesses:
Closed Block division	(48)		16		(52)		43
Other Divested and Run-off Businesses	64		499		171		228
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests	(26)		44		(31)		15
Other adjustments(2)	(9)		0		(18)		(17)
Income (loss) before income taxes and equity in earnings of operating joint ventures per Unaudited Interim Consolidated Financial Statements	$	621	$	(1,068)	$	2,468	$	(1,726)

(1)The Retirement Strategies and Individual Life segments’ results reflect DAC as if the business is a stand-alone operation. The elimination of intersegment costs capitalized in accordance with this policy is included in consolidating adjustments within Corporate and Other operations.

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

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Reconciliation of select financial information

The tables below present certain financial information for the Company’s segments and its Corporate and Other operations, including assets by segment and revenues by segment on an adjusted operating income basis, and the reconciliation of the segment totals to amounts reported in the Unaudited Interim Consolidated Financial Statements.



	June 30, 2023		December 31, 2022
	(in millions)
Assets by segment:
PGIM	$	45,408	$	48,364
U.S. Businesses:
Institutional Retirement Strategies	108,326		108,565
Individual Retirement Strategies	136,508		130,173
Retirement Strategies	244,834		238,738
Group Insurance	37,812		38,201
Individual Life	109,168		102,445
Total U.S. Businesses	391,814		379,384
International Businesses	186,561		186,791
Corporate and Other	22,866		23,556
Closed Block division	50,655		50,934
Total assets per Unaudited Interim Consolidated Financial Statements	$	697,304	$	689,029

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


		Three Months Ended June 30, 2023
Revenues, and benefits and expenses on an adjusted operating income basis by segment		Total Revenues		Net Investment Income		Total Benefits and Expenses		Policyholders’ Benefits		Interest Credited to Policyholders’ Account Balances		Dividends to Policyholders		Interest Expense		Amortization of DAC
	(in millions)
PGIM		$	849	$	67	$	670	$	0	$	0	$	0	$	29	$	0
U.S. Businesses:
Institutional Retirement Strategies		2,737		1,072		2,309		2,263		144		0		(4)		6
Individual Retirement Strategies		1,119		344		671		49		111		0		19		83
Retirement Strategies		3,856		1,416		2,980		2,312		255		0		15		89
Group Insurance		1,598		128		1,459		1,140		41		0		2		2
Individual Life		1,564		709		1,623		823		227		9		232		114
Total U.S. Businesses		7,018		2,253		6,062		4,275		523		9		249		205
International Businesses		4,723		1,321		3,939		2,645		226		2		4		159
Corporate and Other(1)		54		173		581		0		31		0		179		(9)
Total revenues, and benefits and expenses on an adjusted operating income basis		12,644		3,814		11,252		6,920		780		11		461		355
Reconciling items:
Realized investment gains (losses), net, and related adjustments		(549)		(4)		304		21		283		0		0		0
Charges related to realized investment gains (losses), net		46		0		(42)		(63)		6		0		0		7
Change in value of market risk benefits, net of related hedging gains (losses)		16		0		0		0		0		0		0		0
Market experience updates		(5)		0		(2)		(1)		0		0		0		0
Divested and Run-off Businesses:
Closed Block division		955		499		1,003		608		29		292		0		4
Other Divested and Run-off Businesses		401		167		337		176		51		0		(2)		0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		(10)		0		16		0		0		0		0		0
Other adjustments		0		0		9		0		0		0		0		0
Total revenue, and benefits and expenses per Consolidated Statements of Operations		$	13,498	$	4,476	$	12,877	$	7,661	$	1,149	$	303	$	459	$	366

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


		Three Months Ended June 30, 2022
Revenues, and benefits and expenses on an adjusted operating income basis by segment		Total Revenues		Net Investment Income		Total Benefits and Expenses		Policyholders’ Benefits		Interest Credited to Policyholders’ Account Balances		Dividends to Policyholders		Interest Expense		Amortization of DAC
	(in millions)
PGIM		829		(14)		623		0		0		0		10		1
U.S. Businesses:
Institutional Retirement Strategies		2,422		892		1,990		2,310		75		0		(2)		3
Individual Retirement Strategies		2,425		178		676		26		100		0		17		91
Retirement Strategies		4,847		1,070		2,666		2,336		175		0		15		94
Group Insurance		1,496		117		1,442		1,144		39		0		1		1
Individual Life		1,286		614		2,948		864		231		8		198		111
Total U.S. Businesses		7,629		1,801		7,056		4,344		445		8		214		206
International Businesses		4,455		1,286		3,763		2,767		175		13		5		150
Corporate and Other(1)		44		168		365		3		34		0		172		(12)
Total revenues, and benefits and expenses on an adjusted operating income basis		12,957		3,241		11,807		7,114		654		21		401		345
Reconciling items:
Realized investment gains (losses), net, and related adjustments		(2,293)		(4)		(77)		30		(107)		0		0		0
Charges related to realized investment gains (losses), net		32		0		254		102		12		0		0		8
Change in value of market risk benefits, net of related hedging gains (losses)		(710)		0		0		0		0		0		0		0
Market experience updates		72		0		(299)		(17)		0		0		0		0
Divested and Run-off Businesses:
Closed Block division		529		520		513		637		31		(228)		0		4
Other Divested and Run-off Businesses		740		181		241		92		54		0		0		1
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		65		0		21		0		0		0		0		0
Other adjustments		0		0		0		0		0		0		0		0
Total revenue, and benefits and expenses per Consolidated Statements of Operations		$	11,392	$	3,938	$	12,460	$	7,958	$	644	$	(207)	$	401	$	358

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


		Six Months Ended June 30, 2023
Revenues, and benefits and expenses on an adjusted operating income basis by segment		Total Revenues		Net Investment Income		Total Benefits and Expenses		Policyholders’ Benefits		Interest Credited to Policyholders’ Account Balances		Dividends to Policyholders		Interest Expense		Amortization of DAC
	(in millions)
PGIM		$	1,747	$	147	$	1,417	$	0	$	0	$	0	$	56	$	1
U.S. Businesses:
Institutional Retirement Strategies		7,626		2,076		6,802		6,613		269		0		6		10
Individual Retirement Strategies		2,214		662		1,325		82		226		0		33		176
Retirement Strategies		9,840		2,738		8,127		6,695		495		0		39		186
Group Insurance		3,162		254		2,998		2,358		85		0		6		3
Individual Life		3,091		1,378		3,252		1,647		450		18		455		228
Total U.S. Businesses		16,093		4,370		14,377		10,700		1,030		18		500		417
International Businesses		9,738		2,606		8,114		5,797		441		9		15		310
Corporate and Other(1)		170		362		1,182		(5)		65		0		331		(18)
Total revenues, and benefits and expenses on an adjusted operating income basis		27,748		7,485		25,090		16,492		1,536		27		902		710
Reconciling items:
Realized investment gains (losses), net, and related adjustments		(74)		(9)		461		46		415		0		0		0
Charges related to realized investment gains (losses), net		83		0		(56)		(120)		18		0		0		14
Change in value of market risk benefits, net of related hedging gains (losses)		91		0		0		0		0		0		0		0
Market experience updates		19		0		(26)		3		0		0		0		0
Divested and Run-off Businesses:
Closed Block division		1,926		980		1,978		1,181		59		594		1		7
Other Divested and Run-off Businesses		779		340		608		363		102		1		(3)		0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		(29)		0		2		0		0		0		0		0
Other adjustments		0		0		18		0		0		0		0		0
Total revenue, and benefits and expenses per Consolidated Statements of Operations		$	30,543	$	8,796	$	28,075	$	17,965	$	2,130	$	622	$	900	$	731

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)


		Six Months Ended June 30, 2022
Revenues, and benefits and expenses on an adjusted operating income basis by segment		Total Revenues		Net Investment Income		Total Benefits and Expenses		Policyholders’ Benefits		Interest Credited to Policyholders’ Account Balances		Dividends to Policyholders		Interest Expense		Amortization of DAC
	(in millions)
PGIM		$	1,755	$	(18)	$	1,361	$	0	$	0	$	0	$	16	$	2
U.S. Businesses:
Institutional Retirement Strategies		5,169		1,860		4,222		4,488		155		0		2		6
Individual Retirement Strategies		3,522		440		1,342		91		178		0		21		186
Retirement Strategies		8,691		2,300		5,564		4,579		333		0		23		192
Group Insurance		3,035		241		3,096		2,497		75		0		2		(1)
Individual Life		2,844		1,258		4,524		1,729		458		17		387		222
Total U.S. Businesses		14,570		3,799		13,184		8,805		866		17		412		413
International Businesses		9,933		2,583		8,290		6,252		365		28		8		305
Corporate and Other(1)		1		290		738		(4)		68		0		329		(22)
Total revenues, and benefits and expenses on an adjusted operating income basis		26,259		6,654		23,573		15,053		1,299		45		765		698
Reconciling items:
Realized investment gains (losses), net, and related adjustments		(3,941)		(14)		(88)		59		(147)		0		0		0
Charges related to realized investment gains (losses), net		10		0		316		122		31		0		0		22
Change in value of market risk benefits, net of related hedging gains (losses)		(1,014)		0		0		0		0		0		0		0
Market experience updates		113		0		(379)		(9)		0		0		0		1
Divested and Run-off Businesses:
Closed Block division		1,494		1,074		1,451		1,261		61		(17)		0		7
Other Divested and Run-off Businesses		278		582		50		247		(540)		0		1		1
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		48		0		33		0		0		0		0		0
Other adjustments		0		0		17		0		0		0		0		0
Total revenue, and benefits and expenses per Consolidated Statements of Operations		$	23,247	$	8,296	$	24,973	$	16,733	$	704	$	28	$	766	$	729

(1)Corporate and Other operations, through AIQ and Prudential Advisors, generates fee revenues from the sale and distribution of certain insurance, annuity and investment products offered by Prudential and third-parties.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Intersegment revenues

Management has determined the intersegment revenues with reference to market rates. Intersegment revenues are eliminated in consolidation in Corporate and Other operations. The PGIM segment revenues include intersegment revenues, primarily consisting of asset-based management and administration fees, as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
PGIM segment intersegment revenues	$	198	$	201	$	403	$	433

Segments may also enter into internal derivative contracts with other segments. For adjusted operating income, each segment accounts for the internal derivative results consistent with the manner in which that segment accounts for other similar external derivatives.

Asset management and service fees

The table below presents asset management and service fees, predominantly related to investment management activities, for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Asset-based management fees	$	789	$	841	$	1,577	$	1,822
Performance-based incentive fees	4		6		7		10
Other fees	125		140		251		288
Total asset management and service fees	$	918	$	987	$	1,835	$	2,120

20. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments and Guarantees

Commercial Mortgage Loan Commitments


	June 30, 2023		December 31, 2022
	(in millions)
Total outstanding mortgage loan commitments	$	1,855	$	1,995
Portion of commitment where prearrangement to sell to investor exists	$	397	$	582

In connection with the Company’s commercial mortgage operations, it originates commercial mortgage loans. Commitments for loans that will be held for sale are recognized as derivatives and recorded at fair value. In certain of these transactions, the Company prearranges that it will sell the loan to an investor, including to government sponsored entities as discussed below, after the Company funds the loan. The above amount includes unfunded commitments that are not unconditionally cancellable. For related credit exposure, there was an allowance for credit losses of $1 million as of both June 30, 2023 and December 31, 2022. The change in allowance is $0 million for both the three months and six months ended June 30, 2023 and 2022.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Commitments to Purchase Investments (excluding Commercial Mortgage Loans)


	June 30, 2023		December 31, 2022
	(in millions)
Expected to be funded from the general account and other operations outside the separate accounts	$	12,117	$	8,376
Expected to be funded from separate accounts	$	128	$	183

The Company has other commitments to purchase or fund investments, some of which are contingent upon events or circumstances not under the Company’s control, including those at the discretion of the Company’s counterparties. The Company anticipates a portion of these commitments will ultimately be funded from its separate accounts. The above amount includes unfunded commitments that are not unconditionally cancellable. There were no related charges for credit losses for either the three months or six months ended June 30, 2023 or 2022.

Indemnification of Securities Lending and Securities Repurchase Transactions


	June 30, 2023		December 31, 2022
	(in millions)
Indemnification provided to certain clients for securities lending and securities repurchase transactions(1)	$	5,847	$	5,834
Fair value of related collateral associated with above indemnifications(1)	$	5,974	$	5,985
Accrued liability associated with guarantee	$	0	$	0

(1)There were no securities repurchase transactions as of June 30, 2023 and December 31, 2022.

In the normal course of business, the Company may facilitate securities lending or securities repurchase transactions on behalf of certain client accounts (collectively, “the accounts”). In certain of these arrangements, the Company has provided an indemnification to the accounts to hold them harmless against losses caused by counterparty (i.e., borrower) defaults associated with such transactions facilitated by the Company. In securities lending transactions, collateral is provided by the counterparty to the accounts at the inception of the transaction in an amount at least equal to 102% of the fair value of the loaned securities and the collateral is maintained daily to equal at least 102% of the fair value of the loaned securities. In securities repurchase transactions, collateral is provided by the counterparty to the accounts at the inception of the transaction in an amount at least equal to 95% of the fair value of the securities subject to repurchase and the collateral is maintained daily to equal at least 95% of the fair value of the securities subject to repurchase. The Company is only at risk if the counterparty to the transaction defaults and the value of the collateral held is less than the value of the securities loaned to, or subject to repurchase from, such counterparty. The Company believes the possibility of any payments under these indemnities is remote.

Credit Derivatives Written

As discussed further in Note 5, the Company writes credit derivatives under which the Company is obligated to pay the counterparty the referenced amount of the contract and receive in return the defaulted security or similar security.

Guarantees of Asset Values


	June 30, 2023		December 31, 2022
	(in millions)
Guaranteed value of third-parties’ assets	$	82,181	$	84,338
Fair value of collateral supporting these assets	$	76,351	$	77,693
Asset (liability) associated with guarantee, carried at fair value	$	0	$	1

Certain contracts underwritten by the Retirement Strategies segment include guarantees related to financial assets owned by the guaranteed party. These contracts are accounted for as derivatives and carried at fair value. The collateral supporting these guarantees is not reflected on the Unaudited Interim Consolidated Statements of Financial Position.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Indemnification of Serviced Mortgage Loans


	June 30, 2023		December 31, 2022
	(in millions)
Maximum exposure under indemnification agreements for mortgage loans serviced by the Company	$	2,992	$	2,972
First-loss exposure portion of above	$	867	$	862
Accrued liability associated with guarantees(1)	$	30	$	33

(1)The accrued liability associated with guarantees includes an allowance for credit losses of $15 million and $17 million as of June 30, 2023 and December 31, 2022, respectively. The change in allowance is a reduction of $1 million for both three months ended June 30, 2023, and 2022, respectively, and a reduction for both six months ended June 30, 2023, and 2022 of $2 million and $4 million , respectively.

As part of the commercial mortgage activities of the Company’s PGIM segment, the Company provides commercial mortgage origination, underwriting and servicing for certain government sponsored entities, such as Fannie Mae and Freddie Mac. The Company has agreed to indemnify the government sponsored entities for a portion of the credit risk associated with certain of the mortgages it services through a delegated authority arrangement. Under these arrangements, the Company originates multi-family mortgages for sale to the government sponsored entities based on underwriting standards they specify, and makes payments to them for a specified percentage share of losses they incur on certain loans serviced by the Company. The Company’s percentage share of losses incurred generally varies from 4% to 20% of the loan balance, and is typically based on a first-loss exposure for a stated percentage of the loan balance, plus a shared exposure with the government sponsored entity for any losses in excess of the stated first-loss percentage, subject to a contractually specified maximum percentage. The Company determines the liability related to this exposure using historical loss experience, and the size and remaining life of the asset. The Company serviced $24,110 million and $23,937 million of mortgages subject to these loss-sharing arrangements as of June 30, 2023 and December 31, 2022, respectively, all of which are collateralized by first priority liens on the underlying multi-family residential properties. As of June 30, 2023, these mortgages had a weighted-average debt service coverage ratio of 2.03 times and a weighted-average loan-to-value ratio of 60%. As of December 31, 2022, these mortgages had a weighted-average debt service coverage ratio of 1.92 times and a weighted-average loan-to-value ratio of 61%. The Company had no losses related to indemnifications that were settled for either the six months ended June 30, 2023 or 2022.

Other Guarantees


	June 30, 2023		December 31, 2022
	(in millions)
Other guarantees where amount can be determined	$	36	$	57
Accrued liability for other guarantees and indemnifications	$	32	$	33

The Company is also subject to other financial guarantees and indemnity arrangements. The Company has provided indemnities and guarantees related to acquisitions, dispositions, investments and other transactions that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or applicable.

Since certain of these obligations are not subject to limitations, it is not possible to determine the maximum potential amount due under these guarantees. The accrued liability identified above relates to the sale of The Prudential Life Insurance Company of Taiwan Inc. (“POT”) and represents a financial guarantee of certain insurance obligations of POT.

Contingent Liabilities

On an ongoing basis, the Company and its regulators review its operations including, but not limited to, sales and other customer interface procedures and practices, and procedures for meeting obligations to its customers and other parties. These reviews may result in the modification or enhancement of processes or the imposition of other action plans, including concerning management oversight, sales and other customer interface procedures and practices, and the timing or computation of payments to customers and other parties. In certain cases, if appropriate, the Company may offer customers or other parties remediation and may incur charges, including the cost of such remediation, administrative costs and regulatory fines.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

The Company is subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment of unclaimed or abandoned funds, and is subject to audit and examination for compliance with these requirements.

It is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual period could be materially affected as a result of payments in connection with the matters discussed above or other matters depending, in part, upon the results of operations or cash flow for such period. Management believes, however, that ultimate payments in connection with these matters, after consideration of applicable reserves and rights to indemnification, should not have a material adverse effect on the Company’s financial position.

Litigation and Regulatory Matters

The Company is subject to legal and regulatory actions in the ordinary course of its businesses. Pending legal and regulatory actions include proceedings relating to aspects of the Company’s businesses and operations that are specific to it and proceedings that are typical of the businesses in which it operates, including in both cases businesses that have been either divested or placed in wind-down status. Some of these proceedings have been brought on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages. The outcome of litigation or a regulatory matter, and the amount or range of potential loss at any particular time, is often inherently uncertain.

The Company establishes accruals for litigation and regulatory matters when it is probable that a loss has been incurred and the amount of that loss can be reasonably estimated. For litigation and regulatory matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed, including matters discussed below. The Company estimates that as of June 30, 2023, the aggregate range of reasonably possible losses in excess of accruals established for those litigation and regulatory matters for which such an estimate currently can be made is less than $250 million. Any estimate is not an indication of expected loss, if any, or the Company’s maximum possible loss exposure on such matters. The Company reviews relevant information with respect to its litigation and regulatory matters on a quarterly and annual basis and updates its accruals, disclosures and estimates of reasonably possible loss based on such reviews.

The following discussion of litigation and regulatory matters provides an update of those matters discussed in Note 23 to the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and should be read in conjunction with the complete descriptions provided in the Form 10-K.

Escheatment Litigation

Total Asset Recovery Services, LLC v. MetLife, Inc., et al., Prudential Financial, Inc., The Prudential Insurance Company of America, and Prudential Insurance Agency, LLC

In March 2023, defendants filed a motion to dismiss the Fourth Amended Complaint.

Securities Litigation

City of Warren v. PFI, et al.

In June 2023, the Court of Appeals for the Third Circuit affirmed in part and reversed in part the trial court’s December 2020 decision dismissing the amended complaint with prejudice and remanded the case to the District Court to consider alternative grounds for dismissal not reached by the District Court’s 2020 decision.

Assurance IQ, LLC

William James Griffin, et al. v. Benefytt Technologies, Inc., et al. and Assurance IQ, LLC

In February 2023, the Company filed its answer to the third amended complaint.

PRUDENTIAL FINANCIAL, INC.

Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Other Matters

Cho v. PICA, et al.

In May 2023, plaintiff filed a motion for class certification.

Summary

The Company’s litigation and regulatory matters are subject to many uncertainties, and given their complexity and scope, their outcome cannot be predicted. It is possible that the Company’s results of operations or cash flow in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters depending, in part, upon the results of operations or cash flow for such period. In light of the unpredictability of the Company’s litigation and regulatory matters, it is also possible that in certain cases an ultimate unfavorable resolution of one or more pending litigation or regulatory matters could have a material adverse effect on the Company’s financial statements. Management believes, however, that, based on information currently known to it, the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves and rights to indemnification, is not likely to have a material adverse effect on the Company’s financial statements.

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