# PRUDENTIAL FINANCIAL INC (PRU) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from PRUDENTIAL FINANCIAL INC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1137774/000113777424000045/pru-20231231.htm
Accession: 0001137774-24-000045
Filing date: 2024-02-21
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/PRU/
All MD&A years: /company/PRU/mda/
Previous year: /company/PRU/mda/fy2022/ (FY 2022)
Next year: /company/PRU/mda/fy2024/ (FY 2024)

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TABLE OF CONTENTS

[[GREPCENT_TABLE]]
[["","Page"],["Overview","51"],["Outlook","52"],["Industry Trends","53"],["Impact of Changes in the Interest Rate Environment","53"],["Results of Operations","56"],["Consolidated Results of Operations","56"],["Segment Results of Operations","57"],["Segment Measures","59"],["Impact of Foreign Currency Exchange Rates","60"],["Accounting Policies & Pronouncements","62"],["Application of Critical Accounting Estimates","62"],["Adoption of New Accounting Pronouncements","70"],["Results of Operations by Segment","70"],["PGIM","70"],["U.S. Businesses","75"],["Retirement Strategies","76"],["Group Insurance","83"],["Individual Life","85"],["International Businesses","87"],["Corporate and Other","92"],["Divested and Run-off Businesses","94"],["Closed Block Division","95"],["Income Taxes","96"],["Valuation of Assets and Liabilities","97"],["General Account Investments","99"],["Liquidity and Capital Resources","120"],["Ratings","134"],["Risk Management","136"]]
[[/GREPCENT_TABLE]]

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Certain of the statements included in this section constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Prudential Financial, Inc. and its subsidiaries. Prudential Financial, Inc.’s actual results may differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the “Risk Factors” and “Forward-Looking Statements” sections included herein.

Overview

We have 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.

Effective January 1, 2023, we made the following segment reporting changes, which do not impact our consolidated financial statements:

•Based on the write-down of Assurance IQ’s (“AIQ”) goodwill asset, and that its financial results and operations are not considered significant, AIQ no longer represents a separately reportable segment and is now included within our Corporate and Other operations.

•Since Prudential Advisors, our proprietary nationwide distribution business, is no longer managed through the Individual Life segment and its financial results and operations are not considered significant, it is now included within our Corporate and Other operations.

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

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 are composed 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. See “Business—” for a description of our sources of revenue and details on how our profitability is impacted. In addition, our profitability is impacted by our ability to effectively deploy capital, utilize our tax capacity and manage expenses.

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.

In September 2023, we, together with Warburg Pincus and a group of institutional investors, announced the launch of Prismic Life Reinsurance, Ltd. (“Prismic Re”), a licensed Bermuda-based life and annuity reinsurance company. In conjunction with this announcement, we made an initial equity investment through our Corporate and Other operations of approximately $200 million, equivalent to a 20% interest, in Prismic Life Holding Company LP (“Prismic”), the Bermuda-exempted limited partnership that owns all of the outstanding capital stock of Prismic Re. We expect the increased reinsurance capacity that this partnership provides to support our vision of expanding access to investing, insurance, and retirement security for people around the world. Our initial transaction, effective September 2023, was to reinsure approximately $9 billion, or 70%, of reserves related to our structured settlement annuities business with Prismic Re. See Note 15 to the Consolidated Financial Statements for additional information regarding this transaction.

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. As part of this, we are implementing changes to our organizational structure and have recorded a restructuring charge of $200 million in the fourth quarter of 2023. We expect these actions will create operating efficiencies,

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and provide reinvestment capacity to build capabilities, realize additional efficiencies, strengthen our competitiveness and fuel future growth.

Outlook

We feel confident about our prospects for the future based on the foundation of our integrated and complementary businesses. We plan to continue our transformation towards becoming less market-sensitive, including efforts to further de-risk, such as through reinsurance transactions, and to deliver sustainable long-term growth, including through investing in products and solutions that meet the evolving needs of our customers. Our plan remains to reallocate capital across the businesses with the intention of increasing the earnings contribution from our higher-growth businesses and reducing capital allocated to lower-growth, more capital-intensive businesses.

Specific outlook considerations for each of our businesses include the following:

•PGIM. Our global investment management business, PGIM, is focused on maintaining strong investment performance while leveraging the scale of its approximately $1.298 trillion of assets under management and diversified global operations. We are broadening our distribution channels and asset management capabilities through acquisitions and organic initiatives to better serve our clients and support growth as well as providing asset management services to Prismic. In addition to serving third-party clients, we provide our U.S. and International businesses with a competitive advantage through our investment expertise across a broad array of asset classes, including public and private asset class capabilities. Underpinning our growth strategy is our ability to continue to deliver robust investment performance and to attract and retain high-caliber investment talent.

There remain risks to earnings across the asset management industry as adverse changes in market conditions (e.g., equity market declines, higher interest rates, credit spread widening or real estate value declines) could lead to lower fee-based revenues, incentive fees taking longer to be realized and losses in our seed and co-investments. An economic downturn could also have impacts on real estate prices as well as transaction volumes in certain private asset classes. We believe PGIM’s uniquely diversified global platform is well positioned to be resilient in the face of market and industry headwinds.

•Retirement Strategies. We remain focused on helping customers meet their investment and retirement needs. Our Institutional Retirement Strategies business continues to be focused on providing products that respond to the needs of plan sponsors, retirees, and annuitants to manage risk and control their benefit costs while maintaining appropriate pricing and return expectations under changing market conditions. We expect our differentiated capabilities and demonstrated execution to drive our business momentum in the pension risk transfer and international reinsurance markets; however, we expect that growth will not be linear due to the episodic nature of these transactions. In Individual Retirement Strategies, we continue to execute on our strategy to pivot to less interest rate-sensitive products to ensure we realize appropriate returns within the current economic environment. We expect to continue to shift our focus to products that provide protected outcomes for our customers across a wide range of economic environments through simpler, technology-enabled channels. We expect account values, fee income, and spread income to be impacted by volatile market conditions.

•Group Insurance. We are a leading group benefits provider with a focus on further diversifying our portfolio by expanding our Premier Market and Association segments and growing voluntary supplemental health, while maintaining leadership in the National Market segment.

•Individual Life. We continue to focus on making life insurance solutions more accessible to financial professionals and direct customers by providing a broad product portfolio, including growing the amount of accumulation and simplified protection product options, coupled with our multi-channel distribution capabilities. We have taken pricing and product actions to ensure we realize appropriate returns for the current economic environment and to diversify our product mix to further limit our sensitivity to interest rates.

•International Businesses. We remain focused on meeting customers’ protection and financial needs as well as maintaining the underlying strength of our distribution channels. Our strategy is to strengthen our position in Japan while expanding our footprint in select high-growth emerging markets. We believe our needs-based selling and death protection focus are even more valuable to consumers based on the global experience of COVID-19 and will help support the continued long-term growth of our businesses. We continue to invest in our existing businesses and regularly

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assess acquisition opportunities to build scale and complement our portfolio of businesses in emerging markets in support of our long-term growth.

Industry Trends

Our U.S. and International Businesses are impacted by financial markets, economic conditions, regulatory oversight, and a variety of trends that affect the industries in which we compete.

Financial and Economic Environment:

•U.S. Businesses. As discussed further under “—Impact of Changes in the Interest Rate Environment” below, interest rates in the U.S. experienced a prolonged period of historically low levels, followed by a sharp rise in 2022 and sustained higher levels in 2023. We expect that a continued level of higher interest rates will benefit our results over time. We continue to monitor current market conditions and the impact to our businesses from slowing or negative economic growth. In addition, we are subject to financial impacts associated with movements in equity markets and the evolution of the credit cycle as discussed in “—Segment Results of Operations,” where applicable, and more broadly in “Item 1A. Risk Factors.”

•International Businesses. Our International Businesses’ operations, especially in Japan, have operated in a low interest rate environment for many years, as discussed under “—Impact of Changes in the Interest Rate Environment” below, and these low interest rates negatively impact our net investment spread results and reinvestment yields. In addition, we are subject to financial impacts associated with movements in foreign currency rates, particularly the Japanese yen. Fluctuations in the value of the yen can impact the relative attractiveness to customers of both yen-denominated and non-yen denominated products thereby impacting both sales and surrenders. In addition, we are subject to financial impacts associated with movements in equity markets and the evolution of the credit cycle as discussed in “—Segment Results of Operations,” where applicable, and more broadly in “Item 1A. Risk Factors.”

Demographics:

•U.S. Businesses. Individual customer demographics continue to evolve and new opportunities present themselves in different consumer segments such as the millennial and multicultural markets. Consumer expectations and preferences are changing. We believe existing and potential customers are increasingly looking for cost-effective solutions that they can easily understand and access through technology-enabled devices. At the same time, income protection, wealth accumulation and the needs of retiring baby boomers are continuing to shape the insurance industry. A persistent retirement security gap exists in terms of both savings and protection.

•International Businesses. Japan has an aging population as well as a large pool of household assets invested in low-yielding deposit and savings vehicles. The aging of Japan’s population, along with strains on government pension and healthcare programs, have led to a growing demand for products that provide financial solutions for retirement and wealth transfer, as well as for health-related products. Brazil has the largest population in South America and has recently experienced a modest increase in population. The nation is undergoing a rapid demographic transition characterized by a growing proportion of elderly citizens due to declining fertility rates and an increase in life expectancy. This demographic transition has produced challenges in various sectors, particularly impacting healthcare and pension systems, which has led to a growing demand for products that provide financial solutions.

Regulatory Environment. See “Business—Regulation” for a discussion of regulatory developments that may impact the Company and the associated risks.

Competitive Environment. See “Business—” for a discussion of the competitive environment and the basis on which we compete in each of our segments.

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:

•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;

•collateral posting requirements, hedging costs and other risk mitigation activities;

•customer account values and assets under management, including their impacts on fee-related income;

•insurance reserve levels, including market risk benefits (“MRBs”), and market experience true-ups;

•policyholder behavior, including surrender or withdrawal activity;

•product offerings, design features, crediting rates and sales mix; and

•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.”

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 increased throughout 2022 and sustained higher levels in 2023, 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. Businesses and our Corporate and Other operations has approximately $187 billion of fixed maturity securities and commercial mortgage loans (based on net carrying value) as of December 31, 2023, with an average portfolio yield of approximately 4.7%. 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 7.7% of the fixed maturity security and commercial mortgage loan portfolios through 2025.

Included in the $187 billion of fixed maturity securities and commercial mortgage loans are approximately $159 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 $159 billion, approximately 55% 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:

[[GREPCENT_TABLE]]
[["","As of December 31, 2023"],["","(in billions)"],["Long-duration insurance products with fixed and guaranteed terms","$","168"],["Contracts with adjustable crediting rates subject to guaranteed minimums","36"],["Participating contracts where investment income risk ultimately accrues to contractholders","1"],["Total","$","205"]]
[[/GREPCENT_TABLE]]

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The $168 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 13 to the 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 $49 billion of general account assets in the Closed Block division support obligations and liabilities relating to the Closed Block policies only. See Note 16 to the 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, despite the easing of its monetary policy in the fourth quarter of 2022, Japan continues to experience a low interest rate environment.

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 $154 billion of fixed maturity securities and commercial mortgage loans (based on net carrying value) as of December 31, 2023, with an average portfolio yield of approximately 2.7%. Our Japanese operations have continued to invest in U.S. dollar-denominated assets supporting our U.S. dollar-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 2025.

Included in the $154 billion of fixed maturity securities and commercial mortgage loans are approximately $15 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 $15 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:

[[GREPCENT_TABLE]]
[["","As of December 31, 2023"],["","(in billions)"],["Insurance products with fixed and guaranteed terms","$","122"],["Contracts with a market value adjustment if canceled before maturity","31"],["Contracts with adjustable crediting rates subject to guaranteed minimums","9"],["Total","$","162"]]
[[/GREPCENT_TABLE]]

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The $122 billion is primarily comprised of long-duration insurance products that have fixed and guaranteed terms, for which underlying assets may have to be reinvested at interest rates that are lower than current portfolio yields. The remaining insurance liabilities and policyholder account balances include $31 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 13 to the 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:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

2023 to 2022 Annual Comparison. The $4,135 million increase in “Net income (loss) attributable to Prudential Financial, Inc.” reflected the following notable items on a pre-tax basis:

•$3,753 million favorable variance from realized investment gains (losses), net, and related charges and adjustments;

•$726 million favorable variance from a lower goodwill impairment charge related to Assurance IQ recorded in the current year period compared to the prior year period;

•$499 million favorable variance reflecting the change in value of market risk benefits, net of related hedging gains (losses);

•$434 million favorable variance from higher adjusted operating income from our business segments, including a favorable comparative net impact from our annual reviews and update of assumptions and other refinements, primarily reflecting a net charge from these updates in the prior year period in our Individual Life business. This increase was partially offset by the absence of a gain from the sale of Prudential Annuities Life Assurance Corporation (“PALAC”) in the prior year period (see “Segment Results of Operations” for additional information); and

•$121 million favorable variance from our Divested and Run-off Businesses, reflecting higher results in our Long-Term Care business, partially offset by the absence of a gain from the sale of the Full Service Retirement business in the prior year period and lower results from our Closed Block division.

Partially offsetting these increases in “Net income (loss) attributable to Prudential Financial, Inc.” were the following items:

•$892 million unfavorable variance from income taxes reflecting the increase in pre-tax earnings; and

•$532 million unfavorable variance driven by market experience updates, primarily within our Individual Life and International businesses.

2022 to 2021 Annual Comparison. The $10,515 million decrease in “Net income (loss) attributable to Prudential Financial, Inc.” reflected the following notable items on a pre-tax basis:

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•$6,586 million unfavorable variance from realized investment gains (losses), net, and related charges and adjustments;

•$4,005 million unfavorable variance reflecting the change in value of market risk benefits, net of related hedging gains (losses);

•$2,150 million unfavorable variance from lower adjusted operating income from our business segments, including an unfavorable net impact from our annual reviews and update of assumptions and other refinements, primarily reflecting a net charge from these updates in 2022 within the Individual Life business, and the absence of a gain from the sale of the Company’s 35% ownership stake in Pramerica SGR recorded in 2021, partially offset by a gain from the sale of PALAC in 2022; and

•$799 million unfavorable variance reflecting lower results from our Divested and Run-off Businesses, primarily in our Long-Term Care business, partially offset by a gain from the sale of our Full Service Retirement business in 2022.

Partially offsetting these decreases in “Net income (loss) attributable to Prudential Financial, Inc.” were the following items:

•$2,274 million favorable variance from income taxes reflecting the decrease in pre-tax earnings; and

•$622 million favorable variance driven by market experience updates, primarily within our Individual Life and International businesses.

Segment Results of Operations

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

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

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Adjusted operating income before income taxes by segment:"],["PGIM","$","713","","","$","843","","","$","1,643"],["U.S. Businesses:"],["Retirement Strategies","3,568","","","4,529","","","3,951"],["Group Insurance","319","","","(16)","","","(453)"],["Individual Life","(95)","","","(1,802)","","","169"],["Total U.S. Businesses","3,792","","","2,711","","","3,667"],["International Businesses","3,183","","","3,205","","","3,732"],["Corporate and Other","(2,172)","","","(1,677)","","","(1,810)"],["Total segment adjusted operating income before income taxes","5,516","","","5,082","","","7,232"],["Reconciling items:"],["Realized investment gains (losses), net, and related adjustments(1)","(2,915)","","","(6,108)","","","320"],["Charges related to realized investment gains (losses), net(1)","342","","","(218)","","","(60)"],["Change in value of market risk benefits, net of related hedging gains (losses)","56","","","(443)","","","3,562"],["Market experience updates","110","","","642","","","20"],["Divested and Run-off Businesses(2):"],["Closed Block division","(100)","","","(18)","","","158"],["Other Divested and Run-off Businesses","349","","","146","","","769"],["Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests(3)","(68)","","","(36)","","","(54)"],["Other adjustments(4)","(218)","","","(939)","","","(1,112)"],["Consolidated income (loss) before income taxes and equity in earnings of operating joint ventures","$","3,072","","","$","(1,892)","","","$","10,835"]]
[[/GREPCENT_TABLE]]

__________

(1)See “—General Account Investments” and Note 23 to the Consolidated Financial Statements for additional information.

(2)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.

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

(4)Includes goodwill impairments of $177 million, $903 million and $1,060 million recorded in the fourth quarters of 2023, 2022 and 2021, respectively, related to Assurance IQ. See Note 2 and Note 10 to the Consolidated Financial Statements for additional information. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods.

Segment results for 2023 presented above reflect the following:

PGIM. Results for 2023 decreased in comparison to 2022, primarily reflecting lower net asset management fees and higher compensation and operating expenses, partially offset by higher service, distribution and other revenues and higher net other related revenues.

Retirement Strategies. Results for 2023 decreased in comparison to 2022, inclusive of a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, results decreased, primarily reflecting the absence of a gain in the prior year period from the sale of PALAC and lower fee income, net of distribution expenses and other associated costs, partially offset by higher net investment spread results.

Group Insurance. Results for 2023 increased in comparison to 2022, inclusive of a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, results increased, primarily driven by higher underwriting results, partially offset by higher expenses.

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Individual Life. Results for 2023 increased in comparison to 2022, inclusive of a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, results increased, primarily driven by higher net investment spread results and lower expenses, partially offset by lower underwriting results.

International Businesses. Results for 2023 decreased in comparison to 2022, inclusive of an unfavorable 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 decreased, primarily driven by lower underwriting results and lower net investment spread results, partially offset by higher earnings from joint venture investments.

Corporate and Other. Results for 2023 reflected increased losses in comparison to 2022, primarily driven by higher net charges from other corporate activities.

Closed Block Division. Results for 2023 decreased in comparison to 2022, reflecting changes in cumulative earnings and other factors, partially 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 operating joint ventures” or “Net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss we use to evaluate segment performance and allocate resources and, consistent with authoritative guidance, is our measure of segment performance. The adjustments to derive adjusted operating income are important to an understanding of our overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and our definition of adjusted operating income may differ from that used by other companies; however, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses. See Note 23 to the 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.

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Impact of Foreign Currency Exchange Rates

Foreign currency exchange rate movements and related hedging strategies

As a U.S.-based company with significant business operations outside the U.S., particularly in Japan, we are subject to foreign currency exchange rate movements that could impact our U.S. dollar (“USD”)-equivalent 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.

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022"],["","(in billions)"],["Foreign currency hedging instruments:"],["USD-denominated assets associated with yen-based entities(1)","$","7.2","","","$","7.8"],["Dual currency and synthetic dual currency investments(2)","0.3","","","0.4"],["Total foreign currency hedges","$","7.5","","","$","8.2"]]
[[/GREPCENT_TABLE]]

__________

(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 $80.0 billion and $70.1 billion as of December 31, 2023 and 2022, 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.

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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.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Segment impacts of intercompany arrangements:"],["International Businesses","$","(28)","","","$","(57)","","","$","15"],["PGIM","1","","","11","","","(1)"],["Impact of intercompany arrangements(1)","(27)","","","(46)","","","14"],["Corporate and Other:"],["Impact of intercompany arrangements(1)","27","","","46","","","(14)"],["Settlement gains (losses) on forward currency contracts(2)","(31)","","","21","","","33"],["Net benefit (detriment) to Corporate and Other","(4)","","","67","","","19"],["Net impact on consolidated revenues and adjusted operating income","$","(31)","","","$","21","","","$","33"]]
[[/GREPCENT_TABLE]]

__________

(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 December 31, 2023, 2022 and 2021, the total notional amounts of these forward currency contracts within our Corporate and Other operations were $0.8 billion, $0.7 billion and $0.6 billion, respectively.

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

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

As a result, we implemented a structure in Gibraltar Life’s operations that disaggregated the USD- and AUD-denominated businesses into separate divisions, each with its own functional currency that aligns with the underlying products and investments. The result of this alignment was to reduce differences in the accounting for changes in the value of these assets and liabilities that arise due to changes in foreign currency exchange rate movements. For the USD- and AUD-denominated assets that were transferred under this structure, the net cumulative unrealized investment gains associated with foreign exchange remeasurement that were recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) totaled $1.4 billion and $1.6 billion as of December 31, 2023 and 2022, 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 9% of the $1.4 billion balance as of December 31, 2023 will be recognized in 2024, approximately 3% will be recognized in 2025, and the remaining balance will be recognized from 2026 through 2051.

Highly inflationary economies

Our insurance operations in Argentina, Prudential of Argentina (“POA”), have historically utilized the Argentine peso as the functional currency given it is the currency of the primary economic environment in which the entity operates. During 2018, Argentina experienced a cumulative inflation rate that exceeded 100% over a 3-year period. As a result, Argentina’s economy was deemed to be highly inflationary, resulting in reporting changes effective July 1, 2018. Under U.S. GAAP, the financial statements of a foreign entity in a highly inflationary economy are to be remeasured as if its functional currency (formerly the Argentine peso) is the reporting currency of its parent reporting entity (the USD) on a prospective basis. While this changed how the results of POA are remeasured and/or translated into USD, the impact to our financial statements was not material nor

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is it expected to be material in future periods given the relative size of our POA operations. It should also be noted that the majority of POA’s balance sheet consists of USD-denominated product liabilities supported by USD-denominated assets. As a result, this accounting change serves to reduce the remeasurement impact reflected in net income given that the functional currency and currency in which the assets and liabilities are denominated will be more closely aligned.

Our strategic joint venture 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, which will require the joint venture’s results to be remeasured in USD, effective January 1, 2024, as per the U.S. GAAP requirements described above. We do not expect this change to have a material impact to our financial statements given the relative size of the joint venture.

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 Consolidated Financial Statements could change significantly.

The following sections discuss the accounting policies applied in preparing our financial statements that management believes are most dependent on the application of estimates and assumptions and require management’s most difficult, subjective, or complex judgments.

Insurance Liabilities

Future Policy Benefits

Future Policy Benefit Reserves, including Unpaid Claims and Claim Adjustment Expenses

We establish reserves for future policy benefits to, or on behalf of, policyholders using methodologies prescribed by U.S. GAAP. The reserving methodologies used include the following:

•For most long-duration contracts, we utilize a net premium valuation methodology in measuring the liability for future policy benefits. Under this methodology, the Company accrues a liability for future policy benefits when premium revenue is recognized. The liability is based on the present value of expected future benefits to be paid to or on behalf of policyholders and related non-level claim settlement expenses less the present value of expected future net premiums (portion of the gross premium required to provide for all benefits and related non-level claim settlement expenses using current best estimate assumptions). A net-to-gross (“NTG”) ratio is calculated as the ratio of the present value of expected policy benefits and non-level claim settlement expenses divided by the present value of expected gross premiums. The NTG ratio is applied to gross premiums, as premium revenue is recognized, to determine net premiums that are subtracted from the present value of expected benefits and non-level claim settlement expenses to determine the liability for future policy benefits, which cannot be less than zero. The NTG ratio at the cohort measurement unit level cannot exceed 100%, and if it exceeds 100%, the excess benefit expenses are recorded as a charge to current period earnings. The result of the net premium valuation methodology is that the liability at any point in time represents an accumulation of the portion of premiums received to date expected to fund future benefits (i.e., net premiums received to date), less any benefits and expenses already paid. The liability does not necessarily reflect the full policyholder obligation the Company expects to pay at the conclusion of the contract since a portion of that obligation would be funded by net premiums received in the future and would be recognized in the liability at that time. The insurance cash flow assumptions are updated quarterly to reflect actual experience and are generally updated annually to reflect changes in best estimate future insurance cash flow assumptions using a retrospective unlocking method with the impact recorded through current period earnings. At the time of an experience or best estimate assumption unlocking, a revised NTG ratio is calculated using actual historical cash flow experience and updated, if any, best estimate future cash flow assumptions, discounted using the locked-in discount rate. The revised NTG ratio is then applied to prior period cash flows to derive a cumulative catch-up adjustment as of the beginning of the quarter. The revised NTG ratio is then used going forward to accrue the reserve, until the next unlocking. The liability is also remeasured each quarter using a current discount rate, based on an upper-medium grade fixed-income instrument yield, with the impact recorded through accumulated other

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comprehensive income. Expense assumptions included in the liability only include claim related expenses and exclude acquisition costs and non-claim related costs such as costs relating to investments, general administration, policy maintenance, product development, market research, and general overhead.

•For limited-payment contracts, in addition to the liability calculated using the net premium valuation method described above, a deferred profit liability (“DPL”) is established for the amount of gross premiums received in excess of expected net premiums and is amortized into premium income in relation to the discounted amount of insurance in force for life insurance or expected benefit payments for annuity contracts. The DPL is subject to a retrospective unlocking adjustment consistent with the liability for future policy benefits.

•For certain contract features, such as no-lapse guarantees, a liability is established when associated assessments (which include investment margin on policyholders’ account balances in the general account and policy charges for administration, mortality, expense, surrender, and other charges) are recognized. This liability is established using current best estimate assumptions and is based on the ratio of the present value of total expected excess payments (e.g., payments in excess of account value) over the life of the contract divided by the present value of total expected assessments (i.e., benefit ratio). The liability equals the current benefit ratio multiplied by cumulative assessments recognized to date, plus interest, less cumulative excess payments to date. The liability does not necessarily reflect the full policyholder obligation the Company expects to pay at the conclusion of the contract since a portion of that excess payment would be funded by assessments received in the future and would be recognized in the liability at that time. The reserves are subject to adjustments based on annual reviews of assumptions and quarterly adjustments for experience as described below, including market performance. These adjustments reflect the impact on the benefit ratio of using actual historical experience from the issuance date to the balance sheet date plus updated estimates of future experience. The updated benefit ratio is then applied to all prior periods’ assessments to derive an adjustment to the reserve recognized through a benefit or charge to current period earnings.

•For universal life type contracts and participating contracts, the Company performs premium deficiency tests using best estimate assumptions, at a minimum, on an annual basis, and on a quarterly basis for business whose profitability is closely tied to equity market performance. If the current net reserves are less than the best estimate liability, the existing net reserves are adjusted by first reducing the associated deferred sales inducements (“DSI”) or value of business acquired (“VOBA”) by the amount of the deficiency or to zero through a charge to current period earnings. If the deficiency is more than the DSI or VOBA for insurance contracts, the net reserves are increased by the excess through a charge to current period earnings. Since investment yields are used as the discount rate, the premium deficiency test is also performed using a discount rate based on the market yield (i.e., assuming what would be the impact if any unrealized gains (losses) were realized as of the testing date). In the event that by using the market yield a deficiency occurs, an adjustment is established for the deficiency and is included in AOCI.

•In certain instances, the policyholder liability for a particular line of universal life type and participating contract business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional liability (Profits Followed by Losses or “PFL” liability) be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years. The PFL liability is based on our current estimate of the present value of the amount necessary to offset losses anticipated in future periods. Because the liability is measured on a discounted basis, there will also be accretion into future earnings through an interest charge, and the liability will ultimately be released into earnings as an offset to future losses. At the target accrual date (i.e., date of peak deficiency), the PFL liability transitions to a premium deficiency reserve and, for universal life type products, will continue to be updated each quarter using current in-force and market data and as part of the annual assumption update.

Annual assumptions review and quarterly adjustments

The assumptions used in establishing reserves are generally based on the Company’s experience, industry experience and/or other factors, as applicable. We update our actuarial assumptions, such as mortality, morbidity, retirement and policyholder behavior assumptions, 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 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.

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,

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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. 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. The impact on our results from operations of changes in these assumptions can be offsetting and we are unable to predict their movement or impact over time.

The quarterly adjustments for market performance referred to above reflect 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 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 December 31, 2023, our domestic variable life insurance businesses assume an 8.0% long-term equity expected rate of return and a 4.3% near-term mean reversion equity expected rate of return, and our international variable life insurance business assumes a 5.0% long-term equity expected rate of return and a 1.4% 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 2023 annual reviews and update of assumptions and other refinements, we kept our long-term expectation of the U.S. Treasury rate and Japanese Government Bond yield unchanged and continue to grade to rates of 3.25% and 1.00%, respectively, over ten years. As part of our quarterly market experience updates, we update our near-term projections of interest rates to reflect changes in current rates. For additional information regarding discount rates used to establish the liability for future policy benefits, see Note 2 to the Consolidated Financial Statements.

The following paragraphs provide additional details about the reserves we have established:

International Businesses. The reserves for future policy benefits of our International Businesses, which as of December 31, 2023, represented 42% of our total future policy benefit reserves, primarily relate to non-participating whole life and term life products and endowment contracts, and are generally calculated using the net premium valuation methodology, as described above. The primary assumptions used in determining expected future benefits and expenses include mortality, lapse, morbidity, and investment yield assumptions. Reserves also include claims reported but not yet paid, and claims incurred but not yet reported. In addition, future policy benefit reserves for certain contracts also include amounts related to our deferred profit liability, as described above.

Institutional Retirement Strategies. The reserves for future policy benefits of our Institutional Retirement Strategies segment, which as of December 31, 2023, represented 28% of our total future policy benefit reserves, primarily relate to our non-participating life contingent group annuity and structured settlement products and are generally calculated using the net premium valuation methodology, as described above. The primary assumptions used in establishing these reserves include mortality, retirement, and investment yield assumptions. In addition, future policy benefit reserves for certain contracts also include amounts related to our deferred profit liability, as described above.

Individual Retirement Strategies. The reserves for future policy benefits of our Individual Retirement Strategies segment, which as of December 31, 2023, represented less than 1% of our total future policy benefit reserves, primarily relate to reserves for life contingent payout annuity contracts for which a deferred profit liability is established for the amount of gross premiums received in excess of net premiums, and are generally calculated using the net premium valuation methodology. The primary

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assumptions used in determining expected future benefits and expenses include mortality, lapse and investment yield assumptions.

Individual Life. The reserves for future policy benefits of our Individual Life segment, which as of December 31, 2023, represented 9% of our total future policy benefit reserves, primarily relate to term life, universal life and variable life products. For term life contracts, the future policy benefit reserves are generally calculated using the net premium valuation methodology, as described above. The primary assumptions used in determining expected future benefits and expenses include mortality, lapse, and investment yield assumptions. For variable and universal life products, which include universal life contracts that contain no-lapse guarantees, reserves for future policy benefits are established using current best estimate assumptions and are based on the benefit ratio, as described above. The primary assumptions used in establishing these reserves generally include mortality, lapse, and premium pattern, as well as interest rate and equity market return assumptions. Reserves also include claims reported but not yet paid, and claims incurred but not yet reported.

Group Insurance. The reserves for future policy benefits of our Group Insurance segment, which as of December 31, 2023, represented 2% of our total future policy benefit reserves, primarily relate to reserves for group life and disability benefits. For short-duration contracts, a liability is established when the claim is incurred. The reserves for group life and disability benefits also include a liability for unpaid claims and claim adjustment expenses, which relates primarily to the group long-term disability product. This liability represents our estimate of the present value of future disability claim payments and expenses as well as estimates of claims that have been incurred, but have not yet been reported, as of the balance sheet date. The primary assumptions used in determining expected future claim payments are claim termination factors, an assumed interest rate and expected Social Security offsets. The remaining reserves for future policy benefits for group life and disability benefits relate primarily to our group life business, and include reserves for waiver of premium, claims reported but not yet paid, and claims incurred but not yet reported. The waiver of premium reserve is calculated as the present value of future benefits and utilizes assumptions such as expected mortality and recovery rates. The reserve for claims reported but not yet paid is based on the inventory of claims that have been reported but not yet paid. The reserve for claims incurred but not yet reported is estimated using expected patterns of claims reporting.

Corporate and Other. The reserves for future policy benefits of our Corporate and Other operations, which as of December 31, 2023, represented 3% of our total future policy benefit reserves, primarily relate to our long-term care products and are generally calculated using the net premium valuation methodology, as described above. The primary assumptions used in establishing these reserves include inflation, interest rate, morbidity, mortality, lapse and premium rate increase assumptions.

Closed Block Division. The future policy benefit reserves for the traditional participating life insurance products of the Closed Block division, which as of December 31, 2023, represented 16% of our total future policy benefit reserves are determined using the net premium valuation methodology, as described above. In applying this method, we use mortality assumptions to determine our expected future benefits and expected future premiums, and apply an interest rate to determine the present value of both of these amounts. The mortality assumptions are based on standard industry mortality tables that were used to determine the cash surrender value of the policies, and the interest rates used are the interest rates used to calculate the cash surrender value of the policies.

Policyholders’ Account Balances

Policyholders’ account balances liability represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is primarily associated with the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance, as applicable. Policyholders’ account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. The changes in the fair value of the embedded derivatives, including changes in non-performance risk (“NPR”), are recorded in net income. For additional information regarding the valuation of these embedded derivatives, see Note 6 to the Consolidated Financial Statements.

Market Risk Benefits (“MRBs”)

Market risk benefit liabilities (or assets) represent contracts or contract features that provide protection to the contractholder and expose the Company to other than nominal capital market risk. MRBs are primarily related to deferred annuities with guaranteed minimum benefits in the Individual Retirement Strategies segment including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”). The liability (or asset) for MRBs is estimated using a fair value measurement methodology. The fair value of these MRBs is based on assumptions a market participant would use in valuing market risk benefits. On a quarterly basis, the

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fair value of these MRBs is calculated as the present value of expected future benefit payments to contractholders less the present value of expected future rider fees attributable to the market risk benefits. The changes in the fair value of market risk benefits are recorded in net income, net of related hedges, in “Change in value of market risk benefits, net of related hedging gains (losses),” except for the portion of the change attributable to changes in the Company’s own NPR which is recorded in other comprehensive income (“OCI”). The Company estimates that a hypothetical change to its own credit risk of plus 50 and minus 50 basis points (“bps”) would result in an increase and a decrease to OCI of $770 million and $850 million, respectively. For additional information regarding the valuation of MRBs, see Note 6 to the Consolidated Financial Statements.

Sensitivities for Insurance Assets and Liabilities

The following table summarizes the aggregate impact that could result on each of the listed financial statement balances from changes in certain key assumptions. The figures below are presented in aggregate for the Company. The information below is for illustrative purposes and includes only the hypothetical impact on December 31, 2023 balances of changes in a single assumption and not changes in any combination of assumptions. Additionally, the illustration of the insurance assumption impacts below reflects a parallel shift in the insurance assumptions across the Company; however, these may be non-parallel in practice and only applicable to specific businesses. Changes in current assumptions could result in impacts to financial statement balances that are in excess of the amounts illustrated. A description of the estimates and assumptions used in the preparation of each of these financial statement balances is provided above. Changes to the insurance cash flow assumptions are reflected in net income through the retrospective unlocking method for traditional long duration, limited-payment and universal life type products.

The impacts presented within this table exclude the impacts of our asset liability management strategy, which seeks to offset the changes in the balances presented within this table and is primarily composed of investments and derivatives. See further below for a discussion of the estimates and assumptions involved with the application of U.S. GAAP accounting policies for these instruments and “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” for hypothetical impacts on related balances as a result of changes in certain significant assumptions.

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[[/GREPCENT_TABLE]]

__________

(1)“Market risk benefits” reflects the net impact of market risk benefit assets and liabilities prior to hedging.

(2)Assumes the same shock across all products; however, we would not expect lapse rates of different products to move uniformly.

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Other Accounting Policies

Goodwill

As of December 31, 2023, our goodwill balance of $1,071 million is primarily reflected in the following reporting units: $952 million for PGIM and $108 million for Gibraltar Life and Other. The Company recorded pre-tax impairment charges of $177 million, $903 million and $1,060 million in 2023, 2022 and 2021, respectively, all related to the Assurance IQ reporting unit, within Corporate and Other operations, resulting in no remaining goodwill assigned to Assurance IQ as of December 31, 2023.

We test goodwill for impairment on an annual basis as of December 31 and more frequently if events or circumstances indicate the potential for impairment is more likely than not. The goodwill impairment analysis is performed at the reporting unit level, which is the same as, or one level below, our operating segments. Although the accounting guidance provides for an optional qualitative assessment for testing goodwill impairment, the Company performed the quantitative test for all reporting units and compared each reporting unit’s estimated fair value to its carrying value as of December 31, 2023. The carrying value represents the capital that the business would require if operating as a standalone entity.

The annual quantitative goodwill impairment analysis for Assurance IQ utilized both an income and a market approach. The income approach estimated the fair value of Assurance IQ by applying a discount rate, derived from a capital asset pricing model and reflecting a market expected rate of return for the reporting unit, to its projected future cash flows. The market approach derived the fair value of Assurance IQ by applying forward sales market multiples on comparable publicly traded companies to Assurance’s forecasted sales and adding an implied control premium. The estimated fair value of Assurance IQ as of December 31, 2023 was based on weighting the results of each approach. Based on the goodwill impairment test performed as of December 31, 2023, the Company recognized a non-cash goodwill impairment pre-tax charge of $177 million ($140 million after-tax), representing all of the remaining goodwill assigned to Assurance IQ. The impairment was primarily due to a reduction in the forecasted cash flows driven by weaker than expected sales performance in the fourth quarter of 2023.

The fair value of PGIM as of December 31, 2023 was estimated by utilizing a market approach based on an earnings multiple. The average of forward earnings multiples of comparable publicly traded companies based on independent analysts’ consensus estimates for each company’s forecasted earnings was applied to PGIM’s forecasted results and an implied control premium was added. The fair value for Gibraltar and Other was also estimated using a similar approach. The estimated fair values of both PGIM and Gibraltar and Other significantly exceeded their carrying values as of December 31, 2023.

Estimating the fair value of reporting units is a subjective process that involves the use of significant estimates by management. Unanticipated changes in business performance or the regulatory environment, market declines and other events impacting the fair value of the reporting units with assigned goodwill, or increases in the level of equity required to support these businesses, could cause additional goodwill impairment charges in future periods. For additional information regarding goodwill and our reporting segments, see Note 2 and Note 10 to the Consolidated Financial Statements.

Valuation of Investments, Including Derivatives, Measurement of Allowance for Credit Losses, and the Recognition of Other-than-Temporary Impairments

Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, equity securities, other invested assets, and derivative financial instruments. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, values of securities or commodities, credit spreads, market volatility, expected returns, and liquidity. Derivative financial instruments that are generally used include swaps, futures, forwards and options and may be exchange-traded or contracted in the over-the-counter (“OTC”) market. We are also party to financial instruments that contain derivative instruments that are “embedded” in the financial instruments. Management believes the following accounting policies related to investments, including derivatives, are most dependent on the application of estimates and assumptions. Each of these policies is discussed further within other relevant disclosures related to investments and derivatives, as referenced below:

•Valuation of investments, including derivatives;

•Measurement of the allowance for credit losses on fixed maturity securities classified as available-for-sale, commercial mortgage loans, and other loans; and

•Recognition of other-than-temporary impairments (“OTTI”) for equity method investments and wholly-owned investment real estate.

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We present at fair value in the statements of financial position our debt security investments classified as available-for-sale, investments classified as trading such as our assets supporting experience-rated contractholder liabilities and certain fixed maturities, equity securities, and certain investments within “Other invested assets,” such as derivatives. For additional information regarding the key estimates and assumptions surrounding the determination of fair value of fixed maturity and equity securities, as well as derivative instruments, embedded derivatives and other investments, see Note 6 to the Consolidated Financial Statements and “—Valuation of Assets and Liabilities—Fair Value of Assets and Liabilities.”

For our investments classified as available-for-sale, the impact of changes in fair value is recorded as an unrealized gain or loss in AOCI, a separate component of equity. For our investments classified as trading and equity securities, the impact of changes in fair value is recorded within “Other income (loss).” Our commercial mortgage and other loans are carried primarily at unpaid principal balances, net of unamortized deferred loan origination fees and expenses and unamortized premiums or discounts and a valuation allowance for losses.

In addition, an allowance for credit losses is measured each quarter for available-for-sale fixed maturity securities, commercial mortgage and other loans. For additional information regarding our policies regarding the measurement of credit losses, see Note 2 to the Consolidated Financial Statements.

For equity method investments and 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.

Pension and Other Postretirement Benefits

We sponsor pension and other postretirement benefit plans covering employees who meet specific eligibility requirements. Our net periodic costs for these plans consider an assumed discount (interest) rate, an expected rate of return on plan assets, expected increases in compensation levels, mortality and trends in health care costs. Of these assumptions, our expected rate of return assumptions and our discount rate assumptions have historically had the most significant effect on our net period costs associated with these plans.

We determine our expected rate of return on plan assets based upon a building block approach that considers plan asset mix, risk free rates, inflation, real return, term premium, credit spreads, equity risk premium and capital appreciation as well as expenses, the effect of active management and the effect of rebalancing for the equity, debt and real estate asset mix applied on a weighted average basis to our pension asset portfolio. See Note 19 to the Consolidated Financial Statements for our actual asset allocations by asset category and the asset allocation ranges prescribed by our investment policy guidelines for both our pension and other postretirement benefit plans. Our assumed long-term rate of return for 2023 was 7.50% for our domestic pension plans and 7.75% for our other postretirement benefit plans. Given the amount of plan assets as of December 31, 2022, the beginning of the measurement year, if we had assumed an expected rate of return for both our domestic pension and other domestic postretirement benefit plans that was 100 bps higher or 100 bps lower than the rates we assumed, the change in our net periodic costs would have been as shown in the table below. The information provided in the table below considers only changes in our assumed long-term rate of return given the level and mix of invested assets at the beginning of the measurement year, without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed long-term rate of return.

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31, 2023"],["","","Increase/(Decrease) in Net Periodic Pension Cost","","Increase/(Decrease) in Net Periodic Other Postretirement Cost"],["","","(in millions)"],["Increase in expected rate of return by 100 bps","","$","(122)","","","$","(11)"],["Decrease in expected rate of return by 100 bps","","$","122","","","$","11"]]
[[/GREPCENT_TABLE]]

Foreign pension plans represent 3% of plan assets at the beginning of 2023. An increase in expected rate of return by 100 bps would result in an increase in net periodic pension costs of $3 million; conversely, a decrease in expected rate of return by 100 bps would result in a decrease in net periodic pension costs of $3 million.

We determine our discount rate, used to value the pension and postretirement benefit obligations, based upon rates commensurate with current yields on high quality corporate bonds. See Note 19 to the Consolidated Financial Statements for information regarding the December 31, 2022 methodology we employed to determine our discount rate for 2023. Our assumed discount rate for 2023 was 5.45% for our domestic pension plans and 5.55% for our other domestic postretirement benefit plans. Given the amount of pension and postretirement obligations as of December 31, 2022, the beginning of the measurement

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year, if we had assumed a discount rate for both our domestic pension and other postretirement benefit plans that was 100 bps higher or 100 bps lower than the rates we assumed, the change in our net periodic costs would have been as shown in the table below. The information provided in the table below considers only changes in our assumed discount rate without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed discount rate.

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31, 2023"],["","","Increase/(Decrease) in Net Periodic Pension Cost","","Increase/(Decrease) in Net Periodic Other Postretirement Cost"],["","","(in millions)"],["Increase in discount rate by 100 bps","","$","(38)","","","$","0"],["Decrease in discount rate by 100 bps","","$","88","","","$","0"]]
[[/GREPCENT_TABLE]]

Foreign pension plans represent 12% of plan obligations at the beginning of 2023. An increase in discount rate by 100 bps would result in a decrease in net periodic pension costs of $6 million; conversely, a decrease in discount rate by 100 bps would result in an increase in net periodic pension costs of $5 million.

Given the application of the authoritative guidance for accounting for pensions, and the deferral and amortization of actuarial gains and losses arising from changes in our assumed discount rate, the change in net periodic pension cost arising from an increase in the assumed discount rate by 100 bps would not always be expected to equal the change in net periodic pension cost arising from a decrease in the assumed discount rate by 100 bps.

For a discussion of our expected rate of return on plan assets and discount rate for our qualified pension plan in 2023, see “—Results of Operations by Segment—Corporate and Other.”

For purposes of calculating pension income from our own qualified pension plan for the year ended December 31, 2024, we decreased the discount rate to 5.30% from 5.45% in 2023. The expected rate of return on plan assets will remain unchanged at 7.50%, and the assumed rate of increase in compensation increased to 6.25% in 2024 from 4.50% in 2023.

In addition to the effect of changes in our assumptions, the net periodic cost or benefit from our pension and other postretirement benefit plans may change due to factors such as actual experience being different from our assumptions, special benefits to terminated employees, or changes in benefits provided under the plans.

At December 31, 2023, the sensitivity of our domestic and foreign pension and postretirement obligations to a 100 basis point change in discount rate was as follows.

[[GREPCENT_TABLE]]
[["","","December 31, 2023"],["","","Increase/(Decrease) in Pension Benefits Obligation","","Increase/(Decrease) in Accumulated Postretirement Benefits Obligation"],["","","(in millions)"],["Increase in discount rate by 100 bps","","$","(928)","","","$","(68)"],["Decrease in discount rate by 100 bps","","$","1,092","","","$","79"]]
[[/GREPCENT_TABLE]]

Taxes on Income

Our effective tax rate is based on income, non-taxable and non-deductible items, tax credits, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Inherent in determining our annual tax rate are judgments regarding business plans, planning opportunities and expectations about future outcomes. The Dividend Received Deduction (“DRD”) is a major reason for the difference between the Company’s effective tax rate and the U.S. federal statutory rate. The DRD is an estimate that incorporates the prior and current year information, as well as the current year’s equity market performance. Both the current estimate of the DRD and the DRD in future periods can vary based on factors such as, but not limited to, changes in the amount of dividends received that are eligible for the DRD, changes in the amount of distributions received from underlying fund investments, changes in the account balances of variable life and annuity contracts, and the Company’s taxable income before the DRD.

An increase or decrease in our effective tax rate by one percentage point would have resulted in a decrease or increase in our 2023 “Total income tax expense (benefit)” of $31 million.

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Contingencies

A contingency is an existing condition that involves a degree of uncertainty that will ultimately be resolved upon the occurrence of future events. Accruals for contingencies are required to be established when the future event is probable and its impact can be reasonably estimated, such as in connection with an unresolved legal matter. The initial reserve reflects management’s best estimate of the probable cost of ultimate resolution of the matter and is revised accordingly as facts and circumstances change and, ultimately, when the matter is brought to closure.

Commission Revenue

For digital insurance brokerage placement services, the Company earns both initial and renewal commissions as compensation for the placement of insurance policies with insurance carriers. At the effective date of the policy, the Company records within “Other income” the expected lifetime revenue for the initial and renewal commissions considering estimates of the timing of future policy cancellations. These estimates are reassessed each reporting period and any changes in estimates are reflected in the current period.

Adoption of New Accounting Pronouncements

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

As of the January 1, 2021 transition date, the adoption of the standard resulted in a decrease to “Retained earnings” of $2.6 billion primarily from reclassifying the cumulative effect of changes in non-performance risk on market risk benefits from “Retained earnings” to “Accumulated other comprehensive income” (“AOCI”) as well as from a net increase in additional insurance reserves and other related balances primarily related to the no-lapse guarantee features on certain universal life contracts. AOCI decreased $42.4 billion as of the January 1, 2021 transition date largely from remeasuring in-force contract liabilities using upper-medium grade fixed-income instrument yields as of the transition date. As of the January 1, 2023 adoption date, the impacts amounted to a decrease to “Retained earnings” of $1.7 billion and an increase to AOCI of $16.0 billion. The changes in the impacts from January 1, 2021 to January 1, 2023 primarily reflect the increase in interest rates during 2021 and 2022. See Note 2 to the Consolidated Financial Statements for a more detailed discussion of ASU 2018-12, as well as other accounting pronouncements issued but not yet adopted and newly adopted accounting pronouncements.

Results of Operations by Segment

PGIM

Business Update

•In December 2023, we completed the acquisition of a majority stake in Deerpath Capital Management, LP (“Deerpath”), a leading U.S.-based private credit and direct lending manager with approximately $5 billion in assets under management.

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Operating Results

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

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["Operating results(1):"],["Revenues(2)","","$","3,638","","","$","3,622","","","$","4,493"],["Expenses","","2,925","","","2,779","","","2,850"],["Adjusted operating income","","713","","","843","","","1,643"],["Realized investment gains (losses), net, and related adjustments","","0","","","(8)","","","(3)"],["Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests","","16","","","(4)","","","69"],["Other adjustments(3)","","(36)","","","(22)","","","(13)"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","","$","693","","","$","809","","","$","1,696"]]
[[/GREPCENT_TABLE]]

__________

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

(2)Revenues for the year ended December 31, 2021 include a $378 million pre-tax gain related to the sale of our 35% ownership stake in Pramerica SGR, an asset management joint venture in Italy.

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

Adjusted Operating Income

2023 to 2022 Annual Comparison. Adjusted operating income decreased $130 million, primarily reflecting lower asset management fees, net of related expenses, and higher compensation and operating expenses. These impacts were partially offset by higher service, distribution and other revenues, and higher other related revenues, net of related expenses.

2022 to 2021 Annual Comparison. Adjusted operating income decreased $800 million, reflecting a decrease in service, distribution and other revenues, driven by the absence of a gain in 2021 from the sale of our Pramerica SGR joint venture, and lower other related revenues and asset management fees, net of related expenses.

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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: 

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Revenues by type:"],["Asset management fees by source:"],["Institutional customers","$","1,448","","","$","1,443","","","$","1,439"],["Retail customers(1)","1,014","","","1,081","","","1,275"],["General account","457","","","508","","","588"],["Total asset management fees","2,919","","","3,032","","","3,302"],["Other related revenues by source:"],["Incentive fees","46","","","85","","","154"],["Transaction fees","17","","","14","","","27"],["Seed and co-investments","127","","","3","","","49"],["Commercial mortgage(2)","57","","","127","","","173"],["Total other related revenues","247","","","229","","","403"],["Service, distribution and other revenues(3)","472","","","361","","","788"],["Total revenues","$","3,638","","","$","3,622","","","$","4,493"]]
[[/GREPCENT_TABLE]]

__________

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

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

(3)Results for the year ended December 31, 2021 include a $378 million pre-tax gain related to the sale of our 35% ownership stake in Pramerica SGR, an asset management joint venture in Italy.

2023 to 2022 Annual Comparison. Revenues increased $16 million, primarily driven by higher service, distribution and other revenues reflecting higher interest income earned on cash as a result of higher short-term rates and higher revenues from certain consolidated funds (which were fully offset by higher expenses related to noncontrolling interests in these funds). Other related revenues were also favorable reflecting higher seed and co-investments results driven by improved investment performance, partially offset by lower commercial mortgage origination revenues and lower performance-based incentive fees. These increases were partially offset by lower asset management fees primarily due to lower average assets under management.

Expenses increased $146 million, primarily reflecting higher compensation and operating expenses, driven by certain long-term employee compensation plans tied to investment performance, as well as to support business growth. Variable expenses increased, primarily driven by higher interest expense from higher interest rates, and higher revenues from certain consolidated funds, as discussed above, partially offset by lower compensation expenses related to performance-based incentive fees.

2022 to 2021 Annual Comparison. Revenues decreased $871 million. Service, distribution and other revenues decreased, primarily reflecting the absence of a gain in 2021 from the sale of our Pramerica SGR joint venture, and lower revenues from certain consolidated funds (which were fully offset by lower variable expenses related to noncontrolling interests in these funds). Asset management fees decreased primarily due to a decrease in average assets under management, driven by market depreciation reflecting higher interest rates and widening credit spreads, as well as unfavorable equity markets. Also contributing to the decrease were lower other related revenues primarily driven by lower performance-based incentive fees, reflecting investment underperformance, lower commercial mortgage origination revenues driven by higher interest rates and general economic uncertainty, and lower seed and co-investments results.

Expenses decreased $71 million, primarily reflecting lower variable expenses associated with a decrease in overall segment earnings and lower revenues from certain consolidated funds, as discussed above. The decrease was partially offset by higher operating expenses primarily driven by an increase in travel and entertainment costs, and an increase in compensation expenses.

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Assets Under Management

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

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022","","2021"],["","(in billions)"],["Assets Under Management(1) (at fair value):"],["Public equity","$","183.6","","","$","147.8","","","$","216.2"],["Public fixed income","799.8","","","776.8","","","980.7"],["Real estate","129.2","","","129.6","","","132.6"],["Private credit and other alternatives","112.1","","","103.4","","","108.7"],["Multi-asset","73.4","","","70.8","","","85.6"],["Total PGIM assets under management","$","1,298.1","","","$","1,228.4","","","$","1,523.8"],["Assets under management within other reporting segments(2)","151.5","","","148.9","","","218.5"],["Total PFI assets under management","$","1,449.6","","","$","1,377.3","","","$","1,742.3"]]
[[/GREPCENT_TABLE]]

__________

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

(2)Primarily includes assets related to certain annuity, variable life, retirement and group life products in our U.S. Businesses and Corporate 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:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022","","2021"],["","(in billions)"],["Assets Under Management(1) (at fair value):"],["Institutional customers","$","582.6","","","$","549.2","","","$","629.4"],["Retail customers","330.3","","","299.6","","","401.4"],["General account","385.2","","","379.6","","","493.0"],["Total PGIM assets under management","$","1,298.1","","","$","1,228.4","","","$","1,523.8"],["Assets under management within other reporting segments(2)","151.5","","","148.9","","","218.5"],["Total PFI assets under management","$","1,449.6","","","$","1,377.3","","","$","1,742.3"]]
[[/GREPCENT_TABLE]]

__________

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

(2)Primarily includes assets related to certain annuity, variable life, retirement and group life 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.

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

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022","","2021"],["","(in billions)"],["Beginning assets under management","$","1,228.4","","","$","1,523.8","","","$","1,498.6"],["Institutional third-party flows","(23.3)","","","3.0","","","10.9"],["Retail third-party flows","(15.1)","","","(23.2)","","","0.1"],["Total third-party flows","(38.4)","","","(20.2)","","","11.0"],["Affiliated flows(1)","(5.6)","","","13.2","","","(12.2)"],["Market appreciation (depreciation)(2)","118.3","","","(240.9)","","","35.4"],["Foreign exchange rate impact","(4.3)","","","(16.0)","","","(12.4)"],["Net money market activity and other increases (decreases)(3)","(0.3)","","","(31.5)","","","3.4"],["Ending assets under management","$","1,298.1","","","$","1,228.4","","","$","1,523.8"]]
[[/GREPCENT_TABLE]]

__________

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

(2)Includes income reinvestment, where applicable.

(3)Results for the year ended December 31, 2022 include a reduction in assets under management from the sales of the Full Service Retirement business and PALAC.

2023 to 2022 Annual Comparison. PGIM’s assets under management increased $70 billion in 2023, primarily driven by equity market appreciation and tightening credit spreads, partially offset by net outflows.

2022 to 2021 Annual Comparison. PGIM’s assets under management decreased $295 billion in 2022, primarily driven by market depreciation resulting from higher interest rates and widening credit spreads, as well as unfavorable equity markets. The decrease also reflects a reduction in assets under management from the sales of the Full Service Retirement business and PALAC in the second quarter of 2022, public fixed income and public equity net outflows, and unfavorable foreign exchange rate impacts.

Private Capital Deployment

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

Private capital deployment represents the gross value of private capital invested in real estate debt and equity, and private credit and equity asset classes. Assets under management resulting from private capital deployment are included in “Real estate” and “Private credit and other alternatives” in the “—Assets Under Management—by asset class table” above. As of December 31, 2023, these assets increased approximately $8.3 billion compared to December 31, 2022, primarily reflecting net private capital inflows, including assets added as a result of the Deerpath acquisition noted above.

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

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

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022","","2021"],["","(in billions)"],["Private capital deployed:"],["Real estate debt and equity","$","17.6","","","$","26.9","","","$","34.7"],["Private credit and equity","14.0","","","16.1","","","14.5"],["Total private capital deployed","$","31.6","","","$","43.0","","","$","49.2"]]
[[/GREPCENT_TABLE]]

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Seed and Co-Investments

As of December 31, 2023 and 2022, PGIM had approximately $1,088 million and $1,444 million of seed investments and $443 million and $497 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.

U.S. Businesses

Operating Results

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

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["Adjusted operating income before income taxes:"],["U.S. Businesses:"],["Retirement Strategies","","$","3,568","","","$","4,529","","","$","3,951"],["Group Insurance","","319","","","(16)","","","(453)"],["Individual Life","","(95)","","","(1,802)","","","169"],["Total U.S. Businesses","","3,792","","","2,711","","","3,667"],["Reconciling items:"],["Realized investment gains (losses), net, and related adjustments","","(2,312)","","","(3,852)","","","211"],["Charges related to realized investment gains (losses), net","","234","","","(336)","","","(28)"],["Change in value of market risk benefits, net of related hedging gains (losses)","","42","","","(469)","","","3,544"],["Market experience updates","","154","","","439","","","9"],["Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests","","0","","","2","","","7"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","","$","1,910","","","$","(1,505)","","","$","7,410"]]
[[/GREPCENT_TABLE]]

2023 to 2022 Annual Comparison. Adjusted operating income for our U.S. Businesses increased by $1,081 million primarily due to:

•A favorable comparative net impact from our annual reviews and update of assumptions and other refinements, primarily reflecting a net charge from these updates in the second quarter of 2022 in our Individual Life business, mainly driven by unfavorable impacts related to assumptions for policyholder behavior and mortality;

•Higher net investment spread results, primarily reflecting higher reinvestment and short-term rates, as well as business growth, partially offset by lower income on non-coupon investments; and

•Higher underwriting results, primarily reflecting improved mortality experience and more favorable disability results in our Group Insurance business, partially offset by unfavorable mortality experience in our Individual Life business.

•Partially offsetting these increases were the absence of a gain in our Individual Retirement Strategies business from the sale of PALAC in the second quarter of 2022; and

•Lower fee income, net of distribution expenses and other associated costs, primarily in our Individual Retirement Strategies business due to a reduction in account values resulting from net outflows and the impacts of the sale of PALAC and the PDI reinsurance transaction.

2022 to 2021 Annual Comparison. Adjusted operating income for our U.S. Businesses decreased by $956 million primarily due to:

•An unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements, primarily reflecting a net charge from these updates in the second quarter of 2022 in our Individual Life business, mainly driven by unfavorable impacts related to assumptions for policyholder behavior and mortality;

•Lower net investment spread results driven by lower income on non-coupon investments, partially offset by higher reinvestment rates and business growth; and

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•Lower fee income, net of distribution expenses and other associated costs, primarily in our Individual Retirement Strategies business due to a reduction in account values as a result of the sale of PALAC in the second quarter of 2022 and unfavorable equity markets.

•Partially offsetting these decreases were a gain in our Individual Retirement Strategies business from the sale of PALAC; and

•Higher underwriting results, including lower COVID-19 related mortality claims, in our Group Insurance and Individual Life businesses, as well as more favorable disability results in our Group Insurance business, partially offset by the unfavorable ongoing impact from our annual reviews and update of assumptions and other refinements in 2022 in our Individual Life business.

Retirement Strategies

Business Update

•In May 2023, the Company entered into an agreement with The Ohio National Life Insurance Company, now known as AuguStar Life Insurance Company (“AuguStar”), an affiliate of Constellation Insurance Holdings, Inc., to reinsure approximately $10 billion of account values of PDI traditional variable annuity contracts with guaranteed living benefits issued by Pruco Life Insurance Company, a wholly-owned subsidiary of Prudential Financial. The transaction was completed on June 30, 2023 with an effective date of April 1, 2023. See Note 15 to the Consolidated Financial Statements for additional information.

•In September 2023, the Company entered into an agreement with Prismic Re to reinsure approximately $9 billion of reserves for certain structured settlement annuity contracts issued by PICA, a wholly-owned subsidiary of Prudential Financial, effective September 2023. These contracts represent approximately 70% of the Company’s in-force structured settlement annuities business. See Note 15 to the Consolidated Financial Statements for additional information.

Operating Results

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Operating results:"],["Revenues:"],["Institutional Retirement Strategies","$","11,030","","","$","19,116","","","$","15,541"],["Individual Retirement Strategies","4,517","","","5,470","","","4,460"],["Total revenues","15,547","","","24,586","","","20,001"],["Benefits and expenses:"],["Institutional Retirement Strategies","9,335","","","17,569","","","13,409"],["Individual Retirement Strategies","2,644","","","2,488","","","2,641"],["Total benefits and expenses","11,979","","","20,057","","","16,050"],["Adjusted operating income:"],["Institutional Retirement Strategies","1,695","","","1,547","","","2,132"],["Individual Retirement Strategies","1,873","","","2,982","","","1,819"],["Total adjusted operating income","3,568","","","4,529","","","3,951"],["Realized investment gains (losses), net, and related adjustments","(1,787)","","","(2,248)","","","310"],["Charges related to realized investment gains (losses), net","67","","","(298)","","","(165)"],["Change in value of market risk benefits, net of related hedging gains (losses)","42","","","(469)","","","3,544"],["Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests","0","","","2","","","6"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","$","1,890","","","$","1,516","","","$","7,646"]]
[[/GREPCENT_TABLE]]

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Adjusted Operating Income

2023 to 2022 Annual Comparison. Adjusted operating income from our Institutional Retirement Strategies business increased $148 million, including a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2023 and 2022 included net benefits from this update of $6 million and $14 million, respectively. Excluding this item, adjusted operating income increased $156 million, driven by higher net investment spread results, primarily reflecting business growth and higher reinvestment rates, partially offset by lower income on non-coupon investments. Also contributing to the increase was a higher gain from reserve experience and higher fee income, net of distribution expenses and other associated costs, primarily driven by business growth.

Adjusted operating income from our Individual Retirement Strategies business decreased $1,109 million, including a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2023 had no net impact from our annual reviews and update of assumptions, while results for 2022 included a $7 million net benefit. Excluding this item, adjusted operating income decreased $1,102 million primarily reflecting the absence of a gain in the prior year period from the sale of PALAC and lower fee income, net of distribution expenses and other associated costs, resulting from lower average separate account values due to net outflows and the impacts from the sale of PALAC and the PDI reinsurance transaction. These decreases were partially offset by higher net investment spread results due to more favorable short-term interest rates, higher reinvestment rates and growth in indexed variable annuities, partially offset by lower income on non-coupon investments.

Our Individual Retirement Strategies business includes both fixed and variable annuities which may include optional guaranteed living benefit riders (e.g., GMIB, GMAB, GMWB and GMIWB), and/or optional death benefit riders (e.g., 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 drivers of our business results 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. Sales of traditional variable annuities with guaranteed living benefit riders were discontinued as of December 31, 2020, and, in April 2022, the sale of a portion of our in-force traditional variable annuity block was completed. Effective April 2023, the Company entered into an agreement with AuguStar to reinsure approximately $10 billion of account values of PDI traditional variable annuity contracts with guaranteed living benefits. For additional information regarding our external reinsurance agreements, see “Business—Reinsurance” and Note 15 to the Consolidated Financial Statements.

2022 to 2021 Annual Comparison. Adjusted operating income from our Institutional Retirement Strategies business decreased $585 million, including a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2022 and 2021 included net benefits from this update of $14 million and $4 million, respectively. Excluding this item, adjusted operating income decreased $595 million, driven by lower net investment spread results, primarily reflecting lower income on non-coupon investments, partially offset by higher reinvestment rates and business growth.

Adjusted operating income from our Individual Retirement Strategies business increased $1,163 million, including a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2022 included a $7 million net benefit from our annual reviews and update of assumptions, while results for 2021 had no net impact. Excluding this item, adjusted operating income increased $1,156 million primarily driven by the gain on sale of PALAC. Also contributing to the increase were higher net investment spread results, driven by growth in indexed variable annuities and more favorable interest rates, as well as lower expenses and market value gains on a strategic investment. These increases were partially offset by lower fee income, net of distribution expenses and other associated costs, resulting from lower separate account values due to the impact of the sale of PALAC, net outflows and unfavorable equity markets.

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Revenues, Benefits and Expenses

2023 to 2022 Annual Comparison. Revenues from our Institutional Retirement Strategies business decreased $8,086 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $8,441 million. This decrease primarily reflected lower pension risk transfer premiums due to a significant sale in the prior period and the impact of the reinsurance of certain structured settlement annuity contracts, with corresponding offsets in policyholders’ benefits, as discussed below.

Benefits and expenses of our Institutional Retirement Strategies business decreased $8,234 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $8,597 million. Policyholders’ benefits, including changes in reserves, decreased primarily related to the lower pension risk transfer premiums and the impact of the reinsurance of certain structured settlement annuity contracts, as discussed above.

Revenues from our Individual Retirement Strategies business decreased $953 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $946 million primarily driven by the absence of a gain in the prior year period from the sale of PALAC and lower policy charges and fee income, resulting from lower average separate account values due to net outflows and the impacts from the sale of PALAC and the PDI reinsurance transaction. These decreases were partially offset by higher net investment income due to higher reinvestment rates and growth in indexed variable annuities, partially offset by lower income on non-coupon investments.

Benefits and expenses of our Individual Retirement Strategies business increased $156 million primarily driven by higher interest expense, partially offset by lower general and administrative expenses, net of capitalization.

2022 to 2021 Annual Comparison. Revenues from our Institutional Retirement Strategies business increased $3,575 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $3,852 million. This increase primarily reflected higher pension risk transfer premiums due to new sales in 2022, with corresponding offsets in policyholders’ benefits, as discussed below, partially offset by lower net investment income and other income, primarily reflecting lower income on non-coupon investments.

Benefits and expenses of our Institutional Retirement Strategies business increased $4,160 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $4,447 million. Policyholders’ benefits, including the change in policy reserves, increased primarily related to the higher pension risk transfer premiums, discussed above.

Revenues from our Individual Retirement Strategies business increased $1,010 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $1,003 million. The increase was primarily driven by the gain on sale of PALAC, partially offset by lower policy charges and fee income, reflecting lower average separate account values due to the impact of the sale of PALAC, net outflows and unfavorable equity markets.

Benefits and expenses of our Individual Retirement Strategies business decreased $153 million primarily driven by lower general and administrative expenses, net of capitalization, driven by lower distribution and asset management expenses reflecting lower average separate account values, as discussed above, as well as lower interest expense.

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.”

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[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["Total Institutional Retirement Strategies:"],["Beginning total account value","","$","251,818","","","$","245,720","","","$","243,387"],["Additions(1)","","28,498","","","31,773","","","21,967"],["Withdrawals and benefits","","(25,283)","","","(16,398)","","","(20,825)"],["Change in market value, interest credited and interest income","","7,722","","","(4,110)","","","1,881"],["Other(2)","","4,899","","","(5,167)","","","(690)"],["Ending total account value, gross","","267,654","","","251,818","","","245,720"],["Reinsurance ceded","","(9,237)","","","0","","","0"],["Ending total account value, net","","$","258,417","","","$","251,818","","","$","245,720"]]
[[/GREPCENT_TABLE]]

__________

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

(2)“Other” activity includes the effect of foreign exchange rate changes associated with our British pounds sterling denominated international reinsurance business and changes in asset balances for externally-managed accounts. For the years ended December 31, 2023, 2022 and 2021, “Other” activity also includes $3,557 million in receipts offset by $3,533 million in payments, $3,800 million in receipts offset by $3,516 million in payments, and $3,079 million in receipts offset by $3,224 million in payments, respectively, related to funding agreements backed by commercial paper that typically have maturities of less than 90 days.

2023 to 2022 Annual Comparison. The increase in Institutional Retirement Strategies net account values reflects interest credited on customer funds, positive impact of foreign exchange rate changes, net additions primarily driven by significant pension risk transfer transactions, including funded pension risk transfer and international reinsurance sales, and an increase in the market value of the assets, partially offset by the reinsurance of certain structured settlement annuity contracts.

2022 to 2021 Annual Comparison. The increase in Institutional Retirement Strategies net account values reflects net additions primarily driven by significant pension risk transfer transactions, including funded pension risk transfer and international reinsurance sales, and interest credited on customer funds, partially offset by the decline in the market value of account assets and the negative impact of foreign exchange rate changes.

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 annuity industry’s competitive and regulatory landscapes may impact our net flows, including new business sales. The following table sets forth account value information of Individual Retirement Strategies’ products for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Total Individual Retirement Strategies(1):"],["Beginning total account value","$","120,022","","","$","182,305","","","$","176,280"],["Sales","7,635","","","6,027","","","6,599"],["Full surrenders and death benefits","(6,766)","","","(6,115)","","","(10,401)"],["Sales, net of full surrenders and death benefits","869","","","(88)","","","(3,802)"],["Partial withdrawals and other benefit payments","(4,531)","","","(4,670)","","","(5,712)"],["Net flows","(3,662)","","","(4,758)","","","(9,514)"],["Change in market value, interest credited and other activity(2)(3)","15,624","","","(54,809)","","","19,188"],["Policy charges(3)","(2,276)","","","(2,716)","","","(3,649)"],["Ending total account value, gross(4)","129,708","","","120,022","","","182,305"],["Reinsurance ceded","(11,797)","","","(817)","","","(477)"],["Ending total account value, net","$","117,911","","","$","119,205","","","$","181,828"]]
[[/GREPCENT_TABLE]]

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__________

(1)Includes net variable and fixed annuities sold as retail investment products. Variable annuity account values were $111.3 billion, $113.9 billion and $176.4 billion as of December 31, 2023, 2022 and 2021, respectively. Fixed annuity account values were $6.6 billion, $5.3 billion and $5.4 billion as of December 31, 2023, 2022 and 2021, respectively.

(2)Results for the year ended December 31, 2022 reflect the reduction in account values resulting from the sale of PALAC.

(3)Results for the year ended December 31, 2022 have been updated to conform to current period presentation.

(4)Ending total account value for the year ended December 31, 2021 includes approximately $30 billion of account values that were classified as “held-for-sale” as of December 31, 2021 in relation to the PALAC sale.

2023 to 2022 Annual Comparison. The decrease in Individual Retirement Strategies net account values during 2023 was primarily driven by the reinsurance of PDI traditional variable annuity contracts, net outflows and policy charges on contractholder accounts, partially offset by market value appreciation.

The increase in Individual Retirement Strategies sales, net of full surrenders and death benefits, reflects higher sales of fixed annuity products.

2022 to 2021 Annual Comparison. The decrease in Individual Retirement Strategies net account values during 2022 was primarily driven by the impact of the sale of PALAC and market value depreciation.

The increase in Individual Retirement Strategies sales, net of full surrenders and death benefits, reflected general uncertainty and volatility in financial markets in 2022 that led to lower full surrenders by policyholders, partially offset by lower sales.

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 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 “Business—Reinsurance” and Note 15 to the 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 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.

Sales of traditional variable annuities with guaranteed living benefit riders were discontinued as of December 31, 2020, and, in April 2022, the sale of a portion of our in-force traditional variable annuity block was completed. Effective April 2023, the Company entered into an agreement with AuguStar to reinsure approximately $10 billion of account values of PDI

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traditional variable annuity contracts with guaranteed living benefits. For additional information regarding our external reinsurance agreements, see “Business—Reinsurance” and Note 15 to the 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 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. As part of our periodic review of our variable annuities ALM strategy, and in accordance with our Risk Appetite Framework (“RAF”), the Company simplified its hedging approach in the first quarter of 2023 and collapsed the aggregate amount of equity hedging into one program.

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 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

For certain living benefit guarantees, claims will primarily represent the funding of contractholder lifetime withdrawals after the cumulative withdrawals have first exhausted the contractholder account value. Due to the age of the in-force block, limited claim payments have occurred to date, and they are not expected to increase significantly within the next five years, based upon current assumptions. The timing and amount of future claims will depend on actual returns on contractholder account value and actual contractholder behavior relative to our assumptions. The majority of our current living benefit guarantees provide for guaranteed lifetime contractholder withdrawal payments inclusive of a “highest daily” contract value guarantee. Our PDI variable annuity complements our variable annuity products with the highest daily benefit and provides for

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guaranteed lifetime contractholder withdrawal payments but restricts contractholder asset allocation to a single bond fund sub-account within the separate accounts.

The majority of our traditional variable annuity contracts with living benefit guarantees, and contracts with our highest daily living benefit features, include risk mitigants in the form of an automatic rebalancing feature and/or inclusion in our ALM strategy. We may also utilize external reinsurance as a form of additional risk mitigation. The risks associated with the guaranteed benefits of certain legacy products that were sold prior to our development of the automatic rebalancing feature are also managed through our ALM strategy. Certain legacy products with GMAB rider options include the automatic rebalancing feature but are not included in the ALM strategy. Sales of traditional variable annuities with living benefit guarantees and automatic rebalancing features were discontinued as of December 31, 2020, and, in April 2022, the sale of a portion of our in-force traditional variable annuity block was completed. Effective April 2023, the Company entered into an agreement with AuguStar to reinsure approximately $10 billion of account values of PDI traditional variable annuity contracts with guaranteed living benefits. For additional information regarding our external reinsurance agreements, see “Business—Reinsurance” and Note 15 to the Consolidated Financial Statements.

For our GMDBs, we provide a benefit payable in the event of death. Our base GMDB is generally equal to a return of cumulative deposits adjusted for any partial withdrawals. Certain products include an optional enhanced GMDB based on the greater of a minimum return on the contract value or an enhanced value. We have retained the risk that the total amount of death benefit payable may be greater than the contractholder account value; however, a substantial portion of the account values associated with GMDBs are subject to an automatic rebalancing feature because the contractholder also selected a living benefit guarantee which includes an automatic rebalancing feature. All of the variable annuity account values with living benefit guarantees also contain GMDBs. The living and death benefit features for these contracts cover the same insured life and, consequently, we have insured both the longevity and mortality risk on these contracts.

The following table sets forth the risk management profile of our living benefit guarantees and GMDB features as of the periods indicated:

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2023","","2022","","2021"],["","","Account Value","","% of Total","","Account Value","","% of Total","","Account Value(1)","","% of Total"],["","","(in millions)"],["Living benefit/GMDB features(2):"],["Both ALM strategy and automatic rebalancing(3)(4)","","$","70,013","","","58","%","","$","69,282","","","61","%","","$","112,543","","","64","%"],["ALM strategy only(4)","","1,933","","","2","%","","1,972","","","2","%","","7,278","","","4","%"],["Automatic rebalancing only","","80","","","0","%","","83","","","0","%","","567","","","0","%"],["External reinsurance(5)","","12,418","","","10","%","","2,482","","","2","%","","3,303","","","2","%"],["PDI","","1,536","","","1","%","","11,988","","","11","%","","16,909","","","10","%"],["Other products","","1,585","","","1","%","","1,561","","","1","%","","2,444","","","1","%"],["Total living benefit/GMDB features","","87,565","","","","","87,368","","","","","143,044"],["GMDB features and other(6)","","33,873","","","28","%","","26,573","","","23","%","","33,395","","","19","%"],["Total variable annuity account value","","$","121,438","","","","","$","113,941","","","","","$","176,439"]]
[[/GREPCENT_TABLE]]

__________

(1)    Includes approximately $30 billion of account values that were classified as “held-for-sale” as of December 31, 2021 in relation to the PALAC sale.

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

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

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

(5)    Represents contracts subject to reinsurance transactions with external counterparties. Includes approximately $10 billion of account values in relation to the PDI reinsurance transaction, as discussed above, 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 15 to the Consolidated Financial Statements for additional information.

(6)    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 Consolidated Statements of Operations from the portion of Retirement Strategies’ results excluded from adjusted operating income:

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)(1)"],["Results excluded from adjusted operating income:"],["Change in MRBs, excluding changes in the NPR adjustment(2)","$","2,499","","","$","4,631","","","$","8,438"],["Change in the value of the non-MRB liabilities, excluding changes in the NPR adjustment(3)","(173)","","","(357)","","","(42)"],["Change in the NPR adjustment, excluding changes recognized in OCI","(18)","","","32","","","(8)"],["Change in the fair value of hedge assets(4)(5)","(2,812)","","","(4,482)","","","(6,178)"],["Other(6)","(244)","","","(1,130)","","","1,333"],["Total Individual Retirement Strategies results excluded from adjusted operating income","(748)","","","(1,306)","","","3,543"],["Total Institutional Retirement Strategies results excluded from adjusted operating income","(930)","","","(1,707)","","","152"],["Total results excluded from adjusted operating income","$","(1,678)","","","$","(3,013)","","","$","3,695"]]
[[/GREPCENT_TABLE]]

__________

(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)Represents the change in the liability for our fixed and variable indexed annuities, 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 fair value of the current term elected by the policyholder are included in adjusted operating income, while changes in the fair value of all future projected renewals of the policy are excluded from adjusted operating income.

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

(5)Includes changes in the fair value of equity derivatives related to the capital hedge program of $(225) million, $598 million and $(1,268) million for the years ended December 31, 2023, 2022 and 2021, respectively, that were intended to protect a portion of the overall capital position of the variable annuities business against its exposure to the equity markets. The capital hedge program was discontinued in the first quarter of 2023.

(6)Includes the changes in duration swaps, DAC amortization, trading gains or losses, and other activity.

For 2023, the loss of $1,678 million was primarily driven by the impact of rising interest rates on derivatives, MRBs and other liabilities, net of hedging, as well as an unfavorable impact from our annual reviews and update of assumptions and other refinements, partially offset by favorable equity market performance.

For 2022, the loss of $3,013 million was primarily driven by the impact of rising interest rates on fixed maturity securities and derivatives, and unfavorable equity market performance, partially offset by a favorable impact from our annual reviews and update of assumptions and other refinements.

For 2021, the gain of $3,695 million was primarily driven by the impact of favorable equity market performance on MRBs, net of hedging, realized gains on asset sales and favorable impact from our annual reviews and update of assumptions and other refinements.

Group Insurance

Operating Results

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

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Operating results:"],["Revenues","$","6,285","","","$","6,115","","","$","6,219"],["Benefits and expenses","5,966","","","6,131","","","6,672"],["Adjusted operating income","319","","","(16)","","","(453)"],["Realized investment gains (losses), net, and related adjustments","(46)","","","(137)","","","(16)"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","$","273","","","$","(153)","","","$","(469)"],["Benefits ratios(1)(4):"],["Group life(2)","87.0","%","","93.3","%","","102.5","%"],["Group disability(2)","70.2","%","","73.9","%","","83.8","%"],["Total Group Insurance(2)","82.5","%","","88.5","%","","98.1","%"],["Administrative operating expense ratios(3)(4):"],["Group life","11.7","%","","10.8","%","","11.3","%"],["Group disability","25.2","%","","31.3","%","","32.1","%"],["Total Group Insurance","15.2","%","","15.8","%","","16.3","%"]]
[[/GREPCENT_TABLE]]

__________

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

(2)Benefits ratios reflect the impacts of our annual reviews and update of assumptions and other refinements. Excluding these impacts, the group life, group disability and total Group Insurance benefits ratios were 87.6%, 71.1% and 83.2% for 2023, respectively, 93.4%, 73.3% and 88.4% for 2022, respectively, and 102.5%, 83.8% and 98.2% for 2021, respectively.

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

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

Adjusted Operating Income

2023 to 2022 Annual Comparison. Adjusted operating income increased $335 million, including a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2023 included a $36 million net benefit from these updates while results for 2022 included a $3 million net charge from these updates. Excluding this item, adjusted operating income increased $296 million, primarily reflecting higher underwriting results in our group life business, driven by a decline in COVID-19 impacts and favorable mortality experience on non-experience-rated contracts, and higher underwriting results in our group disability business, driven by a favorable impact to reserves from higher interest rates on long-term disability contracts, as well as business growth. These increases were partially offset by higher variable expenses, largely driven by business growth.

2022 to 2021 Annual Comparison. Adjusted operating income increased $437 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2022 included a $3 million net charge from these updates while results for 2021 included a $1 million net benefit from these updates. Excluding this item, adjusted operating income increased $441 million, primarily reflecting higher underwriting results in our group life business, driven by a decline in COVID-19 impacts on non-experience-rated contracts, and higher underwriting results in our group disability business driven by more favorable claims experience and a favorable impact to reserves from higher interest rates on long-term disability contracts, as well as business growth. These increases were partially offset by lower net investment spread results driven by lower income on non-coupon investments.

Revenues, Benefits and Expenses

2023 to 2022 Annual Comparison. Revenues increased $170 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $167 million. The increase primarily reflected higher premiums and policy charges and fee income driven by business growth in our group disability business, including supplemental health products. In our group life business, growth in non-experience-rated contracts was partially offset by higher premium returns driven by favorable mortality on experience-rated contracts. This increase also reflected higher net investment income driven by higher reinvestment rates.

Benefits and expenses decreased $165 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $129 million. The decrease primarily reflected lower policyholders’ benefits and changes in reserves in our group life business driven by favorable mortality experience, including a

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decline in COVID-19 impacts on non-experience-rated contracts. This decrease was partially offset by higher policyholders’ benefits and changes in reserves in our group disability business driven by business growth, as well as higher general and administrative expenses, largely driven by business growth.

2022 to 2021 Annual Comparison. Revenues decreased $104 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $100 million. The decrease primarily reflected lower net investment income driven by lower income on non-coupon investments.

Benefits and expenses decreased $541 million. The decrease primarily reflected lower policyholders’ benefits and changes in reserves in our group life business driven by less unfavorable claim experience from a decline in COVID-19 impacts, as well as in our group disability business driven by a more favorable impact from claims experience and a favorable impact to reserves from higher interest rates 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:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Annualized new business premiums(1):"],["Group life","$","296","","","$","283","","","$","265"],["Group disability","235","","","196","","","221"],["Total","$","531","","","$","479","","","$","486"]]
[[/GREPCENT_TABLE]]

__________

(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.

2023 to 2022 Annual Comparison. Total annualized new business premiums increased $52 million, primarily driven by higher sales in our group disability business in the Premier Market segment, including an increase in supplemental health product sales, as well as higher sales in our group life business, primarily in the Association segment, partially offset by lower sales in the National Market segment.

2022 to 2021 Annual Comparison. Total annualized new business premiums decreased $7 million, primarily driven by lower sales in our group disability business in the National Market segment due to the absence of a large sale in 2021, partially offset by an increase in supplemental health product sales, primarily in the Premier Market segment. Higher group life sales, primarily in the National Market segment, served as a partial offset.

Individual Life

Business Update

•Effective January 1, 2023, Prudential Advisors, the Company’s proprietary nationwide distribution business, which was previously part of the Individual Life segment, is now included within Corporate and Other operations. There are no impacts to the Company's consolidated financial statements from this change and historical results have been updated to conform to the current period presentation.

•In July 2023, the Company entered into an agreement with Somerset Reinsurance Ltd. (“Somerset Re”) to reinsure certain guaranteed universal life policies issued by Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey, both of which are wholly-owned subsidiaries of Prudential Financial. These policies represent approximately 30% of the Company’s reserves on its in-force guaranteed universal life block of business. This transaction, which is structured on a modified coinsurance basis and contains significant structural protections, including overcollateralization by the counterparty and agreed upon investment guidelines, is subject to customary closing conditions.

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Operating Results

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

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["Operating results:"],["Revenues","","$","6,274","","","$","5,786","","","$","6,170"],["Benefits and expenses","","6,369","","","7,588","","","6,001"],["Adjusted operating income","","(95)","","","(1,802)","","","169"],["Realized investment gains (losses), net, and related adjustments","","(479)","","","(1,467)","","","(83)"],["Charges related to realized investment gains (losses), net","","167","","","(38)","","","137"],["Market experience updates","","154","","","439","","","9"],["Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests","","0","","","0","","","1"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","","$","(253)","","","$","(2,868)","","","$","233"]]
[[/GREPCENT_TABLE]]

Adjusted Operating Income

2023 to 2022 Annual Comparison. Adjusted operating income increased $1,707 million, primarily reflecting a less unfavorable net impact from our annual reviews and update of assumptions and other refinements. Results for 2023 included a $26 million net charge from these updates, compared to a $1,608 million net charge for 2022 which was mainly driven by unfavorable impacts related to assumptions for policyholder behavior and mortality. Excluding this item, adjusted operating income increased $125 million, primarily driven by higher net investment spread results reflecting the impact from higher reinvestment and short-term rates, and higher asset balances, which were partially offset by unfavorable derivative settlements. Also contributing to the increase were lower expenses, including a reduction in legal reserves. These increases were partially offset by lower underwriting results, driven by unfavorable reserve experience versus expectations and unfavorable mortality experience, net of reinsurance.

2022 to 2021 Annual Comparison. Adjusted operating income decreased $1,971 million, primarily reflecting an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2022 included a $1,608 million net charge from these updates, mainly driven by unfavorable impacts related to assumptions for policyholder behavior and mortality, while results for 2021 included a $55 million net charge from these updates. Excluding this item, adjusted operating income decreased $418 million, primarily reflecting lower net investment spread results driven by lower income on non-coupon investments. The decrease also reflects lower underwriting results driven by the unfavorable ongoing impact from our annual reviews and update of assumptions and other refinements in 2022, as discussed above, partially offset by less unfavorable mortality experience, net of reinsurance, including lower COVID-19 related claims, and the absence of unfavorable reserve experience in 2021.

Revenues, Benefits and Expenses

2023 to 2022 Annual Comparison. Revenues increased $488 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $264 million, primarily driven by higher net investment income reflecting higher reinvestment and short-term rates, and higher asset balances, partially offset by lower realized investment gains from unfavorable derivative settlements.

Benefits and expenses decreased $1,219 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $139 million. This increase was primarily driven by unfavorable changes in estimates of the liability for future policy benefits reflecting unfavorable reserve experience, and higher interest expense due to higher reserve financing costs corresponding to higher net investment income, as discussed above. These increases were partially offset by lower general and administrative expenses, including a reduction in legal reserves.

2022 to 2021 Annual Comparison. Revenues decreased $384 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $203 million. This decrease was

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primarily driven by lower policy charges and fee income, driven by the absence of a benefit from the recapture of previously reinsured liabilities in 2021, which was mostly offset by reserve changes in policyholders’ benefits, as well as the impact of unfavorable equity markets on account values. Also contributing to the decrease was lower net investment income driven by lower income on non-coupon investments, partially offset by business growth and higher interest rates. These decreases were partially offset by higher premiums due to lower ceded reinsurance from the recapture in 2021, as discussed above, which was mostly offset in policyholders’ benefits below.

Benefits and expenses increased $1,587 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $215 million. This increase was primarily driven by higher policyholders’ benefits, including changes in reserves, driven by the unfavorable ongoing impact from our annual reviews and update of assumptions and other refinements in 2022 and lower ceded reinsurance, as discussed above. This was partially offset by a favorable comparative impact from mortality experience, net of reinsurance, including lower COVID-19 related claims, and the absence of a charge from the reinsurance recapture in 2021, as discussed above. Also contributing to the increase was higher interest credited on policyholders’ account balances due to business growth and higher interest expense driven by higher interest rates, as discussed above. These increases were partially offset by favorable changes in estimates of the liability for future policy benefits reflecting the absence of unfavorable reserve experience in 2021.

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:

[[GREPCENT_TABLE]]
[["","","2023","","2022","","2021"],["","","Prudential Advisors","","Third Party","","Total","","Prudential Advisors","","Third Party","","Total","","Prudential Advisors","","Third Party","","Total"],["","","(in millions)"],["Variable Life","","$","120","","","$","416","","","$","536","","","$","109","","","$","315","","","$","424","","","$","121","","","$","417","","","$","538"],["Term Life","","20","","","100","","","120","","","18","","","75","","","93","","","20","","","95","","","115"],["Universal Life","","4","","","77","","","81","","","6","","","86","","","92","","","8","","","94","","","102"],["Total","","$","144","","","$","593","","","$","737","","","$","133","","","$","476","","","$","609","","","$","149","","","$","606","","","$","755"]]
[[/GREPCENT_TABLE]]

2023 to 2022 Annual Comparison. Total annualized new business premiums increased $128 million, primarily reflecting higher third-party sales across variable and term life products.

2022 to 2021 Annual Comparison. Total annualized new business premiums decreased $146 million, primarily from lower third-party sales across variable life, term life and universal life products due to pricing and product actions taken in 2021.

International Businesses

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 110 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.

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Operating results:"],["Revenues:"],["Life Planner","$","9,596","","","$","9,541","","","$","10,169"],["Gibraltar Life and Other","9,086","","","9,470","","","10,717"],["Total revenues","18,682","","","19,011","","","20,886"],["Benefits and expenses:"],["Life Planner","7,596","","","7,597","","","8,187"],["Gibraltar Life and Other","7,903","","","8,209","","","8,967"],["Total benefits and expenses","15,499","","","15,806","","","17,154"],["Adjusted operating income:"],["Life Planner","2,000","","","1,944","","","1,982"],["Gibraltar Life and Other","1,183","","","1,261","","","1,750"],["Total adjusted operating income","3,183","","","3,205","","","3,732"],["Realized investment gains (losses), net, and related adjustments","(11)","","","(2,210)","","","18"],["Charges related to realized investment gains (losses), net","104","","","116","","","(35)"],["Change in value of market risk benefits, net of related hedging gains (losses)","14","","26","","18"],["Market experience updates","(46)","","","196","","0"],["Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests","(76)","","","13","","","(92)"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","$","3,168","","","$","1,346","","","$","3,641"]]
[[/GREPCENT_TABLE]]

Adjusted Operating Income

2023 to 2022 Annual Comparison. Adjusted operating income from our Life Planner operations increased $56 million, including a net unfavorable impact of $44 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 $5 million net charge in both 2023 and 2022.

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 from our Life Planner operations increased $100 million. This increase primarily reflects higher net investment spread results, driven by higher reinvestment rates and higher income on non-coupon investments, as well as higher underwriting results, primarily due to business growth in Brazil. These impacts were partially offset by higher variable expenses, largely driven by business growth in Brazil.

Adjusted operating income from our Gibraltar Life and Other operations decreased $78 million, including a net favorable impact of $12 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 $18 million net benefit in 2023 compared to a $14 million net charge in 2022.

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 from our Gibraltar Life and Other operations decreased $122 million. This decrease primarily reflects lower net investment spread results, driven by unfavorable derivative settlements and the decline in business in force, partially offset by higher income on non-coupon investments. Also contributing to the decrease were lower underwriting results, primarily driven by the decline of business in force, partially offset by less unfavorable morbidity and mortality experience. These impacts were partially offset by higher earnings from joint venture investments.

2022 to 2021 Annual Comparison. Adjusted operating income from our Life Planner operations decreased $38 million, including a net favorable impact of $13 million from currency fluctuations. Both periods also include the impact of our annual

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reviews and update of assumptions and other refinements, which resulted in a $5 million net charge in 2022 compared to a $6 million net benefit in 2021.

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 from our Life Planner operations decreased $40 million. This decrease primarily reflects lower net investment spread results, driven by lower income on non-coupon investments and higher operating expenses, largely driven by business growth in Brazil, partially offset by higher underwriting results, primarily driven by business growth in Brazil.

Adjusted operating income from our Gibraltar Life and Other operations decreased $489 million, including a net unfavorable impact of $20 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 $14 million net charge in 2022 compared to a $21 million net charge in 2021.

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 from our Gibraltar Life and Other operations decreased $476 million. This decrease primarily reflects lower net investment spread results, driven by lower income on non-coupon investments and lower prepayment fee income, as well as unfavorable derivative settlements and the decline in business in force. Also contributing to the decrease were lower underwriting results, primarily driven by the decline of business in force, and lower earnings from joint venture investments.

Revenues, Benefits and Expenses

2023 to 2022 Annual Comparison. Revenues from our Life Planner operations increased $55 million, including a net unfavorable impact of $195 million from currency fluctuations and a net benefit of $82 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues increased $168 million, primarily reflecting higher net investment income driven by higher reinvestment rates and higher income on non-coupon investments. This increase was partially offset by lower premiums, primarily attributable to the decline of business in force in Japan, partially offset by business growth in Brazil.

Benefits and expenses from our Life Planner operations decreased $1 million, including a net favorable impact of $151 million from currency fluctuations and a net charge of $82 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $68 million, primarily reflecting higher interest credited on policyholders’ account balances, and unfavorable changes in estimates of the liability for future policy benefits. These increases were partially offset by lower policyholder benefits, including changes in reserves, due to the decline of business in force, as discussed above.

Revenues from our Gibraltar Life and Other operations decreased $384 million, including a net unfavorable impact of $30 million from currency fluctuations and a net benefit of $214 million from our annual reviews and update of assumptions and other refinements. Excluding this item, revenues decreased $568 million, primarily reflecting lower premiums and policy charges and fee income attributable to the decline of business in force, and lower realized investment gains from unfavorable derivative settlements. These decreases were partially offset by higher net investment income driven by higher income on non-coupon investments.

Benefits and expenses from our Gibraltar Life and Other operations decreased $306 million, including a net favorable impact of $42 million from currency fluctuations and a net benefit of $182 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses decreased $446 million, primarily reflecting lower policyholders’ benefits, including changes in reserves, due to the decline of business in force, as discussed above, and less unfavorable morbidity and mortality experience, partially offset by higher interest credited on policyholders’ account balances.

2022 to 2021 Annual Comparison. Revenues from our Life Planner operations decreased $628 million, including a net unfavorable impact of $577 million from currency fluctuations and a net charge of $39 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues decreased $12 million, primarily reflecting lower other income and net investment income, driven by lower income on non-coupon investments, partially offset by higher premiums and policy charges and fee income, driven by business growth in Brazil.

Benefits and expenses from our Life Planner operations decreased $590 million, including a net favorable impact of $590 million from currency fluctuations and a net benefit of $28 million from our annual reviews and update of assumptions and

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other refinements. Excluding these items, benefits and expenses increased $28 million, primarily reflecting higher operating expenses, higher interest credited on policyholders’ account balances and higher amortization, including write-offs of deferred policy acquisition costs related to unfavorable policyholder behavior. These increases were partially offset by lower policyholders’ benefits, including changes in reserves, driven by the decline of business in force in Japan.

Revenues from our Gibraltar Life and Other operations decreased $1,247 million, including a net unfavorable impact of $916 million from currency fluctuations and a net charge of $8 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues decreased $323 million, primarily reflecting lower premiums due to the decline of business in force, and lower net investment income driven by lower income on non-coupon investments and lower prepayment fee income. Also contributing to the decrease were lower realized investment gains from unfavorable derivative settlements and lower other income from a decline in earnings from joint venture investments.

Benefits and expenses from our Gibraltar Life and Other operations decreased $758 million, including a net favorable impact of $896 million from currency fluctuations and a net benefit of $15 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $153 million, primarily driven by unfavorable changes in estimates of the liability for future policy benefits, and higher amortization, including write-offs of deferred policy acquisition costs related to unfavorable policyholder behavior. These increases were partially offset by lower policyholders’ benefits, including changes in reserves, driven by the decline of business in force.

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:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["Annualized new business premiums:"],["On an actual exchange rate basis:"],["Life Planner","","$","1,069","","","$","941","","","$","940"],["Gibraltar Life and Other","","1,018","","","878","","","1,000"],["Total","","$","2,087","","","$","1,819","","","$","1,940"],["On a constant exchange rate basis:"],["Life Planner","","$","1,097","","","$","946","","","$","911"],["Gibraltar Life and Other","","1,056","","","900","","","999"],["Total","","$","2,153","","","$","1,846","","","$","1,910"]]
[[/GREPCENT_TABLE]]

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, as a result, we have repriced or discontinued sales of certain products that do not meet our profit expectations. The impact of these actions, coupled with the introduction of certain new products, has generally resulted in an increase in sales of products denominated in USD relative to products denominated in other currencies.

2023 to 2022 Annual Comparison. The table below presents annualized new business premiums on a constant exchange rate basis, by product category and distribution channel, for the periods indicated:

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[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2023","","Year Ended December 31, 2022"],["","","Life","","Accident & Health","","Retirement (1)","","Investment Contracts (2)","","Total","","Life","","Accident & Health","","Retirement (1)","","Investment Contracts (2)","","Total"],["","","(in millions)"],["Life Planner","","$","563","","","$","83","","","$","268","","","$","183","","","$","1,097","","","$","507","","","$","71","","","$","325","","","$","43","","","$","946"],["Gibraltar Life and Other:"],["Life Consultants","","140","","","25","","","24","","","372","","","561","","","176","","","26","","","32","","","300","","","534"],["Banks","","30","","","0","","2","","","225","","","257","","","76","","","0","","4","","","88","","","168"],["Independent Agency","","60","","","34","","","87","","","57","","","238","","","81","","","12","","","104","","","1","","","198"],["Subtotal","","230","","","59","","","113","","","654","","","1,056","","","333","","","38","","","140","","","389","","","900"],["Total","","$","793","","","$","142","","","$","381","","","$","837","","","$","2,153","","","$","840","","","$","109","","","$","465","","","$","432","","","$","1,846"]]
[[/GREPCENT_TABLE]]

__________

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

(2)Includes single-payment market value adjusted investment contracts and single-payment whole life products.

Annualized new business premiums, on a constant exchange rate basis, from our Life Planner operations increased $151 million, primarily driven by higher life product sales in Brazil. In Japan, higher USD-denominated single premium investment contract sales were partially offset by lower USD-denominated recurring premium life and retirement product sales.

Annualized new business premiums, on a constant exchange rate basis, from our Gibraltar Life and Other operations increased $156 million. Bank channel, Independent Agency and Life Consultants sales increased $89 million, $40 million and $27 million, respectively, all reflecting higher USD-denominated single premium investment contract sales, partially offset by lower USD-denominated recurring premium life product sales. Independent Agency sales also reflect higher accident and health product sales, partially offset by lower retirement product sales.

2022 to 2021 Annual Comparison. The table below presents annualized new business premiums on a constant exchange rate basis, by product category and distribution channel, for the periods indicated:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2022","","Year Ended December 31, 2021"],["","","Life","","Accident & Health","","Retirement (1)","","Investment Contracts (2)","","Total","","Life","","Accident & Health","","Retirement (1)","","Investment Contracts (2)","","Total"],["","","(in millions)"],["Life Planner","","$","507","","","$","71","","","$","325","","","$","43","","","$","946","","","$","484","","","$","59","","","$","364","","","$","4","","","$","911"],["Gibraltar Life and Other:"],["Life Consultants","","176","","","26","","","32","","","300","","","534","","","257","","","25","","","41","","","161","","","484"],["Banks","","76","","","0","","4","","","88","","","168","","","251","","","0","","13","","","54","","","318"],["Independent Agency","","81","","","12","","","104","","","1","","","198","","","74","","","21","","","94","","","8","","","197"],["Subtotal","","333","","","38","","","140","","","389","","","900","","","582","","","46","","","148","","","223","","","999"],["Total","","$","840","","","$","109","","","$","465","","","$","432","","","$","1,846","","","$","1,066","","","$","105","","","$","512","","","$","227","","","$","1,910"]]
[[/GREPCENT_TABLE]]

__________

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

(2)Includes single-payment market value adjusted investment contracts and single-payment whole life products. 2021 also includes annuity products.

Annualized new business premiums, on a constant exchange rate basis, from our Life Planner operations increased $35 million, primarily driven by higher life product sales in Brazil and Argentina. In Japan, higher sales of USD-denominated market value adjusted investment contacts, driven by higher interest rates, were partially offset by lower sales of USD-denominated retirement products.

Annualized new business premiums, on a constant exchange rate basis, from our Gibraltar Life and Other operations decreased $99 million. Bank channel sales decreased $150 million reflecting lower USD-denominated life product sales, partially offset by higher sales of USD-denominated market value adjusted investment contacts, driven by higher interest rates. Life Consultants sales increased $50 million reflecting higher sales of USD-denominated market value adjusted investment contacts, driven by rising interest rates, partially offset by lower USD-denominated life product sales. Independent Agency sales increased $1 million, primarily driven by higher sales of life products and USD-denominated endowment products, largely

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offset by the absence of accident & health product sales made to a single large client in 2021 and lower sales of investment contracts.

Sales Force

The following table sets forth the number of Life Planners and Life Consultants for the periods indicated:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["Life Planners:"],["Japan","","4,310","","","4,446","","","4,566"],["All other countries","","1,546","","","1,478","","","1,458"],["Gibraltar Life Consultants","","6,808","","","6,821","","","7,100"],["Total","","12,664","","","12,745","","","13,124"]]
[[/GREPCENT_TABLE]]

2023 to 2022 Comparison. The number of Life Planners decreased by 68, driven by a decrease of 136 in our Japan operations, primarily reflecting our selective recruiting efforts and continued challenges with higher resignations. Life Planners in our other operations increased by 68, primarily reflecting an increase in Brazil. The number of Gibraltar Life Consultants decreased by 13, reflecting a decline in the first half of 2023 from continued recruiting challenges, partially offset by favorable recruitment in the second half of the year.

2022 to 2021 Comparison. The number of Life Planners decreased by 100, driven by a decrease of 120 in our Japan operations, primarily reflecting our selective recruiting efforts and higher resignations. Life Planners in our other operations increased by 20, primarily reflecting an increase in Brazil. The number of Gibraltar Life Consultants decreased by 279, primarily reflecting continued recruiting challenges and higher resignations due to more selective retention standards.

Corporate and Other

Business Update

•Effective January 1, 2023, AIQ and Prudential Advisors are included within Corporate and Other operations. There are no impacts to the Company's consolidated financial statements from these reporting changes and historical results have been updated to conform to the current period presentation.

•In September 2023, the Company acquired a 20% interest as a limited partner in Prismic, a Bermuda-exempted limited partnership that owns all of the outstanding capital stock of Prismic Re. Beginning with the fourth quarter of 2023, the operating results of Corporate and Other reflect the Company’s share of earnings in Prismic on a quarter lag. In connection with this transaction, effective September 2023, the Company entered into an agreement with Prismic Re to reinsure approximately $9 billion of reserves for certain structured settlement annuities contracts issued by PICA, 90% of which is on a coinsurance with funds withheld basis and 10% of which is on a coinsurance basis. The invested assets supporting the contracts reinsured via coinsurance with funds withheld consist primarily of public fixed maturities available-for-sale, private fixed maturities available-for-sale and fixed maturities designated as trading. As the Company considers its relationship with Prismic to be an enterprise initiative that could span business segments, Corporate and Other will report these segregated assets along with the offsetting funds withheld payable. See Note 15 to the Consolidated Financial Statements for additional information.

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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:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["Operating results:"],["Investment income","","$","161","","","$","177","","","$","174"],["Interest expense on debt","","(829)","","","(829)","","","(827)"],["Pension and employee benefits","","345","","","387","","","284"],["Other corporate activities","","(1,849)","","","(1,412)","","","(1,441)"],["Adjusted operating income","","(2,172)","","","(1,677)","","","(1,810)"],["Realized investment gains (losses), net, and related adjustments","","(592)","","","(38)","","","94"],["Charges related to realized investment gains (losses), net","","4","","","2","","","3"],["Market experience updates","","2","","","7","","","11"],["Divested and Run-off Businesses","","349","","","146","","","769"],["Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests","","(8)","","","(47)","","","(38)"],["Other adjustments(1)","","(182)","","","(917)","","","(1,099)"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","","$","(2,599)","","","$","(2,524)","","","$","(2,070)"]]
[[/GREPCENT_TABLE]]

__________

(1)Includes goodwill impairments of $177 million, $903 million and $1,060 million recorded in the fourth quarters of 2023, 2022 and 2021, respectively, related to AIQ. See Note 2 and Note 10 to the Consolidated Financial Statements for additional information regarding goodwill impairments. Also includes certain components of consideration for a business acquisition, which are recognized as compensation expense over the requisite service periods.

2023 to 2022 Annual Comparison. The loss from Corporate and Other operations, on an adjusted operating income basis, increased $495 million. Net charges from other corporate activities increased by $437 million, primarily driven by corporate initiatives, including a restructuring charge and higher technology costs, unfavorable foreign exchange rate impacts, and the absence of gains from the sales of certain home office properties in the prior year period, partially offset by lower net expenses and other corporate charges. Pension and employee benefits were unfavorable by $42 million, primarily driven by an increase in employee benefit plan costs.

For purposes of calculating pension income from our qualified pension plan for the year ended December 31, 2024, we decreased the discount rate from 5.45% to 5.30% as of December 31, 2023. The expected rate of return on plan assets remained unchanged at 7.50%. The assumed rate of increase in compensation increased from 4.50% in 2023 to 6.25% in 2024. Giving effect to the foregoing changes and other factors, we expect income from our qualified pension plan in 2024 to be approximately $5 million to $10 million lower than 2023 levels. This decrease is primarily driven by higher loss amortizations.

For purposes of calculating postretirement benefit expenses for the year ended December 31, 2024, we decreased the discount rate from 5.55% to 5.20% as of December 31, 2023. The expected rate of return on plan assets decreased from 7.75% in 2023 to 6.75% in 2024. Giving effect to the foregoing changes and other factors, we expect postretirement income in 2024 to be approximately $65 million to $75 million higher than 2023 levels. This increase is primarily driven by a change related to the Company’s Retiree Medical plan, partially offset by a decrease in earnings from a decrease in the expected rate of return.

In 2024, pension and other postretirement benefit service costs related to active employees will continue to be allocated to our business segments. For further information regarding our pension and postretirement plans, including the changes to the Company’s Retiree Medical Savings Account plan, see Note 19 to the Consolidated Financial Statements.

2022 to 2021 Annual Comparison. The loss from Corporate and Other operations, on an adjusted operating income basis, decreased $133 million. Pension and employee benefits were favorable by $103 million, driven by higher earnings from our pension and post-retirement plans resulting from higher returns on plan assets, lower benefit costs for these plans resulting from the sale of the Full Service Retirement business, and a favorable impact from design changes to the Company’s Retiree Medical

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Savings Account plan. Net charges from other corporate activities decreased by $29 million, primarily driven by the absence of costs related to the early extinguishment of debt incurred in 2021, gains from the sales of certain home office properties, favorable exchange rate impacts, and lower costs for long-term compensation plans, partially offset by higher expenses, including an increase in costs related to corporate initiatives.

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:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["Long-Term Care","","$","217","","","$","(316)","","","$","519"],["Other","","132","","","462","","","250"],["Total Divested and Run-off Businesses income (loss) excluded from adjusted operating income","","$","349","","","$","146","","","$","769"]]
[[/GREPCENT_TABLE]]

2023 to 2022 Annual Comparison

Long-Term Care. Results for the year ended December 31, 2023 increased $533 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2023 and 2022 included net charges from these updates of $79 million and $3 million, respectively. Excluding this item, results increased $609 million primarily driven by favorable impacts from changes in the market value of equity securities and less unfavorable impacts from changes in the market value of derivatives used for duration management, partially offset by lower income on non-coupon investments.

Other Divested and Run-off Businesses. Results for the year ended December 31, 2023 decreased $330 million, primarily driven by the absence of a gain in the prior period from the sale of the Full Service Retirement business, which was completed in April 2022. See Note 1 to the Consolidated Financial Statements for additional information regarding this sale. The results for 2023 also reflect the absence of losses related to the Full Service Retirement business recorded in the first quarter of 2022, which were largely driven by the impact of rising interest rates on the market value of assets supporting experience-rated contractholder liabilities.

2022 to 2021 Annual Comparison

Long-Term Care. Results for the year ended December 31, 2022 decreased $835 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2022 included a $3 million net charge from these updates, while results for 2021 included a $13 million net benefit. Excluding this item, results decreased $819 million primarily driven by unfavorable impacts from changes in the market value of equity securities, changes in the market value of derivatives used for duration management and lower income on non-coupon investments.

Other Divested and Run-off Businesses. Results for the year ended December 31, 2022 increased $212 million, primarily driven by the gain on the sale of the Full Service Retirement business. See Note 1 to the Consolidated Financial Statements for additional information regarding this sale. The results for 2022 also include losses related to the Full Service Retirement business in the first quarter, largely driven by the impact of rising interest rates on the market value of assets supporting experience-rated contractholder liabilities.

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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 16 to the 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 December 31, 2023, the excess of actual cumulative earnings over the expected cumulative earnings was $2,873 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 December 31, 2023, 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 $2,081 million at December 31, 2023, with a corresponding amount reported in AOCI.

Operating Results

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["U.S. GAAP results:"],["Revenues","$","3,666","","","$","2,958","","","$","5,947"],["Benefits and expenses","3,766","","","2,976","","","5,789"],["Income (loss) before income taxes and equity in earnings of operating joint ventures","$","(100)","","","$","(18)","","","$","158"]]
[[/GREPCENT_TABLE]]

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

2023 to 2022 Annual Comparison. Income (loss) before income taxes and equity in earnings of operating joint ventures decreased $82 million. Net investment activity results increased, primarily reflecting higher other income driven by favorable changes in the market value of equity and fixed income securities, partially offset by lower realized investment gains driven by unfavorable changes in the market value of derivatives and higher losses on the sale of fixed income investments, as well as lower net investment income driven by lower income on non-coupon investments, partially offset by higher reinvestment rates. Net insurance activity results increased driven by a favorable comparative change in claims experience. As a result of these and other factors, a $335 million reduction in the policyholder dividend obligation was recorded in 2023, compared to a $1,180 million reduction in 2022.

2022 to 2021 Annual Comparison. Income (loss) before income taxes and equity in earnings of operating joint ventures decreased $176 million. Net investment activity results decreased primarily reflecting lower other income driven by unfavorable changes in the value of equity securities, a decrease in realized investment gains (losses) driven by losses on the sale of fixed income investments in the current year, and lower net investment income on non-coupon investments. Net insurance activity results increased driven by a favorable comparative change in claims experience and reserves, partially offset by lower premiums due to the runoff of policies in force. As a result of the above, a $1,180 million reduction in the policyholder dividend obligation was recorded in 2022, compared to a $1,469 million increase in 2021.

Revenues, Benefits and Expenses

2023 to 2022 Annual Comparison. Revenues increased $708 million primarily driven by an increase in other income, partially offset by a decrease in realized investment gains and a decrease in net investment income, as discussed above.

Benefits and expenses increased $790 million primarily driven by an increase in dividends to policyholders, reflecting less of a reduction in the policyholder dividend obligation due to changes in cumulative earnings and other factors, as discussed above.

2022 to 2021 Annual Comparison. Revenues decreased $2,989 million primarily driven by a decrease in other income, realized investment gains (losses), net investment income and premiums, as discussed above.

Benefits and expenses decreased $2,813 million primarily driven by a decrease in dividends to policyholders, reflecting a reduction in the policyholder dividend obligation expense due to changes in cumulative earnings, as discussed above.

Income Taxes

The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% applicable for 2023, 2022 and 2021, and the reported income tax expense (benefit) are provided in the following table:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022(1)","","2021(1)"],["","","(in millions)"],["Expected federal income tax expense (benefit) at federal statutory rate","","$","645","","","$","(397)","","","$","2,275"],["Non-taxable investment income","","(162)","","","(86)","","","(292)"],["Foreign taxes at other than U.S. rate","","191","","","122","","","163"],["Low-income housing and other tax credits","","(106)","","","(128)","","","(126)"],["Changes in tax law","","(99)","","","(11)","","","10"],["GILTI","","5","","","101","","","(1)"],["Sale of subsidiary","","0","","","86","","","(25)"],["Noncontrolling interest","","(4)","","","5","","","(14)"],["Non-deductible expenses","","29","","","21","","","11"],["Change in valuation allowance","","111","","","16","","","13"],["State taxes (net of federal benefit)","","20","","","13","","","18"],["Other","","(17)","","","(21)","","","(37)"],["Reported income tax expense (benefit)","","$","613","","","$","(279)","","","$","1,995"],["Effective tax rate","","20.0","%","","14.7","%","","18.4","%"]]
[[/GREPCENT_TABLE]]

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__________

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

Effective Tax Rate

The effective tax rate is the ratio of “Total income tax expense (benefit)” divided by “Income before income taxes and equity in earnings of operating joint ventures.” Our effective tax rate for fiscal years 2023, 2022 and 2021 was 20.0%, 14.7%, and 18.4%, respectively. For a detailed description of the nature of each significant reconciling item, see Note 17 to the Consolidated Financial Statements.

Unrecognized Tax Benefits

The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest that relate to tax years still subject to review by the Internal Revenue Service or other taxing authorities. The completion of review or the expiration of the Federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The total unrecognized benefit as of December 31, 2023, 2022 and 2021 was $133 million, $84 million and $12 million, respectively. It is possible the Company will pay the unrecognized tax benefit attributable to the Section 952 election described in Note 17 within the next 12 months as it pursues resolution of the matter. The Company cannot predict with reasonable accuracy whether there will be any significant changes within the next twelve months to our total unrecognized tax benefits related to tax years for which the statute of limitations has not expired.

Income Tax Expense vs. Income Tax Paid in Cash

Income tax expense recorded under U.S. GAAP routinely differs from the income taxes paid in cash in any given year. Income tax expense recorded under U.S. GAAP is based on income reported in our Consolidated Statements of Operations for the current period and it includes both current and deferred taxes. Income taxes paid during the year include tax installments made for the current year as well as tax payments and refunds related to prior periods.

For additional information regarding income tax related items, see “Business—Regulation” and Note 17 to the Consolidated Financial Statements.

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 Consolidated Financial Statements for an additional description of the valuation hierarchy levels as well as for the balances of assets and liabilities measured at fair value on a recurring basis by hierarchy level presented on a consolidated basis.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis, as of the periods indicated, and the portion of such assets and liabilities that are classified in Level 3 of the valuation hierarchy. The table also provides details about these assets and liabilities excluding those held in the Closed Block division. We believe the amounts excluding the Closed Block division are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial because substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies only. See Note 16 to the Consolidated Financial Statements for additional information regarding the Closed Block.

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[[GREPCENT_TABLE]]
[["","As of December 31, 2023","","As of December 31, 2022"],["","PFI excluding Closed Block Division","","Closed Block Division","","PFI excluding Closed Block Division","","Closed Block Division"],["","Total at Fair Value","","Total Level 3(1)","","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","$","285,835","","","$","5,250","","","$","30,486","","","$","868","","","$","277,648","","","$","4,345","","","$","30,071","","","$","817"],["Assets supporting experience-rated contractholder liabilities:"],["Fixed maturities","889","","","0","","","0","","","0","","","945","","","0","","","0","","","0"],["Equity securities","2,279","","","0","","","0","","","0","","","1,899","","","0","","","0","","","0"],["All other(2)","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0"],["Subtotal","3,168","","","0","","","0","","","0","","","2,844","","","0","","","0","","","0"],["Market risk benefit assets","1,981","","","1,981","","","0","","","0","","","800","","","800","","","0","","","0"],["Fixed maturities, trading","8,903","","","409","","","887","","","20","","","5,051","","","289","","","900","","","15"],["Equity securities","6,112","","","451","","","1,891","","","61","","","5,416","","","528","","","1,734","","","99"],["Commercial mortgage and other loans","519","","","0","","","0","","","0","","","137","","","0","","","0","","","0"],["Other invested assets(3)","1,949","","","846","","","0","","","0","","","1,990","","","537","","","3","","","2"],["Short-term investments","3,765","","","19","","","135","","","10","","","3,637","","","18","","","150","","","0"],["Cash equivalents","9,336","","","4","","","966","","","0","","","6,398","","","0","","","1,076","","","0"],["Reinsurance recoverables and deposit receivables","149","","","224","","","0","","","0","","","38","","","141","","","0","","","0"],["Other assets(4)","11","","","11","","","0","","","0","","","11","","","11","","","0","","","0"],["Separate account assets","171,812","","","1,094","","","0","","","0","","","171,805","","","1,081","","","0","","","0"],["Total assets","$","493,540","","","$","10,289","","","$","34,365","","","$","959","","","$","475,775","","","$","7,750","","","$","33,934","","","$","933"],["Market risk benefit liabilities","$","5,467","","","$","5,467","","","$","0","","","$","0","","","$","5,864","","","$","5,864","","","$","0","","","$","0"],["Policyholders\u2019 account balances","7,752","","","7,752","","","0","","","0","","","3,492","","","3,492","","","0","","","0"],["Reinsurance and funds withheld payables","490","","","0","","","0","","","0","","","(31)","","","0","","","0","","","0"],["Other liabilities(3)(4)","4,174","","","1","","","1","","","0","","","3,056","","","1","","","0","","","0"],["Notes issued by consolidated variable interest entities (\u201cVIEs\u201d)","778","","","778","","","0","","","0","","","0","","","0","","","0","","","0"],["Total liabilities","$","18,661","","","$","13,998","","","$","1","","","$","0","","","$","12,382","","","$","9,357","","","$","0","","","$","0"]]
[[/GREPCENT_TABLE]]

__________

(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 for the Closed Block division totaled 2.1% and 2.8%, respectively, as of December 31, 2023 and 1.6% and 2.7%, respectively, as of December 31, 2022.

(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.

(4)Prior period amounts have been reclassified to conform to current period presentation.

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 included approximately $1.1 billion of public fixed maturities as of December 31, 2023, with values primarily based on indicative broker quotes, and approximately $4.5 billion of private fixed maturities, with values primarily based on internally-developed models. Significant unobservable inputs used in their valuation included: issue specific spread adjustments, material non-public financial information, management judgment, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes

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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 “Policyholder 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 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.

General Account Investments

We maintain diversified investment portfolios in our general account to support our liabilities to customers as well as our other general liabilities. Investments and other assets that do not support general account liabilities, and are therefore excluded from our general account, are as follows:

•assets of our derivative operations;

•assets of our investment management operations, including investments managed for third-parties; and

•those assets classified as “Separate account assets” on our balance sheet.

The general account portfolios are managed pursuant to the distinct objectives and investment policy statements of PFI excluding the Closed Block division and of the Closed Block division. The primary investment objectives of PFI excluding the Closed Block division include:

•hedging and otherwise managing the market risk characteristics of the major product liabilities and other obligations of the Company;

•optimizing investment income yield within risk constraints over time; and

•for certain portfolios, optimizing total return, including both investment income yield and capital appreciation, within risk constraints over time, while managing the market risk exposures associated with the corresponding product liabilities.

We pursue our objective to optimize investment income yield for PFI excluding the Closed Block division over time through:

•the investment of net operating cash flows, including new product premium inflows, and proceeds from investment sales, repayments and prepayments into investments with attractive risk-adjusted yields; and

•the sale of investments, where appropriate, either to meet various cash flow needs or to manage the portfolio's risk exposure profile with respect to duration, credit, currency and other risk factors, while considering the impact on taxes and capital.

The primary investment objectives of the Closed Block division include:

•providing for the reasonable dividend expectations of the participating policyholders within the Closed Block division; and

•optimizing total return, including both investment income yield and capital appreciation, within risk constraints, while managing the market risk exposures associated with the major products in the Closed Block division.

Our portfolio management approach, while emphasizing our investment income yield and asset/liability risk management objectives, also takes into account the capital and tax implications of portfolio activity and our assertions regarding our ability and intent to hold debt securities to recovery. For a further discussion of our allowance for credit losses, including our assertions regarding any intention or requirement to sell debt securities before anticipated recovery, see “—Realized Investment Gains and Losses—Credit Losses” below.

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Management of Investments

The Investment Committee of our Board of Directors (“Board”) oversees our proprietary investments, including our general account portfolios, and regularly reviews performance and risk positions. Our Chief Investment Officer Organization (“CIO Organization”) develops investment policies subject to risk limits proposed by our Risk Management group for the general account portfolios of our domestic and international insurance subsidiaries and directs and oversees management of the general account portfolios within risk limits approved annually by the Investment Committee.

The CIO Organization, including related functions within our insurance subsidiaries, works closely with product actuaries and Risk Management to understand the characteristics of our products and their associated market risk exposures. This information is incorporated into the development of target asset portfolios that manage market risk exposures associated with the liability characteristics and establish investment risk exposures, within tolerances prescribed by Prudential’s investment risk limits, on which we expect to earn an attractive risk-adjusted return. We develop asset strategies for specific classes of product liabilities and attributed or accumulated surplus, each with distinct risk characteristics. Market risk exposures associated with the liabilities include interest rate risk, which is addressed through the duration characteristics of the target asset mix, and currency risk, which is addressed by the currency profile of the target asset mix. In certain of our smaller markets outside of the U.S. and Japan, capital markets limitations hinder our ability to hedge interest rate exposure to the same extent we do for our U.S. and Japan businesses and lead us to accept a higher degree of interest rate risk in these smaller portfolios. General account portfolios typically include allocations to credit and other investment risks as a means to enhance investment yields and returns over time.

Most of our products can be categorized into the following three classes:

•interest-crediting products for which the rates credited to customers are periodically adjusted to reflect market and competitive forces and actual investment experience, such as fixed annuities and universal life insurance;

•participating individual and experience-rated group products in which customers participate in actual investment and business results through annual dividends, interest or return of premium; and

•products with fixed or guaranteed terms, such as traditional whole life and endowment products, guaranteed investment contracts (“GICs”), funding agreements and payout annuities.

Our total investment portfolio is composed of a number of operating portfolios. Each operating portfolio backs a specific set of liabilities, and the portfolios have a target asset mix that supports the liability characteristics, including duration, cash flow, liquidity needs and other criteria. As of December 31, 2023, the average duration of our domestic general account investment portfolios attributable to PFI excluding the Closed Block division, including the impact of derivatives, was approximately 7 years. As of December 31, 2023, the average duration of our international general account portfolios attributable to our Japanese insurance operations, including the impact of derivatives, was between 11 and 12 years and represented a blend of yen-denominated and U.S. dollar and Australian dollar-denominated investments, which have distinct average durations supporting the insurance liabilities we have issued in those currencies. Our asset/liability management process has enabled us to manage our portfolios through several market cycles.

We implement our portfolio strategies primarily through investment in a broad range of fixed income assets, including government and agency securities, public and private corporate bonds and structured securities and commercial mortgage loans. In addition, we hold allocations of 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.

We manage our public fixed maturity portfolio to a risk profile directed or overseen by the CIO Organization and Risk Management groups and to a profile that also reflects the market environments impacting both our domestic and international insurance portfolios. The return that we earn on the portfolio will be reflected in investment income and in realized gains or losses on investments.

We use privately-placed corporate debt securities and commercial mortgage loans, which consist of mortgages on diversified properties in terms of geography, property type and borrowers, to enhance the yield on our portfolio and to improve the overall diversification of the portfolios. Private placements typically offer enhanced yields due to an illiquidity premium and generally offer enhanced credit protection in the form of covenants. Our origination capability offers the opportunity to lead transactions and gives us the opportunity for better terms, including covenants and call protection, and to take advantage of innovative deal structures.

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Derivative strategies are employed in the context of our risk management framework to enhance our ability to manage interest rate and currency risk exposures of the asset portfolio relative to the liabilities and to manage credit and equity positions in the investment portfolios. For a discussion of our risk management process, see “Quantitative and Qualitative Disclosures About Market Risk” below.

Our portfolio asset allocation reflects our emphasis on diversification across asset classes, sectors and issuers. The CIO Organization, directly and through related functions within the insurance subsidiaries, implements portfolio strategies primarily through various investment management units within Prudential’s PGIM segment. Activities of the PGIM segment on behalf of the general account portfolios are directed and overseen by the CIO Organization and monitored by Risk Management for compliance with investment risk limits.

In executing the activities on behalf of the general account portfolio, Prudential investment management units are incorporating environmental, social and governance factors into their respective investment processes as appropriate. These factors include investing in opportunities to support diversity and inclusion and to help mitigate climate change by pursuing relevant investments across asset classes.

Portfolio Composition

Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, policy loans and non-coupon investments as defined above. The composition of our general account reflects, within the discipline provided by our risk management approach, our need for competitive results and the selection of diverse investment alternatives available primarily through our PGIM segment. The size of our portfolio enables us to invest in asset classes that may be unavailable to the typical investor.

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

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[[GREPCENT_TABLE]]
[["","","December 31, 2023"],["","","PFI Excluding Closed Block Division","","Closed Block Division","","Total"],["","","($ in millions)"],["Fixed maturities:"],["Public, available-for-sale, at fair value","","$","220,739","","","58.3","%","","$","20,483","","","$","241,222"],["Public, held-to-maturity, at amortized cost, net of allowance","","0","","","0.0","","","0","","","0"],["Private, available-for-sale, at fair value","","64,539","","","17.0","","","10,003","","","74,542"],["Private, held-to-maturity, at amortized cost, net of allowance","","0","","","0.0","","","0","","","0"],["Fixed maturities, trading, at fair value","","7,898","","","2.1","","","887","","","8,785"],["Assets supporting experience-rated contractholder liabilities, at fair value","","3,168","","","0.8","","","0","","","3,168"],["Equity securities, at fair value","","5,664","","","1.5","","","1,970","","","7,634"],["Commercial mortgage and other loans, at book value, net of allowance","","51,017","","","13.5","","","7,769","","","58,786"],["Policy loans, at outstanding balance","","6,568","","","1.7","","","3,479","","","10,047"],["Other invested assets, net of allowance(1)","","14,523","","","3.8","","","4,513","","","19,036"],["Short-term investments, net of allowance","","4,760","","","1.3","","","232","","","4,992"],["Total general account investments","","378,876","","","100.0","%","","49,336","","","428,212"],["Invested assets of other entities and operations(2)","","6,521","","","","","0","","","6,521"],["Total investments","","$","385,397","","","","","$","49,336","","","$","434,733"],["","","December 31, 2022"],["","","PFI ExcludingClosed Block Division","","Closed Block Division","","Total"],["","","($ in millions)"],["Fixed maturities:"],["Public, available-for-sale, at fair value","","$","221,106","","","60.8","%","","$","21,140","","","$","242,246"],["Public, held-to-maturity, at amortized cost, net of allowance","","1,229","","","0.3","","","0","","","1,229"],["Private, available-for-sale, at fair value","","55,814","","","15.4","","","8,931","","","64,745"],["Private, held-to-maturity, at amortized cost, net of allowance","","67","","","0.0","","","0","","","67"],["Fixed maturities, trading, at fair value","","4,838","","","1.3","","","900","","","5,738"],["Assets supporting experience-rated contractholder liabilities, at fair value","","2,844","","","0.8","","","0","","","2,844"],["Equity securities, at fair value","","4,671","","","1.3","","","1,733","","","6,404"],["Commercial mortgage and other loans, at book value, net of allowance","","48,682","","","13.4","","","7,926","","","56,608"],["Policy loans, at outstanding balance","","6,409","","","1.8","","","3,637","","","10,046"],["Other invested assets, net of allowance(1)","","13,277","","","3.7","","","4,254","","","17,531"],["Short-term investments, net of allowance","","4,236","","","1.2","","","337","","","4,573"],["Total general account investments","","363,173","","","100.0","%","","48,858","","","412,031"],["Invested assets of other entities and operations(2)","","5,410","","","","","0","","","5,410"],["Total investments","","$","368,583","","","","","$","48,858","","","$","417,441"]]
[[/GREPCENT_TABLE]]

__________

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

(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 balance sheet. 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 in 2023 was primarily due to the reinvestment of net investment income and net business inflows, as well as a decrease in net interest rates and spreads, partially offset by the translation impact of the U.S. dollar strengthening against the yen. For information regarding the methodology used in determining the fair value of our fixed maturities, see Note 6 to the Consolidated Financial Statements.

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As of December 31, 2023 and 2022, 44% and 45%, respectively, of our general account investments attributable to PFI excluding the Closed Block division related to our Japanese insurance operations. The following table sets forth the composition of the investments of our Japanese insurance operations’ general account, as of the dates indicated:

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2023","","2022"],["","","(in millions)"],["Fixed maturities:"],["Public, available-for-sale, at fair value","","$","113,737","","","$","112,013"],["Public, held-to-maturity, at amortized cost, net of allowance","","0","","1,229"],["Private, available-for-sale, at fair value","","20,891","","19,268"],["Private, held-to-maturity, at amortized cost, net of allowance","","0","","67"],["Fixed maturities, trading, at fair value","","669","","612"],["Assets supporting experience-rated contractholder liabilities, at fair value","","3,168","","2,844"],["Equity securities, at fair value","","1,614","","1,806"],["Commercial mortgage and other loans, at book value, net of allowance","","17,980","","18,080"],["Policy loans, at outstanding balance","","2,670","","2,607"],["Other invested assets(1)","","5,617","","5,272"],["Short-term investments, net of allowance","","421","","100"],["Total Japanese general account investments","","$","166,767","","","$","163,898"]]
[[/GREPCENT_TABLE]]

__________

(1)Other invested assets consist 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 2023 was primarily due to net business inflows and the reinvestment of net investment income, partially offset by the translation impact of the U.S. dollar strengthening against the yen.

As of December 31, 2023, our Japanese insurance operations had $86.5 billion, at carrying value, of investments denominated in U.S. dollars, including $1.3 billion that were hedged to yen through third-party derivative contracts and $77.7 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, 2022, our Japanese insurance operations had $77.5 billion, at carrying value, of investments denominated in U.S. dollars, including $1.5 billion that were hedged to yen through third-party derivative contracts and $67.4 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 $9.0 billion increase in the carrying value of U.S. dollar-denominated investments from December 31, 2022 was primarily attributable to the reinvestment of net investment income and portfolio growth as a result of net business inflows.

Our Japanese insurance operations had $4.2 billion and $5.2 billion, at carrying value, of investments denominated in Australian dollars that support liabilities denominated in Australian dollars as of December 31, 2023 and 2022, respectively. The $1.0 billion decrease in the carrying value of Australian dollar-denominated investments from December 31, 2022 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 the Closed Block division, for the periods indicated. The yields are based on net investment income as reported under U.S. GAAP and as such do not include certain interest-related items, such as settlements of duration management swaps which are included in “Realized investment gains (losses), net.”

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[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2023"],["","PFI Excluding Closed Block Division and Japanese Operations","","Japanese Insurance Operations","","PFI Excluding Closed Block Division","","Closed Block Division","","Total(5)"],["","Yield(1)","","Amount","","Yield(1)","","Amount","","Yield(1)","","Amount","","Amount","","Amount"],["","($ in millions)"],["Fixed maturities(2)","5.18","%","","$","8,218","","","2.92","%","","$","4,004","","","4.13","%","","$","12,222","","","$","1,489","","","$","13,711"],["Assets supporting experience-rated contractholder liabilities","0.00","","","0","","","1.13","","","25","","","1.13","","","25","","","0","","","25"],["Equity securities","2.82","","","95","","","3.61","","","61","","","3.09","","","156","","","41","","","197"],["Commercial mortgage and other loans","4.19","","","1,299","","","3.70","","","649","","","4.01","","","1,948","","","322","","","2,270"],["Policy loans","5.07","","","191","","","3.88","","","99","","","4.59","","","290","","","209","","","499"],["Short-term investments and cash equivalents","5.54","","","748","","","3.72","","","94","","","5.34","","","842","","","55","","","897"],["Gross investment income","5.01","","","10,551","","","3.03","","","4,932","","","4.15","","","15,483","","","2,116","","","17,599"],["Investment expenses","(0.13)","","","(528)","","","(0.13)","","","(318)","","","(0.13)","","","(846)","","","(254)","","","(1,100)"],["Investment income after investment expenses","4.88","%","","10,023","","","2.90","%","","4,614","","","4.02","%","","14,637","","","1,862","","","16,499"],["Other invested assets(3)","","","707","","","","","306","","","","","1,013","","","97","","","1,110"],["Investment results of other entities and operations(4)","","","256","","","","","0","","","","","256","","","0","","","256"],["Total investment income","","","$","10,986","","","","","$","4,920","","","","","$","15,906","","","$","1,959","","","$","17,865"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2022"],["","PFI Excluding Closed Block Division and Japanese Operations","","Japanese Insurance Operations","","PFI Excluding Closed Block Division","","Closed Block Division","","Total(5)"],["","Yield(1)","","Amount","","Yield(1)","","Amount","","Yield(1)","","Amount","","Amount","","Amount"],["","($ in millions)"],["Fixed maturities(2)","4.56","%","","$","7,036","","","2.75","%","","$","3,831","","","3.71","%","","$","10,867","","","$","1,375","","","$","12,242"],["Assets supporting experience-rated contractholder liabilities","1.68","","","123","","","1.01","","","30","","","1.49","","","153","","","0","","","153"],["Equity securities","1.95","","","56","","","3.59","","","67","","","2.59","","","123","","","37","","","160"],["Commercial mortgage and other loans","3.67","","","1,164","","","3.67","","","686","","","3.67","","","1,850","","","322","","","2,172"],["Policy loans","4.94","","","184","","","3.90","","","99","","","4.52","","","283","","","216","","","499"],["Short-term investments and cash equivalents","2.70","","","340","","","3.75","","","31","","","2.75","","","371","","","24","","","395"],["Gross investment income","4.19","","","8,903","","","2.86","","","4,744","","","3.61","","","13,647","","","1,974","","","15,621"],["Investment expenses","(0.13)","","","(350)","","","(0.13)","","","(281)","","","(0.13)","","","(631)","","","(155)","","","(786)"],["Investment income after investment expenses","4.06","%","","8,553","","","2.73","%","","4,463","","","3.48","%","","13,016","","","1,819","","","14,835"],["Other invested assets(3)","","","744","","","","","208","","","","","952","","","157","","","1,109"],["Investment results of other entities and operations(4)","","","93","","","","","0","","","","","93","","","0","","","93"],["Total investment income","","","$","9,390","","","","","$","4,671","","","","","$","14,061","","","$","1,976","","","$","16,037"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2021"],["","PFI Excluding Closed Block Division and Japanese Operations(6)","","Japanese Insurance Operations","","PFI Excluding Closed Block Division(6)","","Closed Block Division","","Total(5)"],["","Yield(1)","","Amount","","Yield(1)","","Amount","","Yield(1)","","Amount","","Amount","","Amount"],["","($ in millions)"],["Fixed maturities(2)","4.68","%","","$","7,084","","","2.72","%","","$","3,921","","","3.72","%","","$","11,005","","","$","1,461","","","$","12,466"],["Assets supporting experience-rated contractholder liabilities","3.48","","","561","","","0.93","","","30","","","3.05","","","591","","","0","","","591"],["Equity securities","1.44","","","42","","","3.52","","","76","","","2.32","","","118","","","44","","","162"],["Commercial mortgage and other loans","4.16","","","1,401","","","3.92","","","768","","","4.07","","","2,169","","","367","","","2,536"],["Policy loans","5.09","","","196","","","4.05","","","114","","","4.65","","","310","","","222","","","532"],["Short-term investments and cash equivalents","0.48","","","55","","","0.48","","","4","","","0.48","","","59","","","3","","","62"],["Gross investment income","4.26","","","9,339","","","2.85","","","4,913","","","3.63","","","14,252","","","2,097","","","16,349"],["Investment expenses","(0.14)","","","(254)","","","(0.14)","","","(241)","","","(0.14)","","","(495)","","","(124)","","","(619)"],["Investment income after investment expenses","4.12","%","","9,085","","","2.71","%","","4,672","","","3.49","%","","13,757","","","1,973","","","15,730"],["Other invested assets(3)","","","1,413","","","","","457","","","","","1,870","","","527","","","2,397"],["Investment results of other entities and operations(4)","","","160","","","","","0","","","","","160","","","0","","","160"],["Total investment income","","","$","10,658","","","","","$","5,129","","","","","$","15,787","","","$","2,500","","","$","18,287"]]
[[/GREPCENT_TABLE]]

__________

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

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

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

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

(5)The total yield was 4.02%, 3.54% and 3.57% for the years ended December 31, 2023, 2022 and 2021, respectively.

(6)The denominator in the yield percentage includes approximately $40 million of assets that were classified as “Assets held-for-sale.”

The increase in investment income after investment expenses yield attributable to our general account investments, excluding both the Closed Block division and the Japanese insurance operations’ portfolio, for 2023 compared to 2022 was primarily the result of higher fixed income reinvestment rates and higher returns on short-term investments based on an increase in short-term rates.

The increase in investment income after investment expenses yield attributable to the Japanese insurance operations’ portfolio for 2023 compared to 2022 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 approximately $62.7 billion and $60.0 billion, for the years ended December 31, 2023 and 2022, respectively. The majority of U.S. dollar-denominated fixed maturities support liabilities that are denominated in U.S. dollars. The average amortized cost of Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was approximately $4.5 billion and $6.1 billion, for the years ended December 31, 2023 and 2022, 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.

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Realized Investment Gains and Losses

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

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2023","","2022","","2021"],["","","(in millions)"],["PFI excluding Closed Block Division:"],["Realized investment gains (losses), net:"],["(Addition to) release of allowance for credit losses on fixed maturities","","$","(49)","","","$","(5)","","","$","16"],["Write-downs on fixed maturities(1)","","(75)","","","(85)","","","(1)"],["Net gains (losses) on sales and maturities","","(838)","","","(1,027)","","","1,445"],["Fixed maturity securities(2)","","(962)","","","(1,117)","","","1,460"],["(Addition to) release of allowance for credit losses on loans","","(199)","","","(65)","","","87"],["Write-offs on mortgage loans","","(29)","","","0","","","0"],["Net gains (losses) on sales and maturities","","0","","","(70)","","","1"],["Commercial mortgage and other loans","","(228)","","","(135)","","","88"],["Derivatives","","(2,218)","","","(3,198)","","","(446)"],["OTTI losses on other invested assets recognized in earnings","","(50)","","","(69)","","","(52)"],["(Addition to) release of allowance for credit losses on other invested assets","","4","","","(4)","","","0"],["Other net gains (losses)","","219","","","48","","","162"],["Other","","173","","","(25)","","","110"],["Subtotal","","(3,235)","","","(4,475)","","","1,212"],["Investment results of other entities and operations(3)","","0","","","238","","","96"],["Total \u2014 PFI excluding Closed Block Division","","(3,235)","","","(4,237)","","","1,308"],["Related adjustments","","320","","","(1,871)","","","(988)"],["Realized investment gains (losses), net, and related adjustments","","(2,915)","","","(6,108)","","","320"],["Charges related to realized investment gains (losses), net","","342","","","(218)","","","(60)"],["Realized investment gains (losses), net, and charges related to realized investment gains (losses), net and adjustments","","$","(2,573)","","","$","(6,326)","","","$","260"],["Closed Block Division:"],["Realized investment gains (losses), net:"],["(Addition to) release of allowance for credit losses on fixed maturities","","$","29","","","$","(17)","","","$","8"],["Write-downs on fixed maturities(1)","","(6)","","","(31)","","","0"],["Net gains (losses) on sales and maturities","","(370)","","","(318)","","","466"],["Fixed maturity securities(2)","","(347)","","","(366)","","","474"],["(Addition to) release of allowance for credit losses on loans","","(58)","","","(14)","","","11"],["Net gains (losses) on sales and maturities","","0","","","(26)","","","0"],["Commercial mortgage and other loans","","(58)","","","(40)","","","11"],["Derivatives","","19","","","145","","","318"],["(Addition to) release of allowance for credit losses on other invested assets","","2","","","(2)","","","0"],["Other net gains (losses)","","4","","","(7)","","","4"],["Other","","6","","","(9)","","","4"],["Subtotal \u2014 Closed Block Division","","(380)","","","(270)","","","807"],["Consolidated PFI realized investment gains (losses), net","","$","(3,615)","","","$","(4,507)","","","$","2,115"]]
[[/GREPCENT_TABLE]]

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__________

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

(2)Excludes fixed maturity securities classified as trading.

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

2023 to 2022 Annual Comparison. Net losses on sales and maturities of fixed maturity securities were $838 million for the year ended December 31, 2023 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 segment. Net losses on sales and maturities of fixed maturity securities were $1,027 million for the year ended December 31, 2022 primarily driven by rotation sales of public securities into private securities and mortgage loans coupled with relative value trading in a higher interest rate environment, partially offset by the impact of foreign currency exchange rate movements on U.S. and Australian dollar-denominated securities that matured or were sold within our International Businesses segment.

Net realized losses on derivative instruments of $2,218 million for the year ended December 31, 2023, primarily included:

•$826 million of losses on product-related embedded derivatives and related hedge positions associated with certain indexed annuity contracts;

•$544 million of losses on interest rate derivatives due to increases in the swap and U.S. Treasury rates;

•$508 million of losses on the Prismic funds withheld-related embedded derivative; and

•$496 million of losses on foreign currency hedges due to U.S. dollar depreciation versus the euro and British pound sterling.

Partially offsetting these losses were:

•$147 million of gains on credit default swaps due to credit spreads tightening.

Net realized losses on derivative instruments of $3,198 million for the year ended December 31, 2022, primarily included:

•$4,489 million of losses on interest rate derivatives due to increases in the swap and U.S. Treasury rates.

Partially offsetting these losses were:

•$554 million of gains on product-related embedded derivatives and related hedge positions associated with certain indexed annuity contracts;

•$402 million of gains on capital hedges due to decreases in equity indices; and

•$329 million of gains on foreign currency hedges due to U.S. dollar appreciation versus the euro, British pound sterling, and Australian dollar.

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

Included in the table above are “Related adjustments,” which include the portions of “Realized investment gains (losses), net” that are either (1) included in adjusted operating income or (2) included in other reconciling line items to adjusted operating income, such as “Divested and Run-off Businesses.” “Related adjustments” also includes the portions of “Other income (loss),” “Net investment income,” and “Policyholders’ benefits” that are excluded from adjusted operating income. These adjustments are made to arrive at “Realized investment gains (losses), net, and related adjustments” which is excluded from adjusted operating income. See Note 23 to the Consolidated Financial Statements for additional information regarding adjusted operating income and its reconciliation to “Income (loss) before income taxes and equity in earnings of operating joint ventures.” Results for the years ended December 31, 2023 and 2022 reflect net related adjustments of $320 million and $(1,871) million, respectively. Both periods include changes in the fair value of equity securities and fixed income securities that are designated as trading, settlements and changes in the value of derivatives, as well as the impact of foreign currency exchange rate movements on certain non-local currency denominated assets and liabilities.

Also included in the table above are “Charges related to realized investment gains (losses), net,” which are excluded from adjusted operating income and which may be reflected as either a net charge or net benefit. Results for the years ended December 31, 2023 and 2022 reflect a net benefit of $342 million and a net charge of $218 million, respectively, primarily

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driven by the impact of changes in certain policyholder reserves and other costs, inclusive of impacts from our annual reviews and update of assumptions and other refinements.

2022 to 2021 Annual Comparison. Net losses on sales and maturities of fixed maturity securities were $1,027 million for the year ended December 31, 2022 primarily driven by rotation sales of public securities into private securities and mortgage loans coupled with relative value trading in a higher interest rate environment, partially offset by the impact of foreign currency exchange rate movements on U.S. and Australian dollar-denominated securities that matured or were sold within our International Businesses segment. Net gains on sales and maturities of fixed maturity securities were $1,445 million for the year ended December 31, 2021 primarily driven by sales of U.S. treasuries acquired in a higher interest-rate environment within our domestic segments and the impact of foreign currency exchange rate movements on U.S. and Australian dollar-denominated securities that matured or were sold within our International Businesses segment.

Net realized losses on derivative instruments of $3,198 million for the year ended December 31, 2022, primarily included:

•$4,489 million of losses on interest rate derivatives due to increases in the swap and U.S. Treasury rates.

Partially offsetting these losses were:

•$554 million of gains on product-related embedded derivatives and related hedge positions associated with certain indexed annuity contracts;

•$402 million of gains on capital hedges due to decreases in equity indices; and

•$329 million of gains on foreign currency hedges due to U.S. dollar appreciation versus the euro, British pound sterling, and Australian dollar.

Net realized losses on derivative instruments of $446 million for the year ended December 31, 2021, primarily included:

•$1,248 million of losses on capital hedges due to increases in equity indices; and

•$318 million of losses on interest rate derivatives due to increases in swap and U.S. Treasury rates.

Partially offsetting these losses were:

•$562 million of gains on product-related embedded derivatives and related hedge positions associated with certain indexed annuity contracts; and

•$371 million of gains on foreign currency hedges due to U.S. dollar appreciation versus the euro.

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

Results for the years ended December 31, 2022 and 2021 reflect net related adjustments of $(1,871) million and $(988) million, respectively. Both periods include changes in the fair value of equity securities and fixed income securities that are designated as trading, settlements and changes in the value of derivatives, as well as the impact of foreign currency exchange rate movements on certain non-local currency denominated assets and liabilities.

Results for the years ended December 31, 2022 and 2021 reflect net charges of $218 million and $60 million, respectively, primarily driven by the impact of changes in certain policyholder reserves and other costs, inclusive of impacts from our annual reviews and update of assumptions and other refinements.

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

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“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.

General Account Investments of PFI excluding Closed Block Division

In the following sections, we provide details about our investment portfolio, excluding investments held in the Closed Block division. We believe the details of the composition of our investment portfolio excluding the Closed Block division are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial because substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies only. See Note 16 to the Consolidated Financial Statements for additional information regarding the Closed Block.

Fixed Maturity Securities

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

Fixed Maturity Securities by Contractual Maturity Date

The following table sets forth the breakdown of the amortized cost of our fixed maturity securities portfolio by contractual maturity, as of the date indicated:

[[GREPCENT_TABLE]]
[["","","December 31, 2023"],["","","Amortized Cost","","% of Total"],["","","($ in millions)"],["Corporate & government securities:"],["Maturing in 2024","","$","8,307","","","2.8","%"],["Maturing in 2025","","9,739","","","3.2"],["Maturing in 2026","","10,718","","","3.6"],["Maturing in 2027","","13,101","","","4.3"],["Maturing in 2028","","12,651","","","4.2"],["Maturing in 2029","","12,756","","","4.2"],["Maturing in 2030","","11,126","","","3.7"],["Maturing in 2031","","11,501","","","3.8"],["Maturing in 2032","","11,596","","","3.9"],["Maturing in 2033","","9,641","","","3.2"],["Maturing in 2034","","5,895","","","2.0"],["Maturing in 2035 and beyond","","165,716","","","55.1"],["Total corporate & government securities","","282,747","","","94.0"],["Asset-backed securities","","9,802","","","3.2"],["Commercial mortgage-backed securities","","6,171","","","2.0"],["Residential mortgage-backed securities","","2,305","","","0.8"],["Total fixed maturities","","$","301,025","","","100.0","%"]]
[[/GREPCENT_TABLE]]

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Fixed Maturity Securities by Industry

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

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["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","$","40,795","","","$","502","","","$","3,376","","","$","10","","","$","37,911","","","$","40,144","","","$","277","","","$","4,719","","","$","2","","","$","35,700"],["Consumer non-cyclical","33,423","","","704","","","3,105","","","11","","","31,011","","","31,546","","","387","","","4,219","","","16","","","27,698"],["Utility","28,965","","","646","","","2,750","","","3","","","26,858","","","25,871","","","350","","","3,443","","","27","","","22,751"],["Capital goods","17,860","","","418","","","1,330","","","0","","","16,948","","","16,612","","","196","","","2,100","","","36","","","14,672"],["Consumer cyclical","11,081","","","289","","","609","","","5","","","10,756","","","10,659","","","165","","","1,026","","","0","","","9,798"],["Foreign agencies","2,854","","","81","","","211","","","0","","","2,724","","","3,952","","","123","","","289","","","0","","","3,786"],["Energy","11,663","","","278","","","771","","","0","","","11,170","","","11,488","","","181","","","1,166","","","0","","","10,503"],["Communications","6,878","","","281","","","570","","","60","","","6,529","","","6,556","","","160","","","898","","","14","","","5,804"],["Basic industry","6,945","","","178","","","526","","","3","","","6,594","","","6,746","","","103","","","780","","","2","","","6,067"],["Transportation","11,210","","","328","","","821","","","0","","","10,717","","","9,894","","","175","","","1,183","","","4","","","8,882"],["Technology","5,048","","","102","","","334","","","0","","","4,816","","","4,460","","","32","","","523","","","0","","","3,969"],["Industrial other","5,223","","","49","","","766","","","6","","","4,500","","","4,544","","","35","","","953","","","0","","","3,626"],["Total corporate securities","181,945","","","3,856","","","15,169","","","98","","","170,534","","","172,472","","","2,184","","","21,299","","","101","","","153,256"],["Foreign government(2)","71,145","","","3,878","","","5,170","","","54","","","69,799","","","73,638","","","4,490","","","5,316","","","0","","","72,812"],["Residential mortgage-backed(3)","2,305","","","22","","","190","","","0","","","2,137","","","2,481","","","28","","","215","","","0","","","2,294"],["Asset-backed","9,802","","","190","","","79","","","0","","","9,913","","","10,060","","","151","","","206","","","0","","","10,005"],["Commercial mortgage-backed","6,171","","","23","","","435","","","0","","","5,759","","","7,331","","","18","","","521","","","0","","","6,828"],["U.S. Government","21,434","","","1,072","","","3,402","","","0","","","19,104","","","24,857","","","1,089","","","3,482","","","0","","","22,464"],["State & Municipal","8,223","","","248","","","439","","","0","","","8,032","","","9,725","","","226","","","690","","","0","","","9,261"],["Total fixed maturities, available-for-sale","$","301,025","","","$","9,289","","","$","24,884","","","$","152","","","$","285,278","","","$","300,564","","","$","8,186","","","$","31,729","","","$","101","","","$","276,920"]]
[[/GREPCENT_TABLE]]

__________

(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 December 31, 2023 and 2022, based on amortized cost, 88% and 89%, respectively, represent Japanese government bonds held by our Japanese insurance operations with no other individual country representing more than 5% of the balance.

(3)As of December 31, 2023 and 2022, based on amortized cost, 100% and 99% were rated A or higher, respectively.

The change in net unrealized losses from December 31, 2022 to December 31, 2023 was primarily due to credit spreads tightening.

In the third quarter of 2023, the Company changed its intent to hold a portion of its held-to-maturity portfolio, which is expected to be redeemed as part of a recently announced reinsurance transaction. As a result, the entire held-to-maturity portfolio (amortized cost, net of allowance of $1,125 million) was reclassified to fixed maturities, available-for-sale and recorded at fair value, while the $126 million net unrealized gain on the portfolio was recorded in “Accumulated other comprehensive income” as of September 30, 2023.

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

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["Industry(1)","Amortized Cost","","Gross Unrealized Gains","","Gross Unrealized Losses","","Fair Value","","ACL","","Amortized Cost","","Gross Unrealized Gains","","Gross Unrealized Losses","","Fair Value","","ACL"],["","(in millions)"],["Corporate securities:"],["Finance","$","0","","","$","0","","","$","0","","","$","0","","","$","0","","","$","430","","","$","24","","","$","0","","","$","454","","","$","2"],["Total corporate securities","0","","","0","","","0","","","0","","","0","","","430","","","24","","","0","","","454","","","2"],["Foreign government(2)","0","","","0","","","0","","","0","","","0","","","725","","","128","","","0","","","853","","","0"],["Residential mortgage-backed(3)","0","","","0","","","0","","","0","","","0","","","143","","","5","","","0","","","148","","","0"],["Total fixed maturities, held-to-maturity","$","0","","","$","0","","","$","0","","","$","0","","","$","0","","","$","1,298","","","$","157","","","$","0","","","$","1,455","","","$","2"]]
[[/GREPCENT_TABLE]]

__________

(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 December 31, 2022, based on amortized cost, 97% represent Japanese government bonds held by our Japanese insurance operations.

(3)As of December 31, 2022, based on amortized cost, 94% were rated A or higher.

Fixed Maturity Securities Credit Quality

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

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

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 attributable to PFI excluding the Closed Block division, as of the dates indicated:

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[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["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","","$","202,483","","","$","6,954","","","$","17,548","","","$","1","","","$","191,888","","","$","206,050","","","$","7,044","","","$","20,290","","","$","0","","","$","192,804"],["2","","80,899","","","1,929","","","6,494","","","0","","","76,334","","","76,161","","","940","","","9,519","","","0","","","67,582"],["Subtotal High or Highest Quality Securities(4)","","283,382","","","8,883","","","24,042","","","1","","","268,222","","","282,211","","","7,984","","","29,809","","","0","","","260,386"],["3","","10,579","","","273","","","500","","","5","","","10,347","","","10,938","","","104","","","1,163","","","0","","","9,879"],["4","","4,920","","","78","","","189","","","55","","","4,754","","","5,016","","","50","","","435","","","1","","","4,630"],["5","","1,762","","","34","","","132","","","10","","","1,654","","","1,921","","","17","","","258","","","24","","","1,656"],["6","","382","","","21","","","21","","","81","","","301","","","478","","","31","","","64","","","76","","","369"],["Subtotal Other Securities(5)(6)","","17,643","","","406","","","842","","","151","","","17,056","","","18,353","","","202","","","1,920","","","101","","","16,534"],["Total fixed maturities, available-for-sale","","$","301,025","","","$","9,289","","","$","24,884","","","$","152","","","$","285,278","","","$","300,564","","","$","8,186","","","$","31,729","","","$","101","","","$","276,920"]]
[[/GREPCENT_TABLE]]

__________

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

(2)As of December 31, 2023 and 2022, includes 639 securities with amortized cost of $7,242 million (fair value, $7,227 million) and 422 securities with amortized cost of $4,836 million (fair value, $4,610 million), respectively, that have been categorized based on expected NAIC Designations pending receipt of SVO ratings.

(3)As of December 31, 2023, includes gross unrealized losses of $418 million on public fixed maturities and $424 million on private fixed maturities considered to be other than high or highest quality and, as of December 31, 2022, includes gross unrealized losses of $1,116 million on public fixed maturities and $804 million on private fixed maturities considered to be other than high or highest quality.

(4)On an amortized cost basis, as of December 31, 2023, includes $225,007 million of public fixed maturities and $58,375 million of private fixed maturities and, as of December 31, 2022, includes $229,327 million of public fixed maturities and $52,884 million of private fixed maturities.

(5)On an amortized cost basis, as of December 31, 2023, includes $7,705 million of public fixed maturities and $9,938 million of private fixed maturities and, as of December 31, 2022, includes $8,710 million of public fixed maturities and $9,643 million of private fixed maturities.

(6)On an amortized cost basis, as of December 31, 2023, securities considered below investment grade based on low issue composite ratings total $15,132 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.

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

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["NAIC Designation(1)","Amortized Cost","","Gross Unrealized Gains","","Gross Unrealized Losses(2)","","Fair Value","","ACL","","Amortized Cost","","Gross Unrealized Gains","","Gross Unrealized Losses(2)","","Fair Value","","ACL"],["","(in millions)"],["1","$","0","","","$","0","","","$","0","","","$","0","","","$","0","","","$","1,217","","","$","153","","","$","0","","","$","1,370","","","$","1"],["2","0","","","0","","","0","","","0","","","0","","","81","","","4","","","0","","","85","","","1"],["Subtotal High or Highest Quality Securities(3)","0","","","0","","","0","","","0","","","0","","","1,298","","","157","","","0","","","1,455","","","2"],["3","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0"],["4","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0"],["5","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0"],["6","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0"],["Subtotal Other Securities","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0","","","0"],["Total fixed maturities, held-to-maturity","$","0","","","$","0","","","$","0","","","$","0","","","$","0","","","$","1,298","","","$","157","","","$","0","","","$","1,455","","","$","2"]]
[[/GREPCENT_TABLE]]

__________ 

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

(2)As of December 31, 2022, there were less than $1 million gross unrealized losses on public fixed maturities and private fixed maturities considered to be other than high or highest quality.

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(3)On an amortized cost basis, as of December 31, 2022, there were $1,231 million of public fixed maturities and $67 million of private fixed maturities.

Asset-Backed and Commercial Mortgage-Backed Securities

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

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["","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","$","5,452","","","$","5,526","","","$","4,695","","","$","4,443","","","$","7,078","","","$","7,070","","","$","7,320","","","$","6,817"],["AA","3,327","","","3,314","","","1,475","","","1,315","","","2,741","","","2,660","","","0","","","0"],["A","814","","","816","","","1","","","1","","","162","","","151","","","2","","","2"],["BBB","68","","","70","","","0","","","0","","","20","","","20","","","9","","","9"],["BB and below","141","","","187","","","0","","","0","","","59","","","104","","","0","","","0"],["Total(4)","$","9,802","","","$","9,913","","","$","6,171","","","$","5,759","","","$","10,060","","","$","10,005","","","$","7,331","","","$","6,828"]]
[[/GREPCENT_TABLE]]

__________ 

(1)The table above provides ratings as assigned by nationally recognized rating agencies as of December 31, 2023, including S&P, Moody’s, Fitch and Morningstar.

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

(3)As of December 31, 2023 and 2022, based on amortized cost, 100% and 99% were securities with vintages of 2013 or later, respectively.

(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 attributable to PFI excluding the Closed Block division, as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["","Collateralized Loan Obligations"],["Low Issue Composite Rating(1)","Amortized Cost","","Fair Value","","Amortized Cost","","Fair Value"],["","(in millions)"],["AAA","$","4,747","","","$","4,831","","","$","6,132","","","$","6,143"],["AA","2,968","","","2,967","","","2,687","","","2,606"],["A","14","","","13","","","13","","","12"],["BBB","15","","","14","","","15","","","13"],["BB and below","11","","","11","","","11","","","9"],["Total(2)(3)","$","7,755","","","$","7,836","","","$","8,858","","","$","8,783"]]
[[/GREPCENT_TABLE]]

__________ 

(1)The table above provides ratings as assigned by nationally recognized rating agencies as of December 31, 2023, including S&P, Moody’s, Fitch and Morningstar.

(2)There was no allowance for credit losses as of both December 31, 2023 and 2022.

(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 Consolidated Financial Statements.

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Commercial Mortgage and Other Loans

Investment Mix

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

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","(in millions)"],["Commercial mortgage and agricultural property loans","","$","50,809","","","$","48,240"],["Uncollateralized loans","","425","","","463"],["Residential property loans","","30","","","43"],["Other collateralized loans","","125","","","108"],["Total recorded investment gross of allowance(1)","","51,389","","","48,854"],["Allowance for credit losses","","(372)","","","(172)"],["Total net commercial mortgage and other loans","","$","51,017","","","$","48,682"]]
[[/GREPCENT_TABLE]]

__________

(1)As a percentage of recorded investment gross of allowance, 99% of these assets were current as of both December 31, 2023 and 2022.

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

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

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

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

Composition of Commercial Mortgage and Agricultural Property Loans

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

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[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","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","","$","18,538","","","36.5","%","","$","17,509","","","36.3","%"],["South Atlantic","","7,340","","","14.3","","","7,642","","","15.8"],["Middle Atlantic","","5,681","","","11.2","","","5,364","","","11.1"],["East North Central","","2,668","","","5.3","","","2,587","","","5.4"],["West South Central","","5,762","","","11.3","","","5,091","","","10.6"],["Mountain","","2,516","","","5.0","","","2,025","","","4.2"],["New England","","1,248","","","2.5","","","1,286","","","2.7"],["West North Central","","503","","","1.0","","","485","","","1.0"],["East South Central","","1,229","","","2.4","","","1,247","","","2.6"],["Subtotal-U.S.","","45,485","","","89.5","","","43,236","","","89.7"],["Europe","","3,498","","","6.9","","","3,157","","","6.5"],["Asia","","773","","","1.5","","","789","","","1.6"],["Other","","1,053","","","2.1","","","1,058","","","2.2"],["Total commercial mortgage and agricultural property loans","","$","50,809","","","100.0","%","","$","48,240","","","100.0","%"]]
[[/GREPCENT_TABLE]]

__________

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

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","Gross Carrying Value","","% of Total","","Gross Carrying Value","","% of Total"],["","","($ in millions)"],["Commercial mortgage and agricultural property loans by property type:"],["Industrial","","$","13,754","","","27.1","%","","$","11,853","","","24.6","%"],["Retail","","4,323","","","8.5","","","4,800","","","10.0"],["Office","","7,059","","","13.9","","","7,568","","","15.7"],["Apartments/Multi-Family","","14,296","","","28.1","","","13,503","","","28.0"],["Agricultural properties","","6,051","","","11.9","","","5,587","","","11.5"],["Hospitality","","1,805","","","3.6","","","1,733","","","3.6"],["Other","","3,521","","","6.9","","","3,196","","","6.6"],["Total commercial mortgage and agricultural property loans","","$","50,809","","","100.0","%","","$","48,240","","","100.0","%"]]
[[/GREPCENT_TABLE]]

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 December 31, 2023, our commercial mortgage and agricultural property loans attributable to PFI excluding the Closed Block division had a weighted-average debt service coverage ratio of 2.46 times and a weighted-average loan-to-value ratio of 58%. As of December 31, 2023, 96% of commercial mortgage and agricultural property loans were fixed rate loans. For those commercial mortgage and agricultural property loans that were originated in 2023, the weighted-average debt service coverage ratio was 1.70 times, and the weighted-average loan-to-value ratio was 64%.

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

For loans with collateral under construction, renovation or lease-up, a stabilized value and projected net operating income are used in the calculation of the loan-to-value and debt service coverage ratios. Our commercial mortgage and agricultural property loan portfolio included $1.6 billion and $2.4 billion of such loans as of December 31, 2023 and 2022, respectively. All else being equal, these loans are inherently riskier than those collateralized by properties that have already stabilized. As of December 31, 2023 and 2022, there were $1 million and less than $1 million, respectively, 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 attributable to PFI excluding the Closed Block division by loan-to-value and debt service coverage ratios, as of the date indicated:

[[GREPCENT_TABLE]]
[["","","December 31, 2023"],["","","Debt Service Coverage Ratio"],["Loan-to-Value Ratio",""," 1.2x","","1.0x to 1.2x",""," 1.0x","","Total Commercial Mortgage and Agricultural Property Loans"],["","","(in millions)"],["0%-59.99%","","$","26,776","","","$","510","","","$","149","","","$","27,435"],["60%-69.99%","","13,598","","","463","","","90","","","14,151"],["70%-79.99%","","4,770","","","466","","","632","","","5,868"],["80% or greater","","1,680","","","854","","","821","","","3,355"],["Total commercial mortgage and agricultural property loans","","$","46,824","","","$","2,293","","","$","1,692","","","$","50,809"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","December 31, 2023"],["Year of Origination","","Gross Carrying Value","","% of Total"],["","","($ in millions)"],["2023","","$","5,571","","","11.0","%"],["2022","","4,618","","","9.1"],["2021","","7,358","","","14.5"],["2020","","3,567","","","7.0"],["2019","","6,461","","","12.7"],["2018","","6,123","","","12.0"],["2017","","4,207","","","8.3"],["2016 & Prior","","12,871","","","25.3"],["Revolving Loans","","33","","","0.1"],["Total commercial mortgage and agricultural property loans","","$","50,809","","","100.0","%"]]
[[/GREPCENT_TABLE]]

Commercial Mortgage and Other Loans by Contractual Maturity Date

The following table sets forth the breakdown of our commercial mortgage and other loans portfolio by contractual maturity, as of the date indicated:

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[[GREPCENT_TABLE]]
[["","","December 31, 2023"],["Vintage","","Gross Carrying Value","","% of Total"],["","","($ in millions)"],["Maturing in 2024","","$","2,971","","","5.8","%"],["Maturing in 2025","","6,066","","","11.7"],["Maturing in 2026","","5,529","","","10.8"],["Maturing in 2027","","5,146","","","10.0"],["Maturing in 2028","","7,279","","","14.2"],["Maturing in 2029","","5,281","","","10.3"],["Maturing in 2030","","4,249","","","8.3"],["Maturing in 2031","","3,209","","","6.2"],["Maturing in 2032","","2,906","","","5.7"],["Maturing in 2033","","2,122","","","4.1"],["Maturing in 2034","","1,159","","","2.3"],["Maturing in 2035 and beyond","","5,472","","","10.6"],["Total commercial mortgage and other loans","","$","51,389","","","100.0","%"]]
[[/GREPCENT_TABLE]]

Commercial Mortgage and Other Loans Quality

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

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

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

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

The current expected credit loss (“CECL”) allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts. The allowance is calculated separately for commercial mortgage loans, agricultural mortgage loans, uncollateralized loans, other collateralized loans and residential property loans.

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

Key inputs to the CECL model include unpaid principal balances, internal credit ratings, annual expected loss factors, average lives of the loans adjusted for prepayment considerations, current and historical interest rate assumptions and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate.

When individual loans no longer have the credit risk characteristics of the commercial or agricultural mortgage loan pools, they are removed from the pools and are evaluated individually for an allowance. The allowance is determined based on the outstanding loan balance less the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

The CECL allowance for other collateralized and uncollateralized loans carried at amortized cost is determined based on probability of default and loss given default assumptions by sector, credit quality and average lives of the loans.

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

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[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","(in millions)"],["Allowance, beginning of year","","$","172","","","$","102"],["Addition to (release of) allowance for credit losses","","227","","","66"],["Write-offs charged against allowance","","(29)","","","0"],["Other","","2","","","4"],["Allowance, end of period","","$","372","","","$","172"]]
[[/GREPCENT_TABLE]]

The allowance for credit losses as of December 31, 2023 increased compared to December 31, 2022, primarily related to increases in the portfolio reserve to reflect declining market conditions and increases in loan specific reserves within the office sector.

Equity Securities

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

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","Cost","","Gross Unrealized Gains","","Gross Unrealized Losses","","Fair Value","","Cost","","Gross Unrealized Gains","","Gross Unrealized Losses","","Fair Value"],["","","(in millions)"],["Mutual Funds","","$","932","","","$","697","","","$","11","","","$","1,618","","","$","759","","","$","433","","","$","2","","","$","1,190"],["Other Common Stocks","","3,056","","","971","","","43","","","3,984","","","2,581","","","921","","","87","","","3,415"],["Non-redeemable Preferred Stocks","","39","","","42","","","19","","","62","","","30","","","41","","","5","","","66"],["Total equity securities, at fair value","","$","4,027","","","$","1,710","","","$","73","","","$","5,664","","","$","3,370","","","$","1,395","","","$","94","","","$","4,671"]]
[[/GREPCENT_TABLE]]

The net change in unrealized gains (losses) from equity securities attributable to PFI excluding Closed Block division, still held at period end, recorded within “Other income (loss),” was $336 million and $(477) million during the year ended December 31, 2023 and 2022, respectively.

Other Invested Assets

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

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[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","(in millions)"],["LPs/LLCs:"],["Equity method:"],["Private equity","","$","7,261","","","$","5,760"],["Hedge funds","","2,440","","","2,420"],["Real estate-related","","1,703","","","1,763"],["Subtotal equity method","","11,404","","","9,943"],["Fair value:"],["Private equity","","785","","","909"],["Hedge funds","","1,050","","","1,000"],["Real estate-related","","147","","","37"],["Subtotal fair value","","1,982","","","1,946"],["Total LPs/LLCs","","13,386","","","11,889"],["Real estate held through direct ownership(1)","","591","","","705"],["Derivative instruments","","(193)","","","21"],["Other(2)","","739","","","662"],["Total other invested assets","","$","14,523","","","$","13,277"]]
[[/GREPCENT_TABLE]]

__________

(1)As of December 31, 2023 and 2022, real estate held through direct ownership had mortgage debt of $158 million and $208 million, respectively.

(2)Primarily includes equity investments accounted for under the measurement alternative, strategic investments made by investment management, member activity stock held in the Federal Home Loan Bank of New York and leveraged leases. For additional information regarding our holdings in the Federal Home Loan Bank of New York, see Note 18 to the Consolidated Financial Statements.

Invested Assets of Other Entities and Operations

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

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","(in millions)"],["Fixed maturities:"],["Public, available-for-sale, at fair value(1)","","$","557","","","$","523"],["Private, available-for-sale, at fair value","","0","","","205"],["Fixed maturities, trading, at fair value(1)","","1,005","","","213"],["Equity securities, at fair value","","608","","","746"],["Commercial mortgage and other loans, at book value(2)","","519","","","137"],["Other invested assets","","3,819","","","3,568"],["Short-term investments","","13","","","18"],["Total investments","","$","6,521","","","$","5,410"]]
[[/GREPCENT_TABLE]]

__________

(1)As of December 31, 2023 and 2022, balances include investments in CLOs with fair value of $298 million and $294 million, respectively.

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

Fixed Maturities, Trading

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

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Commercial Mortgage and Other Loans

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

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

Other Invested Assets

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

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

Liquidity and Capital Resources

Overview

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

Effective and prudent liquidity and capital management is a priority across the 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.”

From the beginning of 2023 through the date of this report, we took the following significant actions that have impacted, or are expected to impact, our liquidity and capital positions:

•In February 2023, we issued $500 million of junior subordinated notes. We intend to use these proceeds for general corporate purposes, which may include the redemption or repurchase of our $500 million of junior subordinated notes due in 2044.

•In March, we augmented our alternative sources of liquidity by entering into facility agreements with two Delaware trusts, pursuant to which Prudential Financial may issue and sell to the trusts at any time over a pre-determined period up to $1.5 billion of senior notes and receive in exchange a corresponding amount of U.S. Treasury securities. The first facility agreement expires in 2033 and the second facility agreement expires in 2053. These facility agreements are similar to our existing facility agreement for up to $1.5 billion that expires in 2030.

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•In May, we entered into an agreement with AuguStar to reinsure approximately $10 billion of account values of our PDI traditional variable annuity contracts issued by Pruco Life Insurance Company, a wholly-owned subsidiary of Prudential Financial, resulting in proceeds of approximately $650 million, which includes a statutory capital release, release of reserves, and ceding commission received, net of taxes. The transaction was completed on June 30, 2023 with an effective date of April 1, 2023. See Note 15 to the Consolidated Financial Statements for additional information.

•In May, Prudential Financial received $900 million resulting from a policy loan transaction through our irrevocable trust, commonly referred to as a “rabbi trust,” that was created to support certain non-qualified retirement plans. For additional information regarding the rabbi trust, see Note 19 to the Consolidated Financial Statements.

•In June, we redeemed $1.5 billion of 5.625% junior subordinated notes due in 2043.

•In July, we entered into an agreement with Somerset Re to reinsure certain guaranteed universal life policies issued by Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey, both of which are wholly-owned subsidiaries of Prudential Financial. These policies represent approximately 30% of the Company’s reserves on its in-force guaranteed universal life block of business. We will continue to manage financing related to Guideline AXXX reserves for the business reinsured to Somerset Re; as a result, we anticipate changes to our current captive financing arrangements upon closing of the reinsurance transaction, including an increase in the amount of financing related to Guideline AXXX reserves. See “—Individual Life” above for additional information regarding this reinsurance agreement.

•In September, we entered into an agreement with the Federal Agricultural Mortgage Corporation (“Farmer Mac”) under which we can borrow up to $750 million by issuing funding agreements to a subsidiary of Farmer Mac, with borrowings secured by a pledge of certain eligible agricultural mortgage loans.

•In September, we acquired a 20% interest in Prismic, a newly-launched Bermuda limited partnership, and entered into an agreement with its subsidiary, Prismic Re, to reinsure approximately $9 billion of reserves for structured settlement annuities contracts issued by PICA.

•In November, we redeemed $1.5 billion of trust securities issued by a Delaware trust upon the expiration of a ten-year put option agreement with the trust.

•In February 2024, we announced that the Company will redeem, in full, $500 million in aggregate principal amount of 5.20% junior subordinated notes due in 2044.

Capital

Our capital management framework is primarily based on statutory Risk-Based Capital (“RBC”) and solvency margin measures. Due to our diverse mix of businesses and applicable regulatory requirements, we apply certain refinements to the framework that are designed to more appropriately reflect risks associated with our businesses on a consistent basis across the Company.

We believe Prudential Financial’s capitalization and financial profile are consistent with its ratings targets. Our long-term senior debt rating targets for Prudential Financial are “A” for S&P, Moody’s, and Fitch, and “a” for A.M. Best Company (“A.M. Best”). Our financial strength rating targets for our life insurance companies are “AA/Aa/AA” for S&P, Moody’s and Fitch, respectively, and “A+” for A.M. Best. Some entities may currently be rated below these targets, and not all of our insurance company subsidiaries are rated by each of these rating agencies. See “—Ratings” below for a description of the potential impacts of ratings downgrades.

Capital Governance

Our capital management framework is ultimately reviewed and approved by our Board. The Board has authorized our Chairman and Chief Executive Officer and Vice Chair to approve certain capital actions on behalf of the Company and to further delegate authority with respect to capital actions to appropriate officers, up to specified limits. Any capital commitment that exceeds the authority granted to senior management must be separately authorized by the Board.

In addition, our Capital and Finance Committee (“CFC”) reviews the use and allocation of capital above certain threshold amounts to promote the efficient use of capital, consistent with our strategic objectives, ratings aspirations and other goals and targets. This management committee provides a multi-disciplinary due diligence review of specific initiatives or transactions

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requiring the use of capital, including mergers and acquisitions. The CFC also reviews our annual capital plan (and updates to this plan), as well as our capital, liquidity and financial position, borrowing plans, and related matters prior to the discussion of these items with the Board.

Capitalization

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 December 31, 2023, the Company had $47.3 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.

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022"],["","(in millions)"],["Equity(1)","$","34,324","","","$","34,399"],["Junior subordinated debt (including hybrid securities)","8,094","","9,094"],["Other capital debt","4,869","","4,977"],["Total capital","$","47,287","","","$","48,470"]]
[[/GREPCENT_TABLE]]

__________ 

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

Insurance Regulatory Capital

We manage PICA, The Prudential Life Insurance Company, Ltd. (“Prudential of Japan”), Gibraltar Life, and other significant insurance subsidiaries to regulatory capital levels consistent with our “AA” ratings targets. We utilize the 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 is calculated based on statutory financial statements and risk formulas consistent with the practices of the NAIC. RBC considers, among other things, risks related to the type and quality of the invested assets, insurance related risks associated with an insurer’s products and liabilities, interest rate risks, and general business risks. 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, 2022, its most recent statutory fiscal year-end and RBC reporting date, was 383%. 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”).

Although not yet filed, we expect the RBC ratios for PICA and our other domestic insurance subsidiaries as of December 31, 2023 to continue to be above target levels that would support “AA” financial strength ratings.

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 September 30, 2023, the most recent date for which this information is available.

[[GREPCENT_TABLE]]
[["","Ratio"],["Prudential of Japan consolidated(1)","762","%"],["Gibraltar Life consolidated(2)","887","%"]]
[[/GREPCENT_TABLE]]

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__________ 

(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.

Although not yet filed, we expect the solvency margin ratio for each of these subsidiaries to be greater than 700% (3.5 times the regulatory required minimums) as of December 31, 2023.

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. For information regarding the NAIC’s August 2023 adoption of changes to the treatment of negative interest maintenance reserves, see “Item 1. Business—Regulation.” 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.

Captive Reinsurance Companies

We use captive reinsurance companies to more effectively manage our reserves and capital on an economic basis and to enable the aggregation and transfer of risks. Our captive reinsurance companies assume business from affiliates only. To support the risks they assume, our captives are capitalized to a level we believe is consistent with the “AA” financial strength rating targets of our insurance subsidiaries. All of our captives are subject to internal policies governing their activities. In the normal course of business, we contribute capital to the captives to support business growth and other needs. Prudential Financial has also entered into support agreements with several of the captives in connection with financing arrangements. For a description of captive reinsurance company financing activities, see below under “—Financing Activities—Subsidiary Borrowings—Term and Universal Life Reserve Financing.”

Shareholder Distributions

Share Repurchase Program and Shareholder Dividends

In February 2023, Prudential Financial’s Board of Directors authorized the Company to repurchase, at management’s discretion, up to an aggregate of $1.0 billion of its outstanding Common Stock during the period from January 1, 2023 through December 31, 2023. We utilized the entirety of this $1.0 billion share repurchase authorization in 2023. In December 2023, the Board authorized the Company to repurchase, at management’s discretion, up to $1.0 billion of its outstanding Common Stock during the period from January 1, 2024 through December 31, 2024.

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

The following table sets forth information about declarations of Common Stock dividends, as well as repurchases of shares of Prudential Financial’s Common Stock, for each of the quarterly periods in 2023 and for the prior four years:

[[GREPCENT_TABLE]]
[["","Dividend Amount","","Shares Repurchased"],["Quarterly Period Ended:","Per Share","","Aggregate","","Shares","","Total Cost"],["","(in millions, except per share data)"],["December 31, 2023","$","1.25","","","$","458","","","2.6","","","$","250"],["September 30, 2023","$","1.25","","","$","461","","","2.6","","","$","250"],["June 30, 2023","$","1.25","","","$","463","","","3.0","","","$","250"],["March 31, 2023","$","1.25","","","$","468","","","2.7","","","$","250"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Dividend Amount","","Shares Repurchased"],["Year Ended:","Per Share","","Aggregate","","Shares","","Total Cost"],["","(in millions, except per share data)"],["December 31, 2023","$","5.00","","","$","1,850","","","10.9","","","$","1,000"],["December 31, 2022","$","4.80","","","$","1,822","","","14.5","","","$","1,500"],["December 31, 2021","$","4.60","","","$","1,821","","","24.5","","","$","2,500"],["December 31, 2020","$","4.40","","","$","1,769","","","6.7","","","$","500"],["December 31, 2019","$","4.00","","","$","1,644","","","27.2","","","$","2,500"]]
[[/GREPCENT_TABLE]]

In addition, on February 6, 2024, Prudential Financial’s Board of Directors declared a cash dividend of $1.30 per share of Common Stock, payable on March 14, 2024 to shareholders of record as of February 20, 2024.

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 December 31, 2023, Prudential Financial had highly liquid assets with a carrying value totaling $4,570 million, a decrease of $843 million from December 31, 2022. 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 $4,095 million as of December 31, 2023, a decrease of $440 million from December 31, 2022.

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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:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022"],["","(in millions)"],["Highly Liquid Assets, beginning of period","$","4,535","","","$","3,553"],["Dividends and/or returns of capital from subsidiaries(1)","4,636","","","1,584"],["Affiliated loans/(borrowings) - (capital activities)","604","","","(417)"],["Capital contributions to subsidiaries(2)","(1,651)","","","(2,527)"],["Total Business Capital Activity","3,589","","","(1,360)"],["Share repurchases(3)","(1,012)","","","(1,488)"],["Common Stock dividends(4)","(1,846)","","","(1,817)"],["Business dispositions(5)","0","","","4,481"],["Total Share Repurchases, Dividends and Business Disposition Activity","(2,858)","","","1,176"],["Proceeds from the issuance of debt","495","","","2,474"],["Repayments of debt","(1,514)","","","(1,005)"],["Total Debt Activity","(1,019)","","","1,469"],["Net interest expense","(880)","","","(723)"],["Affiliated (borrowings)/loans - (operating activities)(6)","726","","","110"],["Other, net(7)","2","","","310"],["Total Other Activity","(152)","","","(303)"],["Net increase (decrease) in highly liquid assets","(440)","","","982"],["Highly Liquid Assets, end of period","$","4,095","","","$","4,535"]]
[[/GREPCENT_TABLE]]

__________

(1)2023 includes $3,100 million from PICA, $900 million from a rabbi trust, $548 million from international insurance subsidiaries (including $332 million in the form of in-kind dividends), $66 million from PGIM subsidiaries, $18 million from Prudential Annuities Holding Company, and $4 million from other subsidiaries. 2022 includes $1,313 million from international insurance subsidiaries, $156 million from PGIM subsidiaries, $74 million from Prudential Annuities Holding Company, and $41 million from other subsidiaries. See “Item 15—Schedule II—Notes to Condensed Financial Information of Registrant—Dividends and Returns of Capital” for dividends and returns of capital by subsidiary.

(2)2023 includes capital contributions of $829 million to PGIM subsidiaries (of which $401 million is offset in “Affiliated (borrowings)/loans - (operating activities)” within this table), $705 million to international insurance subsidiaries and $117 million to other subsidiaries. 2022 includes capital contributions of $1,000 million to PICA, $780 million to an international reinsurance subsidiary, $487 million to international insurance subsidiaries, and $260 million to other subsidiaries. The majority of the capital contribution to our international reinsurance subsidiary was to fund the payment of ceding commissions to our domestic insurance subsidiaries.

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

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

(5)2022 includes proceeds and capital releases related to the sales of the Full Service Retirement business and PALAC.

(6)Represents loans to and from affiliated subsidiaries to support business operating needs.

(7)2023 includes $267 million of proceeds from stock-based compensation and exercise of stock options, $246 million from internal affiliated settlements and $(554) million for net income tax payments. 2022 includes $317 million of proceeds from stock-based compensation and exercise of stock options and $231 million for net income tax receipts.

Dividends and Returns of Capital from Subsidiaries

Domestic insurance subsidiaries. During 2023, Prudential Financial received dividends of $3,100 million from PICA and $18 million from Prudential Annuities Holding Company. In addition to paying Common Stock dividends, our domestic insurance operations may return capital to Prudential Financial by other means, such as affiliated lending, and reinsurance with Bermuda-based affiliates.

International insurance subsidiaries. During 2023, Prudential Financial received dividends of $548 million from its international insurance subsidiaries, which includes $332 million of in-kind dividends in the form of extinguishment of debt held by 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.

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Other subsidiaries. During 2023, Prudential Financial received dividends and returns of capital of $900 million from a rabbi trust, $66 million from PGIM subsidiaries and $4 million from other subsidiaries.

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

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

Capital redeployment from our international insurance subsidiaries is subject to local regulatory requirements in the international jurisdictions in which they operate. Our most significant international insurance subsidiaries, Prudential of Japan and Gibraltar Life, are permitted to pay Common Stock dividends based on calculations specified by Japanese insurance 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, 2024, 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 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.

Cash Flow

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.

In each of our major insurance subsidiaries, we believe that the cash flows from operations are adequate to satisfy current liquidity requirements. The continued adequacy of this liquidity will depend upon factors such as future securities market conditions, changes in interest rate levels, policyholder perceptions of our financial strength, policyholder behavior, catastrophic events and the relative safety and attractiveness of competing products, each of which could lead to reduced cash inflows or increased cash outflows. Our insurance operations’ cash flows from investment activities result from repayments of principal, proceeds from maturities and sales of invested assets and investment income, net of amounts reinvested. The primary liquidity risks with respect to these cash flows are the risk of default by debtors or bond insurers, our counterparties’

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willingness to extend repurchase and/or securities lending arrangements, commitments to invest and market volatility. We closely manage these risks through our credit risk management process and regular monitoring of our liquidity position.

Domestic insurance operations. In managing the liquidity of our domestic insurance operations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions when selecting assets to support these contractual obligations. We use surrender charges and other contract provisions to mitigate the extent, timing and profitability impact of withdrawals of funds by customers. The following table sets forth the liabilities for market risk benefits, future policy benefits and policyholders’ account balances of certain of our domestic insurance subsidiaries as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022"],["","(in billions)"],["PICA","$","226.7","","","$","221.3"],["PLIC","47.4","","","48.3"],["Pruco Life","78.8","","","66.6"],["Other(1)","(84.9)","","","(81.3)"],["Total market risk benefits, future policy benefits and policyholders\u2019 account balances(2)(3)","$","268.0","","","$","254.9"]]
[[/GREPCENT_TABLE]]

__________

(1)Includes the impact of intercompany eliminations.

(2)Amounts are reflected gross of affiliated reinsurance recoverables.

(3)See Note 13 to the Consolidated Financial Statements for information regarding cash surrender values associated with policyholders’ account balances.

The liabilities presented above are primarily supported by invested assets in our general account. As noted above, when selecting assets to support these contractual obligations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions. As a result, assets will include both liquid assets, as discussed below, and other assets that we believe adequately support our liabilities.

For PICA and other subsidiaries, the liabilities presented above primarily include annuity reserves and deposit liabilities and individual life insurance policy reserves. Individual life insurance policies may impose surrender charges and policyholders may be subject to a new underwriting process in order to obtain a new insurance policy. PICA’s reserves for group annuity contracts primarily relate to pension risk transfer contracts, which are generally not subject to early withdrawal. For our individual annuity contracts, to encourage persistency, most of our variable and fixed annuities have surrender or withdrawal charges for a specified number of years. In addition, certain fixed annuities impose a market value adjustment if the invested amount is not held to maturity. The living benefit features of our variable annuities also encourage persistency because the potential value of the living benefit is fully realized only if the contract persists.

Gross account withdrawals for our domestic insurance operations’ products in 2023 were generally consistent with our assumptions in asset/liability management, and the associated cash outflows did not have a material adverse impact on our overall liquidity.

International insurance operations. As with our domestic operations, in managing the liquidity of our international insurance operations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions in selecting assets to support these contractual obligations. The following table sets forth the liabilities for market risk benefits, future policy benefits and policyholders’ account balances of certain of our international insurance subsidiaries as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022"],["","(in billions)"],["Prudential of Japan(1)","$","63.8","","","$","59.7"],["Gibraltar Life(2)","106.2","","","102.4"],["Other international insurance subsidiaries, excluding Japan","3.5","","","2.7"],["Other(3)","(17.7)","","","(17.2)"],["Total market risk benefits, future policy benefits and policyholders\u2019 account balances(4)(5)","$","155.8","","","$","147.6"]]
[[/GREPCENT_TABLE]]

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__________

(1)As of December 31, 2023 and 2022, $21.0 billion and $18.3 billion, respectively, of the insurance-related liabilities for Prudential of Japan are associated with U.S. dollar-denominated products that are coinsured to our domestic insurance operations and supported by U.S. dollar-denominated assets. As of December 31, 2023 and 2022, $4.0 billion and $2.4 billion, respectively, of the insurance-related liabilities for Prudential of Japan are primarily associated with yen- and U.S. dollar-denominated products that are coinsured to Gibraltar Re, a Bermuda-based reinsurance affiliate, and primarily supported by yen- and U.S. dollar-denominated assets.

(2)Includes PGFL. As of December 31, 2023 and 2022, $6.7 billion and $6.1 billion, respectively, of the insurance-related liabilities for PGFL are associated with U.S. dollar-denominated products that are coinsured to our domestic insurance operations and supported by U.S. dollar-denominated assets. As of December 31, 2023 and 2022, $17.3 billion and $10.9 billion, respectively, of the insurance-related liabilities for Gibraltar Life are primarily associated with yen- and U.S. dollar-denominated products that are coinsured to Gibraltar Re and primarily supported by yen- and U.S. dollar-denominated assets.

(3)Reflects the impact of intercompany eliminations.

(4)Amounts are reflected gross of affiliated reinsurance recoverables.

(5)See Note 13 to the Consolidated Financial Statements for information regarding cash surrender values associated with policyholders’ account balances.

The liabilities presented above are primarily supported by invested assets in our general account. When selecting assets to support these contractual obligations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions. As a result, assets will include both liquid assets, as discussed below, and other assets that we believe adequately support our liabilities.

We believe most of the longer-term recurring pay individual life insurance policies sold by our Japanese operations do not have significant withdrawal risk because policyholders may incur surrender charges and must undergo a new underwriting process to obtain a new insurance policy.

Prudential of Japan and Gibraltar Life sell U.S. dollar denominated investment contracts with a market value adjustment feature to mitigate the profitability impact for surrenders, as these contracts may be subject to increased surrenders should the yen depreciate or if interest rates in the U.S. decline relative to Japan. As of December 31, 2023, products with a market value adjustment feature represented $31.0 billion of our Japan operations’ insurance-related liabilities.

Liquid Assets

Liquid assets include cash and cash equivalents, short-term investments, U.S. Treasury securities, fixed maturities that are not designated as held-to-maturity and public equity securities. In addition to access to substantial investment portfolios, our insurance companies’ liquidity is managed through access to a variety of instruments available for funding and/or managing cash flow mismatches, including from time to time those arising from claim levels in excess of projections. Our ability to utilize assets and liquidity between our subsidiaries is limited by regulatory and other constraints. We believe that ongoing operations and the liquidity profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios for each of our insurance subsidiaries.

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

[[GREPCENT_TABLE]]
[["","December 31, 2023"],["","Prudential Insurance(1)","","PLIC","","Pruco Life","","Total","","December 31, 2022"],["","(in billions)"],["Cash and short-term investments","$","7.0","","","$","1.3","","","$","2.5","","","$","10.8","","","$","8.3"],["Fixed maturity investments(2):"],["High or highest quality","109.4","","","27.6","","","26.6","","","163.6","","","155.9"],["Other than high or highest quality","7.6","","","2.7","","","2.3","","","12.6","","","12.2"],["Subtotal","117.0","","","30.3","","","28.9","","","176.2","","","168.1"],["Public equity securities, at fair value","1.4","","","1.9","","","0.8","","","4.1","","","3.0"],["Total","$","125.4","","","$","33.5","","","$","32.2","","","$","191.1","","","$","179.4"]]
[[/GREPCENT_TABLE]]

__________

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

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

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

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[[GREPCENT_TABLE]]
[["","December 31, 2023"],["","Prudential of Japan","","Gibraltar Life(1)","","All Other(2)","","Total","","December 31, 2022"],["","(in billions)"],["Cash and short-term investments","$","0.9","","","$","3.7","","","$","2.1","","","$","6.7","","","$","1.1"],["Fixed maturity investments(3):"],["High or highest quality(4)","31.7","","","61.7","","","18.4","","","111.8","","","108.8"],["Other than high or highest quality","0.3","","","0.6","","","3.3","","","4.2","","","4.0"],["Subtotal","32.0","","","62.3","","","21.7","","","116.0","","","112.8"],["Public equity securities","2.6","","","1.2","","","0.1","","","3.9","","","3.8"],["Total","$","35.5","","","$","67.2","","","$","23.9","","","$","126.6","","","$","117.7"]]
[[/GREPCENT_TABLE]]

__________

(1)Includes PGFL.

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

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

(4)As of December 31, 2023, $76.1 billion, or 68%, were invested in government or government agency bonds.

Given the size and liquidity profile of our investment portfolios, we believe that claim experience, including policyholder withdrawals and surrenders, varying from our projections does not constitute a significant liquidity risk. Our ALM process takes into account the expected maturity of investments and expected claim payments as well as the specific nature and risk profile of the liabilities. To the extent we need to pay claims in excess of projections, we may borrow temporarily or sell investments sooner than anticipated to pay these claims, which may result in increased borrowing costs or realized investment gains or losses, including from changes in interest rates or credit spreads. The payment of claims and sale of investments earlier than anticipated would have an impact on the reported level of cash flow from operating, investing, and financing activities, in our financial statements. Historically, there has been no significant variation between the expected maturities of our investments and the payment of claims.

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—U.S. Businesses—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. As of December 31, 2023, the derivatives comprising the hedging portion of our Individual Retirement Strategies’ ALM strategy were in a net post position of $13.0 billion compared to a net post position of $11.8 billion as of December 31, 2022. The change in collateral position was primarily driven by the impact of higher interest rates and equity market appreciation.

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.

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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.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Cash Settlements Received (Paid):","2023","","2022"],["","(in millions)"],["Internal Hedges(1)","$","1,176","","","$","691"],["External Hedges(2)(5)","(525)","","","31"],["Total Cash Settlements","$","651","","","$","722"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","As of December 31,"],["Assets (Liabilities):","2023","","2022"],["","(in millions)"],["Internal Hedges(1)","$","875","","","$","1,229"],["External Hedges(3)(5)","134","","","(132)"],["Total Assets (Liabilities)(4)","$","1,009","","","$","1,097"]]
[[/GREPCENT_TABLE]]

__________

(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 $37 million, primarily denominated in Brazilian real, Australian dollar and Chilean peso, and $13 million, primarily denominated in Chilean peso, Australian dollar and Brazilian real for the years ended December 31, 2023 and 2022, respectively.

(3)Includes non-yen related assets (liabilities) of $(74) million, primarily denominated in Brazilian real, Australian dollar and Chilean peso, and $(19) million, primarily denominated in Brazilian real, Australian dollar and Chilean peso, as of December 31, 2023 and 2022, respectively.

(4)As of December 31, 2023, approximately $470 million, $272 million and $267 million of the net market values are scheduled to settle in 2024, 2025 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.

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

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.

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, commercial paper programs, and contingent financing facilities in the form of a put option agreement and facility

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agreements. In September 2023, as an additional source of liquidity, the Company entered into an agreement with Farmer Mac, under which the Company can borrow up to $750 million by issuing funding agreements to a subsidiary of Farmer Mac, with borrowings secured by a pledge of certain eligible agricultural mortgage loans. For additional information regarding these sources of liquidity, see Note 18 to the Consolidated Financial Statements.

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:

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["","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","$","3,803","","","$","2,253","","","$","6,056","","","$","3,548","","","$","3,041","","","$","6,589"],["Cash collateral for loaned securities","5,173","","","1,304","","","6,477","","","5,847","","","253","","","6,100"],["Securities sold but not yet purchased","0","","","0","","","0","","","0","","","0","","","0"],["Total(1)(2)","$","8,976","","","$","3,557","","","$","12,533","","","$","9,395","","","$","3,294","","","$","12,689"],["Portion of above securities that may be returned to the Company overnight requiring immediate return of the cash collateral","$","8,217","","","$","3,457","","","$","11,674","","","$","8,622","","","$","3,189","","","$","11,811"],["Weighted average maturity, in days(3)","8","","","4","","","","","17","","","5"]]
[[/GREPCENT_TABLE]]

__________

(1)The daily average outstanding balance for the years ended December 31, 2023 and 2022 was $8,993 million and $11,385 million, respectively, for PFI excluding the Closed Block division, and $3,178 million and $2,814 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 December 31, 2023, our domestic insurance entities had assets eligible for the asset-based or secured financing programs of $96.5 billion, of which $12.1 billion were on loan. Taking into account market conditions and outstanding loan balances as of December 31, 2023, we believe approximately $11.5 billion of the remaining eligible assets are readily lendable, including approximately $9.2 billion relating to PFI excluding the Closed Block division, of which $2.8 billion relates to certain separate accounts and may only be used for financing activities related to those accounts, and the remaining $2.3 billion relating to the Closed Block division.

Financing Activities

As of December 31, 2023, total short-term and long-term debt of the Company on a consolidated basis was $19.5 billion, a decrease of $1.2 billion from December 31, 2022. 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.

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[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

__________

(1)Amounts are net of assets under set-off arrangements of $12,370 million and $12,290 million as of December 31, 2023 and 2022, respectively.

(2)Limited and non-recourse borrowing primarily represents mortgage debt of our subsidiaries that has recourse only to real estate investment property of $157 million and $208 million as of December 31, 2023 and 2022, respectively, and a draw on a credit facility with recourse only to collateral pledged by the Company of $255 million and $300 million as of December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, 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 18 to the Consolidated Financial Statements.

Based on the use of proceeds, we classify our borrowings as capital debt and operating debt. Capital debt, which is debt utilized to meet the capital requirements of our businesses, was $13.0 billion and $14.1 billion as of December 31, 2023 and 2022, respectively. Operating debt was $6.1 billion as of December 31, 2023 and 2022, and is utilized for business funding to meet specific purposes, which may include activities associated with our PGIM and Assurance IQ businesses. Operating debt also consists of debt issued to finance specific portfolios of investment assets, the proceeds from which will service the debt. Specifically, this includes assets supporting reserve requirements under Regulation XXX and Guideline AXXX as described below, as well as funding for institutional and insurance company portfolio cash flow timing differences.

Prudential Financial Borrowings

Long-term borrowings are conducted primarily by Prudential Financial. It borrows these funds to meet its capital and other funding needs, as well as the capital and funding needs of its subsidiaries. Prudential Financial maintains a shelf registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a “Well-Known Seasoned Issuer” under SEC rules, Prudential Financial’s shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity.

Prudential Financial’s borrowings decreased $1.0 billion from December 31, 2022, primarily driven by $1.5 billion in debt redemptions, offset by $500 million in junior subordinated notes issuances. In February 2023, the Company issued $500 million in aggregate principal amount of 6.750% junior subordinated notes due in March 2053. In June 2023, the Company redeemed, in full, $1.5 billion in aggregate principal amount of 5.625% junior subordinated notes due in 2043. For additional information regarding long-term debt, see Note 18 to the Consolidated Financial Statements.

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Subsidiary Borrowings

Subsidiary borrowings principally consist of commercial paper borrowings by Prudential Funding, asset-based financing and real estate investment financing. Borrowings of our subsidiaries decreased $183 million from December 31, 2022, due primarily to debt maturities of $173 million in current portion of long-term debt.

Term and Universal Life Reserve Financing

For business written prior to the implementation of principle-based reserving, Regulation XXX and Guideline AXXX require domestic life insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other individual life policies with similar guarantees. Many market participants believe that these levels of reserves are excessive relative to the levels reasonably required to maintain solvency for moderately adverse experience. The difference between the statutory reserve and the amount necessary to maintain solvency for moderately adverse experience is considered to be the non-economic portion of the statutory reserve.

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”). 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. The captive can redeem the principal amount of the outstanding credit-linked notes for cash upon the occurrence of, and in an amount necessary to remedy, a specified liquidity stress event affecting the captive. Under the agreements, the external counterparties have agreed to fund any such payments under the credit-linked notes in return for the receipt of fees. Under certain of the transactions, Prudential Financial has agreed to make capital contributions to the captive to reimburse it for investment losses in excess of specified amounts and/or has agreed to reimburse the external counterparties for any payments made under the credit-linked notes. To date, no such payments under the credit-linked notes have been required. Under these transactions, because valid rights of set-off exist, interest and principal payments on the surplus notes and on the credit-linked notes are settled on a net basis, and the surplus notes are reflected in the Company’s total consolidated borrowings on a net basis.

As of December 31, 2023, we had Credit-Linked Note Structures with an aggregate issuance capacity of $15,700 million, of which $13,820 million was outstanding, as compared to an aggregate issuance capacity of $16,050 million, of which $14,070 million was outstanding, as of December 31, 2022.

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The following table summarizes our Credit-Linked Note Structures, which are reported on a net basis, as of December 31, 2023:

[[GREPCENT_TABLE]]
[["","Surplus Notes","","Outstanding as ofDecember 31, 2023"],["Credit-Linked Note Structures:","Original Issue Dates","","Maturity Dates","","","","Facility Size"],["","($ in millions)"],["XXX","2012-2021","","2024-2036","","$","1,600","","(1)","","","$","1,750"],["AXXX","2013","","2033","","3,500","","","","","3,500"],["XXX","2014-2018","","2024-2034","","1,750","","(2)","","","1,750"],["XXX","2014-2017","","2024-2037","","2,330","","","","","2,400"],["AXXX","2017","","2037","","1,540","","","","","2,000"],["XXX","2018","","2038","","1,000","","","","","1,600"],["AXXX","2020","","2032","","2,100","","","","","2,700"],["Total Credit-Linked Note Structures","","","","","$","13,820","","","","","$","15,700"]]
[[/GREPCENT_TABLE]]

__________

(1)Prudential Financial has agreed to reimburse amounts paid under the credit-linked notes issued in this structure up to $250 million.

(2)The $1,750 million of surplus notes represents an intercompany transaction that eliminates upon consolidation. Prudential Financial has agreed to reimburse amounts paid under credit-linked notes issued in this structure up to $1,000 million.

As of December 31, 2023, we also had outstanding an aggregate of $2,600 million of debt issued for the purpose of financing $700 million of Regulation XXX and $1,900 million of Guideline AXXX non-economic reserves. In addition, as of December 31, 2023, 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 18 and other commitments in Note 25 to the 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

Financial strength ratings (which are sometimes referred to as “claims-paying” ratings) and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. Our credit ratings are also important for our ability to raise capital through the issuance of debt and for the cost of such financing. Nationally Recognized Statistical Ratings Organizations continually review the financial performance and financial condition of the entities they rate, including Prudential Financial and its rated subsidiaries.

A downgrade in the credit or financial strength ratings of Prudential Financial or its rated subsidiaries could potentially, among other things, limit our ability to market products, reduce our competitiveness, increase the number or value of policy surrenders and withdrawals, increase our borrowing costs and potentially make it more difficult to borrow funds, adversely affect the availability of financial guarantees, such as letters of credit, cause additional collateral requirements or other required payments under certain agreements, allow counterparties to terminate derivative agreements and/or hurt our relationships with creditors, distributors, or trading counterparties thereby potentially negatively affecting our profitability, liquidity, and/or capital. In addition, we consider our own risk of non-performance in determining the fair value of our liabilities. Therefore, changes in our credit or financial strength ratings may affect the fair value of our liabilities.

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Financial strength ratings represent the opinions of rating agencies regarding the financial ability of an insurance company to meet its obligations under an insurance policy. Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its indebtedness. The following table summarizes the ratings for Prudential Financial and certain of its subsidiaries as of the date of this filing:

[[GREPCENT_TABLE]]
[["","","A.M. Best(1)","","S&P(2)","","Moody\u2019s(3)","","Fitch(4)"],["Last review date","","12/15/2023","","2/16/2024","","11/22/2021","","11/17/2023"],["Current outlook","","Stable","","Stable","","Stable","","Stable"],["Financial Strength Ratings:"],["The Prudential Insurance Company of America","","A+","","AA-","","Aa3","","AA-"],["Pruco Life Insurance Company","","A+","","AA-","","Aa3","","AA-"],["Pruco Life Insurance Company of New Jersey","","A+","","AA-","","NR*","","AA-"],["The Prudential Life Insurance Company Ltd. (Prudential of Japan)","","NR","","A+","","NR","","NR"],["Gibraltar Life Insurance Company, Ltd.","","NR","","A+","","NR","","NR"],["The Prudential Gibraltar Financial Life Insurance Co. Ltd","","NR","","A+","","NR","","NR"],["Credit Ratings:"],["Prudential Financial, Inc.:"],["Short-term borrowings","","AMB-1","","A-1","","P-2","","F1"],["Long-term senior debt","","a-","","A","","A3","","A-"],["Junior subordinated long-term debt","","bbb","","BBB+","","Baa1","","BBB"],["The Prudential Insurance Company of America:"],["Capital and surplus notes","","a","","A","","A2","","A"],["Prudential Funding, LLC:"],["Short-term debt","","AMB-1","","A-1+","","P-1","","F1+"],["Long-term senior debt","","a+","","AA-","","A1","","NR"],["PRICOA Global Funding I:"],["Long-term senior debt","","aa-","","AA-","","Aa3","","AA-"]]
[[/GREPCENT_TABLE]]

__________

* “NR” indicates not rated.

(1)A.M. Best Company, which we refer to as A.M. Best, financial strength ratings for insurance companies range from “A++ (superior)” to “D (Poor).” A rating of A+ is the second highest of thirteen rating categories. A.M. Best long-term credit ratings range from “aaa (exceptional)” to “c (Poor).” A.M. Best short-term credit ratings range from “AMB-1+,” which represents the strongest ability to repay short-term debt obligations, to “AMB-4 (Questionable).”

(2)Standard & Poor’s Rating Services, which we refer to as S&P, financial strength ratings for insurance companies range from “AAA (extremely strong)” to “D (default).” A rating of AA- is the fourth highest of twenty-two rating categories. S&P’s long-term issue credit ratings range from “AAA (extremely strong)” to “D (default).” S&P short-term ratings range from “A-1 (extremely strong)” to “D (default).”

(3)Moody’s Investors Service, Inc., which we refer to as Moody’s, insurance financial strength ratings range from “Aaa (highest quality)” to “C (lowest).” A rating of Aa3 is the fourth highest of twenty-one rating categories. Numeric modifiers are used to refer to the ranking within the group—with 1 being the highest and 3 being the lowest. These modifiers are used to indicate relative strength within a category. Moody’s long-term credit ratings range from “Aaa (highest)” to “C (default).” Moody’s short-term ratings range from “Prime-1 (P-1),” which represents a superior ability for repayment of short-term debt obligations, to “Prime-3 (P-3),” which represents an acceptable ability for repayment of such obligations. Issuers rated “Not Prime” do not fall within any of the Prime rating categories.

(4)Fitch Ratings Inc., which we refer to as Fitch, financial strength ratings range from “AAA (exceptionally strong)” to “C (distressed).” A rating of AA- is the fourth highest of twenty-one rating categories. Fitch long-term credit ratings range from “AAA (highest credit quality),” which denotes exceptionally strong capacity for timely payment of financial commitments, to “D (default).” Short-term ratings range from “F1+ (highest credit quality)” to “D (default).”

The ratings set forth above reflect current opinions of each rating agency. Each rating should be evaluated independently of any other rating. These ratings are not directed toward shareholders and do not in any way reflect evaluations of the safety and security of the Common Stock. These ratings are reviewed periodically and may be changed at any time by the rating agencies. As a result, we cannot assure stakeholders that we will maintain our current ratings in the future.

Rating agencies use an “outlook” statement for both industry sectors and individual companies. For an industry sector, a stable outlook generally implies that over the next 12 to 18 months the rating agency expects ratings to remain unchanged

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among companies in the sector. AM Best, S&P, and Moody’s currently have a Stable outlook on the U.S. life insurance sector, while Fitch revised their outlook for the sector to Improving from Stable in November 2023.

For a particular company, an outlook generally indicates a medium- or long-term trend (generally six months to two years) in credit fundamentals which, if continued, may lead to a rating change. These indicators are not necessarily a precursor of a rating change nor do they preclude a rating agency from changing a rating at any time without notice.

The following is a summary of the significant changes or actions in ratings and rating outlooks for the Company that have occurred from January 1, 2023, through the date of this filing:

•On November 17, 2023, Standard & Poor’s placed the outlook of Prudential Financial Inc.’s holding company ratings on Credit Watch Negative from Stable. This action was specific to the holding company. The ratings and outlooks for PICA and its subsidiaries remained unchanged.

•On February 16, 2024, Standard & Poor’s removed the Credit Watch Negative and affirmed Prudential Financial Inc.’s ratings with a Stable outlook.

Requirements to post collateral or make other payments because of ratings downgrades under certain agreements, including derivative agreements, can be satisfied in cash or by posting permissible securities held by the subsidiaries subject to the agreements. In addition, a ratings downgrade by A.M. Best to “A-” for our domestic life insurance companies would require PICA to either post collateral or a letter of credit in the amount of approximately $1.0 billion, based on the level of statutory reserves related to the variable annuity business acquired from Allstate. We believe that the posting of such collateral would not be a material liquidity event for PICA.

Risk Management

Overview

We employ a risk governance structure, overseen by senior management and our Board and managed by Risk Management, to provide a common framework for: evaluating the risks embedded in and across our businesses and corporate centers; developing risk appetites; managing these risks; and identifying current and future risk challenges and opportunities. For a discussion of the risks of our businesses, see “Risk Factors.”

Risk Governance Framework

Prudential uses a Three Lines of Defense model of risk management in which the businesses are the primary, or first line, responsible for understanding, assessing, and taking steps to mitigate and manage risk. Each business has a risk governance structure that is supported by a common framework at the enterprise level.

While having different roles, responsibilities, and scope, Risk Management and Compliance together act as the second line, further strengthening Prudential’s management of risk by providing effective challenge, and oversight of management activities and testing and assessing the effectiveness of first line controls. Risk Management, led by the Chief Risk Officer, oversees these risks under the guidance of the Executive Risk Committee (“ERC”) and Enterprise Risk Management Council (“ERMC”). Additionally, Risk Management works with Prudential’s businesses and corporate centers to identify, monitor and manage risks that Prudential may face.

The Audit Department acts as the third line of defense through monitoring and testing to assure that the other lines of defense (first in the business and second in Risk and Compliance) are well-designed and operating as intended. Processes are optimized across Prudential’s Three Lines of Defense to strengthen how risk management is performed across the Prudential enterprise while continuing to fulfill the individual mandates of each of the three control functions.

Board of Directors Oversight

Our Board oversees our risk profile and management’s processes for assessing and managing risk, through both the whole Board and its committees. The Board also reviews strategic risks and opportunities facing the Company and its businesses. Other important categories of risk are assigned to designated Board committees that report back to the full Board. In general, the committees oversee the following risks:

•Audit Committee: insurance risk and operational risk, including model risk, as well as risks related to financial controls, legal, regulatory, cyber security and compliance risk;

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•Compensation Committee: the design and operation of the Company’s compensation programs so that they do not encourage unnecessary or excessive risk-taking;

•Corporate Governance and Business Ethics Committee: the Company’s overall ethical culture, political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental risk (which includes climate risk), sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability;

•Finance Committee: liquidity risk and risk involving our capital and liquidity management, the incurrence and repayment of borrowings, the capital structure of the Company, funding of benefit plans and statutory insurance reserves. The Finance Committee oversees our capital plan and receives regular updates on the sources and uses of capital relative to plan, as well as on our Risk Appetite Framework; and

•Investment Committee: investment risk, market risk, and review of investment performance and risk positions. The Investment Committee approves investment and market risk limits based on asset class, issuer, credit quality and geography.

Management Oversight

Our primary risk management committee is the ERC. The ERC is chaired by our Chief Risk Officer and otherwise consists of the Vice Chairman, Head of U.S. Businesses, Head of International Businesses and PGIM, General Counsel, Chief Financial Officer, Chief Investment Officer, Chief Information Officer and Chief Actuary. Our Chief Auditor also attends meetings of the ERC. The ERC oversees the Company’s risk management framework, including the identification, assessment, monitoring and management of risks and how those risks align with the Company’s loss absorption resources. The primary focus of the ERC is the critical analysis of significant quantitative and qualitative risks and the appropriateness and alignment of those risks to the defined risk appetite of the Company.

The ERC is supported by the ERMC, which is also chaired by our Chief Risk Officer and provides a forum for corporate and functional leaders and technical subject matter experts to review and advise decision makers on financial and non-financial risk matters that are of Enterprise significance, providing transparency into the Company’s overall risk profile, assumptions and methodologies used to measure risk exposure and strategies and practices for mitigating risks.

In addition, each of our businesses and corporate centers have forums for leaders to identify, assess, and monitor risk and exposure issues and to review new business activities and initiatives.

Risk Management Oversight

Risk Management manages the risk management framework. The function operates independently and is responsible for recommending policies, limits and standards for all risks. Risk Management oversees these risks under the guidance of the ERC and ERMC. Additionally, Risk Management works with our businesses and corporate areas to identify, monitor and manage risks. The Risk Management infrastructure is generally aligned by risk type (investment, market, liquidity, insurance, model, and operational), with certain groups within Risk Management working across risk types.

Risk Identification

Prudential relies on a combination of activities to ensure that all material risks have been identified and managed as appropriate. The Company conducts risk identification through several processes at the business unit, corporate, senior management, and Board levels to provide a “top-down” and “bottom-up” three-dimensional view of risk. Prudential has developed a comprehensive understanding of the risks to its business, both financial and non-financial, and their interdependencies. A risk can have an impact at the product, business, and enterprise levels, and all these considerations and their range of outcomes through a variety of stresses are the focus of Risk Management as well as the enterprise.

•Business Activities: Each business has a forum that allows senior leaders to discuss and evaluate current, new, and emerging risks in their own operations. Businesses are accountable for identifying and managing top risks through the risk governance structure.

•Corporate Center Activities: The corporate centers review the results of the business activities and examine risks from an enterprise view across businesses under normal and stressed conditions. As a result, the corporate centers, particularly Risk Management, use several processes and activities to identify and assess the risks of the Company. Corporate centers manage key risks and initiatives through existing senior leadership team structures.

•Senior Management and the Board: Senior management plays a critical role in reviewing the risk profile of the Company, including identifying impacts to the business strategy and risks in any new strategies under consideration.

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These risks are discussed with PFI’s Operating Committee or the ERC as appropriate, and with the Board if significant. As discussed above, the Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a full Board and through its committees.

Risk Measurement and Monitoring

Our Risk Appetite Framework is a comprehensive process designed to reasonably ensure that risks taken across the Company align with the Company’s capacity and willingness to take those risks. Using the Risk Appetite Framework, the Company measures, evaluates, and manages its financial risks. The comprehensive models, metrics, and stress scenarios used enable the Company to understand its current risk profile as well as how the risk profile may change over time through varying degrees of stress. The Risk Appetite Framework anchors the risk and capital management processes and supports management and the Board in making well-informed business decisions..

The Risk Appetite Framework is centered around a comprehensive and cohesive stress testing regime which includes a variety of stress scenarios designed to explore outcomes across the investment portfolios and businesses. This robust stress testing examines the sensitivity of assets and liabilities and how they interact with each other through time to identify places where the Company’s capacity may be challenged by the risks taken. These analytics provide insight into the impact of stress scenarios on capital and liquidity.

Additionally, the Risk Appetite Framework contains qualitative risk appetite statements that helps the Company understand and manage risks that are not easily quantifiable.