filings.toolsItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE OF CONTENTS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the consolidated financial condition of Prudential Financial, Inc. (“Prudential,” “Prudential Financial,” “PFI,” or “the Company”) as of June 30, 2025, compared with December 31, 2024, and its consolidated results of operations for the three and six months ended June 30, 2025 and 2024. You should read the following analysis of our consolidated financial condition and results of operations in conjunction with the MD&A, the “Risk Factors” section, and the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as well as the statements under “Forward-Looking Statements,” and the Unaudited Interim Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Overview
Prudential Financial, a financial services leader with approximately $1.580 trillion of assets under management as of June 30, 2025, has operations primarily in the United States of America (“U.S.”), Asia, Europe and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement solutions, mutual funds and investment management. We offer these products and services to individual and institutional customers through one of the largest distribution networks in the financial services industry.
Our principal operations consist of PGIM (our global investment management business), our U.S. Businesses (consisting of our Retirement Strategies, Group Insurance and Individual Life businesses), our International Businesses, the Closed Block division, and our Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under generally accepted accounting principles in the United States of America (“U.S. GAAP”). Our Corporate and Other operations include corporate items and initiatives that are not allocated to business segments as well as the Divested and Run-off Businesses described above.
Effective in the first quarter of 2025, consistent with changes to the Company’s internal management structure, our International Businesses are reflected as a single operating and reportable segment, which is how the chief operating decision maker (“CODM”) now assesses its performance and allocates resources. Prior to the first quarter of 2025, our International Businesses consisted of the Life Planner and Gibraltar Life and Other operating segments, each of which was a reportable segment under U.S. GAAP. The change has been applied retrospectively and did not have any impact on the Company’s Unaudited Interim Consolidated Financial Statements contained herein or to any previously issued financial statements.
We attribute financing costs to each segment based on the amount of financing used by each segment, excluding financing costs associated with corporate debt, which are reflected in our Corporate and Other operations. The net investment income of each segment includes earnings on the amount of capital that management believes is necessary to support the risks of that segment.
Management expects that results will continue to benefit from our mutually-reinforcing business system, which includes a mix of businesses that complement each other to provide competitive advantages, earnings diversification and capital benefits from a balanced risk profile. We believe we are well-positioned to tap into market opportunities to meet the evolving needs of our clients and society at large. Our mix of high-quality protection, retirement and investment management businesses enables us to offer solutions that cover a broad range of financial needs and to engage with our clients through multiple channels.
As part of our continuous improvement process, we are working to become a leaner and more agile company by simplifying our management structure, empowering our employees with faster decision-making processes and investing in technology and data platforms. We expect these actions will create operating efficiencies, and provide reinvestment capacity to build capabilities, realize additional efficiencies, strengthen our competitiveness and fuel future growth.
Regulatory Developments
H.R.1 — One Big Beautiful Bill Act (the “Tax Act of 2025”)
See Note 14 to the Unaudited Interim Consolidated Financial Statements for information about tax law changes included in the Tax Act of 2025.
Current Market Conditions
The imposition of tariffs and retaliatory actions, as we have seen this year, could result in, among other things, rising interest rates, significant equity market declines, stagnant economic growth and high inflation, which could adversely impact our liquidity and capital positions, cash flows, results of operations, and financial position. For example, the combination of stagnant economic growth and high inflation would increase investment risk, including the underperformance of investments in more leveraged companies or companies exposed to weaker consumers. Also, the statutory capital of certain of our insurance subsidiaries could be negatively affected by such things as increased reserve requirements, which could be caused by equity market declines, and asymmetrical and non-economic statutory accounting impacts from rising rates. As we navigate through the current environment, we may take actions consistent with our risk and capital frameworks, as necessary, to preserve our liquidity and capital positions.
Impact of Changes in the Interest Rate Environment
As a global financial services company, market interest rates are a key driver of our liquidity and capital positions, cash flows, results of operations and financial position. Changes in interest rates can affect these in several ways, including favorable or adverse impacts to:
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investment-related activity, including: investment income returns, net investment spread results, new money rates, mortgage loan prepayments and bond redemptions;
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the valuation of fixed income investments and derivative instruments;
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collateral posting requirements, hedging costs and other risk mitigation activities;
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customer account values and assets under management, including their impacts on fee-related income;
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insurance reserve levels, including market risk benefits (“MRBs”), and market experience true-ups;
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policyholder behavior, including surrender or withdrawal activity;
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product offerings, design features, crediting rates and sales mix; and
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the fair value of, and possible impairments on, intangible assets such as goodwill.
For additional information regarding interest rate risks, see “Risk Factors—Market Risk” included in our Annual Report on Form 10-K for the year ended December 31, 2024.
See below for a discussion of the current interest rate environment and its impact to net investment spread in our U.S. and Japanese operations along with the composition of their insurance liabilities and policyholder account balances.
U.S. Operations excluding the Closed Block Division
While interest rates in the U.S. have experienced a sustained period of historically low levels, rates began to increase in 2022 and have continued to sustain higher levels through the first six months of 2025, and our average reinvestment yield is generally now exceeding our current average portfolio yield.
In order to manage the impacts that changes in interest rates have on our net investment spread, we employ a proactive asset/liability management program, which includes strategic asset allocation and hedging strategies within a disciplined risk management framework. These strategies seek to match the liability characteristics of our products, and to closely approximate the interest rate sensitivity of the assets with the estimated interest rate sensitivity of the product liabilities. Our asset/liability management program also helps manage duration gaps, currency and other risks between assets and liabilities through the use of derivatives. We adjust this dynamic process as products change, as customer behavior changes and as changes in the market environment occur. As a result, our asset/liability management process has permitted us to manage the interest rate risk associated with our products through several market cycles. Our interest rate exposure is also mitigated by our business mix, which includes lines of business for which fee-based and insurance underwriting earnings play a more prominent role in product profitability. We also regularly examine our product offerings and their profitability. As a result, we may reprice certain products and discontinue sales of other products that do not meet our profit expectations.
The portion of the general account supporting our U.S. operations has approximately $220 billion of fixed maturity securities and commercial mortgage loans (based on net carrying value) as of June 30, 2025, with an average portfolio yield of approximately 5.0%. For this portion of the general account attributable to these operations, we estimate annual principal payments and prepayments that we would be required to reinvest to be approximately 7.2% of the fixed maturity security and commercial mortgage loan portfolios through 2026.
Included in the $220 billion of fixed maturity securities and commercial mortgage loans are approximately $184 billion that are subject to call or redemption features at the issuer’s option and have a weighted average interest rate of approximately 5%. Of this $184 billion, approximately 54% contain provisions for prepayment premiums. Future operating results will be impacted by (i) the reinvestment of scheduled payments or prepayments (not subject to a prepayment fee) at different rates compared to the current portfolio yield, including in some cases at rates below those guaranteed under our insurance contracts, and (ii) our utilization of other asset/liability management strategies, as described above, in order to maintain favorable net investment spread.
The following table sets forth the insurance liabilities and policyholder account balances of our U.S. operations excluding the Closed Block Division, by type, for the date indicated:
| As of June 30, 2025 | |||||
| (in billions) | |||||
| Long-duration insurance products with fixed and guaranteed terms | $ | 204 | |||
| Contracts with adjustable crediting rates subject to guaranteed minimums | 36 | ||||
| Participating contracts where investment income risk ultimately accrues to contractholders | 1 | ||||
| Total | $ | 241 |
The $204 billion above relates to long-duration products such as group annuities, structured settlements and other insurance products that have fixed and guaranteed terms. We seek to manage the impact of changes in interest rates on these contracts through asset/liability management, as discussed above.
The $36 billion above relates to contracts with crediting rates that may be adjusted over the life of the contract, subject to guaranteed minimums. Although we may have the ability to lower crediting rates for those contracts above guaranteed minimums, our willingness to do so may be limited by competitive pressures. For additional information regarding contracts with adjustable crediting rates subject to guaranteed minimums, see Note 10 to the Unaudited Interim Consolidated Financial Statements.
The remaining $1 billion of insurance liabilities and policyholder account balances in these operations relates to participating contracts for which the investment income risk is expected to ultimately accrue to contractholders. The crediting rates for these contracts are periodically adjusted based on the return earned on the related assets.
Closed Block Division
Substantially all of the $47 billion of general account investments in the Closed Block division support obligations and liabilities relating to the Closed Block policies only. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information regarding the Closed Block.
Japanese Operations
Japan has experienced a low interest rate environment for many years, during which the Bank of Japan’s monetary policy has resulted in even lower and, at times, negative yields for certain tenors of government bonds; however, recent actions by the Bank of Japan have resulted in an increase in interest rates in 2024 and through the first six months of 2025.
In order to manage, to the extent possible, the impact that the current interest rate environment has on our net investment spread, our Japanese operations employ a proactive asset/liability management program. We continue to purchase long-term bonds with tenors of 10 years or greater. We also regularly examine our product offerings and their profitability. As a result, we may reprice certain products, adjust commissions for certain products and discontinue sales of other products that do not meet our profit expectations. Additionally, our diverse product portfolio in terms of currency mix and premium payment structure allows us to further manage any impacts from changes in the interest rate environment. For additional information regarding sales within these operations, see “—International Businesses—Sales Results,” below.
The portion of the general account supporting our Japanese operations has approximately $144 billion of fixed maturity securities and commercial mortgage loans (based on net carrying value) as of June 30, 2025, with an average portfolio yield of approximately 3.0%. Our Japanese operations have continued to invest in U.S. dollar (“USD”)-denominated assets supporting our USD-denominated product portfolio, which has now driven average reinvestment rates to exceed current average portfolio rates. For this portion of the general account attributable to these operations, we estimate annual principal payments and prepayments that we would be required to reinvest to be approximately 6.3% of the fixed maturity security and commercial mortgage loan portfolios through 2026.
Included in the $144 billion of fixed maturity securities and commercial mortgage loans are approximately $13 billion that are subject to call or redemption features at the issuer’s option and have a weighted average interest rate of approximately 4%. Of this $13 billion, approximately 7% contain provisions for prepayment premiums. Future operating results will be impacted by (i) the reinvestment of scheduled payments or prepayments (not subject to a prepayment fee) at different rates compared to the current portfolio yield, including in some cases at rates below those guaranteed under our insurance contracts, and (ii) our utilization of other asset/liability management strategies, as described above, in order to maintain favorable net investment spread.
The following table sets forth the insurance liabilities and policyholder account balances of our Japanese operations, by type, for the date indicated:
| As of June 30, 2025 | |||||
| (in billions) | |||||
| Insurance products with fixed and guaranteed terms | $ | 110 | |||
| Contracts with a market value adjustment if canceled before maturity | 39 | ||||
| Contracts with adjustable crediting rates subject to guaranteed minimums | 9 | ||||
| Total | $ | 158 |
The $110 billion primarily consists of long-duration insurance products that have fixed and guaranteed terms for which underlying assets may have to be reinvested at interest rates that are lower than current portfolio yields. The remaining insurance liabilities and policyholder account balances include $39 billion related to contracts that impose a market value adjustment if the contracts are canceled before maturity and $9 billion related to contracts with crediting rates that may be adjusted over the life of the contract, subject to guaranteed minimums. Most of the current crediting rates on these contracts, however, are at or near contractual minimums. Although we have the ability in some cases to lower crediting rates for those contracts that are above guaranteed minimum crediting rates, the majority of this business has interest crediting rates that are determined by formula. See Note 10 to the Unaudited Interim Consolidated Financial Statements for additional information regarding crediting rates on policyholder account balances.
Results of Operations
Consolidated Results of Operations
The following table summarizes net income (loss) for the periods presented.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Revenues | $ | 13,726 | $ | 14,883 | $ | 27,196 | $ | 38,392 | |||||||||||||||
| Benefits and expenses | 12,986 | 13,468 | 25,536 | 35,587 | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | 740 | 1,415 | 1,660 | 2,805 | |||||||||||||||||||
| Income tax expense (benefit) | 195 | 264 | 402 | 553 | |||||||||||||||||||
| Income (loss) before equity in earnings of joint ventures and other operating entities | 545 | 1,151 | 1,258 | 2,252 | |||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities, net of taxes | 21 | 20 | 50 | 70 | |||||||||||||||||||
| Net income (loss) | 566 | 1,171 | 1,308 | 2,322 | |||||||||||||||||||
| Less: Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 33 | (27) | 68 | (14) | |||||||||||||||||||
| Net income (loss) attributable to Prudential Financial, Inc. | $ | 533 | $ | 1,198 | $ | 1,240 | $ | 2,336 |
Three Month Comparison. The $665 million decrease in “Net income (loss) attributable to Prudential Financial, Inc.” for the second quarter of 2025 compared to the second quarter of 2024 reflected the following notable items on a pre-tax basis:
•$691 million unfavorable variance from realized investment gains (losses), net, and related charges and adjustments; and
- $129 million unfavorable variance reflecting the change in value of MRBs, net of related hedging gains (losses).
Partially offsetting these decreases in “Net income (loss) attributable to Prudential Financial, Inc.” was a $105 million favorable variance from higher adjusted operating income from our business segments, including a $52 million unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements (see “Segment Results of Operations” for additional information).
“Net income (loss) attributable to Prudential Financial, Inc.” also reflected a $69 million favorable variance from income taxes, primarily driven by the decrease in pre-tax earnings, as described above.
Six Month Comparison. The $1,096 million decrease in “Net income (loss) attributable to Prudential Financial, Inc.” for the first six months of 2025 compared to the first six months of 2024 reflected the following notable items on a pre-tax basis:
•$874 million unfavorable variance from realized investment gains (losses), net, and related charges and adjustments; and
- $603 million unfavorable variance reflecting the change in value of MRBs, net of related hedging gains (losses).
Partially offsetting these decreases in “Net income (loss) attributable to Prudential Financial, Inc.” was a $190 million favorable variance from higher adjusted operating income from our business segments, including the unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above (see “Segment Results of Operations” for additional information).
“Net income (loss) attributable to Prudential Financial, Inc.” also reflected a $151 million favorable variance from income taxes, primarily driven by the decrease in pre-tax earnings, as described above.
Segment Results of Operations
We analyze the performance of our segments and Corporate and Other operations using a measure of segment profitability called adjusted operating income. See “—Segment Measures” below for a discussion of adjusted operating income and its use as a measure of segment operating performance.
Annual Reviews and Update of Assumptions and Other Refinements
During the second quarter of each year, we perform an annual comprehensive review of the assumptions used for estimating future premiums, benefits, and other cash flows, including reviews related to mortality, morbidity, lapse, surrender, and other contractholder behavior assumptions, and economic assumptions, including expected future rates of returns on investments. The Company generally looks to relevant Company experience as the primary basis for these assumptions; however, 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 elsewhere within the Company or within the industry. As part of this review, we may update these assumptions and make refinements to our models based upon emerging experience, future expectations and other data, including any observable market data we feel is indicative of a long-term trend. These assumptions are generally reviewed annually unless a material change in our own experience or in industry experience made available to us is observed in an interim period that we feel is also indicative of a long-term trend. Generally, we do not expect trends to change significantly in the short-term and, to the extent these trends may change, we expect such changes to be gradual over the long-term. The impact on our results of operations of changes in these assumptions can be offsetting and we are unable to predict their movement or offsetting impact over time.
Shown below are the impacts on our adjusted operating income from updates of actuarial assumptions and other refinements as discussed above. The information below is presented by each segment and Corporate and Other operations and includes a reconciliation of these impacts to the impacts within income (loss) before income taxes and equity in earnings of joint ventures and other operating entities.
| Three and Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Favorable (unfavorable) impact to adjusted operating income before income taxes by segment: | |||||||||||
| U.S. Businesses: | |||||||||||
| Retirement Strategies | $ | (113) | $ | 140 | |||||||
| Group Insurance | 11 | 25 | |||||||||
| Individual Life | 58 | (98) | |||||||||
| Total U.S. Businesses | (44) | 67 | |||||||||
| International Businesses | (2) | (55) | |||||||||
| Corporate and Other | 0 | (6) | |||||||||
| Total segment favorable (unfavorable) impact to adjusted operating income before income taxes | (46) | 6 | |||||||||
| Reconciling items: | |||||||||||
| Realized investment gains (losses), net, and related charges and adjustments | 146 | 831 | |||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | (263) | (88) | |||||||||
| Divested and Run-off Businesses: | |||||||||||
| Closed Block division | 0 | 0 | |||||||||
| Other Divested and Run-off Businesses | (7) | 110 | |||||||||
| Favorable (unfavorable) impact to consolidated income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | (170) | $ | 859 |
Shown below are the adjusted operating income contributions of each segment and Corporate and Other operations for the periods indicated and a reconciliation of this segment measure of performance to “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” as presented in the Unaudited Interim Consolidated Statements of Operations.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Adjusted operating income before income taxes by segment: | |||||||||||||||||||||||
| PGIM | $ | 229 | $ | 206 | $ | 385 | $ | 375 | |||||||||||||||
| U.S. Businesses: | |||||||||||||||||||||||
| Retirement Strategies(1) | 722 | 989 | 1,598 | 1,870 | |||||||||||||||||||
| Group Insurance | 125 | 121 | 214 | 166 | |||||||||||||||||||
| Individual Life | 108 | (87) | 74 | (208) | |||||||||||||||||||
| Total U.S. Businesses(1) | 955 | 1,023 | 1,886 | 1,828 | |||||||||||||||||||
| International Businesses | 761 | 702 | 1,609 | 1,598 | |||||||||||||||||||
| Corporate and Other | (280) | (371) | (695) | (806) | |||||||||||||||||||
| Total segment adjusted operating income before income taxes(1) | 1,665 | 1,560 | 3,185 | 2,995 | |||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments(1)(2) | (516) | 175 | (762) | 112 | |||||||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | (426) | (297) | (777) | (174) | |||||||||||||||||||
| Market experience updates | 42 | 47 | 81 | 15 | |||||||||||||||||||
| Divested and Run-off Businesses(3): | |||||||||||||||||||||||
| Closed Block division | (18) | (60) | (40) | (63) | |||||||||||||||||||
| Other Divested and Run-off Businesses | 12 | 38 | (39) | 3 | |||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests(4) | (18) | (43) | (15) | (70) | |||||||||||||||||||
| Other adjustments(5) | (1) | (5) | 27 | (13) | |||||||||||||||||||
| Consolidated income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 740 | $ | 1,415 | $ | 1,660 | $ | 2,805 |
(1)The amounts for the three and six months ended June 30, 2024 reflect the correction of an error related to indexed variable and fixed annuity products within the Retirement Strategies segment. See “—Retirement Strategies” for additional information. Prior period amounts have been updated to conform to current period presentation.
(2)See “—General Account Investments” and Note 19 to the Unaudited Interim Consolidated Financial Statements for additional information.
(3)Represents the contribution to income (loss) of Divested and Run-off Businesses that have been or will be sold or exited, including businesses that have been placed in wind-down, but did not qualify for “discontinued operations” accounting treatment under U.S. GAAP. See “—Divested and Run-off Businesses” for additional information.
(4)Equity in earnings of joint ventures and other operating entities is included in adjusted operating income but excluded from “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” as it is reflected on an after-tax U.S. GAAP basis as a separate line in the Unaudited Interim Consolidated Statements of Operations. Earnings attributable to noncontrolling interests are excluded from adjusted operating income but included in “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” as they are reflected on a U.S. GAAP basis as a separate line in the Unaudited Interim Consolidated Statements of Operations. Earnings attributable to noncontrolling interests represents the portion of earnings from consolidated entities that relates to the equity interests of minority investors.
(5)Includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods.
Segment results for the period presented above reflect the following:
PGIM. Results for both the second quarter and the first six months of 2025 increased in comparison to the prior year periods, primarily reflecting higher net asset management fees, partially offset by higher expenses. Results for the first six months of 2025 also reflected lower net other related revenues.
Retireme**nt Strategies. Results for both the second quarter and the first six months of 2025 decreased in comparison to the prior year periods, inclusive of an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, results decreased for both periods, primarily driven by lower net fee income and higher expenses, partially offset by higher net investment spread results and more favorable reserve experience.
Group Insurance. Results for both the second quarter and the first six months of 2025 increased in comparison to the prior year periods, inclusive of a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, results increased for both periods, primarily reflecting higher underwriting results.
Individual Life. Results for both the second quarter and the first six months of 2025 increased in comparison to the prior year periods, inclusive of a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, the results for both periods increased, primarily driven by higher underwriting results, partially offset by lower net investment spread results.
International Businesses. Results for both the second quarter and the first six months of 2025 increased in comparison to the prior year periods, inclusive of an unfavorable comparative net impact from foreign currency exchange rates and a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding these items, results for the second quarter of 2025 increased, primarily driven by higher underwriting results and higher net investment spread results, partially offset by higher expenses. Results for the first six months decreased, primarily driven by lower surrender charges and higher expenses, partially offset by higher underwriting results.
Corporate and Other. Results for both the second quarter and the first six months of 2025 reflected decreased losses in comparison to the prior year periods, primarily driven by lower net charges from other corporate activities.
Closed Block Division. Results for both the second quarter and the first six months of 2025 increased in comparison to the prior year periods. Results for the second quarter of 2025 were driven by higher net investment activity results, partially offset by changes in the policyholder dividend obligation, while results for the first six months of 2025 were driven by lower net investment activity results that were more than offset by changes in the policyholder dividend obligation.
Segment Measures
Adjusted Operating Income. In managing our business, we analyze our segments’ operating performance using “adjusted operating income.” Adjusted operating income does not equate to “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” or “Net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss we use to evaluate segment performance and allocate resources and, consistent with authoritative guidance, is our measure of segment performance. The adjustments to derive adjusted operating income are important to an understanding of our overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and our definition of adjusted operating income may differ from that used by other companies; however, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses.
See Note 19 to the Unaudited Interim Consolidated Financial Statements for additional information regarding the presentation of segment results and our definition of adjusted operating income.
Annualized New Business Premiums. In managing our Individual Life, Group Insurance and International Businesses segments, we analyze annualized new business premiums, which do not correspond to revenues under U.S. GAAP. Annualized new business premiums measure the current sales performance of the business, while revenues primarily reflect the renewal persistency of policies written in prior years and net investment income, in addition to current sales. Annualized new business premiums include 10% of first year premiums or deposits from single-payment products in our Individual Life and International Businesses segments. No other adjustments are made for limited-payment contracts.
The amount of annualized new business premiums for any given period can be significantly impacted by several factors, including but not limited to: addition of new products, discontinuation of existing products, changes in credited interest rates for certain products and other product modifications, changes in premium rates, changes in tax laws, changes in regulations or changes in the competitive environment. Sales volume may increase or decrease prior to certain of these changes becoming effective, and then fluctuate in the other direction following such changes.
Assets Under Management. In managing our PGIM segment, we analyze assets under management (which do not correspond directly to U.S. GAAP assets) because the principal source of revenues is fees based on assets under management. Assets under management represent the fair market value or account value of assets that we manage directly for institutional clients, retail clients, and for our general account, as well as assets invested in our products that are managed by third-party managers.
Account Values. In managing our Retirement Strategies segment, we analyze account values, which do not correspond directly to U.S. GAAP assets. Net additions (withdrawals) in our Institutional Retirement Strategies business and sales (redemptions) in our Individual Retirement Strategies business do not correspond to revenues under U.S. GAAP but are used as a relevant measure of business activity.
Impact of Foreign Currency Exchange Rates
Foreign currency exchange rate movements and related hedging strategies
As a U.S.-based company with significant business operations outside the U.S., particularly in Japan, we are subject to foreign currency exchange rate movements that could impact our USD-equivalent shareholder return on equity. We seek to mitigate this impact through various hedging strategies, including holding USD-denominated assets in certain of our foreign subsidiaries.
In order to reduce equity volatility from foreign currency exchange rate movements, we primarily utilize a yen hedging strategy that calibrates the hedge level to preserve the relative contribution of our yen-based business to the Company’s overall return on equity on a leverage neutral basis. We implement this hedging strategy utilizing a variety of instruments, including USD-denominated assets and dual currency and synthetic dual currency investments held locally in our Japanese insurance subsidiaries. The total hedge level may vary based on our periodic assessment of the relative contribution of our yen-based business to the Company’s overall return on equity.
The table below presents the aggregate amount of instruments that serve to hedge the impact of foreign currency exchange movements on our USD-equivalent shareholder return on equity from our Japanese insurance subsidiaries as of the dates indicated.
| June 30, 2025 | December 31, 2024 | ||||||||||
| (in billions) | |||||||||||
| Foreign currency hedging instruments: | |||||||||||
| USD-denominated assets associated with yen-based entities(1) | $ | 7.6 | $ | 6.1 | |||||||
| Dual currency and synthetic dual currency investments(2) | 0.3 | 0.3 | |||||||||
| Total foreign currency hedges | $ | 7.9 | $ | 6.4 |
(1)Includes USD-denominated fixed maturities at amortized cost plus any related accrued investment income, as well as USD notional amount of foreign currency derivative contracts outstanding. Note this amount represents only those USD assets serving to hedge the impact of foreign currency volatility on equity. Separate from this program, our Japanese operations also have $86.0 billion and $83.2 billion as of June 30, 2025 and December 31, 2024, respectively, of USD-denominated assets supporting USD-denominated liabilities related to USD-denominated products.
(2)Dual currency and synthetic dual currency investments are held by our yen-based entities in the form of fixed maturities and loans with a yen-denominated principal component and USD-denominated interest income. The amounts shown represent the present value of future USD-denominated cash flows.
The USD-denominated investments that hedge the impact of foreign currency exchange rate movements on USD-equivalent shareholder return on equity from our Japanese insurance operations are reported within yen-based entities and, as a result, foreign currency exchange rate movements will impact their value reported within our yen-based Japanese insurance entities. We seek to mitigate the risk that future unfavorable foreign currency exchange rate movements will decrease the value of these USD-denominated investments reported within our yen-based Japanese insurance entities, and therefore negatively impact their equity and regulatory solvency margins, by having our Japanese insurance operations enter into currency hedging transactions with a subsidiary of Prudential Financial. These hedging strategies have the economic effect of moving the change in value of these USD-denominated investments due to foreign currency exchange rate movements from our Japanese yen-based entities to our USD-based entities.
These USD-denominated investments also pay a coupon which is generally higher than what a similar yen-denominated investment would pay. The incremental impact of this higher yield on our USD-denominated investments, as well as our dual currency and synthetic dual currency investments, will vary over time, and is dependent on the duration of the underlying investments as well as interest rate environments in both the U.S. and Japan at the time of the investments.
Impact of intercompany foreign currency exchange rate arrangements on segment results of operations
The financial results of our International Businesses and PGIM reflect the impact of intercompany arrangements with our Corporate and Other operations pursuant to which these segments’ non-USD-denominated earnings are translated at fixed currency exchange rates that are predetermined during the third quarter of the prior year using forward currency exchange rates. Results of our Corporate and Other operations include differences between the translation adjustments recorded by the segments at the fixed currency exchange rate versus the actual average rate during the period.
In addition, specific to our International Businesses where we hedge certain currencies utilizing forward currency contracts with third parties, the results of our Corporate and Other operations also include the impact of any gains or losses recorded from these contracts that settled during the period, which include the impact of any over or under hedging of actual earnings that differ from projected earnings.
The table below presents, for the periods indicated, the increase (decrease) to revenues and adjusted operating income for our International Businesses, PGIM and Corporate and Other operations, reflecting the impact of these intercompany arrangements.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Segment impacts of intercompany arrangements: | |||||||||||||||||||||||
| International Businesses | $ | (2) | $ | 3 | $ | 1 | $ | 6 | |||||||||||||||
| PGIM | (1) | 0 | (1) | 0 | |||||||||||||||||||
| Impact of intercompany arrangements(1) | (3) | 3 | 0 | 6 | |||||||||||||||||||
| Corporate and Other: | |||||||||||||||||||||||
| Impact of intercompany arrangements(1) | 3 | (3) | 0 | (6) | |||||||||||||||||||
| Settlement gains (losses) on forward currency contracts(2) | (2) | (6) | 1 | (9) | |||||||||||||||||||
| Net benefit (detriment) to Corporate and Other | 1 | (9) | 1 | (15) | |||||||||||||||||||
| Net impact on consolidated revenues and adjusted operating income | $ | (2) | $ | (6) | $ | 1 | $ | (9) |
(1)Represents the difference between non-USD-denominated earnings translated on the basis of weighted average monthly currency exchange rates versus fixed currency exchange rates determined in connection with the foreign currency income hedging program.
(2)As of both June 30, 2025 and 2024, the total notional amount of these forward currency contracts within our Corporate and Other operations was $0.8 billion.
Impact of products denominated in non-local currencies on U.S. GAAP earnings
While our international insurance operations offer products denominated in local currency, several also offer products denominated in non-local currencies. This is most notable in our Japanese operations, which currently offer primarily USD-denominated products, but have also historically offered Australian dollar (“AUD”)-denominated products. The non-local currency-denominated insurance liabilities related to these products are supported by investments denominated in corresponding currencies, including a significant portion designated as available-for-sale. While the impact from foreign currency exchange rate movements on these non-local currency-denominated assets and liabilities is economically matched, differences in the accounting for changes in the value of these assets and liabilities due to changes in foreign currency exchange rate movements have historically resulted in volatility in U.S. GAAP earnings.
As a result, we implemented a structure in certain of our Japanese operations that disaggregated the USD- and AUD-denominated businesses into separate divisions, each with its own functional currency that aligns with the underlying products and investments. The result of this alignment was to reduce differences in the accounting for changes in the value of these assets and liabilities that arise due to changes in foreign currency exchange rate movements. For the USD- and AUD-denominated assets that were transferred under this structure, the net cumulative unrealized investment gains associated with foreign exchange remeasurement that were recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) totaled $1.0 billion and $1.1 billion as of June 30, 2025 and December 31, 2024, respectively, and will be recognized in earnings within “Realized investment gains (losses), net” over time as these assets mature or are sold. Absent the sale of any of these assets prior to their stated maturity, approximately 1% of the $1.0 billion balance as of June 30, 2025 will be recognized throughout the remainder of 2025, approximately 5% will be recognized in 2026, and the remaining balance will be recognized from 2027 through 2051.
Highly inflationary economy
Enterprise Group, our strategic investment in Ghana, has historically utilized the Ghanaian cedi as its functional currency given it is the currency of the primary economic environment in which the entity operates. In the fourth quarter of 2023, Ghana experienced a cumulative inflation rate that exceeded 100% over a 3-year period. As a result, Ghana’s economy was deemed to
be highly inflationary, resulting in reporting changes effective January 1, 2024. Under U.S. GAAP, the financial statements of a foreign entity in a highly inflationary economy are to be remeasured as if its functional currency (formerly the Ghanaian cedi) is the reporting currency of its parent reporting entity (the USD) on a prospective basis. While this changed how the results of Enterprise Group were remeasured and/or translated into USD, the impact to our financial statements was not material nor is it expected to have a material impact to our financial statements in future periods given the relative size of the investment.
Accounting Policies & Pronouncements
Application of Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews the estimates and assumptions used in the preparation of the Company’s financial statements. If management determines that modifications to assumptions and estimates are appropriate given current facts and circumstances, the Company’s results of operations and financial position as reported in the Unaudited Interim Consolidated Financial Statements could change significantly.
Management believes the accounting policies relating to the following areas are most dependent on the application of estimates and assumptions and require management’s most difficult, subjective, or complex judgments:
-
Insurance liabilities;
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Goodwill;
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Valuation of investments including derivatives, measurement of allowance for credit losses, and recognition of other-than-temporary impairments (“OTTI”);
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Pension and other postretirement benefits;
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Taxes on income; and
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Reserves for contingencies, including reserves for losses in connection with unresolved legal matters.
Market Performance - Equity and Interest Rate Assumptions
The liability for future policy benefits for certain of our universal life type products includes quarterly adjustments for the impact of changes to our estimate of future rates of returns on investments to reflect actual fund performance and market conditions. A portion of the returns on investments for our variable life contracts are dependent upon the total rate of return on assets held in separate account investment options. This rate of return influences the fees we earn and expected claims to be paid on variable life contracts, as well as other sources of profit. Returns that are higher than our expectations for a given period produce higher than expected account balances, which increase the future fees we expect to earn on variable life contracts and decrease expected claims to be paid on variable life contracts. The opposite occurs when returns are lower than our expectations.
The weighted average rate of return assumptions used in developing estimated market returns consider many factors specific to each product type, including asset durations, asset allocations and other factors. With regard to equity market assumptions, the near-term future rate of return assumption used in evaluating liabilities for future policy benefits for certain of our products, primarily our domestic and international variable life insurance products, is generally updated each quarter and is derived using a reversion to the mean approach, a common industry practice. Under this approach, we consider historical equity returns and adjust projected equity returns over an initial future period of five years (the “near-term”) so that equity returns converge to the long-term expected rate of return. If the near-term projected future rate of return is greater than our near-term maximum future rate of return of 15.0%, we use our maximum future rate of return. If the near-term projected future rate of return is lower than our near-term minimum future rate of return of 0%, we use our minimum future rate of return. As of June 30, 2025, our domestic variable life insurance businesses assume an 8.0% long-term equity expected rate of return and a 2.8% near-term mean reversion equity expected rate of return, and our international variable life insurance business assumes a 5.5% long-term equity expected rate of return and a 1.3% near-term mean reversion equity expected rate of return.
With regard to interest rate assumptions used in evaluating liabilities for future policy benefits for certain of our products, we update the long-term and near-term future rates used to project fixed income returns annually and quarterly, respectively. As a result of our 2025 annual reviews and update of assumptions and other refinements, we kept our long-term expectation of the 10-year U.S. Treasury rate unchanged and continue to grade to a rate of 3.5% over ten years, and increased our long-term expectation of the 10-year Japanese Government Bond yield by 25 basis points and now grade to a rate of 1.5% over ten years. As part of our quarterly market experience updates, we update our near-term projections of interest rates to reflect changes in current rates.
For further discussion of impacts that could result from changes in these key estimates and assumptions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Accounting Policies and Pronouncements—Application of Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024.
Adoption of New Accounting Pronouncements
See Note 2 to the Unaudited Interim Consolidated Financial Statements for accounting pronouncements issued but not yet adopted and newly adopted accounting pronouncements.
Results of Operations by Segment
PGIM
Operating Results
The following table sets forth PGIM’s operating results for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Operating results(1): | |||||||||||||||||||||||
| Revenues | $ | 1,043 | $ | 963 | $ | 2,028 | $ | 1,953 | |||||||||||||||
| Expenses | 814 | 757 | 1,643 | 1,578 | |||||||||||||||||||
| Adjusted operating income | 229 | 206 | 385 | 375 | |||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests | 42 | 7 | 52 | 18 | |||||||||||||||||||
| Other adjustments(2) | (1) | (5) | 27 | (13) | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 270 | $ | 208 | $ | 464 | $ | 380 |
(1)Certain of PGIM’s investment activities are based in currencies other than the USD and are therefore subject to foreign currency exchange rate risk. The financial results of PGIM include the impact of an intercompany arrangement with our Corporate and Other operations designed to mitigate the impact of exchange rate changes on PGIM’s USD-equivalent earnings. For additional information regarding this intercompany arrangement, see “—Results of Operations—Impact of Foreign Currency Exchange Rates,” above.
(2)Includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods.
Adjusted Operating Income
Three Month Comparison. Adjusted operating income increased $23 million, primarily reflecting higher asset management fees, net of related expenses, and higher other related revenues, net of related expenses. These impacts were partially offset by higher operating expenses, as well as lower service, distribution and other revenues, net of related expenses.
Six Month Comparison. Adjusted operating income increased $10 million, primarily reflecting higher asset management fees, net of related expenses. These impacts were partially offset by higher operating expenses and lower other related revenues, net of related expenses.
Revenues and Expenses
The following table sets forth PGIM’s revenues, presented on a basis consistent with the table above under “—Operating Results,” by type:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Revenues by type: | |||||||||||||||||||||||
| Asset management fees by source: | |||||||||||||||||||||||
| Institutional - Third Party(1) | $ | 387 | $ | 365 | $ | 774 | $ | 733 | |||||||||||||||
| Retail - Third Party(1) | 219 | 212 | 444 | 416 | |||||||||||||||||||
| Affiliated(1)(2) | 219 | 200 | 435 | 402 | |||||||||||||||||||
| Total asset management fees | 825 | 777 | 1,653 | 1,551 | |||||||||||||||||||
| Other related revenues by source: | |||||||||||||||||||||||
| Incentive fees | 24 | 19 | 34 | 60 | |||||||||||||||||||
| Transaction fees | 5 | 10 | 12 | 14 | |||||||||||||||||||
| Seed and co-investments | 28 | 30 | 34 | 71 | |||||||||||||||||||
| Commercial mortgage(3) | 25 | 12 | 40 | 19 | |||||||||||||||||||
| Total other related revenues | 82 | 71 | 120 | 164 | |||||||||||||||||||
| Service, distribution and other revenues | 136 | 115 | 255 | 238 | |||||||||||||||||||
| Total revenues | $ | 1,043 | $ | 963 | $ | 2,028 | $ | 1,953 |
(1)Prior period amounts have been updated to conform to current period presentation.
(2)Includes revenues from the Company’s general account assets, as well as certain separate account assets of the Company’s insurance and retirement businesses managed by PGIM.
(3)Includes mortgage origination revenues from our commercial mortgage origination and servicing business.
Three Month Comparison. Revenues increased $80 million. Asset management fees increased, primarily reflecting asset growth driven by the impact of equity market and fixed income appreciation, net inflows and strong investment performance. Service, distribution and other revenues increased, primarily reflecting higher revenues from certain consolidated funds (which were fully offset by higher expenses related to noncontrolling interests in these funds). Other related revenues increased, primarily reflecting higher commercial mortgage origination revenues driven by higher loan production and higher incentive fees driven by more favorable investment performance, partially offset by lower transaction fees.
Expenses increased $57 million, primarily reflecting higher operating expenses, driven by higher compensation expenses, primarily due to business growth, as well as higher variable expenses corresponding to higher revenues from certain consolidated funds, as described above.
Six Month Comparison. Revenues increased $75 million. Asset management fees increased, primarily reflecting asset growth driven by the impact of equity market and fixed income appreciation, net inflows and strong investment performance. Service, distribution and other revenues increased, primarily reflecting higher revenues from certain consolidated funds (which were fully offset by higher expenses related to noncontrolling interests in these funds). These variances were partially offset by lower other related revenues, primarily reflecting lower seed and co-investments results and lower incentive fees driven by less favorable investment performance, partially offset by higher commercial mortgage origination revenues driven by higher loan production.
Expenses increased $65 million, primarily reflecting higher operating expenses, including higher compensation expenses, primarily due to business growth, partially offset by decreases related to certain long-term employee compensation plans. Also contributing to the increase were higher variable expenses corresponding to higher fee-based earnings and higher revenues from certain consolidated funds, as described above.
Assets Under Management
The following table sets forth assets under management by asset class as of the dates indicated:
| June 30, 2025 | December 31, 2024 | June 30, 2024 | |||||||||||||||
| (in billions) | |||||||||||||||||
| Assets Under Management(1) (at fair value): | |||||||||||||||||
| Public equity | $ | 226.8 | $ | 215.7 | $ | 208.6 | |||||||||||
| Public fixed income | 877.7 | 832.2 | 807.4 | ||||||||||||||
| Real estate | 132.3 | 127.2 | 127.0 | ||||||||||||||
| Private credit and other alternatives | 123.6 | 118.0 | 113.3 | ||||||||||||||
| Multi-asset | 80.3 | 82.1 | 71.8 | ||||||||||||||
| Total PGIM assets under management | $ | 1,440.7 | $ | 1,375.2 | $ | 1,328.1 | |||||||||||
| Assets under management within other reporting segments(2) | 139.6 | 137.2 | 153.9 | ||||||||||||||
| Total PFI assets under management | $ | 1,580.3 | $ | 1,512.4 | $ | 1,482.0 |
(1)“Public equity” represents stock ownership interest in a corporation or partnership (excluding hedge funds) or real estate investment trust. “Public fixed income” represents debt instruments that pay interest and usually have a maturity (excluding mortgages). “Real estate” includes direct real estate equity and real estate mortgages. “Private credit and other alternatives” includes private credit, private equity, hedge funds and other alternative strategies. “Multi-asset” includes funds or products that invest in more than one asset class, balancing equity and fixed income funds and target date funds.
(2)Primarily includes assets related to certain insurance and retirement products in our U.S. Businesses and Corporate and Other operations, and certain general account assets in our International Businesses. These assets are not directly managed by PGIM, but rather are invested in non-proprietary funds or are managed by either the divisions themselves or by our Chief Investment Officer Organization.
The following table sets forth assets under management by source as of the dates indicated:
| June 30, 2025 | December 31, 2024 | June 30, 2024 | |||||||||||||||
| (in billions) | |||||||||||||||||
| Assets Under Management (at fair value): | |||||||||||||||||
| Institutional - Third Party(1) | $ | 647.6 | $ | 601.1 | $ | 585.2 | |||||||||||
| Retail - Third Party(1) | 256.7 | 244.9 | 234.5 | ||||||||||||||
| Affiliated(1)(2) | 536.4 | 529.2 | 508.4 | ||||||||||||||
| Total PGIM assets under management | $ | 1,440.7 | $ | 1,375.2 | $ | 1,328.1 | |||||||||||
| Assets under management within other reporting segments(3) | 139.6 | 137.2 | 153.9 | ||||||||||||||
| Total PFI assets under management | $ | 1,580.3 | $ | 1,512.4 | $ | 1,482.0 |
(1)Prior period amounts have been updated to conform to current period presentation.
(2)Includes the Company’s general account assets, as well as certain separate account assets of the Company’s insurance and retirement businesses managed by PGIM.
(3)Primarily includes assets related to certain insurance and retirement products in our U.S. Businesses and Corporate and Other operations, and certain general account assets in our International Businesses. These assets are not directly managed by PGIM, but rather are invested in non-proprietary funds or are managed by either the divisions themselves or by our Chief Investment Officer Organization.
The following table sets forth the component changes in PGIM’s assets under management for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | |||||||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||||||||
| Beginning assets under management | $ | 1,385.3 | $ | 1,341.4 | $ | 1,375.2 | $ | 1,298.1 | $ | 1,328.1 | |||||||||||||||||||
| Institutional third-party flows(1) | 2.6 | (6.4) | 10.2 | 21.7 | 10.2 | ||||||||||||||||||||||||
| Retail third-party flows | (2.8) | (0.6) | (3.0) | (0.1) | (1.5) | ||||||||||||||||||||||||
| Total third-party flows(1) | (0.2) | (7.0) | 7.2 | 21.6 | 8.7 | ||||||||||||||||||||||||
| Affiliated flows(1)(2) | 0.6 | 1.9 | 0.5 | 9.1 | 15.9 | ||||||||||||||||||||||||
| Total net flows(1) | 0.4 | (5.1) | 7.7 | 30.7 | 24.6 | ||||||||||||||||||||||||
| Realizations and distributions(1)(3) | (2.3) | (2.6) | (6.6) | (4.7) | (11.8) | ||||||||||||||||||||||||
| Market appreciation (depreciation)(4) | 53.5 | 4.5 | 58.5 | 23.4 | 95.7 | ||||||||||||||||||||||||
| Foreign exchange rate impact | 4.7 | (4.1) | 8.5 | (10.0) | 9.1 | ||||||||||||||||||||||||
| Net money market activity and other increases (decreases) | (0.9) | (6.0) | (2.6) | (9.4) | (5.0) | ||||||||||||||||||||||||
| Ending assets under management | $ | 1,440.7 | $ | 1,328.1 | $ | 1,440.7 | $ | 1,328.1 | $ | 1,440.7 |
(1)Prior period amounts have been updated to conform to current period presentation.
(2)Represents assets that PGIM manages for the benefit of other reporting segments within the Company. Additions and withdrawals of these assets are attributable to third-party product inflows and outflows in other reporting segments.
(3)Realizations reflect proceeds from the disposition or monetization of assets from closed end funds and from collateralized loan obligations. Distributions reflect income and dividend distributions related to certain closed and open ended private alternative funds and collateralized loan obligations.
(4)Includes income reinvestment, where applicable.
PGIM’s assets under management as of June 30, 2025 increased $113 billion in comparison to the prior year quarter, primarily driven by fixed income and equity market appreciation, net inflows and strong investment performance. PGIM’s assets under management as of June 30, 2025 increased $66 billion in comparison to the prior year end, primarily driven by fixed income and equity market appreciation, favorable foreign exchange rate impacts and net inflows.
Private Capital Deployment
Private capital deployment is indicative of the pace and magnitude of capital that is invested and will result in future revenues that may include management fees, transaction fees, incentive fees and servicing revenues, as well as future costs to manage these assets.
Private capital deployment represents the gross value of private capital invested in real estate debt and equity, and private credit and equity asset classes. Assets under management resulting from private capital deployment are primarily included in “Real estate” and “Private credit and other alternatives” in the “—Assets Under Management— by asset class table” above. As of June 30, 2025, these asset classes increased $10.7 billion compared to December 31, 2024, primarily reflecting private capital net inflows, market appreciation and favorable foreign exchange rate impacts, partially offset by realizations and distributions.
Private capital deployment includes PGIM’s real estate agency debt business, which consists of agency commercial mortgage loans that are originated and sold to third-party investors. PGIM continues to service these loans; however, they are not included in assets under management.
The following table sets forth PGIM’s private capital deployed by asset class for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||
| Private capital deployed: | |||||||||||||||||||||||
| Real estate debt and equity | $ | 6.5 | $ | 5.5 | $ | 11.1 | $ | 7.5 | |||||||||||||||
| Private credit and equity(1) | 5.3 | 6.4 | 11.3 | 11.0 | |||||||||||||||||||
| Total private capital deployed(1) | $ | 11.8 | $ | 11.9 | $ | 22.4 | $ | 18.5 |
(1)Prior period amounts have been updated to conform to current period presentation.
Seed and Co-Investments
As of June 30, 2025 and December 31, 2024, PGIM had approximately $1,192 million and $1,079 million of seed investments and $437 million and $415 million of co-investments at carrying value, respectively, primarily consisting of public fixed income, public equity, private credit and other alternatives, and real estate investments.
Retirement Strategies
Operating Results
The following table sets forth Retirement Strategies’ operating results for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Operating results(1): | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Institutional Retirement Strategies | $ | 3,507 | $ | 4,041 | $ | 6,612 | $ | 15,579 | |||||||||||||||
| Individual Retirement Strategies | 1,321 | 1,254 | 2,659 | 2,475 | |||||||||||||||||||
| Total revenues | 4,828 | 5,295 | 9,271 | 18,054 | |||||||||||||||||||
| Benefits and expenses: | |||||||||||||||||||||||
| Institutional Retirement Strategies | 3,111 | 3,491 | 5,804 | 14,588 | |||||||||||||||||||
| Individual Retirement Strategies | 995 | 815 | 1,869 | 1,596 | |||||||||||||||||||
| Total benefits and expenses | 4,106 | 4,306 | 7,673 | 16,184 | |||||||||||||||||||
| Adjusted operating income: | |||||||||||||||||||||||
| Institutional Retirement Strategies | 396 | 550 | 808 | 991 | |||||||||||||||||||
| Individual Retirement Strategies | 326 | 439 | 790 | 879 | |||||||||||||||||||
| Total adjusted operating income | 722 | 989 | 1,598 | 1,870 | |||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments | (281) | 401 | (530) | 132 | |||||||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | (429) | (306) | (786) | (186) | |||||||||||||||||||
| Market experience updates | (7) | 0 | (7) | 0 | |||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests | 1 | 0 | 2 | 1 | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 6 | $ | 1,084 | $ | 277 | $ | 1,817 |
(1)The amounts for the three and six months ended June 30, 2024 reflect the correction of an error related to indexed variable and fixed annuity products within the Individual Retirement Strategies business. See below for additional information.
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, during the fourth quarter of 2024, the Company identified an immaterial error in the application of adjusted operating income, which resulted in an overstatement thereof for indexed variable and fixed annuity products within the Retirement Strategies segment in the first three quarters of 2024. As a result, the Company voluntarily revised its historical adjusted operating income for the relevant periods, resulting in a decrease in pre-tax adjusted operating income of $47 million and $81 million for the three and six months ended June 30, 2024, respectively.
Our Individual Retirement Strategies business includes both fixed and variable annuities that may include optional guaranteed living benefit riders (e.g., guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”)), and/or optional death benefit riders (e.g., guaranteed minimum death benefits (“GMDB”)). We also offer fixed annuities that provide a guarantee of principal and interest credited at rates we determine (subject to certain contractual minimums) or at rates based upon the performance of an index (subject to caps or participation rates), as well as indexed variable annuities that provide several index crediting strategies and varying levels of downside protection at predetermined levels and durations. The results of our business are generally included in adjusted operating income, with exceptions related to certain guarantees, as discussed below.
Under U.S. GAAP, our guaranteed living and death benefit riders on variable annuities (e.g., GMAB, GMIB, GMWB, GMIWB and GMDB) are accounted for as MRBs and reported at fair value. For purposes of measuring segment performance, adjusted operating income excludes the changes in fair value of MRBs and instead reflects the performance of these riders 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.
Under U.S. GAAP, policyholder liabilities associated with our fixed and variable indexed annuity products are recorded in “Policyholders’ account balances,” and include both the contract value that has accrued to the benefit of the policyholder and the fair value of embedded derivative instruments associated with the index-linked features for these products. The change in the liability for these products is measured utilizing a valuation methodology required under U.S GAAP, and includes the fair value of all index credits for the current term and future projected renewals of the policy. For the purpose of measuring segment performance, however, adjusted operating income reflects only the change in the liability associated with the current term elected by the policyholder, which is the component of the liability the Company hedges based on current contractual index-crediting terms, and which is offset by the change in the value of the corresponding hedge assets. Adjusted operating income excludes the change in the liability associated with all future projected renewals, which the Company does not hedge, consistent with the Company and policyholder optionality that exists at renewal.
Adjusted Operating Income
Three Month Comparison. Adjusted operating income from our Institutional Retirement Strategies business decreased $154 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2025 included a $32 million net charge from this update, while results for 2024 included a net benefit of $132 million. Excluding this item, adjusted operating income increased $10 million primarily driven by more favorable underwriting results, partially offset by higher operating expenses.
Adjusted operating income from our Individual Retirement Strategies business decreased $113 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for the second quarter of 2025 included a net charge of $81 million, mainly due to the establishment of reserves for certain fixed annuity products, while the results for the second quarter of 2024 included a net benefit of $8 million. Excluding this item, adjusted operating income decreased $24 million primarily driven by lower fee income, net of distribution expenses, resulting from lower average separate account values due to net outflows, partially offset by favorable equity markets, and higher amortization costs. These variances were partially offset by higher net investment spread results due to growth in indexed variable annuities and higher income on non-coupon investments, partially offset by the impact of lower short-term interest rates.
Six Month Comparison. Adjusted operating income from our Institutional Retirement Strategies business decreased $183 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding this item, adjusted operating income decreased $19 million, primarily driven by lower net investment spread results reflecting lower income on non-coupon investments and derivatives, partially offset by higher income driven by an increase in account values from business growth, and higher operating expenses. These variances were partially offset by more favorable underwriting results.
Adjusted operating income from our Individual Retirement Strategies business decreased $89 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding this item, adjusted operating income remained unchanged reflecting lower fee income, net of distribution expenses, resulting from lower average separate account values due to net outflows, partially offset by favorable equity markets, and higher amortization costs. These variances were offset by higher net investment spread results due to the growth in indexed variable annuities and higher income on non-coupon investments, partially offset by the impact of lower short-term interest rates.
Revenues, Benefits and Expenses
Three Month Comparison. Revenues from our Institutional Retirement Strategies business decreased $534 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $922 million primarily reflecting lower pension risk transfer premiums due to lower sales in the current quarter, with corresponding offsets in policyholders’ benefits, as discussed below. This variance was partially offset by higher net investment income driven by business growth.
Benefits and expenses of our Institutional Retirement Strategies business decreased $380 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $932 million. Policyholders’ benefits, including changes in reserves, decreased primarily related to the lower pension risk transfer premiums discussed above, partially offset by higher benefits driven by business growth.
Revenues from our Individual Retirement Strategies business increased $67 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $59 million primarily driven by higher net investment income due to growth in indexed variable and fixed annuities, and higher income from non-coupon investments. This variance was partially offset by lower asset management and service fees, as well as lower policy charges and fee income driven by lower average separate account values due to net outflows, partially offset by favorable equity markets. Also contributing to the variance was lower other income driven by the impact of less favorable short-term interest rates on collateral posted to counterparties.
Benefits and expenses of our Individual Retirement Strategies business increased $180 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $83 million primarily driven by higher interest credited to policyholders’ account balances and higher amortizations costs, partially offset by lower general and administrative expenses, net of capitalization.
Six Month Comparison. Revenues from our Institutional Retirement Strategies business decreased $8,967 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $9,355 million. This decrease primarily reflected lower pension risk transfer premiums due to the absence of significant sales that occurred in the prior year period, with corresponding offsets in policyholders’ benefits, as discussed below.
Benefits and expenses of our Institutional Retirement Strategies business decreased $8,784 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $9,336 million. Policyholders’ benefits, including changes in reserves, decreased primarily related to the lower pension risk transfer premiums discussed above, partially offset by higher benefits driven by business growth.
Revenues from our Individual Retirement Strategies business increased $184 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $176 million primarily driven by higher net investment income from growth in indexed variable and fixed annuities, and higher income from non-coupon investments. This variance was partially offset by lower asset management and service fees, as well as lower policy charges and fee income driven by lower average separate account values due to net outflows, partially offset by favorable equity markets. Also contributing to the variance was lower other income driven by the impact of less favorable short-term interest rates on collateral posted to counterparties.
Benefits and expenses of our Individual Retirement Strategies business increased $273 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $176 million, primarily driven by higher interest credited to policyholders’ account balances and higher amortization costs, partially offset by lower general and administrative expenses, net of capitalization.
Account Values
Institutional Retirement Strategies. Account values are a significant driver of our operating results and are primarily driven by net additions (withdrawals) and the impact of market changes. The investment income and interest we credit to policyholders on our spread-based products varies with the level of general account values. The income we earn on most of our fee-based products varies with the level of fee-based account values as many policy fees are determined by these values.
The following table shows the changes in the account values of Institutional Retirement Strategies’ products for the periods indicated. Account values include both internally- and externally-managed client balances as the total balances drive revenue for the Institutional Retirement Strategies business. For additional information regarding internally-managed balances, see “—PGIM.”
| Three Months Ended June 30, | Six Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Total Institutional Retirement Strategies: | |||||||||||||||||||||||||||||
| Beginning total account value, gross(1) | $ | 293,930 | $ | 274,630 | $ | 288,202 | $ | 267,654 | $ | 274,128 | |||||||||||||||||||
| Additions(2) | 8,854 | 4,011 | 15,905 | 15,001 | 37,235 | ||||||||||||||||||||||||
| Withdrawals and benefits | (5,525) | (6,164) | (12,167) | (12,581) | (24,913) | ||||||||||||||||||||||||
| Change in market value, interest credited and interest income | 2,355 | 1,919 | 5,159 | 4,574 | 11,175 | ||||||||||||||||||||||||
| Other(3) | 7,692 | (268) | 10,207 | (520) | 9,681 | ||||||||||||||||||||||||
| Ending total account value, gross | 307,306 | 274,128 | 307,306 | 274,128 | 307,306 | ||||||||||||||||||||||||
| Reinsurance ceded | (8,899) | (9,129) | (8,899) | (9,129) | (8,899) | ||||||||||||||||||||||||
| Ending total account value, net | $ | 298,407 | $ | 264,999 | $ | 298,407 | $ | 264,999 | $ | 298,407 |
(1)Beginning total account values, net of reinsurance ceded, were $284,978 million and $265,451 million for the three months ended June 30, 2025 and 2024, respectively, $279,191 million and $258,417 million for the six months ended June 30, 2025 and 2024, respectively, and $264,999 million for the twelve months ended June 30, 2025.
(2)Additions primarily include: group annuities and funded pension reinsurance calculated based on premiums received; longevity reinsurance contracts calculated as the present value of future projected benefits; investment-only stable value contracts calculated as the fair value of customers’ funds held in a client-owned trust; and funding agreements issued calculated based on premiums received.
(3)“Other” activity includes the effect of foreign exchange rate changes associated with our British pound sterling denominated reinsurance business and changes in asset balances for externally-managed accounts. For the three months ended June 30, 2025 and 2024, “Other” activity also includes $1,250 million in receipts offset by $1,126 million in payments, and $611 million in receipts offset by $918 million in payments, respectively, and for the six months ended June 30, 2025 and 2024, includes $2,052 million in receipts offset by $2,082 million in payments and $1,683 million in receipts offset by $1,851 million in payments, respectively, related to funding agreements backed by commercial paper that typically have maturities of less than 90 days.
The increase in Institutional Retirement Strategies net account values for the three and six months ended June 30, 2025 reflects the positive impact of foreign exchange rate changes, net additions primarily driven by longevity reinsurance transactions, interest credited on customer funds and an increase in the market values of assets.
The increase in Institutional Retirement Strategies net account values for the twelve months ended June 30, 2025 reflects net additions primarily driven by longevity reinsurance transactions, the positive impact of foreign exchange rate changes, interest credited on customer funds and an increase in the market values of assets.
Individual Retirement Strategies. Account values are a significant driver of our operating results. Since most fees are determined by the level of separate account assets, fee income varies primarily based on the level of account values. Account values are driven by net flows from new business sales, surrenders, withdrawals and benefit payments, policy charges and the impact of positive or negative market value changes. The following table sets forth account value information of Individual Retirement Strategies’ products for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Total Individual Retirement Strategies: | |||||||||||||||||||||||||||||
| Beginning total account value, gross(1) | $ | 135,826 | $ | 134,700 | $ | 138,639 | $ | 129,708 | $ | 135,375 | |||||||||||||||||||
| Sales | 3,143 | 3,486 | 6,622 | 6,800 | 13,889 | ||||||||||||||||||||||||
| Full surrenders and death benefits | (2,609) | (2,789) | (5,501) | (5,354) | (11,240) | ||||||||||||||||||||||||
| Sales, net of full surrenders and death benefits | 534 | 697 | 1,121 | 1,446 | 2,649 | ||||||||||||||||||||||||
| Partial withdrawals and other benefit payments | (1,260) | (1,221) | (2,676) | (2,511) | (5,345) | ||||||||||||||||||||||||
| Net flows | (726) | (524) | (1,555) | (1,065) | (2,696) | ||||||||||||||||||||||||
| Change in market value, interest credited and other activity | 8,005 | 1,748 | 6,524 | 7,829 | 12,003 | ||||||||||||||||||||||||
| Policy charges | (513) | (549) | (1,016) | (1,097) | (2,090) | ||||||||||||||||||||||||
| Ending total account value, gross | 142,592 | 135,375 | 142,592 | 135,375 | 142,592 | ||||||||||||||||||||||||
| Reinsurance ceded | (11,073) | (11,476) | (11,073) | (11,476) | (11,073) | ||||||||||||||||||||||||
| Ending total account value, net(2) | $ | 131,519 | $ | 123,899 | $ | 131,519 | $ | 123,899 | $ | 131,519 |
(1)Beginning total account values, net, were $124,074 million and $123,012 million for the three months ended June 30, 2025 and 2024, respectively, $127,120 million and $117,911 million for the six months ended June 30, 2025 and 2024, respectively, and $123,899 million for the twelve months ended June 30, 2025.
(2)Includes net variable and fixed annuities sold as retail investment products. Variable annuity account values were $118,955 million and $115,281 million as of June 30, 2025 and 2024, respectively. Fixed annuity account values were $12,564 million and $8,618 million as of June 30, 2025 and 2024, respectively.
Individual Retirement Strategies sales, net of full surrenders and death benefits, for the three months ended June 30, 2025 decreased in comparison to the prior year period driven by lower sales of indexed variable annuities products, partially offset by lower full surrenders and higher sales of fixed annuities products. Sales, net of full surrenders and death benefits, for the six months ended June 30, 2025 decreased in comparison to the prior year period driven by lower sales of fixed annuities products and higher full surrenders, partially offset by higher sales of indexed variable annuities products.
The increase in Individual Retirement Strategies net account values for the three months, six month and twelve months ended June 30, 2025 reflects market value appreciation, partially offset by net outflows and policy charges on contractholder accounts.
Risks and Risk Mitigants
The following is a summary of certain risks associated with Individual Retirement Strategies’ products, certain strategies in mitigating those risks including any updates to those strategies since the previous year-end, and the related financial results.
Fixed Annuity Risks and Risk Mitigants. The primary risk exposure of our fixed annuity products relates to investment risks we bear for providing customers a minimum guaranteed interest rate or an index-linked interest rate required to be credited to the customer’s account value, which include interest rate fluctuations and/or sustained periods of low interest rates, and credit risk related to the underlying investments. We manage these risk exposures primarily through our investment strategies, inclusive of derivatives, and product design features, which include credit rate resetting subject to the minimum guaranteed interest rate as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals. In addition, a portion of our fixed products has a market value adjustment provision that affords protection of lapse in the case of rising interest rates. We also manage these risk exposures through external reinsurance for certain of our fixed annuity products. For additional information regarding our external reinsurance agreements, see Note 12 to the Unaudited Interim Consolidated Financial Statements.
Indexed Variable Annuity Risks and Risk Mitigants. The primary risk exposure of our indexed variable annuity products relates to the investment risks we bear in order to credit to the customer’s account balance the required crediting rate based on the performance of the elected indices at the end of each term. We manage this risk primarily through our investment strategies, inclusive of derivatives, and product design features, which include credit rate resetting subject to contractual minimums as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals. In
addition, our indexed variable annuity strategies have an interim value provision that provides some protection from lapse in the case of rising interest rates.
Variable Annuity Risks and Risk Mitigants. The primary risk exposures of our variable annuity contracts relate to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including capital markets assumptions such as equity market returns, interest rates and market volatility, along with actuarial assumptions such as contractholder mortality, the timing and amount of annuitization and withdrawals, and contract lapses. For these risk exposures, achievement of our expected returns is subject to the risk that actual experience will differ from the assumptions used in the original pricing of these products. We manage our exposure to certain risks driven by fluctuations in capital markets primarily through a combination of (i) Product Design Features, and (ii) our Asset Liability Management Strategy, as discussed below. We also manage these risk exposures through external reinsurance for certain of our variable annuity products. For additional information regarding our external reinsurance agreements, see Note 12 to the Unaudited Interim Consolidated Financial Statements.
i.Product Design Features:
A portion of the variable annuity contracts that we offered include an automatic rebalancing feature, also referred to as an asset transfer feature. This feature is implemented at the contract level, and transfers assets between certain variable investment sub-accounts selected by the annuity contractholder and, depending on the benefit feature, a fixed-rate account in the general account or a bond fund sub-account within the separate accounts. The objective of the automatic rebalancing feature is to reduce our exposure to equity market risk and market volatility. Other product design features we utilize include, among others, asset allocation restrictions, minimum issuance age requirements and certain limitations on the amount of purchase payments, as well as a required minimum allocation to our general account for certain of our products. In addition, there is diversity in our fee arrangements, as certain fees are primarily based on the benefit guarantee amount, the contractholder account value and/or premiums, which helps preserve certain revenue streams when market fluctuations cause account values to decline.
ii.Asset Liability Management (“ALM”) Strategy (including fixed income instruments and derivatives):
We employ an ALM strategy that utilizes a combination of both traditional fixed income instruments and derivatives to meet expected liabilities associated with our annuity guarantees that under U.S. GAAP are considered MRBs. The MRB liability that we hedge consists of expected living and death benefit claims under various market conditions, which are managed using fixed income instruments, derivatives, or a combination thereof. For our PDI variable annuity, we utilize fixed income instruments to meet expected liabilities. For the portion of our ALM strategy executed with derivatives, we enter into a range of exchange-traded and over-the-counter (“OTC”) equity, interest rate and credit derivatives, including, but not limited to: equity and treasury futures; total return, credit default and interest rate swaps; and options including equity options, swaptions, and floors and caps. The intent of this strategy is to more efficiently manage the capital and liquidity associated with these products while continuing to mitigate fluctuations in net income due to movements in capital markets. To achieve this, we periodically review and recalibrate the ALM strategy by optimizing the mix of derivatives and fixed income instruments to achieve expected outcomes.
Under our ALM strategy, we expect differences in the U.S. GAAP net income impact between the changes in value of the fixed income instruments (either designated as available-for-sale or designated as trading) and derivatives as compared to the changes in the MRB liability these assets support. These differences can be primarily attributed to two distinct areas:
-
Different accounting treatment between liabilities and assets supporting those liabilities. Under U.S. GAAP, changes in the fair value of the derivative instruments and fixed income instruments designated as trading, and MRBs, excluding the changes in the Company’s non-performance risk (“NPR”) spreads, are immediately reflected in net income, while changes in the fair value of fixed income instruments that are designated as available-for-sale are recorded as unrealized gains (losses) in other comprehensive income.
-
General hedge results. For the derivative portion of the ALM strategy, the net hedging impact (the extent to which the changes in value of the hedging instruments offset the change in value of the portion of the MRBs we are hedging) may be impacted by a number of factors, including: cash flow timing differences between our hedging instruments and the corresponding portion of the MRBs we are hedging, basis differences attributable to actual underlying contractholder funds to be hedged versus hedgeable indices, rebalancing costs related to dynamic rebalancing of hedging instruments as markets move, certain elements of the MRBs that may not be hedged (including certain actuarial assumptions), and implied and realized market volatility on the hedge positions relative to the portion of the MRBs we seek to hedge.
Product Specific Risks and Risk Mitigants
As noted above, the risks associated with our Individual Retirement Strategies’ products are mitigated through product design features, including automatic rebalancing, as well as through our ALM strategy and external reinsurance. The following table sets forth the risk management profile of our living benefit guarantees and guaranteed minimum death benefit (“GMDB”) features as of the periods indicated:
| June 30, 2025 | December 31, 2024 | June 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Account Value | % of Total | Account Value | % of Total | Account Value | % of Total | |||||||||||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||||||||||||||
| Living benefit/GMDB features(1): | ||||||||||||||||||||||||||||||||||||||
| Both ALM strategy and automatic rebalancing(2)(3) | $ | 62,571 | 49 | % | $ | 64,856 | 52 | % | $ | 68,434 | 55 | % | ||||||||||||||||||||||||||
| ALM strategy only(3) | 1,713 | 1 | % | 1,782 | 1 | % | 1,891 | 2 | % | |||||||||||||||||||||||||||||
| Automatic rebalancing only | 63 | 0 | % | 77 | 0 | % | 78 | 0 | % | |||||||||||||||||||||||||||||
| External reinsurance(4) | 10,151 | 8 | % | 10,665 | 9 | % | 11,386 | 9 | % | |||||||||||||||||||||||||||||
| PDI | 1,292 | 1 | % | 1,342 | 1 | % | 1,415 | 1 | % | |||||||||||||||||||||||||||||
| Other products | 1,524 | 1 | % | 1,553 | 1 | % | 1,582 | 1 | % | |||||||||||||||||||||||||||||
| Total living benefit/GMDB features | 77,314 | 80,275 | 84,786 | |||||||||||||||||||||||||||||||||||
| GMDB features and other(5) | 50,034 | 40 | % | 45,338 | 36 | % | 39,766 | 32 | % | |||||||||||||||||||||||||||||
| Total variable annuity account value | $ | 127,348 | $ | 125,613 | $ | 124,552 |
(1)All contracts with living benefit guarantees also contain GMDB features, which cover the same insured contract.
(2)Contracts with living benefits that are included in our ALM strategy and that have an automatic rebalancing feature.
(3)Excludes retained PDI which is presented separately within this table.
(4)Represents contracts subject to reinsurance transactions with external counterparties. Includes approximately $8 billion of account values in relation to the PDI reinsurance transaction, and certain Highest Daily Lifetime Income (“HDI”) v.3.0 business for the period April 1, 2015 through December 31, 2016. The HDI contracts with living benefits also have an automatic rebalancing feature. See Note 12 to the Unaudited Interim Consolidated Financial Statements for additional information.
(5)Includes contracts that have a GMDB feature and do not have an automatic rebalancing feature.
Results Excluded from Adjusted Operating Income
The following table provides the net impact to the Unaudited Interim Consolidated Statements of Operations from the portion of Retirement Strategies’ results excluded from adjusted operating income:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions)(1) | |||||||||||||||||||||||
| Results excluded from adjusted operating income: | |||||||||||||||||||||||
| Change in MRBs, excluding changes in the NPR adjustment(2) | $ | 447 | $ | 228 | $ | (205) | $ | 1,796 | |||||||||||||||
| Change in the value of the non-MRB liabilities, excluding changes in the NPR adjustment(3)(4) | 61 | 859 | (228) | 934 | |||||||||||||||||||
| Change in the NPR adjustment, excluding changes recognized in OCI | 9 | (14) | 60 | (65) | |||||||||||||||||||
| Change in the fair value of hedge assets(5) | (863) | (518) | (520) | (1,972) | |||||||||||||||||||
| Other(6) | (100) | (97) | (63) | (157) | |||||||||||||||||||
| Total Individual Retirement Strategies results excluded from adjusted operating income | (446) | 458 | (956) | 536 | |||||||||||||||||||
| Total Institutional Retirement Strategies results excluded from adjusted operating income | (270) | (363) | (365) | (589) | |||||||||||||||||||
| Total results excluded from adjusted operating income | $ | (716) | $ | 95 | $ | (1,321) | $ | (53) |
(1)Positive amounts represent income; negative amounts represent a loss.
(2)Also excludes related hedging gains (losses), which are included within this table in “Change in the fair value of hedge assets.”
(3)The amounts for the three and six months ended June 30, 2024 reflect the correction of an error related to indexed variable and fixed annuity products within the Individual Retirement Strategies business. See above for additional information.
(4)Represents the change in the liability for our fixed and variable indexed annuities, including the fair value of embedded derivative instruments associated with those products, which is measured utilizing a valuation methodology required under U.S. GAAP. The total GAAP liability includes the fair value of all index credits for the current term and all future projected renewals of the policy; however, only changes in the liability associated with the current term elected by the policyholder are included in adjusted operating income, while changes in the liability associated with all future projected renewals of the policy are excluded from adjusted operating income.
(5)Represents the change in fair value of the derivatives utilized to hedge potential claims associated with our variable annuity living and death benefit guarantees.
(6)Includes the changes in duration swaps, deferred policy acquisition costs (“DAC”) amortization, trading gains or losses, and other activity.
For the three and six months ended June 30, 2025, the losses of $716 million and $1,321 million were primarily driven by the net impact of interest rate changes on MRBs and other liabilities, net of hedging, losses on foreign currency hedges, and an unfavorable impact from our annual reviews and update of assumptions and other refinements. The results for the three months ended June 30, 2025 were partially offset by the impact of favorable equity market performance.
Group Insurance
Operating Results
The following table sets forth Group Insurance’s operating results and benefits and administrative expense ratios for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Operating results: | |||||||||||||||||||||||
| Revenues | $ | 1,687 | $ | 1,586 | $ | 3,435 | $ | 3,220 | |||||||||||||||
| Benefits and expenses | 1,562 | 1,465 | 3,221 | 3,054 | |||||||||||||||||||
| Adjusted operating income | 125 | 121 | 214 | 166 | |||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments | (28) | (22) | (49) | (30) | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 97 | $ | 99 | $ | 165 | $ | 136 | |||||||||||||||
| Benefits ratios(1)(2)(3): | |||||||||||||||||||||||
| Group life | 82.4 | % | 85.3 | % | 84.8 | % | 87.7 | % | |||||||||||||||
| Group disability | 74.7 | % | 64.1 | % | 70.3 | % | 67.8 | % | |||||||||||||||
| Total Group Insurance | 80.2 | % | 79.4 | % | 80.8 | % | 82.1 | % | |||||||||||||||
| Administrative expense ratios(2)(4)(5): | |||||||||||||||||||||||
| Group life | 11.5 | % | 11.4 | % | 11.1 | % | 11.4 | % | |||||||||||||||
| Group disability | 24.8 | % | 25.0 | % | 25.3 | % | 24.6 | % | |||||||||||||||
| Total Group Insurance | 15.2 | % | 15.1 | % | 15.0 | % | 15.1 | % |
(1)Ratio of policyholder benefits to earned premiums plus policy charges and fee income.
(2)The benefits and administrative expense ratios are measures used to evaluate profitability and efficiency.
(3)Benefit ratios reflect the impact of our annual reviews and update of assumptions and other refinements. Excluding these impacts, the group life, group disability and total Group Insurance benefit ratios were 83.1%, 75.3% and 80.9% for the three months ended June 30, 2025, respectively; 85.2%, 70.6% and 81.1% for the six months ended June 30, 2025, respectively; 85.3%, 70.4% and 81.1% for the three months ended June 30, 2024, respectively; and 87.7%, 70.9% and 82.9% for the six months ended June 30, 2024, respectively.
(4)Ratio of operating and variable expenses (excluding commissions) to net premiums plus policy charges and fee income, excluding third-party administrator pass-through fees and expenses.
(5)Prior period ratios have been updated to conform to current period presentation.
Adjusted Operating Income
Three Month Comparison. Adjusted operating income increased $4 million, including a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for the second quarter of 2025 and 2024 included net benefits from this update of $11 million and $25 million, respectively. Excluding this item, adjusted operating income increased $18 million, primarily reflecting higher underwriting results in our group life business driven by
more favorable mortality experience on non-experience-rated contracts. This variance was partially offset by lower underwriting results in our group disability business driven by less favorable claims experience on long-term disability contracts, as well as higher variable and operating expenses, largely supporting business growth.
Six Month Comparison. Adjusted operating income increased $48 million, including a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding this item, adjusted operating income increased $62 million, primarily reflecting higher underwriting results in our group life business, driven by more favorable mortality experience on non-experience-rated contracts and a positive impact from a reserve refinement for certain experience-rated contracts. Also contributing to the increase were higher underwriting results in our group disability business driven by more favorable claims experience on long-term disability contracts. These favorable variances were partially offset by higher variable and operating expenses, largely supporting business growth.
Revenues, Benefits and Expenses
Three Month Comparison. Revenues increased $101 million primarily reflecting higher premiums and policy charges and fee income, driven by business growth in our group life and group disability businesses.
Benefits and expenses increased $97 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $83 million. The increase primarily reflected higher policyholders’ benefits and changes in reserves, as well as higher general and administrative expenses, both largely driven by business growth, partially offset by more favorable mortality experience on non-experience-rated contracts in our group life business.
Six Month Comparison. Revenues increased $215 million primarily reflecting higher premiums and policy charges and fee income, driven by business growth in our group life and group disability businesses, as well as a positive impact from a reserve refinement for certain experience-rated contracts.
Benefits and expenses increased $167 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $153 million. The increase primarily reflected higher policyholders’ benefits and changes in reserves, as well as higher general and administrative expenses, both largely driven by business growth, partially offset by more favorable mortality experience on non-experience-rated contracts in our group life business and more favorable claims experience on long-term disability contracts.
Sales Results
The following table sets forth Group Insurance’s annualized new business premiums, as defined under “—Segment Measures” above, for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Annualized new business premiums(1): | |||||||||||||||||||||||
| Group life | $ | 35 | $ | 27 | $ | 260 | $ | 216 | |||||||||||||||
| Group disability | 42 | 19 | 217 | 208 | |||||||||||||||||||
| Total | $ | 77 | $ | 46 | $ | 477 | $ | 424 |
(1)Amounts exclude new premiums resulting from rate changes on existing policies, from additional coverage under our Servicemembers’ Group Life Insurance contract and from excess premiums on group universal life insurance that build cash value but do not purchase face amounts.
Total annualized new business premiums for the three months ended June 30, 2025 increased $31 million compared to the prior year period, primarily driven by higher sales in the National market segment in both our group disability and group life businesses.
Total annualized new business premiums for the six months ended June 30, 2025 increased $53 million compared to the prior year period, primarily driven by higher sales in the Premier market segment in both our group life and group disability businesses, partially offset by lower sales in the National market segment in our group disability business, including lower supplemental health product sales, primarily reflecting the absence of outsized sales which occurred in the prior year period.
Individual Life
Business Update
- In August 2024, the Company entered into an agreement with Wilton Re to reinsure certain guaranteed universal life policies issued by Pruco Life and PLNJ. These policies represented approximately 40% of the Company’s remaining statutory reserves on its in-force guaranteed universal life block of business, following the close of the reinsurance transaction with Somerset Re in the first quarter of 2024. The transaction was completed in December 2024 with an effective date of October 1, 2024. These two external reinsurance agreements reduced, in aggregate, the Company’s previously established statutory reserves on its in-force guaranteed universal life block of business by approximately 60%. See Note 12 to the Unaudited Interim Consolidated Financial Statements for additional information regarding these transactions.
Operating Results
The following table sets forth Individual Life’s operating results for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Operating results: | |||||||||||||||||||||||
| Revenues | $ | 1,493 | $ | 1,529 | $ | 3,008 | $ | 3,109 | |||||||||||||||
| Benefits and expenses | 1,385 | 1,616 | 2,934 | 3,317 | |||||||||||||||||||
| Adjusted operating income | 108 | (87) | 74 | (208) | |||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments | (32) | (12) | (103) | (93) | |||||||||||||||||||
| Market experience updates | 6 | (14) | 10 | (69) | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 82 | $ | (113) | $ | (19) | $ | (370) |
Adjusted Operating Income
Three Month Comparison. Adjusted operating income increased $195 million, including a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for the second quarter of 2025 included a net benefit of $58 million driven by impacts related to assumptions for mortality, policyholder behavior and other reserve refinements, while 2024 included a net charge of $98 million driven by unfavorable impacts related to assumptions for policyholder behavior. Excluding this item, adjusted operating income increased $39 million, primarily driven by higher underwriting results reflecting the ongoing favorable impact from the reinsurance transaction with Wilton Re and favorable mortality experience in the current quarter. This variance was partially offset by lower net investment spread results reflecting the absence of income on assets related to the reinsurance transaction with Wilton Re, and lower income on non-coupon investments, partially offset by lower financing costs resulting from the reinsurance transactions discussed above and the consolidation of our internal captive reinsurance arrangements in the fourth quarter of 2024.
Six Month Comparison. Adjusted operating income increased $282 million, including a favorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding this item adjusted operating income increased $126 million, primarily driven by higher underwriting results reflecting the ongoing favorable impact from the reinsurance transaction with Wilton Re, partially offset by unfavorable mortality experience in the current period. Also contributing to the increase were lower expenses reflecting the absence of costs associated with the closing of the reinsurance transaction with Somerset Re in the first quarter of 2024. These variances were partially offset by lower net investment spread results reflecting the absence of income on assets related to the reinsurance transaction with Wilton Re, and lower income on non-coupon investments, partially offset by lower financing costs resulting from the reinsurance transactions discussed above and the consolidation of our internal captive reinsurance arrangements in the fourth quarter of 2024.
Revenues, Benefits and Expenses
Three Month Comparison. Revenues decreased $36 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $67 million, primarily driven by lower investment results and lower policy charges and fee income, reflecting the impacts from the reinsurance transaction with Wilton Re, partially offset by lower investment losses from derivative settlements.
Benefits and expenses decreased $231 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $106 million, primarily driven by lower policyholders’ benefits, including changes in reserves, and lower interest credited on policyholders’ account balances as a result of the reinsurance transaction with Wilton Re and favorable mortality experience.
Six Month Comparison. Revenues decreased $101 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $132 million, primarily driven by lower investment results reflecting the absence of income on assets related to the reinsurance transaction with Wilton Re, partially offset by lower investment losses from derivative settlements and higher policy charges and fee income due to business growth and favorable equity market performance.
Benefits and expenses decreased $383 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $258 million, primarily driven by lower policyholders’ benefits, including changes in reserves, lower interest credited on policyholders’ account balances, as well as lower interest expense as a result of the reinsurance transaction with Wilton Re. Also contributing to the decrease were lower general and administrative expenses due to the absence of costs associated with the closing of the reinsurance transaction with Somerset Re in the first quarter of 2024. These variances were partially offset by unfavorable changes in estimates of the liability for future policy benefits.
Sales Results
The following table sets forth Individual Life’s annualized new business premiums, as defined under “—Results of Operations—Segment Measures” above, by distribution channel and product, for the periods indicated:
| Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||
| Prudential Advisors | Third- Party | Total | Prudential Advisors | Third- Party | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Variable Life | $ | 38 | $ | 122 | $ | 160 | $ | 38 | $ | 109 | $ | 147 | |||||||||||||||||||||||
| Term Life | 4 | 35 | 39 | 5 | 29 | 34 | |||||||||||||||||||||||||||||
| Universal Life | 1 | 23 | 24 | 1 | 21 | 22 | |||||||||||||||||||||||||||||
| Total | $ | 43 | $ | 180 | $ | 223 | $ | 44 | $ | 159 | $ | 203 | |||||||||||||||||||||||
| Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||
| Prudential Advisors | Third- Party | Total | Prudential Advisors | Third- Party | Total | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Variable Life | $ | 71 | $ | 243 | $ | 314 | $ | 68 | $ | 195 | $ | 263 | |||||||||||||||||||||||
| Term Life | 8 | 63 | 71 | 9 | 56 | 65 | |||||||||||||||||||||||||||||
| Universal Life | 2 | 46 | 48 | 2 | 40 | 42 | |||||||||||||||||||||||||||||
| Total | $ | 81 | $ | 352 | $ | 433 | $ | 79 | $ | 291 | $ | 370 |
Total annualized new business premiums for the three and six months ended June 30, 2025 increased $20 million and $63 million, respectively, primarily reflecting higher third-party sales across all products.
International Businesses
Business Updates
-
Effective in the first quarter of 2025, consistent with changes to the Company’s internal management structure, our International Businesses are reflected as a single operating and reportable segment, which is how the CODM now assesses its performance and allocates resources. Prior to the first quarter of 2025, our International Businesses consisted of the Life Planner and Gibraltar Life and Other operating segments, each of which was a reportable segment under U.S. GAAP. The change has been applied retrospectively and did not have any impact on the Company’s Unaudited Interim Consolidated Financial Statements contained herein or to any previously issued financial statements.
-
In December 2024, the Company entered into an agreement with Prismic Life Reinsurance International, Ltd. (“Prismic Re International”), a wholly-owned subsidiary of Prismic, to reinsure approximately $7 billion of reserves for certain USD-denominated Japanese whole life policies originated by the Company’s Japanese affiliates. The transaction was completed in March 2025 with an effective date of March 1, 2025. See Note 12 to the Unaudited Interim Consolidated Financial Statements for additional information.
Operating Results
The results of our International Businesses’ operations are translated on the basis of weighted average monthly exchange rates, inclusive of the effects of the intercompany arrangement discussed in “—Results of Operations—Impact of Foreign Currency Exchange Rates” above. To provide a better understanding of operating performance within the International Businesses, where indicated below, we have analyzed our results of operations excluding the effect of the year over year change in foreign currency exchange rates. Our results of operations, excluding the effect of foreign currency fluctuations, were derived by translating foreign currencies to USD at uniform exchange rates for all periods presented, including for constant dollar information discussed below. For our Japan operations, we used an exchange rate of 143 yen per USD. In addition, for constant dollar information discussed below, activity denominated in USD is generally reported based on the amounts as transacted in USD. Annualized new business premiums presented on a constant exchange rate basis in the “Sales Results” section below reflect translation based on these same uniform exchange rates.
The following table sets forth the International Businesses’ operating results for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Operating results: | |||||||||||||||||||||||
| Revenues | $ | 4,399 | $ | 4,512 | $ | 9,137 | $ | 9,225 | |||||||||||||||
| Benefits and expenses | 3,638 | 3,810 | 7,528 | 7,627 | |||||||||||||||||||
| Adjusted operating income | 761 | 702 | 1,609 | 1,598 | |||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments | (55) | (256) | 147 | (38) | |||||||||||||||||||
| Change in value of market risk benefits, net of related hedging gains (losses) | 3 | 9 | 9 | 12 | |||||||||||||||||||
| Market experience updates | 38 | 58 | 75 | 81 | |||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests | (42) | (13) | (71) | (49) | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | 705 | $ | 500 | $ | 1,769 | $ | 1,604 |
Adjusted Operating Income
Three Month Comparison. Adjusted operating income increased $59 million, including an unfavorable comparative net impact of $9 million from currency fluctuations. Both periods also include the impact of our annual reviews and update of assumptions and other refinements, which resulted in a net charge of $2 million in the second quarter of 2025, compared to a net charge of $55 million in the second quarter of 2024.
Excluding these items, adjusted operating income increased $15 million, primarily reflecting higher underwriting results, driven by business growth in Brazil, and higher earnings on joint ventures and other operating entities. Also contributing to the increase were higher net investment spread results, primarily driven by an increase in income on non-coupon investments, partially offset by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. These variances were partially offset by lower surrender charges, as well as higher variable expenses, primarily due to business growth in Brazil, and higher operating expenses.
Six Month Comparison. Adjusted operating income increased $11 million, including an unfavorable comparative net impact of $17 million from currency fluctuations. Excluding the impact of currency fluctuations, as well as the impact from our annual reviews and update of assumptions and other refinements as discussed above, adjusted operating income decreased $25 million, primarily reflecting lower surrender charges, higher variable expenses due to business growth in Brazil, and lower net investment spread results, driven by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. These variances were partially offset by higher underwriting results, primarily driven by business growth in Brazil.
Revenues, Benefits and Expenses
Three Month Comparison. Revenues decreased $113 million, including a favorable comparative net impact of $63 million from currency fluctuations, and an unfavorable comparative net impact of $207 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues increased $31 million, primarily reflecting higher income on non-coupon investments and higher earnings from joint ventures and other operating entities. Net investment income also increased, driven by higher reinvestment rates and growth in both variable and investment products in Japan, partially offset by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. Lower premiums attributable to the decline of traditional life insurance business in force in Japan were partially offset by business growth in Brazil.
Benefits and expenses decreased $172 million, including an unfavorable comparative net impact of $72 million from currency fluctuations and a favorable comparative net impact of $260 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $16 million, primarily reflecting higher interest credited to policyholders’ account balances, reflecting growth in both variable and investment products in Japan, as discussed above, and higher general and administrative expenses, driven by business growth in Brazil. These variances were partially offset by lower policyholders’ benefits, including changes in reserves, due to the decline of traditional life insurance business in force in Japan, as discussed above, as well as favorable changes in estimates of the liability for future policy benefits.
Six Month Comparison. Revenues decreased $88 million, including an unfavorable comparative net impact of $36 million from currency fluctuations and the unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding these items, revenues increased $155 million, primarily reflecting higher net investment income, driven by higher reinvestment rates and growth in both variable and investment products in Japan, partially offset by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. Also contributing to the increases were higher income on non-coupon investments and higher earnings from joint ventures and other operating entities. Lower premiums attributable to the decline of traditional life insurance business in force in Japan were partially offset by the absence of the impact from higher ceded reinsurance in the prior year period and business growth in Brazil.
Benefits and expenses decreased $99 million, including a favorable comparative net impact of $19 million from currency fluctuations and the net favorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding these items, benefits and expenses increased $180 million, primarily reflecting higher interest credited to policyholders’ account balances, reflecting growth in both variable and investment products in Japan, as discussed above, and higher general and administrative expenses, driven by business growth in Brazil. Also contributing to the increases were higher policyholders’ benefits, including changes in reserves, reflecting the absence of the impact from higher ceded reinsurance in the prior year period, partially offset by the decline of traditional life insurance business in force in Japan, as discussed above. These variances were partially offset by favorable changes in estimates of the liability for future policy benefits.
Sales Results
The following table sets forth annualized new business premiums, as defined under “—Results of Operations—Segment Measures” above, on an actual and constant exchange rate basis for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Annualized new business premiums: | |||||||||||||||||||||||
| On an actual exchange rate basis | $ | 541 | $ | 519 | $ | 1,117 | $ | 1,036 | |||||||||||||||
| On a constant exchange rate basis | $ | 541 | $ | 521 | $ | 1,127 | $ | 1,029 |
The amount of annualized new business premiums and the sales mix, in terms of types and currency denomination of products, for any given period can be significantly impacted by several factors, including but not limited to: the addition of new products, discontinuation of existing products, changes in credited interest rates for certain products and other product modifications, changes in premium rates, changes in interest rates or fluctuations in currency markets, changes in tax laws, changes in life insurance regulations or changes in the competitive environment. Sales volume may increase or decrease prior to certain of these changes becoming effective, and then fluctuate in the other direction following such changes.
Our diverse product portfolio in Japan, in terms of currency mix and premium payment structure, allows us to adapt to changing market and competitive dynamics, including the low interest rate environment. We regularly examine our product offerings and their related profitability and reprice or discontinue sales of certain products that do not meet our profit expectations. The impact of these actions, coupled with the introduction of certain new products, has generally resulted in higher sales of products denominated in USD relative to products denominated in other currencies; however, more recently we have experienced an increase in sales of our yen-denominated product offerings as a result of growing demand for these products.
The table below presents annualized new business premiums on a constant exchange rate basis, by product category and distribution channel, for the periods indicated:
| Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life | Accident & Health | Retirement (1) | Investment Contracts (2) | Total | Life | Accident & Health | Retirement (1) | Investment Contracts (2) | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life Planner | $ | 84 | $ | 20 | $ | 63 | $ | 47 | $ | 214 | $ | 79 | $ | 17 | $ | 64 | $ | 38 | $ | 198 | |||||||||||||||||||||||||||||||||||||||
| Life Consultants | 21 | 5 | 16 | 109 | 151 | 22 | 4 | 16 | 80 | 122 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Banks | 24 | 2 | 0 | 67 | 93 | 35 | 3 | 0 | 72 | 110 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Independent Agency and Other | 25 | 6 | 21 | 31 | 83 | 20 | 5 | 27 | 39 | 91 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 154 | $ | 33 | $ | 100 | $ | 254 | $ | 541 | $ | 156 | $ | 29 | $ | 107 | $ | 229 | $ | 521 |
(1)Includes retirement income, endowment and savings variable life.
(2)Includes single-payment market value adjusted investment contracts, single-payment whole life products and recurring-payment annuity products.
Three Month Comparison. Annualized new business premiums, on a constant exchange rate basis, increased $20 million. Life Consultant sales increased $29 million, primarily reflecting higher investment contract product sales, and Life Planner sales increased $16 million, primarily reflecting higher investment contract product sales in Japan, and higher life product sales in Brazil. Bank channel sales decreased $17 million, primarily reflecting lower life and investment contract product sales, and Independent Agency and Other sales decreased $8 million, primarily reflecting lower investment contract and retirement product sales, partially offset by higher life product sales.
| Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life | Accident & Health | Retirement (1) | Investment Contracts (2) | Total | Life | Accident & Health | Retirement (1) | Investment Contracts (2) | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life Planner | $ | 189 | $ | 39 | $ | 137 | $ | 114 | $ | 479 | $ | 171 | $ | 33 | $ | 141 | $ | 87 | $ | 432 | |||||||||||||||||||||||||||||||||||||||
| Life Consultants | 43 | 9 | 39 | 192 | 283 | 50 | 8 | 25 | 145 | 228 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Banks | 49 | 4 | 0 | 135 | 188 | 72 | 6 | 0 | 126 | 204 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Independent Agency and Other | 61 | 12 | 44 | 60 | 177 | 40 | 8 | 45 | 72 | 165 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 342 | $ | 64 | $ | 220 | $ | 501 | $ | 1,127 | $ | 333 | $ | 55 | $ | 211 | $ | 430 | $ | 1,029 |
(1)Includes retirement income, endowment and savings variable life.
(2)Includes single-payment market value adjusted investment contracts, single-payment whole life products and recurring-payment annuity products.
Six Month Comparison. Annualized new business premiums, on a constant exchange rate basis, increased $98 million. Life Consultant sales increased $55 million, primarily reflecting higher investment contract and retirement product sales, partially offset by lower life product sales. Life Planner sales increased $47 million, primarily driven by higher investment contract and life product sales in Japan, and higher life product sales in Brazil. Independent Agency and Other sales increased $12 million, primarily reflecting higher life product sales, partially offset by lower investment contract sales. Bank channel sales decreased $16 million, primarily reflecting lower life product sales, partially offset by higher investment contracts product sales.
Corporate and Other
Operating Results
Corporate and Other includes corporate operations, after allocations to our business segments, and Divested and Run-off Businesses other than those that qualify for “discontinued operations” accounting treatment under U.S. GAAP. The following table sets forth Corporate and Other’s operating results for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Operating results: | |||||||||||||||||||||||
| Investment income | $ | 67 | $ | 38 | $ | 122 | $ | 93 | |||||||||||||||
| Interest expense on debt | (238) | (213) | (474) | (418) | |||||||||||||||||||
| Pension and employee benefits | 107 | 97 | 209 | 191 | |||||||||||||||||||
| Other corporate activities | (216) | (293) | (552) | (672) | |||||||||||||||||||
| Adjusted operating income | (280) | (371) | (695) | (806) | |||||||||||||||||||
| Realized investment gains (losses), net, and related charges and adjustments | (120) | 64 | (227) | 141 | |||||||||||||||||||
| Market experience updates | 5 | 3 | 3 | 3 | |||||||||||||||||||
| Divested and Run-off Businesses | 12 | 38 | (39) | 3 | |||||||||||||||||||
| Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests | (19) | (37) | 2 | (40) | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | (402) | $ | (303) | $ | (956) | $ | (699) |
Three Month Comparison. The loss from Corporate and Other operations, on an adjusted operating income basis, decreased $91 million. Net charges from other corporate activities were lower by $77 million, primarily driven by lower net costs related to corporate initiatives and lower expenses related to an update of internal expense allocations. Investment income results increased $29 million, primarily driven by higher income on non-coupon investments. Pension and employee benefits results were favorable by $10 million primarily reflecting higher earnings from our pension and post-retirement plans from higher expected returns on plan assets and lower service costs. Interest expense on debt increased $25 million, largely reflecting the absence of income offsets from the termination of an affiliated financing agreement resulting from the reinsurance transactions in Individual Life.
Six Month Comparison. The loss from Corporate and Other operations, on an adjusted operating income basis, decreased $111 million, primarily driven by lower net charges from other corporate activities of $120 million reflecting lower net costs related to long-term compensation plans and other corporate initiatives, and lower expenses related to an update of internal expense allocations, partially offset by higher technology costs. Investment income results increased $29 million, primarily driven by higher income on non-coupon investments. Pension and employee benefits results were favorable by $18 million, primarily reflecting higher earnings from our pension and post-retirement plans from higher expected returns on plan assets and lower service costs. Interest expense on debt increased $56 million, largely reflecting the absence of income offsets from the termination of an affiliated financing agreement resulting from the reinsurance transactions in Individual Life.
Divested and Run-off Businesses
Divested and Run-off Businesses Included in Corporate and Other
Income from our Divested and Run-off Businesses includes results from several businesses that have been or will be sold or exited, including businesses that have been placed in wind down status that do not qualify for “discontinued operations” accounting treatment under U.S. GAAP. The results of these Divested and Run-off Businesses are reflected in our Corporate and Other operations but are excluded from adjusted operating income. A summary of the results of the Divested and Run-off Businesses reflected in our Corporate and Other operations is as follows for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Long-Term Care | $ | 83 | $ | 152 | $ | 46 | $ | 286 | |||||||||||||||
| Other | (71) | (114) | (85) | (283) | |||||||||||||||||||
| Total Divested and Run-off Businesses income (loss) excluded from adjusted operating income | $ | 12 | $ | 38 | $ | (39) | $ | 3 |
Long-Term Care
Three Month Comparison. Results decreased $69 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for the second quarter of 2025 included a $7 million net charge from these updates, while results for 2024 included a $111 million net benefit from these updates. Excluding this item, results increased $49 million compared to the prior year period, primarily reflecting more favorable impacts from changes in the market value of equity securities, partially offset by higher net realized investment losses from derivatives.
Six Month Comparison. Results decreased $240 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding this item, results decreased $122 million compared to the prior year period, primarily reflecting less favorable impacts from changes in the market value of equity securities, and higher net realized investment losses from derivatives and credit impairments.
Other Divested and Run-off Businesses
Results for the second quarter of 2025 increased $43 million, primarily reflecting the absence of impairments and charges related to management’s decision to exit PGIM Wadhwani LLP (“PGIMW”) and its subsequent classification as a divested business in the second quarter of 2024, as well as less unfavorable results related to Assurance IQ. Results for the first six months of 2025 increased $198 million, primarily reflecting the absence of impairments and charges related to management’s decisions to exit Assurance IQ and PGIMW (and their subsequent classifications as divested businesses in the first and second quarter of 2024, respectively), as well as favorable results related to the Full Service Retirement business.
Closed Block Division
The Closed Block division includes certain in-force traditional domestic participating life insurance and annuity products and assets that are used for the payment of benefits and policyholder dividends on these policies (collectively the “Closed Block”), as well as certain related assets and liabilities. We no longer offer these traditional domestic participating policies. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.
Each year, the Board of Directors of The Prudential Insurance Company of America (“PICA”) determines the dividends payable on participating policies for the following year based on the experience of the Closed Block, including investment income, net realized and unrealized investment gains (losses), mortality experience and other factors. Although the Closed Block experience for dividend action decisions is based upon statutory results, at the time the Closed Block was established, we developed, as required by U.S. GAAP, an actuarial calculation of the timing of the maximum future earnings from the policies included in the Closed Block. Actual cumulative earnings, as required by U.S. GAAP, reflect the recognition of realized investment gains and losses in the current period, as well as changes in assets and related liabilities that support the Closed Block policies. If actual cumulative earnings in any given period are greater than the cumulative earnings we expected, we record this excess as a policyholder dividend obligation. Additionally, any accumulated net unrealized investment gains that have arisen subsequent to the establishment of the Closed Block are reflected as a policyholder dividend obligation, with a
corresponding amount reported in AOCI, while any accumulated net unrealized investment losses are reflected as a reduction of the policyholder dividend obligation, to the extent the overall policyholder dividend obligation is otherwise positive.
We will subsequently pay this excess to Closed Block policyholders as an additional dividend unless it is otherwise offset by future Closed Block performance that is less favorable than we originally expected. The policyholder dividends we charge to expense within the Closed Block division will include any change in our policyholder dividend obligation that we recognize for the excess of actual cumulative earnings in any given period over the cumulative earnings we expected in addition to the actual policyholder dividends declared by the Board of Directors of PICA. If actual cumulative earnings fall below expected cumulative earnings in future periods, earnings volatility in the Closed Block division, which is primarily due to changes in investment results, may not be offset by changes in the cumulative earnings policyholder dividend obligation. For a discussion of the Closed Block division’s realized investment gains (losses), net, see “—General Account Investments.”
As of June 30, 2025, the excess of actual cumulative earnings over the expected cumulative earnings was $1,729 million, which was recorded as a policyholder dividend obligation. Actual cumulative earnings, as required by U.S. GAAP, reflect the recognition of realized investment gains and losses in the current period, as well as changes in assets and related liabilities that support the Closed Block policies. As of June 30, 2025, net unrealized investment losses have arisen subsequent to the establishment of the Closed Block due to the impacts of higher interest rates on the market value of fixed maturities available-for-sale. The impact of these net unrealized investment losses has been reflected as a decrease to the policyholder dividend obligation of $1,514 million at June 30, 2025, with a corresponding amount reported in AOCI.
Operating Results
The following table sets forth the Closed Block division’s results for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| U.S. GAAP results: | |||||||||||||||||||||||
| Revenues | $ | 947 | $ | 811 | $ | 1,767 | $ | 1,773 | |||||||||||||||
| Benefits and expenses | 965 | 871 | 1,807 | 1,836 | |||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities | $ | (18) | $ | (60) | $ | (40) | $ | (63) |
Income (loss) Before Income Taxes and Equity in Earnings of Joint Ventures and Other Operating Entities
Three Month Comparison. Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities increased $42 million. Net investment activity results increased, primarily reflecting higher other income driven by favorable changes in the market value of equity and fixed maturity securities. This variance was partially offset by higher realized investment losses driven by unfavorable changes in the market value of derivatives, partially offset by lower losses from the sale of fixed maturity securities. As a result of these and other factors, a $122 million reduction in the policyholder dividend obligation was recorded in the second quarter of 2025, compared to a $180 million reduction in the second quarter of 2024.
Six Month Comparison. Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities increased $23 million. Net investment activity results decreased, primarily reflecting lower other income driven by unfavorable changes in the market value of equity securities, partially offset by fixed maturity securities, as well as lower net investment income due to the run-off of the portfolio. These variances were partially offset by lower realized investment losses from the sale of fixed income securities, partially offset by unfavorable changes in the market value of derivatives. As a result of these and other factors, a $367 million reduction in the policyholder dividend obligation was recorded in the first six months of 2025, compared to a $246 million reduction in the first six months of 2024.
Revenues, Benefits and Expenses
Three Month Comparison. Revenues increased $136 million primarily driven by an increase in other income, partially offset by higher realized investment losses, as discussed above.
Benefits and expenses increased $94 million primarily driven by an increase in dividends to policyholders, reflecting a lower reduction in the policyholder dividend obligation due to changes in cumulative earnings and other factors, as discussed above.
Six Month Comparison. Revenues decreased $6 million primarily driven by a decrease in other income and net investment income, partially offset by lower realized investment losses, as discussed above.
Benefits and expenses decreased $29 million primarily driven by a decrease in dividends to policyholders, reflecting a higher reduction in the policyholder dividend obligation due to changes in cumulative earnings and other factors, as discussed above.
Income Taxes
For information regarding income taxes, see Note 14 to the Unaudited Interim Consolidated Financial Statements.
General Account Investments
Portfolio Composition
Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, policy loans and non-coupon investments, which include equity securities and other invested assets such as limited partnerships and limited liability companies (“LPs/LLCs”), real estate held through direct ownership, derivative instruments and seed money investments in separate accounts. The composition of our general account reflects, within the discipline provided by our risk management approach, our need for competitive results and the selection of diverse investment alternatives available primarily through our PGIM segment. The size of our portfolio enables us to invest in asset classes that may be unavailable to the typical investor.
A portion of our general account investments supports customer liabilities reinsured under coinsurance with funds withheld and modified coinsurance arrangements. With these reinsurance arrangements, we retain legal ownership of the assets (collectively, the “Funds Withheld”) which remain on our Unaudited Interim Consolidated Statements of Financial Position, while the economic benefits and investment risk associated with the Funds Withheld assets ultimately inure to the reinsurer. The composition of the Funds Withheld assets is subject to investment guidelines specific to the reinsurance treaties, which may differ from the investment guidelines we set for our general account, excluding Funds Withheld. See Note 12 to the Unaudited Interim Consolidated Financial Statements for additional information regarding our material reinsurance agreements.
The following tables set forth the composition of our general account investment portfolio apportioned between PFI excluding the Closed Block division and Funds Withheld, the Closed Block division, and Funds Withheld, as of the dates indicated:
| June 30, 2025 | ||||||||||||||||||||||||||||||||
| PFI Excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | Total | |||||||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||||||||
| Fixed maturities: | ||||||||||||||||||||||||||||||||
| Public, available-for-sale, at fair value | $ | 214,565 | 54.9 | % | $ | 19,065 | $ | 4,371 | $ | 238,001 | ||||||||||||||||||||||
| Private, available-for-sale, at fair value | 76,665 | 19.6 | 10,250 | 2,770 | 89,685 | |||||||||||||||||||||||||||
| Fixed maturities, trading, at fair value | 4,873 | 1.3 | 647 | 8,363 | 13,883 | |||||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities, at fair value | 4,282 | 1.1 | 0 | 0 | 4,282 | |||||||||||||||||||||||||||
| Equity securities, at fair value | 5,553 | 1.4 | 1,475 | 0 | 7,028 | |||||||||||||||||||||||||||
| Commercial mortgage and other loans, at book value, net of allowance | 54,612 | 14.0 | 7,628 | 263 | 62,503 | |||||||||||||||||||||||||||
| Policy loans, at outstanding balance | 6,666 | 1.7 | 3,280 | 0 | 9,946 | |||||||||||||||||||||||||||
| Other invested assets, net of allowance(1) | 17,744 | 4.5 | 4,521 | 1,800 | 24,065 | |||||||||||||||||||||||||||
| Short-term investments, net of allowance | 6,001 | 1.5 | 346 | 8 | 6,355 | |||||||||||||||||||||||||||
| Total general account investments | 390,961 | 100.0 | % | 47,212 | 17,575 | 455,748 | ||||||||||||||||||||||||||
| Invested assets of other entities and operations(2) | 4,833 | 0 | 0 | 4,833 | ||||||||||||||||||||||||||||
| Total investments | $ | 395,794 | $ | 47,212 | $ | 17,575 | $ | 460,581 |
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| PFI Excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | Total | |||||||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||||||||
| Fixed maturities: | ||||||||||||||||||||||||||||||||
| Public, available-for-sale, at fair value | $ | 206,078 | 54.9 | % | $ | 19,103 | $ | 4,837 | $ | 230,018 | ||||||||||||||||||||||
| Private, available-for-sale, at fair value | 68,759 | 18.3 | 9,625 | 2,795 | 81,179 | |||||||||||||||||||||||||||
| Fixed maturities, trading, at fair value | 4,068 | 1.1 | 647 | 7,732 | 12,447 | |||||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities, at fair value | 3,707 | 1.0 | 0 | 0 | 3,707 | |||||||||||||||||||||||||||
| Equity securities, at fair value | 7,254 | 1.9 | 1,642 | 0 | 8,896 | |||||||||||||||||||||||||||
| Commercial mortgage and other loans, at book value, net of allowance | 53,987 | 14.4 | 7,652 | 233 | 61,872 | |||||||||||||||||||||||||||
| Policy loans, at outstanding balance | 6,447 | 1.7 | 3,348 | 0 | 9,795 | |||||||||||||||||||||||||||
| Other invested assets, net of allowance(1) | 16,781 | 4.4 | 4,929 | 1,867 | 23,577 | |||||||||||||||||||||||||||
| Short-term investments, net of allowance | 8,493 | 2.3 | 520 | 43 | 9,056 | |||||||||||||||||||||||||||
| Total general account investments | 375,574 | 100.0 | % | 47,466 | 17,507 | 440,547 | ||||||||||||||||||||||||||
| Invested assets of other entities and operations(2) | 4,233 | 0 | 0 | 4,233 | ||||||||||||||||||||||||||||
| Total investments | $ | 379,807 | $ | 47,466 | $ | 17,507 | $ | 444,780 |
(1) Other invested assets consists of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments. For additional information regarding these investments, see “—Other Invested Assets” below.
(2)Includes invested assets of our investment management and derivative operations. Excludes assets of our investment management operations that are managed for third parties and those assets classified as “Separate account assets” on our Unaudited Interim Consolidated Statements of Financial Position. For additional information regarding these investments, see “—Invested Assets of Other Entities and Operations” below.
The increase in general account investments attributable to PFI excluding the Closed Block division and Funds Withheld in the first six months of 2025 was primarily due to net business inflows, the reinvestment of net investment income and the translation impact of the U.S. dollar weakening against the yen, partially offset by assets transferred due to the Prismic Re International transaction. For information regarding the methodology used in determining the fair value of our fixed maturities, see Note 6 to the Unaudited Interim Consolidated Financial Statements.
As of June 30, 2025 and December 31, 2024, 41% and 42%, respectively, of our general account investments attributable to PFI excluding the Closed Block division and Funds Withheld related to our Japanese insurance operations. The following table sets forth the composition of the investments of our Japanese insurance operations’ general account, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | |||||||||||||
| Japanese Insurance Operations | ||||||||||||||
| (in millions) | ||||||||||||||
| Fixed maturities: | ||||||||||||||
| Public, available-for-sale, at fair value | $ | 104,492 | $ | 102,904 | ||||||||||
| Private, available-for-sale, at fair value | 22,152 | 21,603 | ||||||||||||
| Fixed maturities, trading, at fair value | 488 | 461 | ||||||||||||
| Assets supporting experience-rated contractholder liabilities, at fair value | 4,282 | 3,707 | ||||||||||||
| Equity securities, at fair value | 1,843 | 1,845 | ||||||||||||
| Commercial mortgage and other loans, at book value, net of allowance | 15,589 | 16,137 | ||||||||||||
| Policy loans, at outstanding balance | 2,760 | 2,608 | ||||||||||||
| Other invested assets(1) | 6,302 | 6,588 | ||||||||||||
| Short-term investments, net of allowance | 2,191 | 2,324 | ||||||||||||
| Total Japanese general account investments | $ | 160,099 | $ | 158,177 |
(1)Other invested assets consists of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments.
The increase in general account investments related to our Japanese insurance operations in the first six months of 2025 was primarily due to the translation impact of the U.S. dollar weakening against the yen, net business inflows and the reinvestment of net investment income, partially offset by assets transferred due to the Prismic Re International transaction and an increase in Japan interest rates.
As of June 30, 2025, our Japanese insurance operations had $90.7 billion, at carrying value, of investments denominated in U.S. dollars, including $1.2 billion that were hedged to yen through third-party derivative contracts and $82.3 billion that support liabilities denominated in U.S. dollars, with the remainder constituting part of the hedging of foreign currency exchange rate exposure to U.S. dollar-equivalent equity. As of December 31, 2024, our Japanese insurance operations had $88.1 billion, at carrying value, of investments denominated in U.S. dollars, including $1.0 billion that were hedged to yen through third-party derivative contracts and $80.5 billion that support liabilities denominated in U.S. dollars, with the remainder constituting part of the hedging of foreign currency exchange rate exposure of U.S. dollar-equivalent equity. The $2.6 billion increase in the carrying value of U.S. dollar-denominated investments from December 31, 2024 was primarily attributable to the reinvestment of net investment income and portfolio growth as a result of net business inflows, partially offset by the Prismic Re International transaction.
Our Japanese insurance operations had $2.2 billion and $2.5 billion, at carrying value, of investments denominated in Australian dollars that support liabilities denominated in Australian dollars as of June 30, 2025 and December 31, 2024, respectively. The $0.3 billion decrease in the carrying value of Australian dollar-denominated investments from December 31, 2024 was primarily attributable to run-off of the portfolio. For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations and a discussion of our yen hedging strategy, see “Results of Operations by Segment—Impact of Foreign Currency Exchange Rates” above.
Investment Results
The following tables set forth the investment results of our general account apportioned between PFI excluding the Closed Block division and Funds Withheld, the Closed Block division and Funds Withheld, for the periods indicated. The yields are based on net investment income as reported under U.S. GAAP and as such do not include certain interest-related items, such as settlements of duration management swaps which are included in “Realized investment gains (losses), net.”
| Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| PFI Excluding Closed Block Division, Funds Withheld and Japanese Insurance Operations | Japanese Insurance Operations | PFI Excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | Total(5) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Yield(1) | Amount | Yield(1) | Amount | Yield(1) | Amount | Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed maturities(2) | 5.43 | % | $ | 2,298 | 3.16 | % | $ | 1,108 | 4.39 | % | $ | 3,406 | $ | 367 | $ | 195 | $ | 3,968 | |||||||||||||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities | 0.00 | 0 | 1.12 | 11 | 1.12 | 11 | 0 | 0 | 11 | ||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 1.78 | 20 | 4.78 | 21 | 2.63 | 41 | 8 | 0 | 49 | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage and other loans | 4.70 | 452 | 3.72 | 145 | 4.42 | 597 | 85 | 5 | 687 | ||||||||||||||||||||||||||||||||||||||||||||
| Policy loans | 5.09 | 48 | 3.70 | 26 | 4.52 | 74 | 49 | (1) | 122 | ||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments and cash equivalents | 4.99 | 158 | 4.31 | 44 | 4.82 | 202 | 13 | 1 | 216 | ||||||||||||||||||||||||||||||||||||||||||||
| Gross investment income | 5.20 | 2,976 | 3.21 | 1,355 | 4.39 | 4,331 | 522 | 200 | 5,053 | ||||||||||||||||||||||||||||||||||||||||||||
| Investment expenses | (0.18) | (204) | (0.13) | (89) | (0.16) | (293) | (63) | 0 | (356) | ||||||||||||||||||||||||||||||||||||||||||||
| Investment income after investment expenses | 5.02 | % | 2,772 | 3.08 | % | 1,266 | 4.23 | % | 4,038 | 459 | 200 | 4,697 | |||||||||||||||||||||||||||||||||||||||||
| Other invested assets(3) | 142 | 119 | 261 | 52 | 155 | 468 | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment results of other entities and operations(4) | 61 | 0 | 61 | 0 | 0 | 61 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total net investment income | $ | 2,975 | $ | 1,385 | $ | 4,360 | $ | 511 | $ | 355 | $ | 5,226 |
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| PFI Excluding Closed Block Division, Funds Withheld and Japanese Insurance Operations | Japanese Insurance Operations | PFI Excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | Total(5) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Yield(1) | Amount | Yield(1) | Amount | Yield(1) | Amount | Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed maturities(2) | 5.22 | % | $ | 2,113 | 3.12 | % | $ | 1,069 | 4.25 | % | $ | 3,182 | $ | 376 | $ | 211 | $ | 3,769 | |||||||||||||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities | 0.00 | 0 | 0.95 | 8 | 0.95 | 8 | 0 | 0 | 8 | ||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 3.62 | 29 | 6.02 | 22 | 4.38 | 51 | 10 | 0 | 61 | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage and other loans | 4.61 | 394 | 3.82 | 161 | 4.35 | 555 | 83 | 3 | 641 | ||||||||||||||||||||||||||||||||||||||||||||
| Policy loans | 4.99 | 48 | 3.74 | 24 | 4.48 | 72 | 50 | (2) | 120 | ||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments and cash equivalents | 6.75 | 210 | 9.32 | 32 | 6.97 | 242 | 18 | 3 | 263 | ||||||||||||||||||||||||||||||||||||||||||||
| Gross investment income | 5.17 | 2,794 | 3.23 | 1,316 | 4.33 | 4,110 | 537 | 215 | 4,862 | ||||||||||||||||||||||||||||||||||||||||||||
| Investment expenses | (0.18) | (195) | (0.11) | (76) | (0.15) | (271) | (72) | (1) | (344) | ||||||||||||||||||||||||||||||||||||||||||||
| Investment income after investment expenses | 4.99 | % | 2,599 | 3.12 | % | 1,240 | 4.18 | % | 3,839 | 465 | 214 | 4,518 | |||||||||||||||||||||||||||||||||||||||||
| Other invested assets(3) | 95 | 74 | 169 | 44 | 95 | 308 | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment results of other entities and operations(4) | 23 | 0 | 23 | 0 | 0 | 23 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total net investment income | $ | 2,717 | $ | 1,314 | $ | 4,031 | $ | 509 | $ | 309 | $ | 4,849 |
(1)For interim periods, yields are annualized. The denominator in the yield percentage is based on quarterly average carrying values for all asset types except for fixed maturities which are based on amortized cost, net of allowance. Amounts for fixed maturities, short-term investments and cash equivalents are also netted for securities lending activity (i.e., income netted for rebate expenses and asset values netted for securities lending liabilities). A yield is not presented for other invested assets as it is not considered a meaningful measure of investment performance. Yields exclude investment income and assets related to other invested assets.
(2)Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading, which are included in other invested assets.
(3)Other invested assets consists of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments, fixed maturities classified as trading and other miscellaneous investments.
(4)Includes net investment income of our investment management operations.
(5)The total yield was 4.22% and 4.19% for the three months ended June 30, 2025 and 2024, respectively.
Three Month Comparison. The increase in investment income after investment expenses yield attributable to our general account investments excluding the Closed Block division, Funds Withheld and the Japanese insurance operations’ portfolio for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily the result of higher fixed income reinvestment rates.
The decrease in investment income after investment expenses yield attributable to the Japanese insurance operations’ portfolio for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily the result of lower returns on short-term investments based on lower short-term rates, partially offset by higher fixed income reinvestment rates.
Both the U.S. dollar-denominated and Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts provide a yield that is substantially higher than the yield on comparable yen-denominated fixed maturities. The average amortized cost of U.S. dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was $68.1 billion and $67.0 billion for the three months ended June 30, 2025 and 2024, respectively. The majority of U.S. dollar-denominated fixed maturities support liabilities that are denominated in U.S. dollars. The average amortized cost of Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was $2.1 billion and $3.7 billion for the three months ended June 30, 2025 and 2024, respectively. The majority of Australian dollar-denominated fixed maturities support liabilities that are denominated in Australian dollars. For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations, see “—Results of Operations by Segment—Impact of Foreign Currency Exchange Rates” above.
| Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| PFI Excluding Closed Block Division, Funds Withheld and Japanese Insurance Operations | Japanese Insurance Operations | PFI Excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | Total(5) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Yield(1) | Amount | Yield(1) | Amount | Yield(1) | Amount | Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed maturities(2) | 5.46 | % | $ | 4,517 | 3.17 | % | $ | 2,202 | 4.40 | % | $ | 6,719 | $ | 724 | $ | 386 | $ | 7,829 | |||||||||||||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities | 0.00 | 0 | 1.20 | 23 | 1.20 | 23 | 0 | 0 | 23 | ||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 2.00 | 48 | 3.42 | 30 | 2.38 | 78 | 15 | 0 | 93 | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage and other loans | 4.74 | 901 | 3.78 | 296 | 4.46 | 1,197 | 168 | 10 | 1,375 | ||||||||||||||||||||||||||||||||||||||||||||
| Policy loans | 5.06 | 96 | 3.79 | 51 | 4.54 | 147 | 102 | (2) | 247 | ||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments and cash equivalents | 4.54 | 351 | 4.14 | 81 | 4.45 | 432 | 25 | 2 | 459 | ||||||||||||||||||||||||||||||||||||||||||||
| Gross investment income | 5.23 | 5,913 | 3.21 | 2,683 | 4.40 | 8,596 | 1,034 | 396 | 10,026 | ||||||||||||||||||||||||||||||||||||||||||||
| Investment expenses | (0.18) | (405) | (0.13) | (171) | (0.16) | (576) | (123) | (1) | (700) | ||||||||||||||||||||||||||||||||||||||||||||
| Investment income after investment expenses | 5.05 | % | 5,508 | 3.08 | % | 2,512 | 4.24 | % | 8,020 | 911 | 395 | 9,326 | |||||||||||||||||||||||||||||||||||||||||
| Other invested assets(3) | 285 | 261 | 546 | 93 | 310 | 949 | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment results of other entities and operations(4) | 81 | 0 | 81 | 0 | 0 | 81 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total net investment income | $ | 5,874 | $ | 2,773 | $ | 8,647 | $ | 1,004 | $ | 705 | $ | 10,356 |
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| PFI Excluding Closed Block Division, Funds Withheld and Japanese Insurance Operations | Japanese Insurance Operations | PFI Excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | Total(5) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Yield(1) | Amount | Yield(1) | Amount | Yield(1) | Amount | Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed maturities(2) | 5.20 | % | $ | 4,130 | 3.07 | % | $ | 2,120 | 4.20 | % | $ | 6,250 | $ | 746 | $ | 427 | $ | 7,423 | |||||||||||||||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities | 0.00 | 0 | 1.10 | 18 | 1.10 | 18 | 0 | 0 | 18 | ||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 3.16 | 54 | 3.53 | 27 | 3.28 | 81 | 17 | 0 | 98 | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage and other loans | 4.51 | 757 | 3.80 | 325 | 4.27 | 1,082 | 163 | 5 | 1,250 | ||||||||||||||||||||||||||||||||||||||||||||
| Policy loans | 4.98 | 95 | 3.80 | 49 | 4.50 | 144 | 100 | (2) | 242 | ||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments and cash equivalents | 6.12 | 434 | 7.54 | 57 | 6.25 | 491 | 42 | 7 | 540 | ||||||||||||||||||||||||||||||||||||||||||||
| Gross investment income | 5.15 | 5,470 | 3.16 | 2,596 | 4.27 | 8,066 | 1,068 | 437 | 9,571 | ||||||||||||||||||||||||||||||||||||||||||||
| Investment expenses | (0.19) | (377) | (0.12) | (156) | (0.16) | (533) | (148) | (1) | (682) | ||||||||||||||||||||||||||||||||||||||||||||
| Investment income after investment expenses | 4.96 | % | 5,093 | 3.04 | % | 2,440 | 4.11 | % | 7,533 | 920 | 436 | 8,889 | |||||||||||||||||||||||||||||||||||||||||
| Other invested assets(3) | 262 | 208 | 470 | 103 | 159 | 732 | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment results of other entities and operations(4) | (8) | 0 | (8) | 0 | 0 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total net investment income | $ | 5,347 | $ | 2,648 | $ | 7,995 | $ | 1,023 | $ | 595 | $ | 9,613 |
(1)For interim periods, yields are annualized. The denominator in the yield percentage is based on quarterly average carrying values for all asset types except for fixed maturities which are based on amortized cost, net of allowance. Amounts for fixed maturities, short-term investments and cash equivalents are also netted for securities lending activity (i.e., income netted for rebate expenses and asset values netted for securities lending liabilities). A yield is not presented for other invested assets as it is not considered a meaningful measure of investment performance. Yields exclude investment income and assets related to other invested assets.
(2)Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading, which are included in other invested assets.
(3)Other invested assets consists of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments, fixed maturities classified as trading and other miscellaneous investments.
(4)Includes net investment income of our investment management operations.
(5)The total yield was 4.23% and 4.13% for the six months ended June 30, 2025 and 2024, respectively.
Six Month Comparison. The increase in investment income after investment expenses yield attributable to our general account investments excluding the Closed Block division, Funds Withheld and the Japanese insurance operations’ portfolio for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily the result of higher fixed income reinvestment rates.
The increase in investment income after investment expenses yield attributable to the Japanese insurance operations’ portfolio for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily the result of higher fixed income reinvestment rates.
Both the U.S. dollar-denominated and Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts provide a yield that is substantially higher than the yield on comparable yen-denominated fixed maturities. The average amortized cost of U.S. dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was $69.2 billion and $66.6 billion for the six months ended June 30, 2025 and 2024, respectively. The majority of U.S. dollar-denominated fixed maturities support liabilities that are denominated in U.S. dollars. The average amortized cost of Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was $2.1 billion and $3.4 billion for the six months ended June 30, 2025 and 2024, respectively. The majority of Australian dollar-denominated fixed maturities support liabilities that are denominated in Australian dollars. For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations, see “—Results of Operations by Segment—Impact of Foreign Currency Exchange Rates” above.
Realized Investment Gains and Losses
The following table sets forth “Realized investment gains (losses), net” of our general account apportioned between PFI excluding the Closed Block division and Funds Withheld, the Closed Block division and Funds Withheld, by investment type for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| PFI excluding Closed Block Division and Funds Withheld(4): | |||||||||||||||||||||||
| Realized investment gains (losses), net: | |||||||||||||||||||||||
| (Addition to) release of allowance for credit losses on fixed maturities | $ | 30 | $ | (13) | $ | 100 | $ | (11) | |||||||||||||||
| Write-downs on fixed maturities(1) | (53) | (4) | (151) | (9) | |||||||||||||||||||
| Net gains (losses) on sales and maturities | (55) | (442) | 13 | (260) | |||||||||||||||||||
| Fixed maturity securities(2) | (78) | (459) | (38) | (280) | |||||||||||||||||||
| (Addition to) release of allowance for credit losses on loans | 60 | (52) | 18 | (94) | |||||||||||||||||||
| Write-downs on mortgage loans | (125) | 0 | (133) | 0 | |||||||||||||||||||
| Net gains (losses) on sales and maturities | 1 | 0 | 1 | 0 | |||||||||||||||||||
| Commercial mortgage and other loans | (64) | (52) | (114) | (94) | |||||||||||||||||||
| Derivatives | (1,158) | 503 | (1,437) | 90 | |||||||||||||||||||
| OTTI losses on other invested assets recognized in earnings | 0 | (4) | (12) | (7) | |||||||||||||||||||
| (Addition to) release of allowance for credit losses on other invested assets | 0 | 2 | 0 | 0 | |||||||||||||||||||
| Other net gains (losses) | 25 | 18 | 20 | 58 | |||||||||||||||||||
| Other | 25 | 16 | 8 | 51 | |||||||||||||||||||
| Subtotal | (1,275) | 8 | (1,581) | (233) | |||||||||||||||||||
| Investment results of other entities and operations(3) | (25) | 13 | (2) | 6 | |||||||||||||||||||
| Total — PFI excluding Closed Block Division and Funds Withheld | $ | (1,300) | $ | 21 | $ | (1,583) | $ | (227) | |||||||||||||||
| Closed Block Division: | |||||||||||||||||||||||
| Realized investment gains (losses), net: | |||||||||||||||||||||||
| (Addition to) release of allowance for credit losses on fixed maturities | $ | (4) | $ | (8) | $ | 11 | $ | (22) | |||||||||||||||
| Write-downs on fixed maturities(1) | 0 | 0 | (16) | 0 | |||||||||||||||||||
| Net gains (losses) on sales and maturities | (22) | (155) | (57) | (243) | |||||||||||||||||||
| Fixed maturity securities(2) | (26) | (163) | (62) | (265) | |||||||||||||||||||
| (Addition to) release of allowance for credit losses on loans | 20 | 0 | 3 | (11) | |||||||||||||||||||
| Write-downs on mortgage loans | (33) | 0 | (33) | 0 | |||||||||||||||||||
| Net gains (losses) on sales and maturities | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Commercial mortgage and other loans | (13) | 0 | (30) | (11) | |||||||||||||||||||
| Derivatives | (157) | (11) | (177) | (23) | |||||||||||||||||||
| (Addition to) release of allowance for credit losses on other invested assets | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Other net gains (losses) | (2) | 0 | 14 | 0 | |||||||||||||||||||
| Other | (2) | 0 | 14 | 0 | |||||||||||||||||||
| Subtotal — Closed Block Division | $ | (198) | $ | (174) | $ | (255) | $ | (299) | |||||||||||||||
| Funds Withheld(4): | |||||||||||||||||||||||
| Realized investment gains (losses), net: | |||||||||||||||||||||||
| (Addition to) release of allowance for credit losses on fixed maturities | $ | (1) | $ | 0 | $ | (4) | $ | 0 |
| Write-downs on fixed maturities(1) | (4) | 0 | (9) | 0 | |||||||||||||||||||
| Net gains (losses) on sales and maturities | (28) | (111) | (89) | (169) | |||||||||||||||||||
| Fixed maturity securities(2) | (33) | (111) | (102) | (169) | |||||||||||||||||||
| Commercial mortgage and other loans | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Derivatives | 7 | 247 | (158) | 535 | |||||||||||||||||||
| (Addition to) release of allowance for credit losses on other invested assets(4) | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Other net gains (losses) | (175) | (149) | (331) | (314) | |||||||||||||||||||
| Other | (175) | (149) | (331) | (314) | |||||||||||||||||||
| Subtotal — Funds Withheld(4) | $ | (201) | $ | (13) | $ | (591) | $ | 52 | |||||||||||||||
| PFI realized investment gains (losses), net | $ | (1,699) | $ | (166) | $ | (2,429) | $ | (474) |
(1)Amounts represent write-downs of credit adverse securities and securities actively marketed for sale.
(2)Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading.
(3)Includes “realized investment gains (losses), net” of our investment management operations.
(4)Prior period amounts have been updated to conform to current period presentation.
The following analysis reflects realized gains (losses) attributable to PFI excluding Closed Block Division and Funds Withheld.
Three Month Comparison. Net losses on sales and maturities of fixed maturity securities were $55 million for the second quarter of 2025 primarily driven by net losses on sales in a higher interest rate environment, partially offset by the impact of foreign currency exchange rate movements on U.S. dollar-denominated securities that matured or were sold within our International Businesses. Net losses on sales and maturities of fixed maturity securities were $442 million for the second quarter of 2024 primarily driven by net losses on sales in a higher interest rate environment and the impact of foreign currency exchange rate movements on U.S. dollar-denominated securities that matured or were sold within our International Businesses.
Net realized losses on derivative instruments of $1.2 billion for the second quarter of 2025 primarily included:
-
$631 million of losses on foreign currency hedges primarily due to the U.S. dollar depreciation versus foreign currencies;
-
$381 million of losses primarily related to the fair value of embedded derivatives that were unfavorably impacted by the annual review and update of assumptions and other refinements within Individual Life; and
-
$213 million of losses on interest rate derivatives due to increases in swap and U.S. Treasury rates.
Partially offsetting these losses were:
- $47 million of gains on credit default swaps due to spreads tightening.
Net realized gains on derivative instruments of $503 million for the second quarter of 2024 primarily included:
-
$743 million of gains primarily related to the value of embedded derivatives that were favorably impacted by the annual reviews and update of assumptions and other refinements within Individual Retirement Strategies;
-
$71 million of gains on foreign currency hedges primarily due to U.S. dollar appreciation versus the euro; and
-
$26 million of gains on Synthetic Guarantees.
Partially offsetting these gains were:
- $345 million of losses on interest rate derivatives due to increases in swap and U.S. Treasury rates.
For a discussion of living benefit guarantees and related hedge positions in our Individual Retirement Strategies business, see “—Results of Operations by Segment—Retirement Strategies” above.
Six Month Comparison. Net gains on sales and maturities of fixed maturity securities were $13 million for the first six months of 2025 primarily driven by net gains on assets transferred upon execution of the reinsurance transaction with Prismic Re International and the impact of foreign currency exchange rate movements on U.S. dollar-denominated securities that matured or were sold within our International Businesses, partially offset by net losses on sales in a higher interest rate
environment. Net losses on sales and maturities of fixed maturity securities were $260 million for the first six months of 2024 primarily driven by net losses on sales in a higher interest rate environment and the impact of foreign currency exchange rate movements on U.S. dollar-denominated securities that matured or were sold within our International Businesses.
Net realized losses on derivative instruments of $1.4 billion for the first six months of 2025 primarily included:
-
$796 million of losses on foreign currency hedges primarily due to the U.S. dollar depreciation versus foreign currencies; and
-
$617 million of losses primarily related to the fair value of embedded derivatives that were unfavorably impacted by the annual review and update of assumptions and other refinements within Individual Life.
Net realized gains on derivative instruments of $90 million for the first six months of 2024 primarily included:
-
$767 million of gains primarily related to the value of embedded derivatives that were favorably impacted by the annual reviews and update of assumptions and other refinements within Individual Retirement Strategies;
-
$151 million of gains on foreign currency hedges primarily due to U.S. dollar appreciation versus the euro; and
-
$51 million of gains on Synthetic Guarantees.
Partially offsetting these gains were:
- $913 million of losses on interest rate derivatives due to increases in swap and U.S. Treasury rates.
For a discussion of living benefit guarantees and related hedge positions in our Individual Retirement Strategies business, see “—Results of Operations by Segment—Retirement Strategies” above.
Credit Losses
The level of credit losses generally reflects current and expected economic conditions and is expected to increase when economic conditions worsen and to decrease when economic conditions improve. Historically, the causes of credit losses have been specific to each individual issuer and have not directly resulted in credit losses to other securities within the same industry or geographic region. We may also realize additional credit and interest rate-related losses through sales of investments pursuant to our credit risk and portfolio management objectives.
We maintain separate monitoring processes for public and private fixed maturities and create watch lists to highlight securities that require special scrutiny and management. For private placements, our credit and portfolio management processes help ensure prudent controls over valuation and management. We have separate pricing and authorization processes to establish “checks and balances” for new investments. We apply consistent standards of credit analysis and due diligence for all transactions, whether they originate through our own in-house staff or through agents. Our regional offices closely monitor the portfolios in their regions. We set all valuation standards centrally, and we assess the fair value of all investments quarterly. Our public and private fixed maturity investment managers formally review all public and private fixed maturity holdings on a quarterly basis and more frequently when necessary to identify potential credit deterioration whether due to ratings downgrades, unexpected price variances and/or company or industry-specific concerns.
For LPs/LLCs accounted for using the equity method and for wholly-owned investment real estate, the carrying value of these investments is written down or impaired to fair value when a decline in value is considered to be other-than-temporary. For additional information regarding our OTTI policies, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
General Account Investments of PFI excluding Closed Block Division and Funds Withheld
In the following sections, we provide details about our investment portfolio, excluding investments held in the Closed Block division and the Funds Withheld portfolios. We believe the details of the composition of our investment portfolio excluding Closed Block division and Funds Withheld are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial, Inc. because (1) substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies where the economics inure to those participating policies and not to shareholders of the Company’s Common Stock and (2) the Funds Withheld assets support liabilities relating to reinsurance agreements where the economic benefits and associated investment risk of the Funds Withheld ultimately inure to the reinsurer. See Notes 12 and 13 to the Unaudited Interim Consolidated Financial Statements for additional information regarding our material reinsurance agreements and the Closed Block division, respectively.
Fixed Maturity Securities
In the following sections, we provide details about our fixed maturity securities portfolio, which excludes fixed maturity securities classified as assets supporting experience-rated contractholder liabilities and classified as trading.
Fixed Maturity Securities by Industry
The following table sets forth the composition of our fixed maturity, available-for-sale portfolio by industry category and the associated gross unrealized gains and losses, as well as the allowance for credit losses (“ACL”), as of the dates indicated:
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Industry(1) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | ACL | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | ACL | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Finance | $ | 45,989 | $ | 632 | $ | 2,903 | $ | 2 | $ | 43,716 | $ | 43,697 | $ | 470 | $ | 3,614 | $ | 4 | $ | 40,549 | |||||||||||||||||||||||||||||||||||||||
| Consumer non-cyclical | 32,085 | 569 | 3,002 | 5 | 29,647 | 31,721 | 420 | 3,504 | 33 | 28,604 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Utility | 30,574 | 620 | 2,671 | 25 | 28,498 | 28,984 | 421 | 2,991 | 18 | 26,396 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Capital goods | 20,727 | 484 | 1,176 | 11 | 20,024 | 19,444 | 242 | 1,561 | 37 | 18,088 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer cyclical | 12,328 | 316 | 564 | 71 | 12,009 | 11,955 | 198 | 674 | 81 | 11,398 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign agencies | 1,795 | 22 | 155 | 0 | 1,662 | 1,838 | 26 | 168 | 0 | 1,696 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Energy | 12,791 | 236 | 761 | 18 | 12,248 | 12,310 | 159 | 894 | 19 | 11,556 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Communications | 6,940 | 207 | 555 | 3 | 6,589 | 6,872 | 169 | 568 | 63 | 6,410 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Basic industry | 7,859 | 182 | 514 | 1 | 7,526 | 7,651 | 96 | 619 | 0 | 7,128 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Transportation | 12,619 | 357 | 799 | 0 | 12,177 | 11,783 | 177 | 1,002 | 0 | 10,958 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Technology | 6,386 | 161 | 310 | 32 | 6,205 | 5,554 | 84 | 408 | 14 | 5,216 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Industrial other | 4,874 | 39 | 812 | 5 | 4,096 | 4,750 | 30 | 881 | 5 | 3,894 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total corporate securities | 194,967 | 3,825 | 14,222 | 173 | 184,397 | 186,559 | 2,492 | 16,884 | 274 | 171,893 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign government(2) | 67,925 | 1,203 | 11,030 | 0 | 58,098 | 62,880 | 1,828 | 7,801 | 0 | 56,907 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed(3) | 3,854 | 23 | 179 | 0 | 3,698 | 2,468 | 14 | 214 | 0 | 2,268 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Asset-backed | 16,220 | 156 | 59 | 1 | 16,316 | 14,664 | 201 | 40 | 0 | 14,825 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed | 6,690 | 53 | 256 | 0 | 6,487 | 6,185 | 22 | 344 | 0 | 5,863 | |||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government | 20,961 | 653 | 4,370 | 0 | 17,244 | 21,451 | 584 | 4,499 | 0 | 17,536 | |||||||||||||||||||||||||||||||||||||||||||||||||
| State & Municipal | 5,477 | 124 | 611 | 0 | 4,990 | 5,965 | 129 | 549 | 0 | 5,545 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total fixed maturities, available-for-sale | $ | 316,094 | $ | 6,037 | $ | 30,727 | $ | 174 | $ | 291,230 | $ | 300,172 | $ | 5,270 | $ | 30,331 | $ | 274 | $ | 274,837 |
(1)Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.
(2)As of June 30, 2025 and December 31, 2024, based on amortized cost, 89% and 90% represent Japanese government bonds held by our Japanese insurance operations, respectively. No other individual country represented more than 5% of the balance as of both June 30, 2025 and December 31, 2024.
(3)As of June 30, 2025 and December 31, 2024, based on amortized cost, 95% and 93% were rated A or higher, respectively.
The decrease in net unrealized losses from December 31, 2024 to June 30, 2025 was primarily due to the net impact of decreases in U.S. interest rates and credit spreads widening, partially offset by increases in Japan interest rates.
Fixed Maturity Securities Credit Quality
The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the investments of insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called “NAIC Designations.” In general, NAIC Designations of “1” highest quality, or “2” high quality, include fixed maturities considered investment grade, which include securities rated Baa3 or higher by Moody’s Investor Service, Inc. (“Moody’s”) or BBB- or higher by Standard & Poor’s Rating Services (“S&P”). NAIC Designations of “3” through “6” generally include fixed maturities referred to as below investment grade, which include securities rated Ba1 or lower by Moody’s and BB+ or lower by S&P. The NAIC Designations for commercial mortgage-backed securities and non-agency residential mortgage-backed securities, including our asset-backed securities collateralized by sub-prime mortgages, are based on security level expected losses as modeled by an independent third party (engaged by the NAIC) and the statutory carrying value of the security, including any purchase discounts or impairment charges previously recognized.
As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the fixed maturity portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date. Pending receipt of SVO designations, the categorization of these securities by NAIC Designation is based on the expected ratings indicated by internal analysis.
Ratings assigned by nationally recognized rating agencies include S&P, Moody’s, Fitch Ratings Inc. (“Fitch”) and Morningstar, Inc. (“Morningstar”). Low issue composite rating uses ratings from the major credit rating agencies or, if these are not available, an equivalent internal rating. For securities where the ratings assigned are not equivalent, the second lowest rating is utilized.
Investments of our international insurance companies are not subject to NAIC guidelines. Investments of our Japanese insurance operations are regulated locally by the Financial Services Agency (“FSA”), an agency of the Japanese government. The FSA has its own investment quality criteria and risk control standards. Our Japanese insurance companies comply with the FSA’s credit quality review and risk monitoring guidelines. The credit quality ratings of the investments of our Japanese insurance companies are based on ratings assigned by nationally recognized credit rating agencies, including Moody’s and S&P, or rating equivalents based on ratings assigned by Japanese credit rating agencies.
The following table sets forth our fixed maturity, available-for-sale portfolio by NAIC Designation or equivalent rating, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NAIC Designation(1) (2) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses(3) | ACL | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses(3) | ACL | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | $ | 205,993 | $ | 3,356 | $ | 24,273 | $ | 1 | $ | 185,075 | $ | 195,449 | $ | 3,669 | $ | 22,081 | $ | 0 | $ | 177,037 | |||||||||||||||||||||||||||||||||||||||
| 2 | 90,625 | 2,131 | 5,542 | 1 | 87,213 | 87,400 | 1,287 | 7,197 | 0 | 81,490 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal High or Highest Quality Securities(4) | 296,618 | 5,487 | 29,815 | 2 | 272,288 | 282,849 | 4,956 | 29,278 | 0 | 258,527 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | 13,365 | 384 | 772 | 0 | 12,977 | 11,290 | 174 | 856 | 0 | 10,608 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 4,159 | 98 | 78 | 1 | 4,178 | 3,910 | 63 | 131 | 28 | 3,814 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | 1,440 | 33 | 53 | 41 | 1,379 | 1,490 | 46 | 46 | 36 | 1,454 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | 512 | 35 | 9 | 130 | 408 | 633 | 31 | 20 | 210 | 434 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal Other Securities(5) (6) | 19,476 | 550 | 912 | 172 | 18,942 | 17,323 | 314 | 1,053 | 274 | 16,310 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total fixed maturities, available-for-sale | $ | 316,094 | $ | 6,037 | $ | 30,727 | $ | 174 | $ | 291,230 | $ | 300,172 | $ | 5,270 | $ | 30,331 | $ | 274 | $ | 274,837 |
(1)Reflects equivalent ratings for investments of the international insurance operations.
(2)As of June 30, 2025 and December 31, 2024, 1,089 securities with amortized cost of $6,146 million (fair value, $6,246 million) and 803 securities with amortized cost of $4,147 million (fair value, $3,840 million), respectively, have been categorized based on expected NAIC Designations pending receipt of SVO ratings.
(3)As of June 30, 2025, includes gross unrealized losses of $667 million on public fixed maturities and $245 million on private fixed maturities considered to be other than high or highest quality and, as of December 31, 2024, includes gross unrealized losses of $625 million on public fixed maturities and $428 million on private fixed maturities considered to be other than high or highest quality.
(4)On an amortized cost basis, as of June 30, 2025, includes $229,663 million of public fixed maturities and $66,955 million of private fixed maturities and, as of December 31, 2024, includes $219,914 million of public fixed maturities and $62,935 million of private fixed maturities.
(5)On an amortized cost basis, as of June 30, 2025, includes $7,797 million of public fixed maturities and $11,679 million of private fixed maturities and, as of December 31, 2024, includes $6,706 million of public fixed maturities and $10,617 million of private fixed maturities.
(6)On an amortized cost basis, as of June 30, 2025, securities considered below investment grade based on low issue composite ratings total $16,038 million, or 5% of the total fixed maturities, and include securities considered high or highest quality by the NAIC based on the rules described above.
Asset-Backed and Commercial Mortgage-Backed Securities
The following table sets forth the amortized cost and fair value of asset-backed and commercial mortgage-backed securities within our fixed maturity, available-for-sale portfolio by credit quality, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Asset-Backed Securities(2) | Commercial Mortgage-Backed Securities(3) | Asset-Backed Securities(2) | Commercial Mortgage-Backed Securities(3) | ||||||||||||||||||||||||||||||||||||||||||||
| Low Issue Composite Rating(1) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| AAA | $ | 7,763 | $ | 7,795 | $ | 5,191 | $ | 5,129 | $ | 7,548 | $ | 7,624 | $ | 4,905 | $ | 4,735 | |||||||||||||||||||||||||||||||
| AA | 5,872 | 5,867 | 1,490 | 1,349 | 4,836 | 4,863 | 1,271 | 1,119 | |||||||||||||||||||||||||||||||||||||||
| A | 1,868 | 1,881 | 1 | 1 | 1,790 | 1,795 | 1 | 1 | |||||||||||||||||||||||||||||||||||||||
| BBB | 508 | 514 | 0 | 0 | 363 | 367 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| BB and below | 209 | 259 | 8 | 8 | 127 | 176 | 8 | 8 | |||||||||||||||||||||||||||||||||||||||
| Total(4) | $ | 16,220 | $ | 16,316 | $ | 6,690 | $ | 6,487 | $ | 14,664 | $ | 14,825 | $ | 6,185 | $ | 5,863 |
(1)The table above provides ratings as assigned by nationally recognized rating agencies as of June 30, 2025 and December 31, 2024, including S&P, Moody’s, Fitch and Morningstar.
(2)Includes credit-tranched securities collateralized by loan obligations (“CLOs”), home equity loans, auto loans, education loans and other asset types.
(3)As of both June 30, 2025 and December 31, 2024, based on amortized cost, 100% were securities with vintages of 2013 or later.
(4)Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading.”
Included in “Asset-backed securities” above are investments in CLOs. The following table sets forth information pertaining to these investments in CLOs within our fixed maturity, available-for-sale portfolio, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Collateralized Loan Obligations | |||||||||||||||||||||||
| Low Issue Composite Rating(1) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| AAA | $ | 5,667 | $ | 5,684 | $ | 5,811 | $ | 5,883 | |||||||||||||||
| AA | 4,306 | 4,306 | 3,937 | 3,970 | |||||||||||||||||||
| A | 33 | 33 | 13 | 13 | |||||||||||||||||||
| BBB | 21 | 21 | 14 | 14 | |||||||||||||||||||
| BB and below | 14 | 15 | 11 | 11 | |||||||||||||||||||
| Total(2)(3) | $ | 10,041 | $ | 10,059 | $ | 9,786 | $ | 9,891 |
(1)The table above provides ratings as assigned by nationally recognized rating agencies as of June 30, 2025 and December 31, 2024, including S&P, Moody’s, Fitch and Morningstar.
(2)There was no allowance for credit losses as of both June 30, 2025 and December 31, 2024.
(3)Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading.”
Assets Supporting Experience-Rated Contractholder Liabilities
For information regarding the composition of “Assets supporting experience-rated contractholder liabilities,” see Note 3 to the Unaudited Interim Consolidated Financial Statements.
Commercial Mortgage and Other Loans
Investment Mix
The following table sets forth the composition of our commercial mortgage and other loans portfolio, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| Commercial mortgage and agricultural property loans | $ | 54,212 | $ | 53,384 | ||||||||||
| Uncollateralized loans | 368 | 595 | ||||||||||||
| Residential property loans | 18 | 19 | ||||||||||||
| Other collateralized loans | 465 | 457 | ||||||||||||
| Total recorded investment gross of allowance(1) | 55,063 | 54,455 | ||||||||||||
| Allowance for credit losses | (451) | (468) | ||||||||||||
| Total commercial mortgage and other loans, net | $ | 54,612 | $ | 53,987 |
(1)As a percentage of recorded investment gross of allowance, 99% of these assets were current as of both June 30, 2025 and December 31, 2024.
We originate commercial mortgage and agricultural property loans using a dedicated sales and underwriting staff through our various regional offices in the U.S. and international offices primarily in London and Tokyo. All loans are underwritten consistently to our standards using a proprietary quality rating system that has been developed from our industry experience in real estate and mortgage lending.
Uncollateralized loans primarily represent corporate loans and unsecured consumer loans.
Residential property loans primarily include Japanese recourse loans. To the extent there is a default on these recourse loans, we can make a claim against the personal assets of the property owner, in addition to the mortgaged property. These loans are also backed by third-party guarantors.
Other collateralized loans include mezzanine real estate debt investments and consumer loans.
Composition of Commercial Mortgage and Agricultural Property Loans
Our commercial mortgage and agricultural property loan portfolio strategy emphasizes diversification by property type and geographic location. The following tables set forth the breakdown of the gross carrying values of commercial mortgage and agricultural property loans by geographic region and property type, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Gross Carrying Value | % of Total | Gross Carrying Value | % of Total | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Commercial mortgage and agricultural property loans by region: | ||||||||||||||||||||||||||
| U.S. Regions(1): | ||||||||||||||||||||||||||
| Pacific | $ | 18,500 | 34.1 | % | $ | 18,683 | 35.0 | % | ||||||||||||||||||
| South Atlantic | 9,033 | 16.7 | 8,643 | 16.2 | ||||||||||||||||||||||
| Middle Atlantic | 6,487 | 12.0 | 6,192 | 11.6 | ||||||||||||||||||||||
| East North Central | 3,549 | 6.5 | 3,090 | 5.8 | ||||||||||||||||||||||
| West South Central | 5,088 | 9.4 | 5,428 | 10.2 | ||||||||||||||||||||||
| Mountain | 2,830 | 5.2 | 2,845 | 5.3 | ||||||||||||||||||||||
| New England | 1,090 | 2.0 | 1,205 | 2.3 | ||||||||||||||||||||||
| West North Central | 599 | 1.1 | 520 | 1.0 | ||||||||||||||||||||||
| East South Central | 1,226 | 2.3 | 1,122 | 2.1 | ||||||||||||||||||||||
| Subtotal-U.S. | 48,402 | 89.3 | 47,728 | 89.5 | ||||||||||||||||||||||
| Europe | 3,743 | 6.9 | 3,505 | 6.5 | ||||||||||||||||||||||
| Mexico | 913 | 1.7 | 913 | 1.7 | ||||||||||||||||||||||
| Asia | 729 | 1.3 | 688 | 1.3 | ||||||||||||||||||||||
| Other | 425 | 0.8 | 550 | 1.0 | ||||||||||||||||||||||
| Total commercial mortgage and agricultural property loans | $ | 54,212 | 100.0 | % | $ | 53,384 | 100.0 | % |
(1)Regions as defined by the United States Census Bureau.
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Gross Carrying Value | % of Total | Gross Carrying Value | % of Total | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Commercial mortgage and agricultural property loans by property type: | ||||||||||||||||||||||||||
| Industrial | $ | 15,559 | 28.7 | % | $ | 15,314 | 28.7 | % | ||||||||||||||||||
| Retail | 4,448 | 8.2 | 4,547 | 8.5 | ||||||||||||||||||||||
| Office | 5,994 | 11.1 | 6,587 | 12.3 | ||||||||||||||||||||||
| Apartments/Multi-Family | 16,233 | 29.9 | 15,066 | 28.2 | ||||||||||||||||||||||
| Agricultural properties | 6,459 | 11.9 | 6,497 | 12.2 | ||||||||||||||||||||||
| Hospitality | 1,445 | 2.7 | 1,603 | 3.0 | ||||||||||||||||||||||
| Self-Storage(1) | 1,939 | 3.6 | 1,858 | 3.5 | ||||||||||||||||||||||
| Health Care Senior Living(1) | 1,625 | 3.0 | 1,635 | 3.1 | ||||||||||||||||||||||
| Other(1) | 510 | 0.9 | 277 | 0.5 | ||||||||||||||||||||||
| Total commercial mortgage and agricultural property loans | $ | 54,212 | 100.0 | % | $ | 53,384 | 100.0 | % |
(1)Prior period amounts have been updated to conform to current period presentation.
Loan-to-value and debt service coverage ratios are measures commonly used to assess the quality of commercial mortgage and agricultural property loans. The loan-to-value ratio compares the amount of the loan to the fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. The debt service coverage ratio compares a property’s net operating income to its debt service payments. Debt service coverage ratios less than 1.0 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt service coverage ratio greater than 1.0 times indicates an excess of net operating income over the debt service payments.
As of June 30, 2025, our commercial mortgage and agricultural property loans had a weighted-average debt service coverage ratio of 2.37 times and a weighted-average loan-to-value ratio of 59%. As of June 30, 2025, 95% of commercial mortgage and agricultural property loans were fixed rate loans. For those commercial mortgage and agricultural property loans that were originated in 2025, the weighted-average debt service coverage ratio was 1.50 times, and the weighted-average loan-to-value ratio was 60%.
The values utilized in calculating these loan-to-value ratios are developed as part of our periodic reviews of the commercial mortgage and agricultural property loan portfolio, which include internal evaluations of the underlying collateral values. Our periodic reviews also include a credit quality re-rating process, whereby we update the internal quality ratings originally assigned at underwriting based on the proprietary quality rating system mentioned above. As discussed below, the internal credit quality rating is a key input in determining our allowance for credit losses.
For loans with collateral under construction, renovation or lease-up, projected stabilized values and net operating income are used in the calculation of the loan-to-value and debt service coverage ratios. Our commercial mortgage and agricultural property loan portfolio included $2.4 billion and $1.8 billion of such loans as of June 30, 2025 and December 31, 2024, respectively. All else being equal, these loans are inherently riskier than those collateralized by properties that have already stabilized. As of both June 30, 2025 and December 31, 2024, there were less than $1 million of allowances related to these loans. In addition, these unstabilized loans are included in the calculation of our portfolio reserve, as discussed below.
The following table sets forth the gross carrying value of our commercial mortgage and agricultural property loans by loan-to-value and debt service coverage ratios, as of the date indicated:
| June 30, 2025 | ||||||||||||||||||||||||||
| Debt Service Coverage Ratio | ||||||||||||||||||||||||||
| > 1.2x | 1.0x to < 1.2x | < 1.0x | Total Commercial Mortgage and Agricultural Property Loans | |||||||||||||||||||||||
| Loan-to-Value Ratio | (in millions) | |||||||||||||||||||||||||
| 0%-59.99% | $ | 26,934 | $ | 1,006 | $ | 302 | $ | 28,242 | ||||||||||||||||||
| 60%-69.99% | 14,517 | 580 | 117 | 15,214 | ||||||||||||||||||||||
| 70%-79.99% | 5,182 | 442 | 363 | 5,987 | ||||||||||||||||||||||
| 80% or greater | 2,741 | 1,036 | 992 | 4,769 | ||||||||||||||||||||||
| Total commercial mortgage and agricultural property loans | $ | 49,374 | $ | 3,064 | $ | 1,774 | $ | 54,212 |
The following table sets forth the breakdown of our commercial mortgage and agricultural property loans by year of origination, as of the date indicated:
| June 30, 2025 | ||||||||||||||
| Gross Carrying Value | % of Total | |||||||||||||
| Year of Origination | ($ in millions) | |||||||||||||
| 2025 | $ | 3,221 | 5.9 | % | ||||||||||
| 2024 | 7,430 | 13.8 | ||||||||||||
| 2023 | 5,481 | 10.2 | ||||||||||||
| 2022 | 4,248 | 7.8 | ||||||||||||
| 2021 | 6,898 | 12.7 | ||||||||||||
| 2020 | 3,259 | 6.0 | ||||||||||||
| 2019 | 5,489 | 10.1 | ||||||||||||
| 2018 & Prior | 18,014 | 33.2 | ||||||||||||
| Revolving Loans | 172 | 0.3 | ||||||||||||
| Total commercial mortgage and agricultural property loans | $ | 54,212 | 100.0 | % |
Commercial Mortgage and Other Loans Quality
The commercial mortgage and other loans portfolio is monitored on an ongoing basis. If certain criteria are met, loans are assigned to either of the following “watch list” categories:
(1) “Closely Monitored,” which includes a variety of considerations, such as when loan metrics fall below acceptable levels, the borrower is not cooperative or has requested a material modification, or the portfolio manager has directed a change in category; or
(2) “Not in Good Standing,” which includes loans in default or with a high probability of loss of principal, such as when the loan is in the process of foreclosure or the borrower is in bankruptcy.
Our workout and special servicing professionals manage the loans on the watch list.
The current expected credit loss (“CECL”) allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts. The allowance is calculated separately for commercial mortgage loans, agricultural mortgage loans, uncollateralized loans, other collateralized loans and residential property loans.
For commercial mortgage and agricultural property loans, the allowance is calculated using an internally developed CECL model.
Key inputs to the CECL model include unpaid principal balances, internal credit ratings, annual expected loss factors, average lives of the loans adjusted for prepayment considerations, current and historical interest rate assumptions and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate.
When individual loans no longer have the credit risk characteristics of the commercial or agricultural mortgage loan pools, they are removed from the pools and are evaluated individually for an allowance. The allowance is determined based on the outstanding loan balance less the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.
The CECL allowance for other collateralized and uncollateralized loans carried at amortized cost is determined based on probability of default and loss given default assumptions by sector, credit quality and average lives of the loans.
The following table sets forth the change in allowance for credit losses for our commercial mortgage and other loans portfolios, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| Allowance, beginning of year | $ | 468 | $ | 372 | ||||||||||
| Addition to (release of) allowance for credit losses | 99 | 207 | ||||||||||||
| Write-downs charged against the allowance | (117) | (107) | ||||||||||||
| Other | 1 | (4) | ||||||||||||
| Allowance, end of period | $ | 451 | $ | 468 |
The allowance for credit losses as of June 30, 2025 decreased in comparison to December 31, 2024 primarily related to a write-down against a loan-specific reserve within agricultural property loans, partially offset by an increase in loan-specific reserves within the retail sector.
Equity Securities
The equity securities portfolio consists principally of investments in common and preferred stock of publicly-traded companies, as well as mutual fund shares. The following table sets forth the composition of our equity securities portfolio and the associated gross unrealized gains and losses, as of the dates indicated:
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mutual funds | $ | 863 | $ | 1,098 | $ | 3 | $ | 1,958 | $ | 903 | $ | 1,010 | $ | 9 | $ | 1,904 | ||||||||||||||||||||||||||||||||||
| Other common stocks | 2,896 | 688 | 74 | 3,510 | 4,728 | 684 | 122 | 5,290 | ||||||||||||||||||||||||||||||||||||||||||
| Non-redeemable preferred stocks | 69 | 35 | 19 | 85 | 43 | 36 | 19 | 60 | ||||||||||||||||||||||||||||||||||||||||||
| Total equity securities, at fair value | $ | 3,828 | $ | 1,821 | $ | 96 | $ | 5,553 | $ | 5,674 | $ | 1,730 | $ | 150 | $ | 7,254 |
The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $201 and $62 million during the three months ended June 30, 2025 and 2024, respectively, and $41 million and $356 million during the six months ended June 30, 2025 and 2024, respectively.
Other Invested Assets
The following table sets forth the composition of “Other invested assets,” as of the dates indicated:
| June 30, 2025 | December 31, 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| LPs/LLCs: | ||||||||||||||
| Equity method: | ||||||||||||||
| Private equity | $ | 7,744 | $ | 7,535 | ||||||||||
| Hedge funds | 2,295 | 2,339 | ||||||||||||
| Real estate-related | 1,621 | 1,586 | ||||||||||||
| Subtotal equity method | 11,660 | 11,460 | ||||||||||||
| Fair value: | ||||||||||||||
| Private equity | 647 | 728 | ||||||||||||
| Hedge funds | 1,294 | 1,308 | ||||||||||||
| Real estate-related | 428 | 423 | ||||||||||||
| Subtotal fair value | 2,369 | 2,459 | ||||||||||||
| Total LPs/LLCs | 14,029 | 13,919 | ||||||||||||
| Real estate held through direct ownership(1) | 1,451 | 1,426 | ||||||||||||
| Total alternative assets | 15,480 | 15,345 | ||||||||||||
| Credit-like instruments(2) | 1,128 | 933 | ||||||||||||
| Derivative instruments | 201 | (438) | ||||||||||||
| Other(3) | 935 | 941 | ||||||||||||
| Total other invested assets | $ | 17,744 | $ | 16,781 |
The following table presents a reconciliation of “Total alternative assets” included in the table above to the “Total alternative assets of operating businesses”:
| June 30, 2025 | December 31, 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| Total alternative assets | $ | 15,480 | $ | 15,345 | ||||||||||
| Less: Divested Businesses(4) | (891) | (799) | ||||||||||||
| Less: Interests held by unaffiliated investors(5) | (1,243) | (1,209) | ||||||||||||
| Total alternative assets of operating businesses | $ | 13,346 | $ | 13,337 |
(1)As of June 30, 2025 and December 31, 2024, real estate held through direct ownership had mortgage debt of $192 million and $185 million, respectively.
(2)Includes structured debt investments in feeder funds that are consolidated, resulting in the Company reporting the consolidated feeder funds’ proportionate share of the net assets of the master fund within “Other invested assets.”
(3)Primarily includes equity investments accounted for under the measurement alternative, tax advantaged investments, leveraged leases and member and activity stock held in the Federal Home Loan Bank of New York. For additional information regarding our holdings in the Federal Home Loan Bank of New York, see Note 18 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
(4)As of June 30, 2025 and December 31, 2024, interests held by Divested Businesses include private equity of $571 million and $520 million, hedge funds of $156 million and $117 million, real estate-related of $160 million and $156 million and real estate held through direct ownership of $4 million and $6 million, respectively.
(5)As of June 30, 2025 and December 31, 2024, interests held by unaffiliated investors that have been consolidated into the Consolidated Statements of Financial Position include real estate held through direct ownership of $788 million and $741 million, hedge funds of $156 million and $177 million and real estate-related of $299 million and $291 million, respectively.
Invested Assets of Other Entities and Operations
“Invested Assets of Other Entities and Operations” presented below includes investments held outside the general account and primarily represents investments associated with our investment management operations and derivative operations. Our derivative operations act on behalf of affiliates primarily to manage interest rate, foreign currency, credit and equity exposures. Assets within our investment management operations that are managed for third parties and those assets classified as “Separate account assets” on our Unaudited Interim Consolidated Statements of Financial Position are not included.
| June 30, 2025 | December 31, 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| Fixed maturities: | ||||||||||||||
| Public, available-for-sale, at fair value(1) | $ | 330 | $ | 368 | ||||||||||
| Private, available-for-sale, at fair value | 286 | 5 | ||||||||||||
| Fixed maturities, trading, at fair value(1) | 137 | 83 | ||||||||||||
| Equity securities, at fair value | 406 | 521 | ||||||||||||
| Commercial mortgage and other loans, at book value(2) | 463 | 469 | ||||||||||||
| Other invested assets | 3,191 | 2,774 | ||||||||||||
| Short-term investments | 20 | 13 | ||||||||||||
| Total investments | $ | 4,833 | $ | 4,233 |
(1)As of June 30, 2025 and December 31, 2024, balances include investments in CLOs with fair value of $207 million and $224 million, respectively.
(2)Book value is generally based on unpaid principal balance, net of any allowance for credit losses, or at fair value when the fair value option has been elected.
Fixed Maturities, Trading
“Fixed maturities, trading, at fair value” is primarily related to assets associated with consolidated VIEs for which the Company is the investment manager. The assets of the consolidated VIEs are generally offset by liabilities for which the fair value option has been elected. For additional information regarding these consolidated VIEs, see Note 4 to the Unaudited Interim Consolidated Financial Statements.
Commercial Mortgage and Other Loans
Our investment management operations include our commercial mortgage operations, which provide mortgage origination, investment management and servicing for our general account, institutional clients, the Federal Housing Administration and government-sponsored entities such as Fannie Mae and Freddie Mac.
The mortgage loans of our commercial mortgage operations are included in “Commercial mortgage and other loans.” Derivatives and other hedging instruments related to our commercial mortgage operations are primarily included in “Other invested assets.”
Other Invested Assets
“Other invested assets” primarily includes assets of our derivative operations used to manage interest rate, foreign currency, credit, and equity exposures.
Furthermore, other invested assets include strategic investments made as part of our investment management operations. We make these strategic investments in real estate, as well as fixed income, public equity and real estate securities, including controlling interests. Certain of these investments are made primarily for purposes of co-investment in our managed funds and structured products. Other strategic investments are made with the intention to sell or syndicate to investors, including our general account, or for placement in funds and structured products that we offer and manage (seed investments). As part of our investment management operations, we also make loans to our managed funds that are secured by equity commitments from investors or assets of the funds. “Other invested assets” also includes certain assets in consolidated investment funds where the Company is deemed to exercise control over the funds.
Valuation of Assets and Liabilities
Fair Value of Assets and Liabilities
The authoritative guidance related to fair value measurement establishes a framework that includes a three-level hierarchy used to classify the inputs used in measuring fair value. The level in the hierarchy within which the fair value falls is determined based on the lowest level input that is significant to the measurement. The fair values of assets and liabilities classified as Level 3 include at least one significant unobservable input in the measurement. See Note 6 to the Unaudited Interim Consolidated Financial Statements for an additional description of the valuation hierarchy levels as well as for the balances of assets and liabilities measured at fair value on a recurring basis by hierarchy level presented on a consolidated basis.
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis, as of the dates indicated, and the portion of such assets and liabilities that are classified in Level 3 of the valuation hierarchy. The table also provides details about these assets and liabilities excluding those held in the Closed Block division and Funds Withheld portfolios. We believe the amounts excluding the Closed Block division and Funds Withheld are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial, Inc. because (1) substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies where the economics inure to those participating policies and not to shareholders of the Company’s Common Stock and (2) the Funds Withheld assets support liabilities relating to reinsurance agreements where the economic benefits and associated investment risk of the Funds Withheld assets ultimately inure to the reinsurer. See Notes 12 and 13 to the Unaudited Interim Consolidated Financial Statements for additional information regarding our material reinsurance agreements and the Closed Block, respectively.
| As of June 30, 2025 | |||||||||||||||||||||||||||||||||||
| PFI excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | |||||||||||||||||||||||||||||||||
| Total at Fair Value | Total Level 3(1) | Total at Fair Value | Total Level 3(1) | Total at Fair Value | Total Level 3(1) | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | 291,846 | $ | 9,370 | $ | 29,315 | $ | 1,012 | $ | 7,141 | $ | 616 | |||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities: | |||||||||||||||||||||||||||||||||||
| Fixed maturities | 938 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Equity securities | 3,344 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| All other(2) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Subtotal | 4,282 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Market risk benefit assets | 2,188 | 2,188 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Fixed maturities, trading | 5,010 | 576 | 647 | 19 | 8,363 | 1,495 | |||||||||||||||||||||||||||||
| Equity securities | 5,959 | 551 | 1,475 | 50 | 0 | 0 | |||||||||||||||||||||||||||||
| Commercial mortgage and other loans | 463 | 0 | 0 | 0 | 263 | 263 | |||||||||||||||||||||||||||||
| Other invested assets(3) | 2,712 | 977 | 1 | 1 | 48 | 0 | |||||||||||||||||||||||||||||
| Short-term investments | 5,674 | 12 | 271 | 6 | 8 | 0 | |||||||||||||||||||||||||||||
| Cash equivalents | 9,057 | 1 | 343 | 0 | 223 | 0 | |||||||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | (59) | 0 | 0 | 0 | 693 | 367 | |||||||||||||||||||||||||||||
| Separate account assets | 167,818 | 252 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Total assets | $ | 494,950 | $ | 13,927 | $ | 32,052 | $ | 1,088 | $ | 16,739 | $ | 2,741 | |||||||||||||||||||||||
| Market risk benefit liabilities | $ | 4,859 | $ | 4,859 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||
| Policyholders’ account balances | 15,289 | 15,289 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Reinsurance and funds withheld payables | (18) | 0 | 0 | 0 | 45 | 0 | |||||||||||||||||||||||||||||
| Other liabilities(3) | 6,339 | 15 | 0 | 0 | 11 | 0 | |||||||||||||||||||||||||||||
| Notes issued by consolidated variable interest entities (“VIEs”) | 195 | 195 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Total liabilities | $ | 26,664 | $ | 20,358 | $ | 0 | $ | 0 | $ | 56 | $ | 0 |
| As of December 31, 2024 | |||||||||||||||||||||||||||||||||||
| PFI excluding Closed Block Division and Funds Withheld | Closed Block Division | Funds Withheld | |||||||||||||||||||||||||||||||||
| Total at Fair Value | Total Level 3(1) | Total at Fair Value | Total Level 3(1) | Total at Fair Value | Total Level 3(1) | ||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Fixed maturities, available-for-sale | $ | 275,210 | $ | 6,712 | $ | 28,728 | $ | 914 | $ | 7,632 | $ | 551 | |||||||||||||||||||||||
| Assets supporting experience-rated contractholder liabilities: | |||||||||||||||||||||||||||||||||||
| Fixed maturities | 826 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Equity securities | 2,881 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| All other(2) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Subtotal | 3,707 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Market risk benefit assets | 2,331 | 2,331 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Fixed maturities, trading | 4,151 | 467 | 647 | 15 | 7,732 | 1,504 | |||||||||||||||||||||||||||||
| Equity securities | 7,776 | 479 | 1,641 | 39 | 0 | 0 | |||||||||||||||||||||||||||||
| Commercial mortgage and other loans | 469 | 0 | 0 | 0 | 233 | 233 | |||||||||||||||||||||||||||||
| Other invested assets(3) | 2,526 | 952 | 2 | 1 | 25 | 0 | |||||||||||||||||||||||||||||
| Short-term investments | 8,091 | 383 | 460 | 76 | 44 | 2 | |||||||||||||||||||||||||||||
| Cash equivalents | 10,144 | 0 | 346 | 0 | 201 | 0 | |||||||||||||||||||||||||||||
| Reinsurance recoverables and deposit receivables | (75) | 0 | 0 | 0 | 924 | 613 | |||||||||||||||||||||||||||||
| Separate account assets | 166,672 | 232 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Total assets | $ | 481,002 | $ | 11,556 | $ | 31,824 | $ | 1,045 | $ | 16,791 | $ | 2,903 | |||||||||||||||||||||||
| Market risk benefit liabilities | $ | 4,455 | $ | 4,455 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||
| Policyholders’ account balances | 12,746 | 12,746 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Reinsurance and funds withheld payables | (27) | 0 | 0 | 0 | (91) | 0 | |||||||||||||||||||||||||||||
| Other liabilities(3) | 4,749 | 1 | 0 | 0 | 2 | 0 | |||||||||||||||||||||||||||||
| Notes issued by consolidated variable interest entities (“VIEs”) | 60 | 60 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Total liabilities | $ | 21,983 | $ | 17,262 | $ | 0 | $ | 0 | $ | (89) | $ | 0 |
(1)Level 3 assets expressed as a percentage of total assets measured at fair value on a recurring basis for PFI excluding the Closed Block division and Funds Withheld, the Closed Block division and Funds Withheld totaled 2.8%, 3.4%, and 16.4%, respectively, as of June 30, 2025, and 2.4%, 3.3%, and 17.3%, respectively, as of December 31, 2024.
(2)“All other” represents cash equivalents and short-term investments.
(3)“Other invested assets” and “Other liabilities” primarily include derivatives. The amounts include the impact of netting subject to master netting agreements.
The determination of fair value, which for certain assets and liabilities is dependent on the application of estimates and assumptions, can have a significant impact on our results of operations and may require the application of a greater degree of judgment depending on market conditions, as the ability to value assets and liabilities can be significantly impacted by a decrease in market activity or a lack of transactions executed in an orderly manner.
Fixed maturity securities included in Level 3 in our fair value hierarchy are generally priced based on internally-developed valuations or indicative broker quotes. For certain private fixed maturity and equity securities, the internal valuation models use significant unobservable inputs and, accordingly, such securities are included in Level 3 in our fair value hierarchy. Level 3 fixed maturity securities for PFI excluding the Closed Block division and Funds Withheld included approximately $1,554 million of public fixed maturities as of June 30, 2025, with values primarily based on indicative broker quotes, and approximately $10,501 million of private fixed maturities, with values primarily based on internally-developed models. Significant unobservable inputs used in their valuation included: issue specific spread adjustments, material non-public financial information, management judgment, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. Separate account assets included in Level 3 in our fair value hierarchy primarily include corporate securities and commercial mortgage loans.
Contracts or contract features reported in “Market risk benefit assets” and “Market risk benefit liabilities” and embedded derivatives reported in “Policyholders’ account balances” that are included in Level 3 of our fair value hierarchy represent general account assets and liabilities pertaining to living benefit features of the Company’s variable annuity contracts and the index-linked interest credited features on certain life and annuity products. “Market risk benefit assets” and “Market risk benefit liabilities” are carried at fair value with changes in fair value included 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 that is recorded in OCI. Embedded derivatives included in “Policyholders’ account balances” are carried at fair value with changes in fair value included in “Realized investment gains (losses), net.” These assets and liabilities are valued using internally-developed models that require significant estimates and assumptions developed by management. Changes in these estimates and assumptions can have a significant impact on the results of our operations. For additional information, see Note 6 to the Unaudited Interim Consolidated Financial Statements.
For additional information regarding the valuation techniques and the key estimates and assumptions used in our determination of fair value, see Note 6 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Liquidity and Capital Resources
Overview
Liquidity refers to the ability to generate sufficient cash resources to meet the payment obligations of the Company. Capital refers to the long-term financial resources available to support the operations of our businesses, fund business growth, and provide a cushion to withstand adverse circumstances. Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of our businesses, general economic conditions and our access to the capital markets and the alternate sources of liquidity and capital described herein.
Effective and prudent liquidity and capital management is a priority across the Company. Management monitors the liquidity of Prudential Financial and its subsidiaries on a daily basis and projects borrowing and capital needs over a multi-year time horizon. We use a Risk Appetite Framework (“RAF”) to ensure that all risks taken across the Company align with our capacity and willingness to take those risks. The RAF provides a dynamic assessment of capital and liquidity stress impacts and is intended to ensure that sufficient resources are available to absorb those impacts. We believe that our capital and liquidity resources are sufficient to satisfy the capital and liquidity requirements of Prudential Financial and its subsidiaries.
Our businesses are subject to comprehensive regulation and supervision by domestic and international regulators. These regulations currently include requirements (many of which are the subject of ongoing rule-making) relating to capital and liquidity management. For information regarding these regulatory initiatives and their potential impact on us, see “Business—Regulation” and “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024.
From the beginning of 2025 through the date of this report, we took the following significant actions that have impacted, or are expected to impact, our liquidity and capital positions:
-
In March, we issued $750 million of 5.200% senior unsecured notes. We intend to use these proceeds for general corporate purposes, which may include refinancing medium-term notes maturing through 2026.
-
In March, we entered into a reinsurance agreement with Prismic Re International, a wholly-owned subsidiary of Prismic, to reinsure approximately $7 billion of reserves for certain USD-denominated Japanese whole life policies originated by our Japanese insurance subsidiaries. We also made an additional equity investment in Prismic of approximately $100 million to maintain our equity interest at approximately 20 percent. The value of the reinsurance transaction is estimated to be $400 million, which includes a release of capital, ceding commission, taxes, and the net present value of future income, of which a portion was used to fund the equity investment in Prismic, with the remaining amount to be released over time.
-
In May, we redeemed $1.0 billion of 5.375% junior subordinated notes due 2045.
-
In July, we repaid $350 million of 8.300% fixed-rate surplus notes due July 2025.
Capital
The primary components of the Company’s capitalization consist of equity and outstanding capital debt, including junior subordinated debt. As shown in the table below, as of June 30, 2025, the Company had $48.7 billion in capital, all of which was available to support the aggregate capital requirements of its businesses and its Corporate and Other operations. Based on our assessment of these businesses and operations, we believe this level of capital is consistent with our ratings targets.
| June 30, 2025 | December 31, 2024 | ||||||||||
| (in millions) | |||||||||||
| Equity(1) | $ | 34,503 | $ | 34,583 | |||||||
| Junior subordinated debt (including hybrid securities) | 7,595 | 7,588 | |||||||||
| Other capital debt | 6,603 | 6,237 | |||||||||
| Total capital | $ | 48,701 | $ | 48,408 |
(1)Amounts attributable to Prudential Financial, excluding AOCI.
We manage PICA, The Prudential Life Insurance Company, Ltd. (“Prudential of Japan”), The Gibraltar Life Insurance Co., Ltd. (“Gibraltar Life”), and other significant insurance subsidiaries to regulatory capital levels consistent with our “AA” ratings targets. We utilize the risk-based capital (“RBC”) ratio as a primary measure of the capital adequacy of our domestic insurance subsidiaries and the solvency margin ratio as a primary measure of the capital adequacy of our Japanese insurance subsidiaries.
RBC ratio calculations are intended to assist insurance regulators in measuring an insurer’s solvency and ability to pay future claims. The reporting of RBC measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities, but is available to the public.
PICA’s RBC ratio as of December 31, 2024, its most recent statutory fiscal year-end and RBC reporting date, was 409%. PICA’s RBC ratio is calculated on a consolidated basis and included Pruco Life Insurance Company (“Pruco Life”), Pruco Life Insurance Company of New Jersey (“PLNJ”), which is a subsidiary of Pruco Life, and Prudential Legacy Insurance Company of New Jersey (“PLIC”).
Similar to the RBC ratios that are employed by U.S. insurance regulators, regulatory authorities in the international jurisdictions in which we operate generally establish some form of minimum solvency margin requirements for insurance companies based on local statutory accounting practices. These solvency margins are a primary measure of the capital adequacy of our international insurance operations. Maintenance of our solvency margins at certain levels is also important to our competitive positioning, as in certain jurisdictions, such as Japan, these solvency margins are required to be disclosed to the public and therefore impact the public perception of an insurer’s financial strength.
The table below presents the solvency margin ratios of our most significant international insurance subsidiaries as of March 31, 2025, the most recent date for which this information is available.
| Ratio | |||||
| Prudential of Japan consolidated(1) | 757 | % | |||
| Gibraltar Life consolidated(2) | 960 | % |
(1)Includes Prudential Trust Co., Ltd., a subsidiary of Prudential of Japan.
(2)Includes Prudential Gibraltar Financial Life Insurance Co., Ltd. (“PGFL”), a subsidiary of Gibraltar Life.
All of our domestic and significant international insurance subsidiaries have capital levels that substantially exceed the minimum level required by applicable insurance regulations. The statutory capital of our insurance companies and our overall capital flexibility could be impacted by, among other things, market conditions and changes in insurance reserves, including those stemming from updates to our actuarial assumptions. Our regulatory capital levels also may be affected in the future by changes to the applicable regulations, proposals for which are currently under consideration by both domestic and international insurance regulators. The FSA has developed a new market-based alternative to the solvency margin ratio framework called the Economic Solvency Ratio (“ESR”) that will apply to our Japanese insurance subsidiaries. The ESR framework became effective April 1, 2025, with disclosure under the new framework required beginning in 2026. For additional information
regarding the calculation of RBC and solvency margin ratios, as well as regulatory minimums, see Note 20 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Captive Reinsurance Companies
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital—Captive Reinsurance Companies” included in our Annual Report on Form 10-K for the year ended December 31, 2024, for a discussion of our use of captive reinsurance companies.
Shareholder Distributions
Share Repurchase Program and Shareholder Dividends
In December 2024, Prudential Financial’s Board of Directors 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, 2025 through December 31, 2025. In general, the timing and amount of share repurchases are determined by management based on market conditions and other considerations, including compliance with applicable laws and any increased capital needs of our businesses due to, among other things, credit migration and losses in our investment portfolio, changes in regulatory capital requirements and opportunities for growth and acquisitions. Repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended.
The following table sets forth information about declarations of Common Stock dividends, as well as repurchases of shares of Prudential Financial’s Common Stock, for the six months ended June 30, 2025:
| Dividend Amount | Shares Repurchased | ||||||||||||||||||||||
| Three months ended: | Per Share | Aggregate | Shares | Total Cost | |||||||||||||||||||
| (in millions, except per share data) | |||||||||||||||||||||||
| March 31, 2025 | $ | 1.35 | $ | 486 | 2.2 | $ | 250 | ||||||||||||||||
| June 30, 2025 | $ | 1.35 | $ | 485 | 2.4 | $ | 250 | ||||||||||||||||
Liquidity
Liquidity management and stress testing are performed on a legal entity basis as the ability to transfer funds between subsidiaries is limited due in part to regulatory restrictions. Liquidity needs are determined through daily and quarterly cash flow forecasting at the holding company and within our operating subsidiaries. We seek to maintain a minimum balance of highly liquid assets to ensure that adequate liquidity is available at Prudential Financial to cover fixed expenses in the event that we experience reduced cash flows from our operating subsidiaries at a time when access to capital markets is also not available.
We seek to mitigate the risk of having limited or no access to financing due to stressed market conditions by generally pre-funding debt in advance of maturity. We mitigate the refinancing risk associated with our debt that is used to fund operating needs by matching the term of debt with the assets financed. To ensure adequate liquidity in stress scenarios, stress testing is performed for our major operating subsidiaries. We seek to further mitigate liquidity risk by maintaining our access to alternative sources of liquidity, as discussed below.
Liquidity of Prudential Financial
The principal sources of funds available to Prudential Financial, the parent holding company, are dividends, returns of capital and loans from subsidiaries, and proceeds from debt issuances and certain stock-based compensation activity. These sources of funds may be supplemented by Prudential Financial’s access to the capital markets as well as the “—Alternative Sources of Liquidity” described below.
The primary uses of funds at Prudential Financial include servicing debt, making capital contributions and loans to subsidiaries, making acquisitions, paying declared shareholder dividends and repurchasing outstanding shares of Common Stock executed under authority from the Board.
As of June 30, 2025, Prudential Financial had highly liquid assets with a carrying value totaling $4,713 million, a decrease of $1,551 million from December 31, 2024. Highly liquid assets predominantly include cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds. We maintain an intercompany liquidity account that is designed to optimize the use of cash by facilitating the lending and borrowing of funds between Prudential Financial and its subsidiaries on a daily basis. Excluding the net borrowings from this intercompany liquidity account, Prudential Financial had highly liquid assets of $3,912 million as of June 30, 2025, a decrease of $729 million from December 31, 2024.
The following table sets forth Prudential Financial’s principal sources and uses of highly liquid assets, excluding net borrowings from our intercompany liquidity account, for the periods indicated:
| Six Months Ended June 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| Highly Liquid Assets, beginning of period | $ | 4,641 | $ | 4,095 | ||||||||||
| Dividends and/or returns of capital from subsidiaries(1) | 795 | 1,606 | ||||||||||||
| Affiliated (borrowings)/loans - (capital activities)(2) | 0 | 702 | ||||||||||||
| Capital contributions to subsidiaries(3) | (21) | (46) | ||||||||||||
| Total Business Capital Activity(4) | 774 | 2,262 | ||||||||||||
| Share repurchases(5) | (496) | (493) | ||||||||||||
| Common Stock dividends(6) | (972) | (955) | ||||||||||||
| Total Share Repurchases, Dividends and Business Disposition Activity | (1,468) | (1,448) | ||||||||||||
| Proceeds from the issuance of debt(7) | 863 | 990 | ||||||||||||
| Repayments of debt | (1,005) | (508) | ||||||||||||
| Total Debt Activity | (142) | 482 | ||||||||||||
| Net interest expense | (578) | (508) | ||||||||||||
| Affiliated (borrowings)/loans - (operating activities)(8) | 544 | (889) | ||||||||||||
| Tax cash flows(4) | (198) | 131 | ||||||||||||
| Other corporate cash flows(4) | 208 | 89 | ||||||||||||
| Share issuances for employee stock purchases and other(4) | 131 | 193 | ||||||||||||
| Total Other Activity | 107 | (984) | ||||||||||||
| Net increase/(decrease) in highly liquid assets | (729) | 312 | ||||||||||||
| Highly Liquid Assets, end of period | $ | 3,912 | $ | 4,407 |
(1)2025 includes $500 million from Individual Life insurance captives, $218 million from international insurance subsidiaries and $77 million from PGIM subsidiaries. 2024 includes $800 million from a holding company, funded by one of our captive insurance subsidiaries, inclusive of proceeds associated with the reinsurance of a portion of the Company’s guaranteed universal life policies, $650 million from PICA, $117 million from international subsidiaries, $31 million from PGIM subsidiaries and $8 million from other subsidiaries.
(2)Represents loans to and from subsidiaries made for capital management purposes. 2024 includes $502 million from international insurance subsidiaries and $200 million from captive reinsurance subsidiaries.
(3)2025 includes capital contributions of $15 million to other subsidiaries and $6 million to PICA. 2024 includes capital contributions of $39 million to international insurance subsidiaries and $7 million to other subsidiaries.
(4)2025 “Total Business Capital Activity” includes segment inflows of $890 million from U.S. Businesses, $387 million from International Businesses, $255 million from PGIM, and outflows of $758 million to Corporate and Other operations. 2024 “Total Business Capital Activity” includes segment inflows of $1,822 million from U.S. Businesses, $676 million from International Businesses, $184 million from PGIM, and outflows of $420 million to Corporate and Other operations. In addition, Corporate & Other operations had net inflows of $141 million and $413 million, respectively, from “Tax cash flows,” “Other corporate cash flows” and “Share issuances for employee stock purchases and other,” as shown within this table.
(5)Excludes cash payments made on trades that settled in the subsequent period.
(6)Includes cash payments made on dividends declared in prior periods.
(7)2025 includes $120 million of proceeds from the issuance of retail medium-term notes that were used exclusively to purchase funding agreements from PICA.
(8)Represents loans to and from subsidiaries to support business operating needs.
Dividends and Returns of Capital from Subsidiaries
Domestic insurance subsidiaries. During the first six months of 2025, Prudential Financial did not receive dividends from its domestic insurance subsidiaries. In addition to paying Common Stock dividends, our domestic insurance operations may return capital to Prudential Financial by other means, such as affiliated lending, and reinsurance with Bermuda-based affiliates. In the first quarter of 2025, Prudential Financial received a return of capital of $500 million from a holding company funded by a domestic captive insurance subsidiary.
International insurance subsidiaries. During the first six months of 2025, Prudential Financial received dividends of $218 million from its international insurance subsidiaries. In addition to paying Common Stock dividends, our international insurance operations may return capital to Prudential Financial by other means, such as the repayment of preferred stock obligations held by Prudential Financial or other affiliates, affiliated lending, affiliated derivatives and reinsurance with U.S.- and Bermuda-based affiliates.
Other subsidiaries. During the first six months of 2025, Prudential Financial received dividends of $77 million from PGIM subsidiaries.
Restriction on dividends and returns of capital from subsidiaries. Our insurance companies are subject to limitations on the payment of dividends and other transfers of funds to Prudential Financial and other affiliates under applicable insurance law and regulation. Further, market conditions could negatively impact capital positions of our insurance companies, which could further restrict their ability to pay dividends. More generally, the payment of dividends by any of our subsidiaries is subject to declaration by their Board of Directors and can be affected by market conditions and other factors.
With respect to our domestic insurance subsidiaries, PICA is permitted to pay ordinary dividends based on calculations specified under New Jersey insurance law, subject to prior notification to the New Jersey Department of Banking and Insurance (“NJDOBI”). Any distributions above this amount in any twelve-month period are considered to be “extraordinary” dividends, and the approval of the NJDOBI is required prior to payment. The laws regulating dividends of the states where our other domestic insurance companies are domiciled are similar, but not identical, to those of New Jersey.
Capital redeployment from our international insurance subsidiaries is subject to local regulatory requirements in the international jurisdictions in which they operate. Our most significant international insurance subsidiaries, Prudential of Japan and Gibraltar Life, are permitted to pay Common Stock dividends based on calculations specified by Japanese insurance business law. Dividends in excess of these amounts and other forms of capital distribution may require the prior approval of the FSA. The regulatory fiscal year end for both Prudential of Japan and Gibraltar Life is March 31, after which time the Common Stock dividend amount permitted to be paid without prior approval from the FSA can be determined.
The ability of our PGIM subsidiaries and the majority of our other operating subsidiaries to pay dividends is largely unrestricted from a regulatory standpoint.
See Note 20 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, for information regarding specific dividend restrictions.
Liquidity of Insurance Subsidiaries
We manage the liquidity of our insurance operations to ensure stable, reliable and cost-effective sources of cash flows to meet all of our obligations. Liquidity within each of our insurance subsidiaries is provided by a variety of sources, including portfolios of liquid assets. The investment portfolios of our subsidiaries are integral to the overall liquidity of our insurance operations. We segment our investment portfolios and employ an asset/liability management approach specific to the requirements of each of our product lines. This enhances the discipline applied in managing the liquidity, as well as the interest rate and credit risk profiles, of each portfolio in a manner consistent with the unique characteristics of the product liabilities.
Liquidity is measured against internally-developed benchmarks that take into account the characteristics of both the asset portfolio and the liabilities that they support. We consider attributes of the various categories of liquid assets (for example, type of asset and credit quality) in calculating internal liquidity measures to evaluate our insurance operations’ liquidity under various stress scenarios, including company-specific and market-wide events. We continue to believe that cash generated by ongoing operations and the profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios for each of our insurance subsidiaries.
The principal sources of liquidity for our insurance subsidiaries are premiums, investment and fee income, investment maturities, sales of investments, and sales associated with our insurance and annuity operations, as well as internal and external borrowings. The principal uses of liquidity include benefits, claims and dividends paid to policyholders, and payments to policyholders and contractholders in connection with surrenders, withdrawals and net policy loan activity. Other uses of liquidity may include commissions, general and administrative expenses, purchases of investments, the payment of dividends to the parent holding company, hedging and reinsurance activity and payments in connection with financing activities.
The following table sets forth the fair value of certain of our domestic insurance operations’ portfolio of liquid assets, as of the dates indicated:
| June 30, 2025 | |||||||||||||||||||||||||||||
| Prudential Insurance(1) | PLIC | Pruco Life | Total | December 31, 2024 | |||||||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||||||||
| Cash and short-term investments | $ | 6.0 | $ | 0.8 | $ | 2.7 | $ | 9.5 | $ | 12.5 | |||||||||||||||||||
| Fixed maturity investments(2): | |||||||||||||||||||||||||||||
| High or highest quality | 123.5 | 26.6 | 44.1 | 194.2 | 180.3 | ||||||||||||||||||||||||
| Other than high or highest quality | 8.6 | 2.4 | 2.9 | 13.9 | 12.1 | ||||||||||||||||||||||||
| Subtotal | 132.1 | 29.0 | 47.0 | 208.1 | 192.4 | ||||||||||||||||||||||||
| Public equity securities, at fair value | 1.0 | 1.5 | 0.8 | 3.3 | 5.4 | ||||||||||||||||||||||||
| Total | $ | 139.1 | $ | 31.3 | $ | 50.5 | $ | 220.9 | $ | 210.3 |
(1)Represents legal entity view and as such includes both domestic and international activity.
(2)Credit quality is based on NAIC or equivalent rating.
The following table sets forth the fair value of our international insurance operations’ portfolio of liquid assets, as of the dates indicated:
| June 30, 2025 | |||||||||||||||||||||||||||||
| Prudential of Japan | Gibraltar Life(1) | All Other(2) | Total | December 31, 2024 | |||||||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||||||||
| Cash and short-term investments | $ | 1.0 | $ | 4.5 | $ | 3.0 | $ | 8.5 | $ | 7.4 | |||||||||||||||||||
| Fixed maturity investments(3): | |||||||||||||||||||||||||||||
| High or highest quality(4) | 27.5 | 50.9 | 24.0 | 102.4 | 102.6 | ||||||||||||||||||||||||
| Other than high or highest quality | 0.4 | 0.5 | 3.7 | 4.6 | 3.6 | ||||||||||||||||||||||||
| Subtotal | 27.9 | 51.4 | 27.7 | 107.0 | 106.2 | ||||||||||||||||||||||||
| Public equity securities | 3.6 | 0.8 | 0.4 | 4.8 | 4.2 | ||||||||||||||||||||||||
| Total | $ | 32.5 | $ | 56.7 | $ | 31.1 | $ | 120.3 | $ | 117.8 |
(1)Includes PGFL.
(2)Represents our international insurance operations, excluding Japan.
(3)Credit quality is based on NAIC or equivalent rating.
(4)As of June 30, 2025, $63.4 billion, or 62%, were invested in government or government agency bonds.
Liquidity associated with other activities
Hedging activities associated with Individual Retirement Strategies
For the portion of our Individual Retirement Strategies’ ALM strategy executed through hedging, we enter into a range of exchange-traded, cleared and other OTC equity and interest rate derivatives in order to hedge certain capital market risks related to more severe market conditions. For a full discussion of our Individual Retirement Strategies’ risk management strategy, see “—Results of Operations by Segment—Retirement Strategies.” This portion of our Individual Retirement Strategies’ ALM strategy requires access to liquidity to meet payment obligations relating to these derivatives, such as payments for periodic
settlements, purchases, maturities and terminations. These liquidity needs can vary materially due to, among other items, changes in interest rates, equity markets, mortality and policyholder behavior.
The hedging portion of our Individual Retirement Strategies’ ALM strategy may also result in derivative related collateral postings to (when we are in a net post position) or from (when we are in a net receive position) counterparties. The net collateral position depends on changes in interest rates and equity markets related to the amount of the exposures hedged. Depending on market conditions, the collateral posting requirements can result in material liquidity needs when we are in a net post position.
Foreign exchange hedging activities
We employ various hedging strategies to manage potential exposure to foreign currency exchange rate movements, particularly those associated with the yen. Our overall yen hedging strategy calibrates the hedge level to preserve the relative contribution of our yen-based business to the Company’s overall return on equity on a leverage neutral basis.
We hold both internal and external hedges primarily to hedge our USD-equivalent equity. These hedges also mitigate volatility in the solvency margins of yen-based subsidiaries resulting from changes in the market value of their USD-denominated investments hedging our USD-equivalent equity attributable to changes in the yen-USD exchange rate.
For additional information regarding our hedging strategy, see “—Results of Operations—Impact of Foreign Currency Exchange Rates.”
Cash settlements from these hedging activities result in cash flows between subsidiaries of Prudential Financial and either international-based subsidiaries or external parties. The cash flows are dependent on changes in foreign currency exchange rates and the notional amount of the exposures hedged. For example, a significant yen depreciation over an extended period of time could result in net cash inflows, while a significant yen appreciation could result in net cash outflows. The following tables set forth information about net cash settlements and the net asset or liability resulting from these hedging activities related to the yen and other currencies for the periods indicated:
| Six Months Ended June 30, | |||||||||||
| Cash Settlements Received (Paid): | 2025 | 2024 | |||||||||
| (in millions) | |||||||||||
| Internal Hedges(1) | $ | 65 | $ | 389 | |||||||
| External Hedges(2) | 223 | (203) | |||||||||
| Total Cash Settlements | $ | 288 | $ | 186 | |||||||
| Assets (Liabilities): | June 30, 2025 | December 31, 2024 | |||||||||
| (in millions) | |||||||||||
| Internal Hedges(1) | $ | 636 | $ | 968 | |||||||
| External Hedges(3) | 61 | 341 | |||||||||
| Total Assets (Liabilities)(4) | $ | 697 | $ | 1,309 |
__________
(1)Represents internal transactions between international-based and U.S.-based entities. Amounts noted are from the U.S.-based entities’ perspectives.
(2)Includes non-yen related cash settlements received (paid) of $1 million, primarily denominated in Australian dollar, Chilean peso and Brazilian real, and $(10) million, primarily denominated in Brazilian real, Chilean peso and Australian dollar for the six months ended June 30, 2025 and 2024, respectively.
(3)Includes non-yen related assets (liabilities) of $20 million, primarily denominated in Brazilian real, Chilean Peso and Australian dollar as of June 30, 2025 and $91 million, primarily denominated in Brazilian real, Chilean peso and Australian dollar, as of December 31, 2024.
(4)As of June 30, 2025, approximately $282 million, $113 million, $85 million and $217 million of the net market values are scheduled to settle in 2025, 2026, 2027, and thereafter, respectively. The net market value of the assets (liabilities) will vary with changing market conditions to the extent there are no corresponding offsetting positions.
PGIM operations
The principal sources of liquidity for our fee-based PGIM businesses include cash flows from asset management, commercial mortgage origination and servicing activities, and internal and external funding facilities. The principal uses of liquidity for our fee-based PGIM businesses include general and administrative expenses, facilitating our commercial mortgage loan business, funding needs of our seed and co-investment portfolio and distributions of dividends and returns of capital to
Prudential Financial. The primary liquidity risks for our fee-based PGIM businesses relate to their profitability, which is impacted by market conditions, our investment management performance and client redemptions. We believe the cash flows from our fee-based PGIM businesses are adequate to satisfy the current liquidity requirements of these operations, as well as requirements that could arise under reasonably foreseeable stress scenarios, which are monitored through the use of internal measures.
The principal sources of liquidity for our seed and co-investments held in our PGIM businesses are cash flows from investments, cash flows from our fee-based businesses, as described above, borrowing lines from internal sources, including Prudential Financial and Prudential Funding, LLC (“Prudential Funding”), a wholly-owned subsidiary of PICA, and external sources, including PGIM’s limited-recourse credit facility. The principal uses of liquidity for our seed and co-investments include making investments to support business growth and paying interest expense from the internal and external borrowings used to fund those investments. The primary liquidity risks include the inability to sell assets in a timely manner, declines in the value of assets and credit defaults.
There have been no material changes to the liquidity position of our PGIM operations since December 31, 2024.
Alternative Sources of Liquidity
In addition to asset-based financing as discussed below, Prudential Financial and certain subsidiaries have access to other sources of liquidity, including syndicated, unsecured committed credit facilities, membership in the Federal Home Loan Bank of New York, a funding agreement facility with Farmer Mac, commercial paper programs and contingent financing facilities in the form of facility agreements. For additional information regarding these sources of liquidity, see Note 15 to the Unaudited Interim Consolidated Financial Statements contained herein and Note 18 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Asset-based Financing
We conduct asset-based or secured financing within our insurance and other subsidiaries, including transactions such as securities lending, committed and uncommitted repurchase agreements and mortgage dollar rolls, to earn spread income, to borrow funds, or to facilitate trading activity. These programs are primarily driven by portfolio holdings of securities that are lendable based on counterparty demand for these securities in the marketplace. The collateral received in connection with these programs is primarily used to purchase securities in the short-term spread portfolios of our insurance entities. Investments held in the short-term spread portfolios include cash and cash equivalents, short-term investments (primarily corporate bonds), mortgage loans and fixed maturities (primarily collateralized loan obligations and other structured securities), with a weighted average life at time of purchase by the short-term portfolios of four years or less. Floating rate assets comprise the majority of our short-term spread portfolio. These short-term portfolios are subject to specific investment policy statements, which among other things, do not allow for significant asset/liability interest rate duration mismatch.
The following table sets forth our liabilities under asset-based or secured financing programs as of the dates indicated:
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| PFI Excluding Closed Block Division | Closed Block Division | Consolidated | PFI Excluding Closed Block Division | Closed Block Division | Consolidated | ||||||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | $ | 5,867 | $ | 2,338 | $ | 8,205 | $ | 4,779 | $ | 2,017 | $ | 6,796 | |||||||||||||||||||||||
| Cash collateral for loaned securities | 8,212 | 955 | 9,167 | 8,315 | 1,306 | 9,621 | |||||||||||||||||||||||||||||
| Securities sold but not yet purchased | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Total(1)(2) | $ | 14,079 | $ | 3,293 | $ | 17,372 | $ | 13,094 | $ | 3,323 | $ | 16,417 | |||||||||||||||||||||||
| Portion of above securities that may be returned to the Company overnight requiring immediate return of the cash collateral | $ | 12,834 | $ | 2,864 | $ | 15,698 | $ | 12,325 | $ | 3,220 | $ | 15,545 | |||||||||||||||||||||||
| Weighted average maturity, in days(3) | 1 | 1 | 5 | 4 |
(1)The daily average outstanding balance for the three and three and six months ended June 30, 2025 was $14,491 million and $14,119 million, respectively, for PFI excluding the Closed Block division, and $3,562 million and $3,449 million, respectively, for the Closed Block division.
(2)Includes utilization of external funding facilities for PGIM’s commercial mortgage origination business.
(3)Excludes securities that may be returned to the Company overnight.
As of June 30, 2025, our domestic insurance entities had assets eligible for the asset-based or secured financing programs of $104.8 billion, of which $17.7 billion were on loan. Taking into account market conditions and outstanding loan balances as of June 30, 2025, we believe approximately $17.2 billion of the remaining eligible assets are readily lendable, including approximately $15.0 billion relating to PFI excluding the Closed Block division, of which $4.6 billion relates to certain separate accounts and may only be used for financing activities related to those accounts, and the remaining $2.2 billion relating to the Closed Block division.
Financing Activities
As of June 30, 2025, total short-term and long-term debt of the Company on a consolidated basis was $20 billion, a decrease of $0.1 billion from December 31, 2024. The following table sets forth total consolidated borrowings of the Company as of the dates indicated. We may, from time to time, seek to redeem or repurchase our outstanding debt securities through open market purchases, individually negotiated transactions or otherwise. Any such actions will depend on prevailing market conditions, our liquidity position, and other factors.
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| Borrowings: | Prudential Financial | Subsidiaries | Consolidated | Prudential Financial | Subsidiaries | Consolidated | |||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| General obligation short-term debt: | |||||||||||||||||||||||||||||||||||
| Commercial paper | $ | 25 | $ | 500 | $ | 525 | $ | 25 | $ | 496 | $ | 521 | |||||||||||||||||||||||
| Current portion of long-term debt | 499 | 348 | 847 | 0 | 347 | 347 | |||||||||||||||||||||||||||||
| Subtotal | 524 | 848 | 1,372 | 25 | 843 | 868 | |||||||||||||||||||||||||||||
| General obligation long-term debt: | |||||||||||||||||||||||||||||||||||
| Senior debt | 10,610 | 0 | 10,610 | 10,245 | 0 | 10,245 | |||||||||||||||||||||||||||||
| Junior subordinated debt | 7,552 | 43 | 7,595 | 8,548 | 39 | 8,587 | |||||||||||||||||||||||||||||
| Surplus notes(1) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Subtotal | 18,162 | 43 | 18,205 | 18,793 | 39 | 18,832 | |||||||||||||||||||||||||||||
| Total general obligations | 18,686 | 891 | 19,577 | 18,818 | 882 | 19,700 | |||||||||||||||||||||||||||||
| Limited and non-recourse borrowings(2): | |||||||||||||||||||||||||||||||||||
| Short-term debt | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
| Current portion of long-term debt | 0 | 1 | 1 | 0 | 85 | 85 | |||||||||||||||||||||||||||||
| Long-term debt | 0 | 446 | 446 | 0 | 355 | 355 | |||||||||||||||||||||||||||||
| Total limited and non-recourse borrowings | 0 | 447 | 447 | 0 | 440 | 440 | |||||||||||||||||||||||||||||
| Total borrowings | $ | 18,686 | $ | 1,338 | $ | 20,024 | $ | 18,818 | $ | 1,322 | $ | 20,140 |
(1)Amounts are net of assets under set-off arrangements of $15,220 million and $14,748 million as of June 30, 2025 and December 31, 2024, respectively. Amounts include credit-linked note structures used to finance Guideline AXXX reserves for business reinsured to Somerset Re in March 2024.
(2)Limited and non-recourse borrowing primarily represents mortgage debt of our subsidiaries that has recourse only to real estate investment property of $192 million and $185 million as of June 30, 2025 and December 31, 2024, respectively, and a draw on a credit facility that has recourse only to collateral pledged by the Company of $255 million as of both June 30, 2025 and December 31, 2024.
As of June 30, 2025, and December 31, 2024, the Company was in compliance with all debt covenants related to the borrowings in the table above. For additional information regarding the Company’s short- and long-term debt obligations, see Note 15 to the Unaudited Interim Consolidated Financial Statements contained herein and Note 18 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Prudential Financial’s consolidated borrowings decreased $0.1 billion from December 31, 2024. In March 2025, the Company issued $750 million in aggregate principal amount of 5.200% medium-term notes due in March 2035. In May 2025, the company redeemed, in full, $1.0 billion in aggregate principal amount of 5.375% junior subordinated notes due in 2045.
Term and Universal Life Reserve Financing
We use captive reinsurance subsidiaries to finance the portion of the statutory reserves required to be held by our domestic life insurance companies under Regulation XXX and Guideline AXXX that we consider to be non-economic. The financing
arrangements involve the reinsurance of term and universal life business to our captive reinsurers and the issuance of surplus notes by those captives that are treated as capital for statutory purposes. These surplus notes are subordinated to policyholder obligations, and the payment of principal and interest on the surplus notes can only be made with prior insurance regulatory approval.
We have entered into agreements with external counterparties providing for the issuance of surplus notes by our captive reinsurers in return for the receipt of credit-linked notes (“Credit-Linked Note Structures”). As of both June 30, 2025 and December 31,2024, we had Credit-Linked Note Structures with an aggregate issuance capacity of $8,000 million to support Regulation XXX reserves, of which $7,560 million was outstanding and matures in 2044. These amounts exclude credit-linked note structures used to finance Guideline AXXX reserves for business reinsured to Somerset Re in March 2024. Under the agreements, the captive receives in exchange for the surplus notes one or more credit-linked notes issued by a special-purpose affiliate of the Company with an aggregate principal amount equal to the surplus notes outstanding. The captive holds the credit-linked notes as assets supporting Regulation XXX or Guideline AXXX non-economic reserves, as applicable. For additional information regarding our Credit-Linked Note Structures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities” in our Annual Report on Form 10-K for the year ended December 31, 2024.
As of June 30, 2025, we also had outstanding an aggregate of $200 million of debt issued for the purpose of financing Regulation XXX non-economic reserves. In addition, as of June 30, 2025, for purposes of financing Guideline AXXX non-economic reserves, one captive had $3,982 million of surplus notes outstanding that were issued to affiliates.
The Company introduced updated versions of its individual life products in conjunction with the requirement to adopt principle-based reserving by January 1, 2020. These updated products are currently priced to support the principle-based statutory reserve level without the need for reserve financing.
Off-Balance Sheet Arrangements
See additional information regarding off-balance sheet arrangements in Note 15 and other commitments in Note 21 to the Unaudited Interim Consolidated Financial Statements.
We do not have retained or contingent interests in assets transferred to unconsolidated entities, or variable interests in unconsolidated entities or other similar transactions, arrangements or relationships that serve as credit, liquidity or market risk support, that we believe are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or our access to or requirements for capital resources. In addition, we do not have relationships with any unconsolidated entities that are contractually limited to narrow activities that facilitate our transfer of or access to associated assets.
Ratings
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Ratings” in our Annual Report on Form 10-K for the year ended December 31, 2024, for a discussion of our financial strength and credit ratings and their impact on our business.
There have been no significant changes or actions in ratings or ratings outlooks for the Company that have occurred since the filing of our Form 10-K for the year ended December 31, 2024.
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