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What changed in PRUDENTIAL FINANCIAL INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PRUDENTIAL FINANCIAL INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+805 added−879 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-21)

Top changes in PRUDENTIAL FINANCIAL INC's 2024 10-K

805 paragraphs added · 879 removed · 665 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

106 edited+40 added−28 removed249 unchanged
Biggest changeMarketing and Distribution Our distribution efforts, which are supported by a network of internal and external wholesalers, are executed through a diverse group of distributors, including: • Third-party distribution through: ◦ Independent brokers; ◦ Banks and wirehouses; and ◦ General agencies and producer groups. • Financial professionals associated with Prudential Advisors, Prudential’s proprietary nationwide sales organization. • Assurance IQ, which distributes proprietary simplified products consisting of term life and final expense insurance (as well as other third-party life, health and financial wellness solutions) directly to retail shoppers primarily through its digital and agent channels. • Direct-to-Consumer through: ◦ Prudential.com, a digital platform that provides distribution of our simplified products online. ◦ Personal Advisory Group, Prudential’s sales desk where customers can speak to an agent via phone to fulfill their insurance or investment needs. 9 Table of Contents Individual Life (Continued) Revenues and Profitability Our revenues primarily come in the form of: • Premiums that are fixed in accordance with the terms of the policies. • Policy charges and fee income consisting of in-force policy- and/or asset-based fees. • Investment income (which contributes to the net spread over interest credited on our products and related expenses).
Biggest changeMarketing and Distribution Our distribution efforts, which are supported by a network of internal and external wholesalers, are executed through a diverse group of distributors, including: • Third-party distribution through: ◦ Independent brokers; ◦ Banks and wirehouses; and ◦ General agencies and producer groups. • Financial professionals associated with Prudential Advisors, Prudential’s proprietary nationwide sales organization. • Trusted Partnerships, via embedded digital solutions through: ◦ Credit Unions; ◦ Mortgage originators; ◦ Affinities; and ◦ Digital marketing affiliates/paid media efforts. 9 Table of Contents Individual Life (Continued) Revenues and Profitability Our revenues primarily come in the form of: • Premiums that are fixed in accordance with the terms of the policies. • Policy charges and fee income consisting of in-force policy- and/or asset-based fees. • Investment income (which contributes to the net spread over interest credited on our products and related expenses).
Our Gibraltar Life and Other operations also provide similar products, as well as advisory and administration services, through multiple distribution channels (including banks, independent agencies and Life Consultants) to broad middle income and mass affluent customers across Japan, through our joint ventures in Chile, China, India and Indonesia, and through our strategic investments in Ghana, Kenya and South Africa .
Our Gibraltar Life and Other operations also provide similar products, as well as advisory and administration services, through multiple distribution channels (including Life Consultants, banks and independent agencies) to broad middle income and mass affluent customers across Japan, through our joint ventures in Chile, China, India and Indonesia, and through our strategic investments in Ghana, Kenya and South Africa .
State insurance laws require us to analyze the adequacy of our reserves annually. The respective appointed actuaries for each of our life insurance companies must each submit an opinion that our reserves, when considered in light of the assets we hold with respect to those reserves, make adequate provision for our contractual obligations and related expenses.
Insurance Reserves. State insurance laws require us to analyze the adequacy of our reserves annually. The respective appointed actuaries for each of our life insurance companies must each submit an opinion that our reserves, when considered in light of the assets we hold with respect to those reserves, make adequate provision for our contractual obligations and related expenses.
The Bermuda Insurance Act imposes solvency, capital and liquidity standards and auditing and reporting requirements on Bermuda (re)insurance companies. This includes prohibiting companies from declaring 24 Table of Contents or paying any dividends during any financial year unless certain financial conditions are met and/or prior approval from the BMA is received. U.S.
The Bermuda Insurance Act imposes solvency, capital and liquidity standards and auditing and reporting requirements on Bermuda (re)insurance companies. This includes prohibiting companies from declaring or paying any dividends during any financial year unless certain financial conditions are met and/or prior approval from the BMA is received. 24 Table of Contents U.S.
Our U.S. registered broker-dealer subsidiaries are subject to federal net capital requirements that may limit the ability of these subsidiaries to pay dividends to Prudential Financial. 25 Table of Contents International Investment and Retirement Products and Investment Management Operations Our non-insurance international operations are supervised primarily by regulatory authorities in the countries in which they operate.
Our U.S. registered broker-dealer subsidiaries are subject to federal net capital requirements that may limit the ability of these subsidiaries to pay dividends to Prudential Financial. International Investment and Retirement Products and Investment Management Operations Our non-insurance international operations are supervised primarily by regulatory authorities in the countries in which 25 Table of Contents they operate.
Products Our products and services are offered through the following businesses: • PGIM Fixed Income —provides global active asset management services across public fixed income markets. • Jennison Associates —provides active fundamental public equity and fixed income asset management services across an array of growth, value, global and specialty equity strategies, as well as fixed income strategies. • PGIM Quantitative Solutions —provides a range of systematic, customized solutions across equity, multi-asset, and liquid alternative platforms. • PGIM Private Capital —provides private credit solutions across the risk spectrum including investment grade, high yield, direct lending and mezzanine financing. • PGIM Real Estate —provides a broad range of public and private real estate debt and equity strategies as well as private equity investments with a focus on secondary transactions in the small and mid-cap market. • PGIM Investments —offers actively managed investment solutions, including mutual funds, listed and unlisted closed-end funds, exchange-traded funds (“ETFs”) and separately managed accounts to individual investors, defined contribution plans and financial intermediaries in the U.S., as well as Undertakings for the Collective Investment in Transferable Securities (“UCITS”) and other investment solutions to financial intermediaries in select countries across Europe, Asia and Latin America.
Products Our products and services are offered through the following businesses: • PGIM Fixed Income —provides global active asset management services across public fixed income markets, as well as alternatives. • Jennison Associates —provides active fundamental public equity and fixed income asset management services across an array of growth, value, global and specialty equity strategies, as well as fixed income strategies. • PGIM Quantitative Solutions —provides a range of systematic, customized solutions across equity, multi-asset, and liquid alternative platforms. • PGIM Private Capital —provides private credit solutions across the risk spectrum including investment grade, high yield, direct lending and mezzanine financing. • PGIM Real Estate —provides a broad range of public and private real estate debt and equity strategies as well as private equity investments with a focus on secondary transactions in the small and mid-cap market. • PGIM Investments —offers actively managed investment solutions, including mutual funds, listed and unlisted closed-end funds, exchange-traded funds (“ETFs”) and separately managed accounts to individual investors, defined contribution plans and financial intermediaries in the U.S., as well as Undertakings for the Collective Investment in Transferable Securities (“UCITS”) and other investment solutions to financial intermediaries in select countries across Europe, Asia and Latin America.
In addition, we set underwriting limits together with each operation’s reinsurers. • Achieving a targeted rate of return for each operation, taking into account the country-specific costs of capital, risks, and competitive environment. The profitability of our products is impacted by differences between actual mortality, morbidity, expense, and investment experience and the related assumptions used in pricing these policies.
In addition, we set underwriting limits together with each operation’s reinsurers. • Achieving a targeted rate of return for each operation, while taking into account the country-specific costs of capital, risks, and competitive environment. The profitability of our products is impacted by differences between actual mortality, morbidity, expense, and investment experience and the related assumptions used in pricing these policies.
We periodically adjust product offerings, prices and features based on the market and our strategy, with a goal of achieving customer and enterprise value. 10 Table of Contents International Businesses Develops and distributes life insurance, retirement products, investment products and certain accident and health products with fixed benefits to mass affluent and affluent customers through our Life Planner operations in Japan, Brazil, Argentina and Mexico.
We periodically adjust product offerings, prices and features based on the market and our strategy, with a goal of achieving customer and enterprise value. 10 Table of Contents International Businesses Develops and distributes life insurance, retirement products, investment products and certain accident and health products with fixed benefits to mass affluent and affluent customers through our Life Planner operations in Japan, Brazil and Mexico.
Our Life Consultant operation is based on a variable compensation plan designed to improve productivity and persistency that is similar to compensation plans in our Life Planner operations. • Third-party channels: ◦ Bank Distribution Channel — sells primarily life insurance products intended to provide savings features, premature death protection and estate planning benefits as well as investment products primarily denominated in U.S. dollars.
Our Life Consultant operation is based on a variable compensation plan designed to improve productivity and persistency that is similar to compensation plans in our Life Planner operations. • Third-party channels: ◦ Bank Distribution Channel — sells primarily life insurance products intended to provide savings features, premature death protection and estate planning benefits as well as investment and annuity products primarily denominated in U.S. dollars.
Divested and Run-off Businesses include: • Long-Term Care— In 2012, we discontinued sales of our individual and group long-term care insurance products. We establish reserves for these products in accordance with U.S. GAAP. We use best estimate assumptions when establishing reserves for future policyholder benefits, including assumptions for morbidity, mortality, mortality improvement, persistency, and inflation.
Divested and Run-off Businesses primarily include: • Long-Term Care— In 2012, we discontinued sales of our individual and group long-term care insurance products. We establish reserves for these products in accordance with U.S. GAAP. We use best estimate assumptions when establishing reserves for future policyholder benefits, including assumptions for morbidity, mortality, mortality improvement, persistency, and inflation.
These products are typically used by large corporations to fund deferred compensation plans and benefit plans for retired employees. Group Disability Insurance • Short-term and long-term group disability insurance, which protect against loss of wages due to illness or injury.
These products are typically used by large corporations to fund deferred compensation plans and benefit plans for retired employees. Group Disability Insurance & Other • Short-term and long-term group disability insurance, which protect against loss of wages due to illness or injury.
In addition to Japan, we operate insurance companies in Argentina, Bermuda, Brazil and Mexico, and have insurance operations in China, India and Indonesia through joint ventures. 23 Table of Contents We also have strategic investments in insurance operations in Ghana, Kenya and South Africa.
In addition to Japan, we operate insurance companies in Bermuda, Brazil and Mexico, and have insurance operations in China, India and Indonesia through joint ventures. We also 23 Table of Contents have strategic investments in insurance operations in Ghana, Kenya and South Africa.
To the extent permitted by local regulation, we base premiums and policy charges for our products on expected death and morbidity benefits, surrender benefits, expenses, required reserves, interest rates, policy persistency and premium payment patterns. In setting underwriting limits, we also consider local industry standards to prevent adverse selection and to stay abreast of industry trends.
To the extent permitted by local regulation, we base premiums and policy charges for our products on expected death and morbidity benefits, surrender benefits, expenses, required reserves, interest rates, investment returns, policy persistency and premium payment patterns. In setting underwriting limits, we also consider local industry standards to prevent adverse selection and to stay abreast of industry trends.
Due to the ongoing nature of the NAIC’s activities regarding RBC, we cannot determine the ultimate timing of proposed changes or their impact to the Company. Economic Scenario Generator (“Generator”) . In 2017, the American Academy of Actuaries notified the NAIC that it did not have the resources to maintain its Generator used in regulatory reserve and capital calculations.
Due to the ongoing nature of the NAIC’s activities regarding RBC, we cannot determine the ultimate timing of proposed changes or their impact to the Company. Generator of Economic Scenarios (“Generator”). In 2017, the American Academy of Actuaries notified the NAIC that it did not have the resources to maintain its Generator used in regulatory reserve and capital calculations.
The California Privacy Rights Act (the “CPRA”), which became operative in January 2023 and amends the CCPA, imposes additional rights and obligations including expanding consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.
The California Privacy Rights Act (the “CPRA”), which became operative in January 2023 and amends the CCPA, imposes additional rights and obligations including expanding consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA, the CPRA and their regulations.
Schmidt was the Head of Global Portfolio Management for Prudential from 2012 to 2018 and he was responsible for the overall asset/liability management for Prudential’s Retirement and Group Insurance businesses from 2010 to 2012. Prior to joining Prudential in July 2010, he served as Chief Financial Officer for MetLife’s Individual Business and had headed MetLife’s Wealth Strategy Group.
Previously, Mr. Schmidt was the Head of Global Portfolio Management for Prudential from 2012 to 2018 and he was responsible for the overall asset/liability management for Prudential’s Retirement and Group Insurance businesses from 2010 to 2012. Prior to joining Prudential in July 2010, he served as Chief Financial Officer for MetLife’s Individual Business and had headed MetLife’s Wealth Strategy Group.
The sale was completed in the second quarter of 2021. 13 Table of Contents Closed Block Division In connection with the demutualization in 2001, we ceased offering domestic participating individual life insurance and annuity products under which policyholders are eligible to receive policyholder dividends reflecting experience.
The sale was completed in the second quarter of 2022. 13 Table of Contents Closed Block Division In connection with the demutualization in 2001, we ceased offering domestic participating individual life insurance and annuity products under which policyholders are eligible to receive policyholder dividends reflecting experience.
While we cannot predict the amount and timing of future assessments on our U.S. insurance companies under these laws, we have established estimated reserves totaling approximately $29 million as of December 31, 2023, for future assessments relating to insurance companies that are currently subject to insolvency proceedings. U.S.
While we cannot predict the amount and timing of future assessments on our U.S. insurance companies under these laws, we have established estimated reserves totaling approximately $29 million as of December 31, 2024, for future assessments relating to insurance companies that are currently subject to insolvency proceedings. U.S.
We operate investment-related businesses in, among other jurisdictions, Japan, Taiwan, the U.K., Ireland, India, Hong Kong, Mexico, Germany, Luxembourg, the Netherlands, Switzerland, China and Singapore, and participate in investment-related joint ventures in China and South Africa and in a retirement related joint venture with operations in Chile, Peru and Columbia.
We operate investment-related businesses in, among other jurisdictions, Japan, Taiwan, the U.K., Ireland, India, Hong Kong, Mexico, Germany, Luxembourg, the Netherlands, Switzerland, China and Singapore, and participate in investment-related joint ventures in China and South Africa and in a retirement related joint venture with operations in Chile, Peru and Colombia.
The loss of QPAM status could result from, among other things, us or an affiliate (potentially including a joint venture partner over whom we exercise no or limited control) being convicted of a “covered” crime in the U.S. or in a foreign jurisdiction.
The loss of QPAM status could result from, among other things, us or an affiliate (potentially including a joint venture partner over whom we exercise no or limited control) being convicted of a “covered” crime in the U.S. or in a foreign jurisdiction. In June 2024, the U.S.
BUSINESS Table of Contents Page Overview 2 PGIM 3 Retirement Strategies 5 Group Insurance 7 Individual Life 9 International Businesses 11 Corporate and Other 13 Closed Block Division 14 Seasonality of Key Financial Items 15 Reinsurance 16 Intangible and Intellectual Property 17 Regulation 18 Human Capital Resources 30 Available Information 32 Information About our Executive Officers 32 1 Table of Contents Overview Prudential Financial, Inc.
BUSINESS Table of Contents Page Overview 2 PGIM 3 Retirement Strategies 5 Group Insurance 7 Individual Life 9 International Businesses 11 Corporate and Other 13 Closed Block Division 14 Seasonality of Key Financial Items 15 Reinsurance 16 Intangible and Intellectual Property 17 Regulation 18 Human Capital Resources 31 Available Information 32 Information About our Executive Officers 33 1 Table of Contents Overview Prudential Financial, Inc.
We are permitted under the Plan of Reorganization, with the prior consent of the Commissioner of Banking and Insurance for the State of New Jersey, to enter into agreements to transfer all or any part of the risks underlying the Closed Block policies. 14 Table of Contents Seasonality of Key Financial Items The following chart summarizes our key areas of seasonality in our results of operations: First Quarter Second Quarter Third Quarter Fourth Quarter PGIM Higher compensation expense(1) Individual Life Lowest underwriting gains Highest underwriting gains International Businesses Highest premiums Lower premiums Lowest premiums Corporate & Other Higher compensation expense(1) and lower Assurance IQ revenue Lower Assurance IQ revenue Lower Assurance IQ revenue Higher Assurance IQ revenue (annual Medicare enrollment) All Businesses Impact of annual assumption updates(2) Higher expenses(3) __________ (1) Long-term compensation expense for retirement eligible employees is recognized when awards are granted, typically in the first quarter of each year.
We are permitted under the Plan of Reorganization, with the prior consent of the Commissioner of Banking and Insurance for the State of New Jersey, to enter into agreements to transfer all or any part of the risks underlying the Closed Block policies. 14 Table of Contents Seasonality of Key Financial Items The following chart summarizes our key areas of seasonality in our results of operations: First Quarter Second Quarter Third Quarter Fourth Quarter PGIM Higher compensation expense(1) Individual Life Lowest underwriting gains Highest underwriting gains International Businesses Highest premiums Lower premiums Lowest premiums Corporate & Other Higher compensation expense(1) All Businesses Impact of annual assumption updates(2) Higher expenses(3) __________ (1) Long-term compensation expense for retirement eligible employees is recognized when awards are granted, typically in the first quarter of each year.
We enter into reinsurance agreements as the ceding entity for a variety of reasons, but primarily do so to reduce exposure to loss, reduce risk volatility, provide additional capacity for future growth, facilitate the disposition of a block of business, and for capital management purposes.
We enter into reinsurance agreements as the ceding entity for a variety of reasons, but primarily to reduce exposure to loss, reduce risk volatility, provide additional capacity for future growth, facilitate the disposition of a block of business, and for capital management purposes.
State Insurance Holding Company Regulation We are subject to the insurance holding company laws in the states where our insurance subsidiaries are domiciled, which currently include New Jersey, Arizona and Indiana, or are treated as commercially domiciled, such as New York.
U.S. State Insurance Holding Company Regulation We are subject to the insurance holding company laws in the states where our insurance subsidiaries are domiciled, which currently include New Jersey, Arizona and Indiana, or are treated as commercially domiciled, such as New York.
Additionally, operates local asset management businesses in Taiwan and India and has interests in an operating joint venture in China. • PGIM Portfolio Advisory —provides public and private multi-asset class liability-driven investment solutions to institutional clients.
Additionally, operates local asset management businesses in Taiwan and India and has interests in an operating joint venture in China. • PGIM Multi-Asset Solutions —provides public and private multi-asset class liability-driven investment solutions to institutional clients.
This change is currently scheduled to expire on January 1, 2026. Market Conduct Regulation State insurance laws and regulations include numerous provisions governing the marketplace activities of insurers, 22 Table of Contents including provisions governing the form and content of disclosure to consumers, illustrations, advertising, sales practices and complaint handling, as well as underwriting and claims activity.
This change is currently scheduled to expire on January 1, 2026. Market Conduct Regulation State insurance laws and regulations include numerous provisions governing the marketplace activities of insurers, including provisions governing the form and content of disclosure to consumers, illustrations, advertising, sales practices and complaint handling, as well as underwriting and claims activity.
We define our market segments as follows: • National Market—employer groups having over 5,000 individuals. • Premier Market—employer groups having between 100 and 5,000 individuals. • Association—affinity groups, regardless of size. 7 Table of Contents Group Insurance (Continued) Revenues and Profitability Our revenues primarily come in the form of: • Premiums and policy charges for our group life, group disability and supplemental health products. • Investment income (which contributes to the net spread over interest credited on our products and related expenses).
We define our market segments as follows: • National Market—employer groups having over 5,000 benefit eligible employees. • Premier Market—employer groups having between 100 and 5,000 benefit eligible employees. • Association—affinity groups, regardless of size. 7 Table of Contents Group Insurance (Continued) Revenues and Profitability Our revenues primarily come in the form of: • Premiums and policy charges for our group life, group disability and supplemental health products. • Investment income (which contributes to the net spread over interest credited on our products and related expenses).
Prior to joining Prudential in 2009, she was a Partner at Wilmer Cutler Pickering Hale and Dorr, General Counsel at Fannie Mae, and a Litigation Partner at Jenner & Block. She started her career as a Judicial Law Clerk at the U.S. Supreme Court and the U.S. Court of Appeals, D.C. Circuit. Kenneth Y.
Prior to joining Prudential in 2009, she was a Partner at Wilmer Cutler Pickering Hale and Dorr, General Counsel at Fannie Mae, and a Litigation Partner at Jenner & Block. She started her career as a Judicial Law Clerk at the U.S. Supreme Court and the U.S. Court of Appeals, D.C. Circuit. Yanela C.
Securities and Commodity Operations • International Investment and Retirement Products and Investment Management Operations • Derivatives Regulation • Privacy, Data Protection and Cybersecurity Regulation • Anti-Money Laundering and Anti-Bribery Laws • Environmental Laws and Regulations • Unclaimed Property Laws • Taxation ◦ U.S.
Securities and Commodity Operations • International Investment and Retirement Products and Investment Management Operations • Derivatives Regulation • Privacy, Data Protection and Cybersecurity Regulation • Artificial Intelligence • Anti-Money Laundering and Anti-Bribery Laws • Environmental Laws and Regulations • Unclaimed Property Laws • Taxation ◦ U.S.
Unclaimed Property Laws We are subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment of unclaimed or abandoned funds, and we are subject to audit and examination for compliance with these requirements. For additional discussion of these matters, see Note 25 to the Consolidated Financial Statements. 27 Table of Contents Taxation U.S.
Unclaimed Property Laws We are subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment of unclaimed or abandoned funds, and we are subject to audit and examination for compliance with these requirements. For additional discussion of these matters, see Note 25 to the Consolidated Financial Statements. Taxation U.S.
Accordingly, changes in tax law, our ability to generate taxable income, or other factors 29 Table of Contents impacting the availability or value of the tax characteristics generated by our products, could impact product pricing, increase our tax expense or require us to reduce our sales of these products or implement other actions that could be disruptive to our businesses.
Accordingly, changes in tax law, our ability to generate taxable income, or other factors impacting the availability or value of the tax characteristics generated by our products, could impact product pricing, increase our tax expense or require us to reduce our sales of these products or implement other actions that could be disruptive to our businesses.
The amount of tax in any period on GILTI can depend on annual differences between U.S. taxable income recognition rules and taxable income recognition rules in the country of operations and the overall taxable income of U.S. operations, as well as U.S. expense allocation rules which limit the amount of foreign tax credits that can be applied to reduce the U.S. tax on the GILTI.
The amount of tax in any period on GILTI can depend on annual differences between U.S. taxable income recognition rules and taxable income recognition rules in the country of operations and the overall taxable income of U.S. operations, as well as U.S. expense allocation rules which limit the amount of foreign tax credits that can be 28 Table of Contents applied to reduce the U.S. tax on the GILTI.
Finally, insurance regulatory authorities in the various jurisdictions in which our insurance companies are domiciled, including Japan, must approve any change of control of the insurance companies organized under their laws.
Finally, insurance regulatory authorities in certain jurisdictions in which our insurance companies are domiciled, including Japan, must approve any change of control of the insurance companies organized under their laws.
Previously he had been a managing director at PREI, Head of PREI’s Global Merchant Banking Group and Chief 32 Table of Contents Executive Officer of its European business; a managing director at Prudential Securities; and regional vice president at Prudential Capital Group (now known as PGIM Private Capital). Ann M.
Previously he had been a managing director at PREI, Head of PREI’s Global Merchant Banking Group and Chief Executive Officer of its European business; a managing director at Prudential Securities; and regional vice president at Prudential Capital Group (now known as PGIM Private Capital). Ann M.
Group Insurance Ceded Ceded reinsurance on most products to limit losses from large claims, in response to client requests and for capital management purposes. Individual Life Ceded/Assumed Ceded reinsurance covering a variety of products to mitigate mortality risk.
Group Insurance Ceded Ceded reinsurance on most products to limit losses from large claims, in response to client requests and for capital management purposes. Individual Life Ceded/Assumed Ceded reinsurance covering a variety of products to reduce market sensitivity and mitigate mortality risk.
As of January 2022, New Jersey has recognized an additional presumption of control upon the holding or controlling of enough proxies to elect 10% or more of the board of directors of a New Jersey-domiciled insurance company or its parent company.
As of January 2022, New Jersey has 20 Table of Contents recognized an additional presumption of control upon the holding or controlling of enough proxies to elect 10% or more of the board of directors of a New Jersey-domiciled insurance company or its parent company.
Insurers that have less statutory capital 21 Table of Contents than required are considered to have inadequate capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy. The RBC framework is subject to periodic reexamination or revision.
Insurers that have less statutory capital than required are considered to have inadequate capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy. The RBC framework is subject to periodic reexamination or revision.
The model law requires that insurance companies establish a cybersecurity program and includes specific technical safeguards as well as requirements regarding governance, incident planning, data management, system testing, vendor oversight and regulator notification.
The model law requires that, among other things, insurance companies establish a cybersecurity program and includes specific technical safeguards as well as requirements regarding governance, incident planning, data management, system testing, vendor oversight and regulator notification.
Corporate Operations— Consists primarily of: (1) capital that is not deployed in any business segment; (2) investments not allocated to business segments; (3) capital debt; (4) our qualified and non-qualified pension and other employee benefit plans, after allocations to business segments; (5) corporate-level activities, after allocations to business segments, including strategic expenditures, acquisition and disposition costs, corporate governance, corporate advertising, philanthropic activities, deferred compensation, and costs related to certain contingencies and legal matters; (6) expenses associated with the multi-year plan of programs that span across our businesses and the functional areas that support those businesses; (7) certain retained obligations relating to pre-demutualization policyholders; (8) impacts of risk management activities pursuant to our Risk Appetite Framework; (9) the foreign currency income hedging program used to hedge certain non-U.S. dollar denominated earnings in our International Businesses segment; (10) intercompany arrangements with our International Businesses and PGIM segments to translate certain non-U.S. dollar-denominated earnings at fixed currency exchange rates; (11) Assurance IQ, a wholly-owned consumer solutions distribution platform; (12) Prudential Advisors, Prudential’s proprietary nationwide sales organization; (13) the Company’s share of earnings in Prismic as well as the invested assets supporting the contracts reinsured with Prismic Re via coinsurance with funds withheld arrangements and the offsetting funds withheld payable; and (14) transactions with and between other segments, including the elimination of intercompany transactions for consolidation purposes.
Corporate Operations— Consists primarily of: (1) capital that is not deployed in any business segment; (2) investments not allocated to business segments; (3) capital debt; (4) our qualified and non-qualified pension and other employee benefit plans, after allocations to business segments; (5) corporate-level activities, after allocations to business segments, primarily including strategic expenditures, acquisition and disposition costs, corporate governance, corporate advertising, philanthropic activities, deferred compensation, and costs related to certain contingencies and legal matters; (6) expenses associated with the multi-year plan of programs that span across our businesses and the functional areas that support those businesses; (7) certain retained obligations relating to pre-demutualization policyholders; (8) impacts of risk management activities pursuant to our Risk Appetite Framework; (9) the foreign currency income hedging program used to hedge certain non-U.S. dollar denominated earnings in our International Businesses segment; (10) intercompany arrangements with our International Businesses and PGIM segments to translate certain non-U.S. dollar-denominated earnings at fixed currency exchange rates; (11) results of certain consolidated investment funds managed by our PGIM business; (12) Prudential Advisors, Prudential’s proprietary nationwide sales organization; (13) the Company’s share of earnings in Prismic as well as the invested assets supporting the contracts reinsured with Prismic Re via coinsurance with funds withheld arrangements and the offsetting funds withheld payable; and (14) transactions with and between other segments, including the elimination of intercompany transactions for consolidation purposes.
Earlier in his 25-year tenure at MetLife, Schmidt held various positions in the investment organization, including Head of MetLife’s Portfolio Management Unit, as well as its Structured Finance and Government Securities unit. 33 Table of Contents
Earlier in his 25-year tenure at MetLife, Schmidt held various positions in the investment organization, including Head of MetLife’s Portfolio Management Unit, as well as its Structured Finance and Government Securities unit.
Financial regulators in the U.S. and international jurisdictions in which we operate continue to focus on 26 Table of Contents data privacy and cybersecurity, including in rulemaking and examinations of regulated entities, and have communicated heightened expectations.
Financial regulators in the U.S. and international jurisdictions in which we operate continue to focus on data privacy and cybersecurity, including in rulemaking and examinations of regulated entities, and have communicated heightened expectations.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information. 2 Table of Contents PGIM Provides investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit and other alternatives, and multi-asset class strategies, to institutional and retail clients globally, as well as our general account.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information. 2 Table of Contents PGIM Provides investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit and other alternatives, and multi-asset class strategies, to institutional and retail clients globally, as well as our insurance and retirement businesses.
See “Available Information.” Compensation Program and Retirement Plans The philosophy underlying our compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of employees necessary to deliver sustained high performance to our shareholders, customers, and communities.
Compensation Program and Retirement Plans The philosophy underlying our compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of employees necessary to deliver sustained high performance to our shareholders, customers, and communities.
(“Prudential Financial” or “PFI”), a global financial services leader and premier active global investment manager with approximately $1.450 trillion of assets under management as of December 31, 2023, has operations in the United States, Asia, Europe and Latin America.
(“Prudential Financial” or “PFI”), a global financial services leader and premier active global investment manager with approximately $1.512 trillion of assets under management as of December 31, 2024, has operations in the United States, Asia, Europe and Latin America.
Group-Wide Supervision The New Jersey Department of Banking and Insurance (“NJDOBI”) acts as the group-wide supervisor of Prudential Financial pursuant to New Jersey legislation that authorizes group-wide supervision of internationally active insurance groups 20 Table of Contents (“IAIGs”).
Group-Wide Supervision The New Jersey Department of Banking and Insurance (“NJDOBI”) acts as the group-wide supervisor of Prudential Financial pursuant to New Jersey legislation that authorizes group-wide supervision of internationally active insurance groups (“IAIGs”).
Rather than competing primarily based on price, we generally compete on the basis of customer service, including our needs-based approach to selling, the quality and diversity of our distribution capabilities, and our financial strength.
In both of these markets, rather than competing primarily based on price, we generally compete on the basis of customer service, including our needs-based approach to selling, the quality and diversity of our distribution capabilities, and our financial strength.
For the years ended December 31, 2023, 2022 and 2021, we paid $0.7 million, $0.4 million and $0.5 million, respectively, in assessments pursuant to state insurance guaranty association laws.
For the years ended December 31, 2024, 2023 and 2022, we paid $71 million, $0.7 million and $0.4 million, respectively, in assessments pursuant to state insurance guaranty association laws.
Privacy, Data Protection and Cybersecurity Regulation We are subject to laws, regulations and directives that require financial institutions and other businesses to protect the security and confidentiality of personal, proprietary, or other non-public information, including intellectual property, health-related, and customer information, and to notify their customers and other appropriate individuals of their policies and practices relating to the collection, use and disclosure of such information.
Privacy, Data Protection and Cybersecurity Regulation We are subject to U.S. federal laws, regulations and directives that require financial institutions and other businesses to protect the security and confidentiality of personal, proprietary, or other non-public information, including intellectual property, health-related, and customer information, which they may handle and process, and to notify their customers and other appropriate individuals of their policies and practices relating to the collection, use and disclosure of such information.
(now known as “PGIM”) from January 2008 to February 2011, and as Chief Executive Officer of Prudential Real Estate Investors (“PREI”) (now known as PGIM Real Estate), our real estate investment management and advisory business from February 2002 to January 2008.
He also served as Chief Executive Officer and President of Prudential Investment Management, Inc. (now known as “PGIM”) from January 2008 to February 2011, and as Chief Executive Officer of Prudential Real Estate Investors (“PREI”) (now known as PGIM Real Estate), our real estate investment management and advisory business from February 2002 to January 2008.
Short-term disability generally provides weekly benefits for three to six months while long-term disability benefits are typically paid monthly, following a waiting period, and generally continue until the insured either returns to work or reaches normal retirement age. • Other supplemental health solutions, including accident, hospital indemnity and critical illness insurance. • Plan administration and absence management services.
Short-term disability generally provides weekly benefits for three to six months while long-term disability benefits are typically paid monthly, following a waiting period, and generally continue until the insured either returns to work or reaches normal retirement age. • Other supplemental health solutions, including accident, critical illness and hospital indemnity plans which help offset expenses associated with medical events. • Plan administration and absence management services.
The best interest standards became effective on June 30, 2020. The standards apply to recommendations to purchase certain products 19 Table of Contents offered by our PGIM, Retirement Strategies and Individual Life businesses, and have resulted in increased compliance costs, in particular in our Prudential Advisors distribution system, which we include in the results of our Corporate and Other operations.
The best interest standards became effective on June 30, 2020. The standards apply to recommendations to purchase certain products offered by our PGIM, Retirement Strategies and Individual Life businesses, and have resulted in increased compliance costs, which we include in the results of our Corporate and Other operations.
The Company has a number of subsidiaries incorporated under the laws of non-U.S. jurisdictions. Those non-U.S. subsidiaries intend to operate in a manner that will not cause any to be treated as being engaged in a trade or business within the U.S. or subject to current U.S. federal income taxation on their net income.
Those non-U.S. subsidiaries intend to operate in a manner that will not cause any to be treated as being engaged in a trade or business within the U.S. or subject to current U.S. federal income taxation on their net income.
Prior to this role, she served as CEO of U.S. Insurance & Retirement Businesses from January 2021 to December 2022, which consisted of Group Insurance, Individual Life Insurance, Prudential Retirement Strategies, the Retail Advice and Solutions organization, as well as key support functions which include Enabling Solutions and Enterprise Capabilities.
Insurance & Retirement Businesses from January 2021 to December 2022, which consisted of Group Insurance, Individual Life Insurance, Prudential Retirement Strategies, the Retail Advice and Solutions organization, as well as key support functions which include Enabling Solutions and Enterprise Capabilities.
In 2020, the NAIC selected a third-party vendor to provide, maintain, and support the Generator prescribed for life and annuity statutory reserve and capital calculations. Development of the new Generator is ongoing, and the NAIC expects implementation to occur no earlier than 2025. We cannot predict what impact a new Generator may ultimately have on our businesses. Insurance Reserves.
In 2020, the NAIC selected a third-party vendor to provide, maintain, and support the Generator prescribed for life and annuity statutory reserve and capital calculations. NAIC expects implementation to occur no earlier than 2026. Due to the ongoing nature of the NAIC’s activities regarding the Generator, we cannot predict what impact a new Generator may ultimately have on our businesses.
Generally, all transactions affecting the insurers in the holding company system must be fair and reasonable and, if material, require prior notice and approval or non-disapproval by the state’s insurance department.
Generally, all transactions among affiliates, including an insurer in the holding company system, must be fair and reasonable and, if material, require prior notice and approval or non-disapproval by the state’s insurance department.
Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements. 31 Table of Contents We view retirement benefits as a key component of our compensation program because they encourage long-term service.
Our compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements. We view retirement benefits as a key component of our compensation program because they encourage long-term service.
Copies of any documents on our website are available without charge, and reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC. The information found on our website is not part of this or any other report filed with or furnished to the SEC.
Copies of any documents on our website are available without charge, and reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC.
We enter into reinsurance agreements as the assuming entity as part of our normal product offering process (e.g., certain pension risk transfer products in our Institutional Retirement Strategies business) or in order to facilitate an acquisition of a block of business. The following table summarizes our current uses of third-party reinsurance in each of the applicable reporting segments.
We enter into reinsurance agreements as the assuming entity as part of our normal product offering process (e.g., certain pension risk transfer products in our Institutional Retirement Strategies business) or in order to facilitate an acquisition of a block of business.
Before joining Prudential in 2011, he served as Senior Vice President at CareFirst BlueCross BlueShield. Previously, he spent eight years at Cigna where he held a number of senior leadership positions. He also held management roles at Diamond Technology Partners and DaimlerChrysler. Caroline A. Feeney was elected Executive Vice President and Head of U.S. Businesses in January 2023.
Previously, he spent eight years at Cigna where he held a number of senior leadership positions. He also held management roles at Diamond Technology Partners and DaimlerChrysler. Caroline A. Feeney was elected Executive Vice President and Head of U.S. Businesses for Prudential Financial and PICA in January 2023. Prior to this role, she served as CEO of U.S.
Our business system includes a mix of high-quality protection, retirement and investment management businesses which creates growth potential due to earnings diversification and the opportunity to provide customers with integrated cross-business solutions, as well as capital benefits from a balanced risk profile.
Our business system includes a mix of high-quality protection, retirement and investment management businesses which creates growth potential by capitalizing on long-term, durable trends to provide customers with integrated cross-business solutions, as well as generate capital benefits from a balanced risk profile.
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.
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 Company and the IRS have not been able to resolve this disagreement through the IRS Independent Office of Appeals. The Company is considering all of its options for a resolution of the matter. For additional information regarding the 952 Election, see Note 17 to the Consolidated Financial Statements.
The Company and the IRS have not been able to resolve this disagreement through the IRS Independent Office of Appeals. The Company is considering all of its options for a resolution of the matter.
Insurance commissions paid to our Life Planners and Life Consultants are subject to a 10% consumption tax for individuals exceeding certain earnings thresholds; however, the tax is not charged on employee compensation (other than commissions) or insurance premiums.
Insurance commissions paid to our Life Planners and Life Consultants are subject to a 10% consumption tax for individuals exceeding certain earnings thresholds; however, the tax is not charged on employee compensation (other than commissions) or insurance premiums. In December 2024, the Japanese government proposed a 4% surtax on corporate tax liabilities, effective April 1, 2026.
Lowrey was elected Chairman of Prudential Financial in April 2019 and Chief Executive Officer, President and Director of Prudential Financial and PICA in December 2018. Previously, he served as Executive Vice President and Chief Operating Officer, International Businesses, of Prudential Financial and PICA from March 2014 to November 2018. He served as Executive Vice President and Chief Operating Officer, U.S.
Previously, he served as Executive Vice President and Chief Operating Officer, International Businesses, of Prudential Financial and PICA from March 2014 to November 2018. He served as Executive Vice President and Chief Operating Officer, U.S. Businesses, of Prudential Financial and PICA from February 2011 to March 2014.
New York’s version of PBR, which became effective in January 2020, allows for modifications to the NAIC valuation model and New York’s modifications might require us to increase our New York statutory reserves. Yearly Renewable Term Reinsurance Reserve Credit. In August 2021, the NAIC adopted a limit on yearly renewable term (“YRT”) reserve credits (Amendment Proposal Form 2020-10).
New York’s version of PBR, which became effective in January 2020, allows for modifications to the NAIC valuation model and New York’s modifications might require us to increase our New York statutory reserves. 22 Table of Contents Yearly Renewable Term Reinsurance Reserve Credit.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Capital Financing Activities—Term and Universal Life Reserve Financing” for a discussion of our life product reserves and reserve financing. The NAIC is developing a PBR framework for non-variable (fixed) annuity products in the accumulation and payout phases. Variable Annuities Framework for Change .
See “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Capital Financing Activities—Term and Universal Life Reserve Financing” for a discussion of our life product reserves and reserve financing. Variable Annuities Framework Change .
Human Capital Resources As of December 31, 2023, our employee population was comprised as set forth in the tables below: Global Employee Profile Region Number of Employees(1) Full-time Equivalent Positions(2) U.S. 16,124 15,882 Non-U.S. 24,534 24,484 Total 40,658 40,366 __________ (1) Excludes independent contractors and other individuals classified as non-employees in their respective jurisdictions.
Human Capital Resources As of December 31, 2024, our employee population was comprised as set forth in the tables below: Global Employee Profile Region Number of Employees(1) Full-time Equivalent Positions(2) U.S. 14,087 13,868 Non-U.S. 24,109 24,068 Total 38,196 37,936 __________ (1) Excludes independent contractors and other individuals classified as non-employees in their respective jurisdictions.
For example, the E.U.’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, and the U.K.’s Data Protection Act 2018, confer additional privacy rights on individuals in the E.U. and U.K. and establish significant penalties for violations. The E.U.’s Digital Operational Resilience Act came in force in January 2023 and will be effective from January 2025.
For example, the E.U.’s General Data Protection Regulation (“GDPR”), which became effective in 26 Table of Contents May 2018, and the U.K.’s Data Protection Act 2018, confer additional privacy rights on individuals in the E.U. and U.K. and establish significant penalties for violations.
Internationally, a number of countries such as Brazil, India, and Japan have enacted GDPR-like regulations, while others, such as Argentina, are considering such regulations or, in the case of China, have enacted other privacy and data security regulations.
The E.U.’s Digital Operational Resilience Act came in force in January 2023 and became effective from January 2025. Internationally, a number of countries such as Brazil, India, and Japan have enacted GDPR-like regulations, while others, such as Argentina, are considering such regulations or, in the case of China, have enacted other privacy and data security regulations.
In addition, in the U.S., certain lawmakers in Congress have proposed a number of sweeping privacy laws and amendments to the Gramm-Leach-Bliley Act of 1999 took effect in June 2023. In California, the California Consumer Privacy Act (the “CCPA”) became effective in 2020 and confers numerous privacy rights on individuals and corresponding obligations on businesses.
In addition, in the U.S., certain lawmakers in Congress have proposed a number of sweeping privacy laws, and amendments to the Gramm-Leach-Bliley Act of 1999 took effect in June 2023.
International Insurance Regulation Our international insurance operations are principally supervised by regulatory authorities in the jurisdictions in which they operate, including the FSA, the financial services regulator in Japan.
Such regulation may affect investment advice, sales and related activities for these products . International Insurance Regulation Our international insurance operations are principally supervised by regulatory authorities in the jurisdictions in which they operate, including the FSA, the financial services regulator in Japan.
Goodman began her career at Salomon Brothers. Timothy L. Schmidt was elected Senior Vice President and Chief Investment Officer of Prudential Financial and PICA in December 2018. He chairs the Senior Asset Liability Committee and serves as Prudential’s representative to the Institute of International Finance’s Committee on Asset and Investment Management. Previously, Mr.
He also held various positions at John Hancock, First Union National Bank, and Bank of America. Timothy L. Schmidt was elected Senior Vice President and Chief Investment Officer of Prudential Financial and PICA in December 2018. He chairs the Senior Asset Liability Committee and serves as Prudential’s representative to the Institute of International Finance’s Committee on Asset and Investment Management.
Our assumptions also include our estimate of the timing and amount of anticipated future premium rate increases and policyholder benefit reductions, including those which may require approval by state regulatory authorities, and a discount rate assumption based on an upper-medium grade fixed-income instrument yield. • Full Service Retirement Business— In the third quarter of 2021, we entered into a definitive agreement to sell our Full Service Retirement business.
Our assumptions also include our estimate of the timing and amount of anticipated future premium rate increases and policyholder benefit reductions, including those which may require approval by state regulatory authorities, and a discount rate assumption based on an upper-medium grade fixed-income instrument yield. • PGIM Wadhwani LLP (“PGIMW”)— In the third quarter of 2024, we exited PGIMW, our London-based managed futures investment management firm.
The Bermuda corporate income tax will be effective for tax years beginning on January 1, 2025. An election is available to exclude the income of a Bermuda entity that is a controlled foreign corporation within the meaning of the U.S. tax rules from the Bermuda corporate income tax for fiscal years ending prior to January 1, 2027.
U.S. income tax paid by a Section 953(d) Bermuda insurance company may be claimed as a foreign tax credit to offset Bermuda income tax, while an election is available to exclude the income of a Bermuda entity that is a controlled foreign corporation, within the meaning of U.S. tax rules, from the Bermuda corporate income tax for fiscal years ending prior to January 1, 2027.
The Company is monitoring regulatory guidance and rulemaking in these areas, and may be subject to increased compliance costs and regulatory requirements.
The Company is monitoring regulatory guidance and rulemaking in these areas, and may be subject to increased compliance costs and regulatory requirements. For additional information on our cybersecurity risk management and governance, see “Item 1C.
The FSA is developing a new market-based alternative to the SMR framework called the Economic Solvency Ratio (“ESR”), which will be implemented in 2025 with disclosure under the new framework required in 2026. Because of the potential for modifications to the ESR framework prior to implementation, we cannot predict what impact it may have on our businesses.
The FSA is developing a new market-based alternative to the SMR framework called the Economic Solvency Ratio (“ESR”), which will be implemented in 2025 with disclosure under the new framework required in 2026.
Rather than competing primarily based on price, we generally compete on the basis of customer service, including our needs-based approach to selling, the quality and diversity of our distribution capabilities, and our financial strength. 12 Table of Contents Corporate and Other Includes corporate items and initiatives that are not allocated to our business segments, certain businesses whose financial results and operations are not considered significant, and businesses that have been or will be divested or placed in wind-down status, except for the Closed Block.
We periodically adjust product offerings, prices and features based on the market and our strategy, with a goal of achieving customer and enterprise value. 12 Table of Contents Corporate and Other Includes corporate items and initiatives that are not allocated to our business segments, certain businesses whose financial results and operations are not considered significant, and businesses that have been or will be divested or placed in wind-down status, except for the Closed Block.
Andrew F. Sullivan was elected Executive Vice President and Head of International Businesses and Global Investment Management in January 2023. Previously, he served as Executive Vice President and Head of U.S. Businesses from December 2019 to December 2022. He also served as CEO of Prudential’s Workplace Solutions Group, which consisted of Prudential Retirement and Prudential Group Insurance.
Previously, he served as Executive Vice President and Head of U.S. Businesses from December 2019 to December 2022. He also served as CEO of Prudential’s Workplace Solutions 33 Table of Contents Group, which consisted of Prudential Retirement and Prudential Group Insurance. Before joining Prudential in 2011, he served as Senior Vice President at CareFirst BlueCross BlueShield.
Human capital is discussed by management at every Board meeting and, at least once per year, the Board devotes time to discuss human capital 30 Table of Contents at each business and functional leadership level across the Company. Attracting Employees We believe that our success depends on our ability to attract, develop and retain talented, skilled, and motivated employees.
Human capital is discussed by management at every Board meeting and, at least once per year, the Board devotes time to discuss human capital at each business and functional leadership level across the Company.
The PPC assesses each member in an amount related to its premium income and policy reserves. There were no payments made for the year ended December 31, 2023.
The PPC assesses each member in an amount related to its premium income and policy reserves. There were no payments made for the years ended December 31, 2024 and 2023. For the year ended December 31, 2022, we paid approximately $12 million, based on fixed currency exchange rates, in assessments pursuant to Japanese insurance guaranty association laws.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMarket-sensitive cash flows exist with other product liabilities including products whose cash flows can be linked to market performance through secondary guarantees, minimum crediting rates, and/or changes in insurance assumptions. 37 Table of Contents Our exposure to interest rates can manifest over years as in the case of earnings compression or in the short term by creating volatility in both earnings and capital.
Biggest changeIn addition, certain of our products provide for recurring premiums which may be invested at interest rates lower than the rates included in our pricing assumptions. Market-sensitive cash flows exist with other product liabilities including products whose cash flows can be linked to market performance through secondary guarantees, minimum crediting rates, and/or changes in insurance assumptions.
While we maintain certain standards for all vendors that provide us services, our vendors, and in turn, their own service providers, have become subject to security breaches, including as a result of their failure to perform in accordance with their contractual obligations. • Hardware, software or applications developed by, obtained from, or implemented in accordance with specifications provided by third parties may contain vulnerabilities in design, maintenance or manufacturing that could be exploited to compromise the Company’s information security. • Continuing use of remote or flexible work arrangements, including remote access tools and mobile technology (including use of personal devices), have expanded potential attack surfaces. • The proliferation of third-party financial data aggregators and emerging technologies, including the development and use of artificial intelligence (“AI”), increase our information security risks and exposure.
While we maintain certain standards for all vendors that provide us services, our vendors, and in turn, their own service providers, have become subject to security breaches, including as a result of their failure to perform in accordance with their contractual obligations. • Hardware, software or applications developed by, obtained from, or implemented in accordance with specifications provided by third parties may contain vulnerabilities in design, maintenance or manufacturing that could be exploited to compromise the Company’s information security. • Continuing use of remote or flexible work arrangements, including remote access tools and mobile technology (including use of personal devices), have expanded potential attack surfaces. • The proliferation of third-party financial data aggregators and emerging technologies, including the development and use of artificial intelligence, increase our information security risks and exposure.
Any compromise or perceived compromise of the security of our systems or data or of that of one of our vendors could damage our reputation, cause the deterioration or termination of relationships with, among others, customers, distributors, government-run health insurance exchanges, marketing partners and insurance carriers, reduce demand for our services, result in the loss of business opportunities, and subject us to significant liability and expense as well as regulatory action and lawsuits, which would harm our business, operating results and financial condition.
Any compromise or perceived compromise of the security of our systems or data or of that of one of our vendors could damage our reputation, cause the deterioration or termination of relationships with, among others, customers, distributors, government-run health insurance exchanges, marketing partners and insurance carriers, reduce demand for our services, result in the loss of business opportunities, and subject us to significant liability and expense as well as regulatory action, penalties and lawsuits, which would harm our business, operating results and financial condition.
Changes in the fair value of embedded derivatives are included in “Realized investment gains (losses), net” on the Consolidated Statements of Operations, whereas changes in the fair value of assets are recorded in “Accumulated other comprehensive income.” Liquidity Risk As a financial services company, we are exposed to liquidity risk, which is the risk that the Company is unable to meet near-term obligations as they come due.
Changes in the fair value of embedded derivatives are included in “Realized investment gains (losses), net” on the Consolidated Statements of Operations, whereas changes in the fair value of assets are recorded primarily in “Accumulated other comprehensive income.” Liquidity Risk As a financial services company, we are exposed to liquidity risk, which is the risk that the Company is unable to meet near-term obligations as they come due.
We may also benefit from offsetting impacts between our mortality and longevity products in adverse mortality or longevity scenarios; however, the extent of this offset may vary. Certain of our insurance products are subject to morbidity risk, which is the risk that either incidence or continuation experience deviates adversely from what is expected .
We may also benefit from offsetting impacts between our mortality and longevity products in adverse mortality or longevity scenarios; however, the extent of this offset may vary. Certain of our insurance products are subject to morbidity risk, which is the risk that either incidence, utilization or continuation experience deviates adversely from what is expected .
GAAP. Certain of our products, particularly our variable annuity products and to a lesser extent certain international insurance products, include guarantees of minimum surrender values or income streams for stated periods or for life, which may be in excess of account values.
Certain of our products, particularly our variable annuity products and to a lesser extent certain international insurance products, include guarantees of minimum surrender values or income streams for stated periods or for life, which may be in excess of account values.
We may experience a disruption in business continuity as a result of, among other things, the following: • Severe pandemic, epidemic, or other public health crises, either naturally occurring or resulting from intentionally manipulated pathogens; 40 Table of Contents • Geo-political risks, including armed conflict and civil unrest; • Terrorist events; • Significant natural or accidental disasters; • Cyber-attacks, both systemic (e.g., affecting the internet, cloud services, and/or other financial services industry infrastructure) and targeted (e.g., failures in or breach of our systems or that of third-parties on whom we rely); • Insider threats; • Physical infrastructure outages; and • Workforce unavailability resulting from any of the above events, among others.
We may experience a disruption in business continuity as a result of, among other things, the following: • Severe pandemic, epidemic, or other public health crises, either naturally occurring or resulting from intentionally manipulated pathogens; • Geo-political risks, including armed conflict and civil unrest; • Terrorist events; • Significant natural or accidental disasters; • Cyber-attacks, both systemic (e.g., affecting the internet, cloud services, and/or other financial services industry infrastructure) and targeted (e.g., failures in or breach of our systems or that of third-parties on whom we rely); • Insider threats; • Physical infrastructure outages; and • Workforce unavailability resulting from any of the above events, among others.
See “Business—Regulation” for a discussion of certain recently enacted and pending proposals by international, federal and state regulatory authorities and their potential impact on our business, including in the following areas: • Financial sector regulatory reform. 44 Table of Contents • U.S. federal, state and local and non-U.S. tax laws, including BEAT, GILTI and CAMT. • Fiduciary rules and other standards of care. • Our regulation under U.S. state insurance laws and developments regarding group-wide supervision and capital standards, accounting rules, RBC factors for invested assets and reserves for life insurance, variable annuities and other products. • Insurer capital standards in Japan and other non-U.S. jurisdictions. • Privacy, data, artificial intelligence and cybersecurity regulation.
See “Business—Regulation” for a discussion of certain recently enacted and pending proposals by international, federal and state regulatory authorities and their potential impact on our business, including in the following areas: • Financial sector regulatory reform. • U.S. federal, state and local and non-U.S. tax laws, including BEAT, GILTI and CAMT. • Fiduciary rules and other standards of care. • Our regulation under U.S. state insurance laws and developments regarding group-wide supervision and capital standards, accounting rules, RBC factors for invested assets and reserves for life insurance, variable annuities and other products. • Insurer capital standards in Japan and other non-U.S. jurisdictions. • Privacy, data, artificial intelligence and cybersecurity regulation.
Operational Risk Types • People: Internal fraud, breaches of employment law, unauthorized activities; loss or lack of key personnel, inadequate training; inadequate supervision. • Processes: Processing failure; failure to safeguard or retain documents/records; errors in valuation/pricing models and processes; project management or execution failures; improper sales practices; improper administration of our products; failure to adhere to clients’ investment guidelines. • Technology: Failures during the development and implementation of new systems; systems failures. • External Events: External crime; cyber-attack, outsourcing risk; vendor risk; natural and other disasters; changes in laws/regulations. • Legal and Regulatory: Legal and regulatory compliance failures.
Operational Risk Types • People: Internal fraud, breaches of employment law, unauthorized activities; loss or lack of key personnel, inadequate training; inadequate supervision. • Processes: Processing failure; failure to safeguard or retain documents/records; errors in valuation/pricing models and processes; project management or execution failures; improper sales practices; improper administration of our products; failure to adhere to clients’ investment guidelines. • Technology: Failures during the development and implementation of new systems; systems failures. • External Events: External crime; cyber-attack; outsourcing risk; vendor risk; natural and other disasters; changes in laws/regulations. 40 Table of Contents • Legal and Regulatory: Legal and regulatory compliance failures.
Because the Generative AI technology is so new, many of the potential risks of Generative AI are currently unknowable; however, specific risks relating to AI and Generative AI could include, among others: • Reputational Damage: Malicious actors could use AI to create deepfakes of the Company's executives or manipulate financial documents, leading to loss of customer trust and significant reputational damage.
Because the Generative AI technology is so new, some of the potential risks of Generative AI are currently unknowable; however, specific risks relating to AI and Generative AI could include, among others: • Reputational Damage: Malicious actors could use AI to create deepfakes of the Company's executives or manipulate financial documents, leading to loss of customer trust and significant reputational damage.
Risks related to cyber-attack arise in various areas, including: • Protecting sensitive information is a constant need; however, some risks cannot be fully mitigated using administrative, technological, or physical controls, or otherwise. • Employees, customers, third-party service providers on whom we rely, or other users of our systems continue to be a key avenue for malicious external parties to gain access to our network, systems, data, or that of our customers.
Risks related to cyber-attack arise in various areas, including: 41 Table of Contents • Protecting sensitive information is a constant need; however, some risks cannot be fully mitigated using administrative, technological, or physical controls, or otherwise. • Employees, customers, third-party service providers on whom we rely, or other users of our systems continue to be a key avenue for malicious external parties to gain access to our network, systems, data, or that of our customers.
For a discussion of our hedging program and the impact of foreign currency exchange rates on our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of Foreign Currency Exchange Rates.” Guarantees within certain of our products, in particular our variable annuities and to a lesser extent certain individual life and international insurance products, are market sensitive and may decrease our earnings or increase the volatility of our results of operations or financial position under U.S.
For a discussion of our hedging program and the impact of foreign currency exchange rates on our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of Foreign Currency Exchange Rates.” Guarantees within certain of our products, in particular our variable annuities and to a lesser extent certain individual life and international insurance products, are market sensitive and may decrease our earnings or increase the volatility of our results of operations or financial position.
Reinsurance treaties may also be used to further strategic goals of the Company by facilitating the acquisition or divestiture of a block of business if an entity purchase or sale is not practical. These transactions expose the Company to counterparty risk. 34 Table of Contents Counterparties include commercial banks, investment banks, broker-dealers and insurance and reinsurance companies.
Reinsurance treaties may also be used to further strategic goals of the Company by facilitating the acquisition or divestiture of a block of business if an entity purchase or sale is not practical. These transactions expose the Company to counterparty risk. Counterparties include commercial banks, investment banks, broker-dealers and insurance and reinsurance companies.
The composition of these assets is subject to investment guidelines specific to the reinsurance treaties and may differ from those we would normally invest in. Under GAAP, funds withheld and modified coinsurance reinsurance most often create embedded derivatives for the ceding company and the reinsurer, which are measured at fair value.
The composition of these assets is subject to investment guidelines specific to the reinsurance treaties and may differ from those we would normally invest in. Under GAAP, funds withheld and modified coinsurance reinsurance most often create embedded derivatives for the ceding company and the 39 Table of Contents reinsurer, which are measured at fair value.
Lapse calamity can also impact our earnings through its impact on estimated future profits. • Policyholder behavior risk is the risk that the behavior of our customers or policyholders deviates adversely from what is expected.
Lapse calamity can also impact our earnings and capital through its impact on estimated future profits. • Policyholder behavior risk is the risk that the behavior of our customers or policyholders deviates adversely from what is expected.
For example, pension system reforms being proposed in some jurisdictions (including Chile, Columbia and Peru) may limit the role of private companies, fundamentally changing our business in these markets.
For example, pension system reforms being proposed in some jurisdictions (including Chile, Colombia and Peru) may limit the role of private companies, fundamentally changing our business in these markets.
Such campaigns have targeted online applications and services. • Nation-state sponsored or affiliated organizations are engaged in cyber-attacks, not only for monetization purposes, but also to gain information about foreign citizens, businesses and governments, or to influence or cause disruptions in commerce or political affairs.
Such campaigns have targeted online applications and services. • Nation-state sponsored or affiliated organizations, or politically motivated actors, are engaged in cyber-attacks, not only for monetization purposes, but also to gain information about foreign citizens, businesses and governments, or to influence or cause disruptions in commerce or political affairs.
Fluctuations in foreign currency exchange rates could adversely affect our profitability, financial condition and cash flows, as well as increase the volatility of our results of operations under U.S. GAAP. In the short-term, solvency margins in our Japan businesses can also be impacted by fluctuations in exchange rates.
Fluctuations in foreign currency exchange rates could 38 Table of Contents adversely affect our profitability, financial condition and cash flows, as well as increase the volatility of our results of operations under U.S. GAAP. In the short-term, solvency margins in our Japan businesses can also be impacted by fluctuations in exchange rates.
We are also at risk that key distribution partners may merge, change their business models in ways that affect how our products are sold, or 43 Table of Contents terminate their distribution contracts with us, or that new distribution channels could emerge and adversely impact the effectiveness of our distribution efforts.
We are also at risk that key distribution partners may merge, change their business models in ways that affect how our products are sold, or terminate their distribution contracts with us, or that new distribution channels could emerge and adversely impact the effectiveness of our distribution efforts.
Market conditions can limit availability of hedging instruments, require us to post additional collateral, and further increase the cost of executing product related hedges and such costs may not be recovered in the pricing of the underlying products being hedged.
Market conditions can limit availability of hedging 37 Table of Contents instruments, require us to post additional collateral, and further increase the cost of executing product related hedges and such costs may not be recovered in the pricing of the underlying products being hedged.
There continues to be significant and increased cyber-attack activity against businesses, including but not limited to the financial services sector, and no organization, regardless of measures implemented to safeguard the systems and detect threats, is fully immune to cyber-attacks.
There continues to be significant and increased cyber-attack activity against businesses, including but not limited to Prudential and others in the financial services sector, and no organization, regardless of measures implemented to safeguard the systems and detect threats, is fully immune to cyber-attacks.
If we were found to have infringed or misappropriated a third-party patent or other intellectual property right, we could in some circumstances be enjoined from providing certain products or services to our customers or from utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses.
If we were found to have infringed or misappropriated a third-party 44 Table of Contents patent or other intellectual property right, we could in some circumstances be enjoined from providing certain products or services to our customers or from utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses.
Moreover, the use of AI trained on inaccurate data sets could result in inaccurate or biased decisions. • Fraudulent Activity: AI could be used to create forged documents or impersonate individuals to commit financial fraud, leading to financial losses and regulatory scrutiny. • Misinformation and Disinformation: The ability to generate realistic and convincing synthetic media could be used to spread misinformation and disinformation, impacting public opinion and undermining trust in the financial system. • Privacy Concerns: AI could be used to create synthetic identities or manipulate personal data, raising privacy concerns and potentially violating data protection regulations. • Cybersecurity Threats: AI could be used to create sophisticated phishing attacks or bypass security measures, increasing the risk of cyberattacks and data breaches.
Moreover, the use of AI trained on inaccurate data sets could result in inaccurate or biased decisions. • Fraudulent Activity: AI could be used to create forged documents or impersonate individuals to commit financial fraud, leading to financial losses and regulatory scrutiny. • Misinformation and Disinformation: The ability to generate realistic and convincing synthetic media could be used to spread misinformation and disinformation, impacting public opinion and undermining trust in the financial system. • Privacy Concerns: AI could be used to create synthetic identities or manipulate personal data, raising privacy concerns related to data breaches and other potential violations of consumer rights and data protection regulations. • Cybersecurity Threats: AI could be used to create sophisticated phishing attacks or bypass security measures, increasing the risk of cyberattacks and data breaches.
Certain of our insurance products are subject to policyholder behavior risk, which is the risk that actual policyholder behavior deviates adversely from what is expected. • Lapse calamity is the risk that lapse rates over the short-term deviate adversely from what is expected, for example, surrenders of certain insurance products may increase following a downgrade of our financial strength ratings, adverse publicity or economic conditions.
Certain of our insurance products are subject to policyholder behavior risk, which is the risk that actual policyholder behavior deviates adversely from what is expected. 36 Table of Contents • Lapse calamity is the risk that lapse rates over the short-term deviate adversely from what is expected, for example, surrenders of certain insurance products may increase following a downgrade of our financial strength ratings or adverse publicity.
If this risk were to emerge, the Company would update assumptions used to calculate reserves for in-force business, which may result in additional assets needed to meet the higher expected annuity claims or earlier expected life 35 Table of Contents claims.
If this risk were to emerge, the Company would update assumptions used to calculate reserves for in-force business, which may result in additional assets needed to meet the higher expected annuity claims or earlier expected life claims.
In addition, if we experience higher than expected surrenders, withdrawals or claims, our liquidity position may be adversely impacted, and we may incur losses on investments if we are required to sell assets in order to fund surrenders, withdrawals or claims.
In 35 Table of Contents addition, if we experience higher than expected surrenders, withdrawals or claims, our liquidity position may be adversely impacted, and we may incur losses on investments if we are required to sell assets in order to fund surrenders, withdrawals or claims.
In each of our businesses, we face intense competition from insurance companies, asset managers and diversified financial institutions, both for the ultimate customers for our products and, in many businesses, for distribution through non-affiliated distribution channels.
In each of our businesses, we face intense competition from insurance companies, asset managers, private equity firms and other diversified financial institutions, both for the ultimate customers for our products and, in many businesses, for distribution through non-affiliated distribution channels.
Even if the malicious actors are discovered quickly, it could take considerable additional time for us to determine the scope of compromise, and the extent, amount, and type of information compromised, if any, and to fully contain the malicious actors, remediate and recover. • Employees, third-party service providers or other individuals purportedly acting on behalf of the Company may fail (as a result of human error or misconduct) to comply with applicable policies and procedures, and/or circumvent controls or safeguards for unauthorized purposes. 41 Table of Contents • We rely on third-parties to provide services, as described further below.
Even if the malicious actors are discovered quickly, it could take considerable additional time for us to determine the scope of compromise, and the extent, amount, and type of information compromised, if any, and to fully contain the malicious actors, remediate and recover. • Employees, third-party service providers or other individuals purportedly acting on behalf of the Company may fail (as a result of human error or misconduct) to comply with applicable policies and procedures, and/or circumvent controls or safeguards for unauthorized purposes.
Base mortality risk can arise from a lack of credible data on which to base the assumptions. We use a variety of strategies to manage our mortality risks, including the use of reinsurance and derivative instruments.
Base mortality risk can arise from a lack of credible data on which to base the assumptions. We manage mortality risk primarily through our underwriting practices. We use a variety of strategies to further manage our mortality risks, including the use of reinsurance and derivative instruments.
For example, in PGIM, 45 Table of Contents we expect to see continued pressure on fees given the focus on passive investment and the growth of the robo-advice channel. • Climate change may increase the severity and frequency of calamities, or adversely affect our investment portfolio or investor sentiment.
For example, in PGIM, we expect to see continued pressure on fees given the focus on passive investment and the growth of the robo-advice channel. • Climate change may increase the severity and frequency of calamities, or adversely affect our investment portfolio or investor sentiment. Climate change may increase the frequency and severity of weather-related disasters and pandemics.
For example, environmental concerns spur scientific inquiry which may reposition the relative attractiveness of wind or sun power over oil and gas. The transportation industry may favor alternative modes of conveyance of goods which may shift trucking or air transport out of favor.
Technology may have a significant impact on the companies in which the Company invests. For example, environmental concerns spur scientific inquiry which may reposition the relative attractiveness of wind or sun power over oil and gas. The transportation industry may favor alternative modes of conveyance of goods which may shift trucking or air transport out of favor.
If such events were to occur, the Company may face unexpectedly high levels of claim payments to policyholders. 39 Table of Contents For a discussion of the Company’s liquidity and sources and uses of liquidity, including information about legal and regulatory limits on the ability of our subsidiaries to pay dividends, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity.” Operational Risk Our operations are exposed to the risk of loss resulting from inadequate or failed processes or systems, human error or misconduct, and as a result of external events.
For a discussion of the Company’s liquidity and sources and uses of liquidity, including information about legal and regulatory limits on the ability of our subsidiaries to pay dividends, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity.” Operational Risk Our operations are exposed to the risk of loss resulting from inadequate or failed processes or systems, human error or misconduct, and as a result of external events.
Our cybersecurity risk remains heightened because of, among other things, the rapidly evolving nature and pervasiveness of cyber threats, our brand and reputation, our size and scale, our geographic presence and our role in the financial services industry and the broader economy.
Our cybersecurity risk remains heightened because of, among other things, the rapidly evolving nature and pervasiveness of cyber threats, our brand and reputation, our size and scale, our geographic presence and our role in the financial services industry and the broader economy. See “Item 1C. Cybersecurity” for additional information about cybersecurity risk management and governance.
For example, see “Business—Regulation—ERISA.” In those jurisdictions where we are constrained by law from owning a majority interest in jointly owned operations, our remedies in the event of a breach by a joint venture partner may be limited (e.g., we may have no ability to exercise a “call” option).
For example, see “Business—Regulation—ERISA.” In those jurisdictions where we are constrained by law from owning a majority interest in jointly owned operations, our remedies in the event of a breach by a joint venture partner may be limited (e.g., we may have no ability to exercise a “call” option). 43 Table of Contents Affiliate and third-party distributors of our products present added regulatory, competitive and other risks to our enterprise.
Losses are likely to be higher under stressed conditions. Our investment portfolio is subject to equity risk, which is the risk of loss due to deterioration in market value of public equity or alternative assets .
Our investment portfolio is subject to equity risk, which is the risk of loss due to deterioration in market value of public equity or alternative assets .
Consumers may change their purchasing behavior to favor online activity which would change the role of malls and retail properties. • Medical Advances . The Company is exposed to the impact of medical advances in two major ways. Genetic testing and the availability of that information unequally to consumers and insurers can bring anti-selection risks.
Consumers may change their purchasing behavior to favor online activity which would change the role of malls and retail properties. • Medical Advances . The Company is exposed to the impact of medical advances. The unequal availability of detailed medical information (e.g., genetic testing) to consumers and insurers can create asymmetrical information and create anti-selection risks.
In the event of a counterparty deterioration or default, the magnitude of the losses will depend on current market conditions and the feasibility (dependent on the complexity) and time requirement of entering a replacement transaction with a new counterparty. Highly bespoke transactions (e.g. strategic reinsurance) may not be replicable with any degree of certainty.
In the event of a counterparty deterioration or default, the magnitude of the losses (e.g., replacement costs) will depend on current market conditions and the feasibility (dependent on the complexity) and time requirement of entering a replacement transaction with a new counterparty.
We may also incur significant costs in connection with our response, recovery, remediation, and compliance efforts. Additionally, our failure to timely or accurately communicate cyber incidents to relevant parties could result in regulatory, operational and reputational risk.
We may also incur significant costs in connection with our response, recovery, remediation, modification of protective measures, and compliance efforts, including costs associated with mitigating the impact of any errors, interruptions, delays or cessations of service. Additionally, our failure to timely or accurately communicate cyber incidents to relevant parties could result in regulatory, operational and reputational risk.
Credit defaults (as well as credit impairments, realized losses on credit-related sales, and increases in credit related reserves) may result in losses which adversely impact earnings, capital and our ability to appropriately match our liabilities and meet future obligations. Some of our insurance operations are in emerging markets where we may be required to hold capital in local sovereign obligations.
Credit defaults (as well as credit impairments, realized losses on credit-related sales, and increases in credit related reserves) may result in losses which adversely impact earnings, capital and our ability to appropriately match our liabilities and meet future obligations.
We are exposed to morbidity incidence risk primarily through short-term disability, long-term disability and long-term care products in the U.S., and through accident and health products in Japan. • Morbidity continuation is the risk that the length of time for which policyholders remain unhealthy deviates adversely from what is expected.
This risk relates primarily to our long-term care products. • Morbidity continuation is the risk that the length of time for which policyholders remain unhealthy deviates adversely from what is expected. This risk is primarily in our disability and long-term care products.
Investment risk is heightened in these markets, in particular for obligations that are not denominated in the local currency. Our Company is subject to counterparty risk, which is the risk that the counterparty to a transaction could default or deteriorate in creditworthiness before or at the final settlement of a transaction .
Our Company is subject to counterparty risk, which is the risk that the counterparty to a transaction could default or deteriorate in creditworthiness before or at the final settlement of a transaction .
An increase in reserves due to revised assumptions has an immediate impact on our results of operations and financial condition; however, from an economic or cash flow perspective, the impact is generally long term as the excess outflow is paid over time. 36 Table of Contents Our ability to reprice products is limited and may not compensate for deviations from our expected insurance assumptions.
Policyholder behavior risk is generally a long-term risk that emerges over time. An increase in reserves due to revised assumptions has an immediate impact on our results of operations and financial condition; however, from an economic or cash flow perspective, the impact is generally long term as the excess outflow is paid over time.
The third-party distributing firms are rarely dedicated to us exclusively and may frequently recommend and/or market products of our competitors. Accordingly, we must compete for their services.
Our products are sold primarily through captive/affiliated distributors and third-party distributing firms. Our captive/affiliated distributors are made up of sales personnel who are generally compensated based on commissions. The third-party distributing firms are rarely dedicated to us exclusively and may frequently recommend and/or market products of our competitors. Accordingly, we must compete for their services.
Examples include: ◦ A change in market conditions, such as higher inflation and higher interest rates, like we have seen since 2022, could cause a change in consumer sentiment and behavior adversely affecting sales and persistency of our savings and protection products.
Examples include: ◦ A change in market conditions, such as higher inflation and higher interest rates could cause a change in consumer sentiment and behavior adversely affecting sales and persistency of our savings and protection products. Conversely, low inflation and low interest rates could cause persistency of these products to vary from that anticipated and adversely affect profitability.
Certain of our regulators have proposed or adopted, or may propose or adopt, ESG rules or standards that would apply to our business. Our practices may be judged by ESG standards that are continually evolving and not always clear. Prevailing ESG standards and expectations may also reflect contrasting or conflicting values or agendas.
Our practices may be judged by ESG standards that are continually evolving and not always clear. Prevailing ESG standards and expectations may 46 Table of Contents also reflect contrasting or conflicting values or agendas.
Investment risk may result from (1) economic conditions, (2) adverse capital market conditions, including disruptions in individual market sectors or a lack of buyers in the marketplace, (3) volatility, (4) credit spread changes, (5) benchmark interest rate changes, (6) changes in foreign currency exchange rates and (7) declines in value of underlying collateral.
For a discussion of our general account investments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—General Account Investments.” We are also exposed to investment risk through a potential counterparty default. 34 Table of Contents Investment risk may result from (1) economic conditions, (2) adverse capital market conditions, including disruptions in individual market sectors or a lack of buyers in the marketplace, (3) volatility, (4) credit spread changes, (5) benchmark interest rate changes, (6) changes in foreign currency exchange rates and (7) declines in value of underlying collateral.
Changes in accounting rules applicable to our business may also have an adverse impact on our results of operations or financial condition. For a discussion of accounting pronouncements and their potential impact on our business, including ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, see Note 2 to the Consolidated Financial Statements.
Changes in accounting rules applicable to our business may also have an adverse impact on our results of operations or financial condition. For a discussion of accounting pronouncements and their potential impact on our business see Note 2 to the Consolidated Financial Statements. Changes in technology and other external factors may be unsettling to our business model .
There may be other unforeseen changes in technology and the external environment, including the regulatory response to technological change, which may have a significant impact on our business model. • Interaction with customers . Technology is moving rapidly and as it does, it puts pressure on existing business models.
We believe the following aspects of technological and other changes would significantly impact our business model. There may be other unforeseen changes in technology and the external environment, including the regulatory response to technological change, which may have a significant impact on our business model. 45 Table of Contents • Interaction with customers .
Such misuse could expose the Company to legal or regulatory risk, damage customer relationships or cause reputational harm. Our competitors may also adopt AI or Generative AI more quickly or more effectively than we do, which could cause competitive harm.
Our competitors may also adopt AI or Generative AI more quickly or more effectively than we do, which could cause competitive harm.
For a discussion of our ratings and the potential impact of a ratings downgrade on our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Ratings.” We cannot predict what additional actions rating agencies may take, or what actions we may take in response to the actions of rating agencies, which could adversely affect our business.
For additional information, see “Item 1. Business—Regulation—International Insurance Regulation—Solvency Regulation” and “Item 7. Management Discussion and Analysis—Liquidity and Capital Resources—Dividends and Returns of Capital from Subsidiaries.” We cannot predict what additional actions rating agencies may take, or what actions we may take in response to the actions of rating agencies, which could adversely affect our business.
An interruption in certain key relationships could materially affect our ability to market our products and could have a material adverse effect on our business, operating results and financial condition.
We periodically negotiate the terms of these relationships, and there can be no assurance that such terms will remain acceptable to us or such third parties. An interruption in certain key relationships could materially affect our ability to market our products and could have a material adverse effect on our business, operating results and financial condition.
Climate change may increase the frequency and severity of weather-related disasters and pandemics. In addition, climate change regulation may affect the prospects of companies and other entities whose securities we hold, or our willingness to continue to hold their securities.
In addition, climate change regulation may affect the prospects of companies and other entities whose securities we hold, or our willingness to continue to hold their securities. It may also impact other counterparties, including reinsurers, and affect the value of investments, including real estate investments we hold or manage for others.
Our distribution channels may change to become more automated, at the place and time of the customer’s choosing. Such changes clearly have the potential to disrupt our business model. • Investment Portfolio . Technology may have a significant impact on the companies in which the Company invests.
Evolving customer preferences and changing privacy regulations may drive a need to redesign products and change the way we interact with customers. Our distribution channels may change to become more automated, at the place and time of the customer’s choosing. Such changes clearly have the potential to disrupt our business model. • Investment Portfolio .
Climate change may also influence investor sentiment with respect to the Company and investments in our portfolio. • We may fail to meet expectations relating to environmental, social, and governance standards and practices. Certain existing or potential investors, customers and regulators evaluate our business or other practices according to a variety of environmental, social and governance (“ESG”) standards and expectations.
We cannot predict the long-term impacts on us from climate change or related regulation. Climate change may also influence investor sentiment with respect to the Company and investments in our portfolio. • We may fail to meet expectations relating to environmental, social, and governance standards and practices.
We have experienced cybersecurity events resulting in, among other things, the compromise of personal and confidential information, including sensitive health information, of our employees, customers and other stakeholders. See “Business—Regulation—Privacy and Cybersecurity Regulation” for a discussion of the applicable laws and regulations (including those requiring notice, disclosure or remediation) relating to cybersecurity events.
See “Business—Regulation—Privacy and Cybersecurity Regulation” for a discussion of the applicable laws and regulations (including those requiring notice, disclosure or remediation) relating to cybersecurity events. We may incur significant costs and other negative consequences resulting from cyber-attacks or other information security breaches.
Violations of these regulations could subject our affiliated distributors to litigation and regulatory inquiries that result in penalties or damages. See Note 25 to the Consolidated Financial Statements for additional information regarding litigation and regulatory matters relating to the distribution of products. Many of our distribution personnel are independent contractors or franchisees.
Our business may also be harmed if captive/affiliate distributors engage in inappropriate conduct in connection with the sale of third-party products. See Note 25 to the Consolidated Financial Statements for additional information regarding litigation and regulatory matters relating to the distribution of products. Many of our distribution personnel are independent contractors or franchisees.
For example, a significant amount of our sales in Japan are derived through major Japanese banks and a significant portion of our sales in Japan through Life Consultants is derived through a single association relationship. We periodically negotiate the terms of these relationships, and there can be no assurance that such terms will remain acceptable to us or such third-parties.
For example, a significant amount of our sales in Japan are derived through major Japanese banks and a significant portion of our sales in Japan through Life Consultants is derived through a single association relationship.
Certain of our products, particularly certain index-linked annuity and individual life products, include interest crediting guarantees based on the performance of an 38 Table of Contents index.
Certain of our products, particularly our variable annuity and variable life products, include minimum death benefits or “no-lapse guarantees” that guarantee a death benefit as long as the “no-lapse guarantee” premium is paid. Certain of our products, particularly certain index-linked annuity and individual life products, include interest crediting guarantees based on the performance of an index.
Some of the changes we can anticipate are increased choices about how customers want to interact with the Company or how they want the Company to interact with them. Evolving customer preferences and changing privacy regulations may drive a need to redesign products and change the way we interact with customers.
Technology is moving rapidly and as it does, it puts pressure on existing business models. Some of the changes we can anticipate are increased choices about how customers want to interact with the Company or how they want the Company to interact with them.
To the extent we maintain cyber insurance, liabilities or losses arising from certain cyber incidents may not be covered or fully covered under such policies, and the amount of insurance may not be adequate. 42 Table of Contents Third parties (outsourcing providers, vendors and suppliers and joint venture partners) present added operational risk to our enterprise.
To the extent we maintain cyber insurance, liabilities or losses arising from certain cyber incidents may not be covered or fully covered under such policies, including if our insurer denies coverage as to any particular claim in the future, and may not take into account reputational damage, the costs of which are impossible to quantify, and the amount of insurance may not be adequate.
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For a discussion of our general account investments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—General Account Investments.” We are also exposed to investment risk through a potential counterparty default.
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Highly bespoke transactions (e.g., strategic reinsurance) may not be replicable with any degree of certainty, possibly causing us to recapture liabilities and reestablish or strengthen reserves and capital, which could reduce capital flexibility. Losses are likely to be higher under stressed conditions.
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This risk is primarily in our disability and long-term care products.
Added
We are exposed to morbidity incidence risk primarily through short-term disability, long-term disability and long-term care products in the U.S., and through accident and health products in Japan. • Morbidity utilization is the risk that policyholder morbidity benefit utilization (relative to available maximum benefits) deviates adversely from our expectations.
Removed
Policyholder behavior risk is generally a long-term risk that emerges over time.
Added
Our ability to reprice products is limited and may not compensate for deviations from our expected insurance assumptions.
Removed
In addition, certain of our products provide for recurring premiums which may be invested at interest rates lower than the rates included in our pricing assumptions.
Added
Our exposure to interest rates can manifest over years as in the case of earnings compression or in the short term by creating volatility in both earnings and capital.
Removed
We may incur significant costs and other negative consequences resulting from cyber-attacks or other information security breaches.
Added
If such events were to occur, the Company may face unexpectedly high levels of claim payments to policyholders.
Removed
Affiliate and third-party distributors of our products present added regulatory, competitive and other risks to our enterprise. Our products are sold primarily through captive/affiliated distributors and third-party distributing firms. Our captive/affiliated distributors are made up of sales personnel who are generally compensated based on commissions.
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Our increased adoption of remote working increases these risks, as our interaction with employees and external service providers occur on information systems, networks and environments over which we have less control and which may be more difficult to monitor. • We rely on third parties to provide services, as described further below.
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Our business may also be harmed if captive/affiliate distributors engage in inappropriate conduct in connection with the sale of third-party products.
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There are significant risks involved in developing and deploying AI and there can be no assurance that the usage of AI will enhance our products or services or be beneficial to our business, including our efficiency or profitability.
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Additionally, certain of our affiliated distributors engage in direct marketing to consumers through telemarketing, email marketing and other lead generation activities that subject us to various state and federal laws and regulations, including the Telephone Consumer Protection Act and the Americans with Disabilities Act.
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Such misuse could expose the Company to legal or regulatory risk, damage customer relationships or cause reputational harm.
Removed
Changes in technology and other external factors may be unsettling to our business model . We believe the following aspects of technological and other changes would significantly impact our business model.
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Further, our ability to continue to develop and efficiently deploy AI technologies depends on access to specific third-party equipment and other physical infrastructure, 42 Table of Contents such as processing hardware and network capacity, as to which we cannot control the availability or pricing, especially in a highly competitive environment.
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Specifically, data from genetic testing can give our prospective customers a clearer view into their future, allowing them to select products protecting them against likelihoods of mortality or longevity with more precision. Also, technologies that extend lives will challenge our actuarial assumptions especially in the annuity-based businesses.
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And we may have insufficient recourse against such third parties from which such breaches originate. We have experienced cybersecurity events resulting in, among other things, the compromise of personal and confidential information, including sensitive health information, of our employees, customers and other stakeholders.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe CISO has served in various roles in information technology and information security for over 25 years, including serving as the head of information technology risk at two large public companies. The CISO holds a graduate degree in technology management and has attained the professional certifications of Certified Information Systems Security Professional and Certified Information Privacy Professional.
Biggest changeWe expect these employees to, among other things, understand computer systems, networks, and security technologies and be proficient in a variety of security tools and techniques. The CISO has served in various roles in information technology and information security for over 25 years, including serving as the head of information technology risk at two large public companies.
Cybersecurity risk management is integrated within our risk management framework. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” for additional information on 46 Table of Contents our risk management. We conduct risk identification through several processes at the business unit, corporate, senior management, and Board levels.
Cybersecurity risk management is integrated within our risk management framework. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” for additional information on our risk management processes. We conduct risk identification through several processes at the business unit, corporate, senior management, and Board levels.
The Audit Committee regularly briefs the full Board of Directors on these matters, and the full Board of Directors also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues. 47 Table of Contents
The Audit Committee regularly briefs the full Board of Directors on these matters, and the full Board of Directors also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues.
For a description of the relevant expertise of the CIO, see “Item 1. Business—Information About our Executive Officers.” The Audit Committee of the Board of Directors, which is responsible for oversight of certain risk issues, including cybersecurity, receives reports from the CISO, the CIO and Operational Risk Management throughout the year.
Business—Information About our Executive Officers.” The Audit Committee of the Board of Directors, which is responsible for oversight of certain risk issues, including cybersecurity, receives reports from the CISO, the HGTO and Operational Risk Management throughout the year.
This plan is executed in close coordination with our corporate functions, including a dedicated cyber and privacy law function, external affairs, and risk management, and is designed to ensure, among other things, appropriate and timely reporting and disclosure.
We also maintain an incident response plan, which specifies escalation and evaluation processes for cyber events. This plan is executed in close coordination with our corporate functions, including a dedicated cyber and privacy law function, external affairs, and risk management, and is designed to ensure, among other things, appropriate and timely reporting and disclosure.
As part of the information security program, we conduct periodic exercises with independent outside advisors to assess the effectiveness of our program and our internal response preparedness. We regularly engage with the broader security community and monitor cyber threat information. To address risks associated with third-parties, Prudential has established an enterprise-wide Third-Party Risk Management Program.
We regularly engage with the broader cybersecurity community and monitor cyber threat information. To address risks associated with third parties, Prudential has established an enterprise-wide Third-Party Risk Management Program. This program’s features include, among other things, identifying, assessing and managing cybersecurity risks throughout the life of our third-party relationships.
Among other things, the information security program establishes security standards for our technological resources and includes training for employees, contractors and third parties. Employees with access to our Company’s systems are subject to comprehensive annual training on responsible information security, data security, and cybersecurity practices and how to protect data against cyber threats.
Among other things, the information security program establishes security standards for our technological resources and includes training for employees, contractors and third parties.
Governance The Company’s information security program is overseen by the Chief Information Security Officer (“CISO”) and Information Security Office, as well as the Chief Information Officer (“CIO”).
Governance The Company’s information security program is overseen by the Chief Information Security Officer (“CISO”) and Information Security Office, as well as the Head of Global Technology and Operations (“HGTO”). The CISO and Information Security Office are responsible for monitoring for, and informing management of, cybersecurity incidents impacting Prudential’s systems.
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This program’s features include, among other things, identifying, assessing and managing cybersecurity risks throughout the life of our third-party relationships. We also maintain an incident response plan, which specifies escalation and evaluation processes for cyber events.
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Employees with access to our Company’s systems are subject to comprehensive annual training on responsible information security, data security, and cybersecurity practices and how to protect data against cyber threats. 47 Table of Contents As part of the information security program, we conduct periodic exercises with independent outside advisors to assess the effectiveness of our program and our internal response preparedness.
Removed
On February 13, 2024, as amended on February 21, 2024, the Company disclosed the occurrence of a cybersecurity incident. We continue to investigate the extent of the incident.
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When we do experience cybersecurity incidents, like the cybersecurity incident we disclosed in February 2024, we aim to utilize that experience to inform and strengthen our information security program.
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As of the date of this Report, the incident has not had a material impact on the Company’s operations, and the Company has not determined the incident is reasonably likely to materially impact the Company’s financial condition or results of operations.
Added
The CISO holds a graduate degree in technology management and has attained the professional certifications of Certified Information Systems Security Professional and Certified Information Privacy Professional. For a description of the relevant expertise of the HGTO, see “Item 1.
Removed
We expect these employees to, among other things, understand computer systems, networks, and security technologies and be proficient in a variety of security tools and techniques, including intrusion detection, malware analysis and penetration testing.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe above properties do not include properties we own solely for investment purposes. At our domestic home office properties, we are developing programs to reduce emissions. These programs include seeking ways to expand energy efficiency.
Biggest changeAt our domestic home office properties, we are developing programs to reduce emissions. These programs include seeking ways to expand energy efficiency. For home office properties in Brazil and Japan, we are also developing waste diversion measures including internal recycling and composting infrastructures and availing ourselves of third-party waste diversion programs.
ITEM 2. PROPERTIES We own our headquarters building located at 751 Broad Street, Newark, New Jersey. Excluding our headquarters building and properties used by our International Businesses and the international operations of PGIM, which are discussed below, as of December 31, 2023, we conduct our business and home office functions in both owned and leased locations throughout the United States.
ITEM 2. PROPERTIES We own our headquarters building located at 751 Broad Street, Newark, New Jersey. Excluding our headquarters building and properties used by our International Businesses and the international operations of PGIM, which are discussed below, as of December 31, 2024, we conduct our business and home office functions in both owned and leased locations throughout the United States.
We also conduct back-office functions in leased properties outside of the United States. For our International Businesses, as of December 31, 2023, we own and lease home offices located in Japan, Argentina, Brazil and Mexico. We also conduct our business in owned and leased properties, primarily field offices, located throughout these same countries.
We also conduct back-office functions in leased properties outside of the United States. For our International Businesses, as of December 31, 2024, we own and lease home offices located in Japan, Brazil and Mexico. We also conduct our business in owned and leased properties, primarily field offices, located throughout these same countries.
For PGIM’s international operations, as of December 31, 2023, we lease home offices located in Japan, Taiwan, the United Kingdom, Switzerland, India and Ireland. We also lease principal properties and other branch and field offices in other countries where PGIM conducts business. We believe our properties are adequate and suitable for our business as currently conducted and are adequately maintained.
We also lease principal properties and other branch and field offices in other countries where PGIM conducts business. 48 Table of Contents We believe our properties are adequate and suitable for our business as currently conducted and are adequately maintained. The above properties do not include properties we own solely for investment purposes.
For home office properties in the U.S., Brazil and Japan, we are also developing waste diversion measures including internal recycling and composting infrastructures and availing ourselves of third-party waste diversion programs. Our Prudential Tower home office property in Newark, New Jersey has been awarded LEED Gold Certification from the U.S. Green Building Council.
Our Prudential Tower home office property in Newark, New Jersey has been awarded LEED Gold Certification from the U.S. Green Building Council.
Added
For PGIM’s international operations, as of December 31, 2024, we lease home offices located in Japan, Taiwan, the United Kingdom, India and Ireland.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities (c) The following table provides information about purchases by the Company during the three months ended December 31, 2023, of its Common Stock: Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased under the Program October 1, 2023 through October 31, 2023 913,505 $ 92.35 902,146 November 1, 2023 through November 30, 2023 893,291 $ 93.75 889,728 December 1, 2023 through December 31, 2023 828,114 $ 101.72 818,899 Total 2,634,910 2,610,773 $ 0 __________ (1) Includes shares of Common Stock withheld from participants for income tax withholding purposes whose shares of restricted stock units vested during the period.
Biggest changeIssuer Purchases of Equity Securities (c) The following table provides information about purchases by the Company during the three months ended December 31, 2024, of its Common Stock: Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased under the Program October 1, 2024 through October 31, 2024 679,420 $ 123.85 672,930 November 1, 2024 through November 30, 2024 666,408 $ 125.74 662,617 December 1, 2024 through December 31, 2024 687,131 $ 121.86 684,318 Total 2,032,959 2,019,865 $ 0 __________ (1) Includes shares of Common Stock withheld from participants for income tax withholding purposes whose shares of restricted stock units vested during the period.
Such restricted stock units were originally issued to participants pursuant to the Prudential Financial Inc. Omnibus Incentive Plan. On December 11, 2023, Prudential Financial’s Board of Directors authorized the Company to repurchase, at management’s discretion, up to $1.0 billion of its outstanding Common Stock during the period from January 1, 2024 through December 31, 2024.
Such restricted stock units were originally issued to participants pursuant to the Prudential Financial Inc. Omnibus Incentive Plan. On December 10, 2024, Prudential Financial’s Board of Directors authorized the Company to repurchase, at management’s discretion, up to $1.0 billion of its outstanding Common Stock during the period from January 1, 2025 through December 31, 2025.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES General Prudential Financial’s Common Stock trades on the New York Stock Exchange under the symbol “PRU.” On January 31, 2024, there were 1,057,537 registered holders of record for the Common Stock and 359 million shares outstanding.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES General Prudential Financial’s Common Stock trades on the New York Stock Exchange under the symbol “PRU.” On January 31, 2025, there were 1,019,340 registered holders of record for the Common Stock and 354 million shares outstanding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee Note 16 to the Consolidated Financial Statements for additional information regarding the Closed Block. 97 Table of Contents 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’ 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 (“VIEs”) 778 778 0 0 0 0 0 0 Total liabilities $ 18,661 $ 13,998 $ 1 $ 0 $ 12,382 $ 9,357 $ 0 $ 0 __________ (1) Level 3 assets expressed as a percentage of total assets measured at fair value on a recurring basis for PFI excluding the Closed Block division and 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.
Biggest changeDecember 31, 2024 PFI excluding Closed Block Division and Funds Withheld Closed Block Division Funds Withheld Total at Fair Value Total Level 3(1) Total at Fair Value Total Level 3(1) Total at Fair Value Total Level 3(1) (in millions) Fixed maturities, available-for-sale $ 275,210 $ 6,712 $ 28,728 $ 914 $ 7,632 $ 551 Assets supporting experience-rated contractholder liabilities: Fixed maturities 826 0 0 0 0 0 Equity securities 2,881 0 0 0 0 0 All other(2) 0 0 0 0 0 0 Subtotal 3,707 0 0 0 0 0 Market risk benefit assets 2,331 2,331 0 0 0 0 Fixed maturities, trading 4,151 467 647 15 7,732 1,504 Equity securities 7,776 479 1,641 39 0 0 Commercial mortgage and other loans 469 0 0 0 233 233 Other invested assets(3) 2,526 952 2 1 25 0 Short-term investments 8,091 383 460 76 44 2 Cash equivalents 10,144 0 346 0 201 0 Reinsurance recoverables and deposit receivables (75) 0 0 0 924 613 Other assets 0 0 0 0 0 0 Separate account assets 166,672 232 0 0 0 0 Total assets $ 481,002 $ 11,556 $ 31,824 $ 1,045 $ 16,791 $ 2,903 Market risk benefit liabilities $ 4,455 $ 4,455 $ 0 $ 0 $ 0 $ 0 Policyholders’ account balances 12,746 12,746 0 0 0 0 Reinsurance and funds withheld payables (27) 0 0 0 (91) 0 Other liabilities(3) 4,749 1 0 0 2 0 Notes issued by consolidated variable interest entities (“VIEs”) 60 60 0 0 0 0 Total liabilities $ 21,983 $ 17,262 $ 0 $ 0 $ (89) $ 0 113 Table of Contents December 31, 2023 PFI excluding Closed Block Division and Funds Withheld Closed Block Division Funds Withheld Total at Fair Value Total Level 3(1) Total at Fair Value Total Level 3(1) Total at Fair Value Total Level 3(1) (in millions) Fixed maturities, available-for-sale $ 279,887 $ 5,241 $ 30,486 $ 868 $ 5,948 $ 9 Assets supporting experience-rated contractholder liabilities: Fixed maturities 889 0 0 0 0 0 Equity securities 2,279 0 0 0 0 0 All other(2) 0 0 0 0 0 0 Subtotal 3,168 0 0 0 0 0 Market risk benefit assets 1,981 1,981 0 0 0 0 Fixed maturities, trading 5,959 409 887 20 2,944 0 Equity securities 6,112 451 1,891 61 0 0 Commercial mortgage and other loans 519 0 0 0 0 0 Other invested assets(3) 1,949 846 0 0 0 0 Short-term investments 3,714 19 135 10 51 0 Cash equivalents 8,930 4 966 0 406 0 Reinsurance recoverables and deposit receivables (75) 0 0 0 224 224 Other assets 11 11 0 0 0 0 Separate account assets 171,812 1,094 0 0 0 0 Total assets $ 483,967 $ 10,056 $ 34,365 $ 959 $ 9,573 $ 233 Market risk benefit liabilities $ 5,467 $ 5,467 $ 0 $ 0 $ 0 $ 0 Policyholders’ account balances 7,752 7,752 0 0 0 0 Reinsurance and funds withheld payables (24) 0 0 0 514 0 Other liabilities(3) 4,174 1 1 0 0 0 Notes issued by consolidated variable interest entities (“VIEs”) 778 778 0 0 0 0 Total liabilities $ 18,147 $ 13,998 $ 1 $ 0 $ 514 $ 0 __________ (1) Level 3 assets expressed as a percentage of total assets measured at fair value on a recurring basis for PFI excluding Closed Block division and Funds Withheld, Closed Block division and Funds Withheld totaled 2.4%, 3.3% and 17.3%, respectively, as of December 31, 2024 and 2.1% , 2.8% and 2.4%, respectively, as of December 31, 2023.
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.
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 investing in products and solutions that meet the evolving needs of our customers.
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.
An increase in expected rate of return by 100 bps would result in a decrease in net periodic pension costs of $3 million; conversely, a decrease in expected rate of return by 100 bps would result in an increase in net periodic pension costs of $3 million.
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, 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 of U.S. dollar-equivalent equity.
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.
The allowance is calculated separately for commercial mortgage loans, agricultural mortgage loans, uncollateralized loans, other collateralized loans and residential property loans. For commercial mortgage and agricultural property loans, the allowance is calculated using an internally developed CECL model.
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.
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.
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- __________ * “NR” indicates not rated.
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- (P)A1 NR PRICOA Global Funding I: Long-term senior debt aa- AA- Aa3 AA- __________ * “NR” indicates not rated.
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.
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. A.M.
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.
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 and 2024. We expect that a continued level of higher interest rates will benefit our results over time.
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 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, investment 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.
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.
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.
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.
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 law.
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.
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 goodwill impairment charges in future periods.
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.
Private capital deployment represents the gross value of private capital invested in real estate debt and equity, and private credit and equity asset classes. Assets under management resulting from private capital deployment are primarily included in “Real estate” and “Private credit and other alternatives” in the “—Assets Under Management—by asset class table” above.
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.
We pursue our objective to optimize investment income yield for PFI excluding the Closed Block division and Funds Withheld 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.
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.
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 portfolios and to improve the overall diversification of the portfolios.
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.
We expect our differentiated capabilities and 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.
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.
Segment Results of Operations We analyze the performance of our segments and Corporate and Other operations using a measure of segment profitability called adjusted operating income. See “—Segment Measures” below for a discussion of adjusted operating income and its use as a measure of segment operating performance.
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; 53 Table of Contents • 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.
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; • 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 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.
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 December 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, 2024 through December 31, 2024.
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 reserves for future policy benefits of our Individual Retirement Strategies segment, which as of December 31, 2024, 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.
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.
Given the amount of plan assets as of December 31, 2023, 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.
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.
In addition, as of December 31, 2024, 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.
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.
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. • Retirement Strategies.
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.
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, 2024. The carrying value represents the capital that the business would require if operating as a standalone entity.
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.
Embedded derivatives included in “Policyholders’ account balances” are carried at fair value with changes in fair value included in “Realized investment gains (losses), net.” These assets and liabilities are valued using internally-developed models that require significant estimates and assumptions developed by management. Changes in these estimates and assumptions can have a significant impact on the results of our operations.
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.
The primary investment objectives of PFI excluding the Closed Block division and Funds Withheld 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.
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.
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, 2025, after which time the Common Stock dividend amount permitted to be paid without prior approval from the FSA can be determined.
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.
All else being equal, these loans are inherently riskier than those collateralized by properties that have already stabilized. As of December 31, 2024 and 2023, there were less than $1 million and $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.
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.
As of December 31, 2024 and 2023, 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.
(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.
(4) Represents the contribution to income (loss) of Divested and Run-off Businesses that have been or will be sold or exited, including businesses that have been placed in wind-down, but did not qualify for “discontinued operations” accounting treatment under U.S. GAAP. See “—Divested and Run-off Businesses” for additional information.
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.
We manage these risk exposures primarily through our investment strategies, inclusive of derivatives, and product design features, which include credit rate resetting subject to the minimum guaranteed interest rate as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals.
(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.
(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, 2024.
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.
Prudential of Japan and Gibraltar Life sell USD-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.
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.
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, 2023 methodology we employed to determine our discount rate for 2024.
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.
We manage this risk primarily through our investment strategies, inclusive of derivatives, and product design features, which include credit rate resetting subject to contractual minimums as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals.
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.
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 $0.9 billion, based on the level of statutory reserves related to the variable annuity business acquired from Allstate.
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.
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 $1.1 billion and $1.4 billion as of December 31, 2024 and 2023, respectively, and will be recognized in earnings within “Realized investment gains (losses), net” over time as these assets mature or are sold.
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.
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 129 yen per USD.
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.
As part of our investment management operations, we also make loans to our managed funds that are secured by equity commitments from investors or assets of the funds. “Other invested assets” also include certain assets in consolidated investment funds where the Company is deemed to exercise control over the funds.
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 continue to focus on making life insurance solutions more accessible to financial professionals, partners and 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.
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 reserves for future policy benefits of our Corporate and Other operations, which as of December 31, 2024, 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.
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 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.” 67 Table of Contents 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.
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.
In addition, an allowance for credit losses is measured each quarter for available-for-sale fixed maturity securities and for commercial mortgage and other loans. For additional information regarding our policies with respect to the measurement of credit losses, see Note 2 to the Consolidated Financial Statements.
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.
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 significant reason for the difference between the Company’s effective tax rate and the U.S. federal statutory rate.
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.
We seek to manage the impact of changes in interest rates on these contracts through asset/liability management, as discussed above. The $37 billion above relates to contracts with crediting rates that may be adjusted over the life of the contract, subject to guaranteed minimums.
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.
Gross account withdrawals for our domestic insurance operations’ products in 2024 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.
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.
The total GAAP liability includes the fair value of all index credits for the current term and all future projected renewals of the policy; however, only changes in the liability associated with the current term elected by the policyholder are included in adjusted operating income, while changes in the liability associated with all future projected renewals of the policy are excluded from adjusted operating income.
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 98 Table of Contents from market makers. Separate account assets included in Level 3 in our fair value hierarchy primarily include corporate securities and commercial mortgage loans.
Significant unobservable inputs used in their valuation included: issue specific spread adjustments, material non-public financial information, management judgment, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. Separate account assets included in Level 3 in our fair value hierarchy primarily include corporate securities and commercial mortgage loans.
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.
Although not yet filed, we expect the RBC ratios for PICA and our other domestic insurance subsidiaries as of December 31, 2024 to continue to be above target levels that would support “AA” financial strength ratings.
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.
Investment Results The following tables set forth the investment results of our general account apportioned between PFI excluding the Closed Block division and Funds Withheld, the Closed Block division and Funds Withheld, for the periods indicated. The yields are based on net investment income as reported under U.S.
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.
We utilized the entirety of this $1.0 billion share repurchase authorization in 2024. In December 2024, 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, 2025 through December 31, 2025.
(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.
(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 2024 to 2023 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 $659 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.
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 plan remains to allocate 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.
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.
Repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended.
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: A.M.
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: 128 Table of Contents A.M.
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.
Sales volume may increase or decrease prior to certain of these changes becoming effective, and then fluctuate in the other direction following such changes. 86 Table of Contents 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.
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.
Contracts or contract features reported in “Market risk benefit assets” and “Market risk benefit liabilities” and embedded 114 Table of Contents 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.
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.
Closed Block Division Substantially all of the $47 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.
PGIM continues to service these commercial loans; however, they are not included in assets under management.
PGIM continues to service these loans; however, they are not included in assets under management.
Effective April 2023, the Company entered into an agreement with AuguStar to reinsure approximately $10 billion of account values of PDI 80 Table of Contents 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.
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. i.
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.
Liquidity associated with other activities Hedging activities associated with Individual Retirement Strategies 123 Table of Contents 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.
(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.
(3) “ 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.
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.
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. 120 Table of Contents Liquidity is measured against internally-developed benchmarks that take into account the characteristics of both the asset portfolio and the liabilities that they support.
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.
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 $38 million.
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.
Our global investment management business, PGIM, is focused on maintaining strong investment performance while leveraging the scale of its approximately $1.375 trillion of assets under management and diversified global operations.
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.
The information below is for illustrative purposes and includes only the hypothetical impact on December 31, 2024 balances of changes in a single assumption and not changes in any combination of assumptions.
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.
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 2024 was 7.50% for our domestic pension plans and 6.75% for our other postretirement benefit plans.
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.
Our captive reinsurance companies assume business from affiliates only. To 117 Table of Contents 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.
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.
This robust stress testing examines the sensitivity of assets and liabilities and how they interact 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.
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.
Our Japanese operations have continued to invest in U.S. dollar (“USD”)-denominated assets supporting our USD-denominated product portfolio, which has now driven average reinvestment rates to exceed current average portfolio rates.
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 __________ (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.
December 31, 2024 2023 (in billions) Foreign currency hedging instruments: USD-denominated assets associated with yen-based entities(1) $ 6.1 $ 7.2 Dual currency and synthetic dual currency investments(2) 0.3 0.3 Total foreign currency hedges $ 6.4 $ 7.5 __________ (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.
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.
At December 31, 2024, the sensitivity of our domestic and foreign pension and postretirement obligations to a 100 basis point change in discount rate was as follows.
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.
The increase in investment income after investment expenses yield attributable to the Japanese insurance operations’ portfolio for 2024 compared to 2023 was primarily the result of higher fixed income reinvestment rates.
(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.
(2) As of December 31, 2024, 2023, and 2022, the total notional amounts of these forward currency contracts within our Corporate and Other operations were $0.8 billion, $0.8 billion and $0.7 billion, respectively. Impact of products denominated in non-local currencies on U.S.
Given the amount of pension and postretirement obligations as of December 31, 2022, the beginning of the measurement 68 Table of Contents 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.
Given the amount of pension and postretirement obligations as of December 31, 2023, the beginning of the measurement 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.
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.
Included in the table above are “Related charges and 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 and (3) charges related to “Realized investment gains (losses), net,” which are excluded from adjusted operating income.
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.
As part of this review, we may update these assumptions and make refinements to our models 63 Table of Contents based upon emerging experience, future expectations and other data, including any observable market data we feel is indicative of a long-term trend.
(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) Represents the change in fair value of the derivatives utilized to hedge potential claims associated with our variable annuity living and death benefit guarantees.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe estimated changes in fair values do not include separate account assets. 139 Table of Contents As of December 31, 2023 As of December 31, 2022 Notional Fair Value Hypothetical Change in Fair Value Notional Fair Value Hypothetical Change in Fair Value (in millions) Financial assets with interest rate risk: Fixed maturities(1) $ 327,000 $ (31,628) $ 316,070 $ (30,524) Commercial mortgage and other loans 56,171 (2,275) 52,479 (2,300) Derivatives with interest rate risk: Swaps $ 276,414 (11,980) (3,768) $ 268,764 (8,565) (3,631) Futures 11,120 (20) (460) 19,452 (12) (309) Options 85,760 (777) (166) 49,351 (938) 241 Forwards 36,112 (116) (125) 38,899 (581) (185) Synthetic GICs 78,009 0 (9) 84,338 0 (6) Indexed universal life contracts (1,348) 169 (986) 190 Indexed annuity contracts (6,404) (645) (2,506) (457) Total embedded derivatives(2) (7,752) (476) (3,492) (267) Financial liabilities with interest rate risk(3): Short-term and long-term debt 18,886 3,026 19,441 3,091 Policyholders’ account balances—investment contracts 68,883 2,786 66,602 1,944 Insurance liabilities with interest rate risk: Benefit reserves (traditional and limited-payment contracts)(4) 192,302 25,711 182,304 28,942 Market risk benefits(5) 3,486 2,113 5,064 2,440 Net estimated potential loss $ (5,271) $ (564) __________ (1) Includes assets classified as “Fixed maturities, available-for-sale, at fair value,” “Assets supporting experience-rated contractholder liabilities, at fair value” and “Fixed maturities, trading, at fair value.” Approximately $316 billion and $308 billion as of December 31, 2023 and 2022, respectively, of fixed maturities are classified as available-for-sale.
Biggest changeThe estimated changes in fair values do not include separate account assets. 133 Table of Contents As of December 31, 2024 As of December 31, 2023 Notional Fair Value Hypothetical Change in Fair Value Notional Fair Value Hypothetical Change in Fair Value (in millions) Financial assets with interest rate risk(1): Fixed maturities(2) $ 309,562 $ (26,593) $ 318,108 $ (30,804) Commercial mortgage and other loans 58,932 (2,148) 56,148 (2,275) Derivatives with interest rate risk: Swaps $ 285,786 (11,014) (2,428) $ 276,414 (11,980) (3,768) Futures 11,792 (16) (369) 11,120 (20) (460) Options 139,693 (436) 20 85,760 (777) (166) Forwards 35,144 268 (112) 36,112 (116) (125) Synthetic GICs 76,416 0 (1) 78,009 0 (9) Indexed universal life contracts (1,434) 179 (1,348) 169 Indexed annuity contracts (11,312) 137 (6,404) (645) Total embedded derivatives(3) (12,746) 316 (7,752) (476) Financial liabilities with interest rate risk(4): Short-term and long-term debt 19,092 2,730 18,886 3,026 Policyholders’ account balances—investment contracts 74,871 3,048 68,883 2,786 Insurance liabilities with interest rate risk: Benefit reserves (traditional and limited-payment contracts)(5) 186,845 21,294 192,302 25,711 Market risk benefits(6) 2,124 1,602 3,486 2,113 Net estimated potential loss $ (2,641) $ (4,447) __________ (1) Excludes financial assets that are considered Funds Withheld, where the economic benefits and investment risk associated with the Funds Withheld assets ultimately inure to the reinsurer.
The following table sets forth the net estimated potential loss in fair value from such a change as of December 31, 2023 and 2022. While these scenarios are for illustrative purposes only and do not reflect our expectations regarding future changes in foreign exchange markets, they represent reasonably possible near-term hypothetical changes that illustrate the potential impact of such events.
The following table sets forth the net estimated potential loss in fair value from such a change as of December 31, 2024 and 2023. While these scenarios are for illustrative purposes only and do not reflect our expectations regarding future changes in foreign exchange markets, they represent reasonably possible near-term hypothetical changes that illustrate the potential impact of such events.
The following table sets forth the net estimated potential loss in fair value on these financial instruments from a hypothetical 100 basis point upward shift as of December 31, 2023 and 2022. This table is presented on a gross basis and excludes offsetting impacts to certain insurance liabilities that are not considered financial liabilities under U.S. GAAP.
The following table sets forth the net estimated potential loss in fair value on these financial instruments from a hypothetical 100 basis point upward shift as of December 31, 2024 and 2023. This table is presented on a gross basis and excludes offsetting impacts to certain insurance liabilities that are not considered financial liabilities under U.S. GAAP.
For our domestic general account investment portfolios supporting our U.S. insurance operations and other proprietary investment portfolios, our foreign currency exchange rate risk arises primarily from investments that are denominated in foreign currencies. We manage this risk by hedging substantially all domestic foreign currency denominated fixed income investments into U.S. dollars.
For our domestic general account investment portfolios supporting our U.S. insurance operations and other proprietary investment portfolios, our foreign currency exchange rate risk arises primarily from investments that are denominated in foreign currencies. We manage this risk by hedging substantially all domestic foreign currency denominated fixed income investments into USD.
For additional information regarding our risk management strategies, including our ALM strategy and product design features, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations by Segment—U.S. Businesses—Retirement Strategies” above. 143 Table of Contents
For additional information regarding our risk management strategies, including our ALM strategy and product design features, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations by Segment—U.S. Businesses—Retirement Strategies” above. 137 Table of Contents
Changes in fair value of fixed maturities classified as available-for-sale are included in AOCI. (2) Excludes any offsetting impact of derivative instruments purchased to hedge changes in the embedded derivatives. Amounts reported net of third-party reinsurance.
Changes in fair value of fixed maturities classified as available-for-sale are included in AOCI. (3) Excludes any offsetting impact of derivative instruments purchased to hedge changes in the embedded derivatives. Amounts reported net of third-party reinsurance.
We estimate our equity risk from a hypothetical 10% decline in equity benchmark market levels. The following table sets forth the net estimated potential loss in fair value from such a decline as of December 31, 2023 and 2022.
We estimate our equity risk from a hypothetical 10% decline in equity benchmark market levels. The following table sets forth the net estimated potential loss in fair value from such a decline as of December 31, 2024 and 2023.
We manage our exposure to certain risks driven by fluctuations in capital markets primarily through a combination of product design features, such as an automatic rebalancing feature and/or inclusion in our ALM strategy. In addition, we may also utilize external reinsurance as a form of addi tional risk mitigatio n.
We manage our exposure to certain risks driven by fluctuations in capital markets primarily through a combination of product design features, such as an automatic rebalancing feature and/or 136 Table of Contents inclusion in our ALM strategy. In addition, we may also utilize external reinsurance as a form of addi tional risk mitigatio n.
(4) Changes in fair value of benefit reserves (traditional and limited-payment contracts) are included in AOCI. (5) Amounts reported net of third-party reinsurance. Under U.S.
(5) Changes in fair value of benefit reserves (traditional and limited-payment contracts) are included in AOCI. (6) Amounts reported net of third-party reinsurance. Under U.S.
For additional information regarding our overall risk management framework and governance structure, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” above. 138 Table of Contents Market Risk Mitigation Risk mitigation takes three primary forms: • Asset/Liability Management: Managing assets to liability-based measures.
For additional information regarding our overall risk management framework and governance structure, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” above. Market Risk Mitigation Risk mitigation takes three primary forms: • Asset/Liability Management: Managing assets to liability-based measures.
Additionally, changes in equity prices may impact other items including, but not limited to, the following: 140 Table of Contents • Asset-based fees earned on assets under management or contractholder account value; and • Net exposure to the guarantees provided under certain products. We manage equity price risk against benchmarks in respective markets.
Additionally, changes in equity prices may impact other items including, but not limited to, the following: • Asset-based fees earned on assets under management or contractholder account value; and • Net exposure to the guarantees provided under certain products. We manage equity price risk against benchmarks in respective markets.
For our international insurance operations, changes in foreign currency exchange rates create risk that we may experience volatility in the U.S. dollar-equivalent earnings and equity of these operations. We actively manage this risk through various hedging strategies, including the use of foreign currency hedges and through holding U.S. dollar-denominated securities in the investment portfolios of certain of these operations.
For our international insurance operations, changes in foreign currency exchange rates create risk that we may experience volatility in the USD-equivalent earnings and equity of these operations. We actively manage this risk through various hedging strategies, including the use of foreign currency hedges and through holding USD-denominated securities in the investment portfolios of certain of these operations.
Changes in equity prices create risk that the resulting changes in asset values will differ from the changes in the value of the liabilities relating to the underlying or hedged products.
Changes in equity prices create risk that the resulting changes in asset values will differ from the 134 Table of Contents changes in the value of the liabilities relating to the underlying or hedged products.
Our guaranteed living and death benefit features on variable annuities are accounted for as MRBs and recorded at fair value. The 142 Table of Contents market risk sensitivities associated with U.S.
Our guaranteed living and death benefit features on variable annuities are accounted for as MRBs and recorded at fair value. The market risk sensitivities associated with U.S.
(3) Excludes approximately $155 billion and $144 billion as of December 31, 2023 and 2022, respectively, of certain insurance reserve and deposit liabilities that are not considered financial liabilities. We believe that the interest rate sensitivities of these insurance liabilities would serve as an offset to the net interest rate risk of the financial assets and liabilities, including investment contracts.
(4) Excludes approximately $169 billion and $155 billion as of December 31, 2024 and 2023, respectively, of certain insurance reserve and deposit liabilities that are not considered financial liabilities. We believe that the interest rate sensitivities of these insurance liabilities would serve as an offset to the net interest rate risk of the financial assets and liabilities, including investment contracts.
As of December 31, 2023 As of December 31, 2022 Fair Value Hypothetical Change in Fair Value Fair Value Hypothetical Change in Fair Value (in millions) Unhedged portion of equity investment in international subsidiaries and foreign currency denominated investments in domestic general account portfolio $ 3,808 $ 381 $ 3,797 $ 380 For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—General Account Investments—Portfolio Composition” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations by Segment—International Businesses” above.
As of December 31, 2024 As of December 31, 2023 Fair Value Hypothetical Change in Fair Value Fair Value Hypothetical Change in Fair Value (in millions) Unhedged portion of equity investment in international subsidiaries and foreign currency denominated investments in domestic general account portfolio $ 2,859 $ 286 $ 3,808 $ 381 For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—General Account Investments—Portfolio Composition” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations by Segment—International Businesses” above.
This volatility has been mitigated by disaggregating the U.S. and Australian dollar-denominated businesses in Gibraltar Life into separate divisions, each with its own functional currency that aligns with the underlying products and investments.
This volatility has been mitigated by disaggregating the USD and AUD-denominated businesses in Gibraltar 135 Table of Contents Life into separate divisions, each with its own functional currency that aligns with the underlying products and investments.
As of December 31, 2023 As of December 31, 2022 Notional Fair Value Hypothetical Change in Fair Value Notional Fair Value Hypothetical Change in Fair Value (in millions) Equity securities(1) $ 10,282 $ (1,028) $ 9,049 $ (905) Equity-based derivatives(2) $ 61,701 (441) (679) $ 51,501 (961) (73) Indexed universal life contracts (1,348) 21 (986) 24 Indexed annuity contracts (6,404) 1,388 (2,506) 841 Total embedded derivatives(2)(3) (7,752) 1,409 (3,492) 865 Market risk benefits(4) 3,486 (1,069) 5,064 (1,026) Net estimated potential loss $ (1,367) $ (1,139) __________ (1) Includes equity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Equity securities, at fair value.” (2) The notional and fair value of equity-based derivatives and the fair value of embedded derivatives are also reflected in amounts under “Market Risk Related to Interest Rates” above, and are not cumulative.
As of December 31, 2024 As of December 31, 2023 Notional Fair Value Hypothetical Change in Fair Value Notional Fair Value Hypothetical Change in Fair Value (in millions) Equity securities(1) $ 12,298 $ (1,230) $ 10,282 $ (1,028) Equity-based derivatives(2) $ 116,253 720 (1,538) $ 61,701 (441) (679) Indexed universal life contracts (1,434) 23 (1,348) 21 Indexed annuity contracts (11,312) 2,278 (6,404) 1,388 Total embedded derivatives(2)(3) (12,746) 2,301 (7,752) 1,409 Market risk benefits(4) 2,124 (848) 3,486 (1,069) Net estimated potential loss $ (1,315) $ (1,367) __________ (1) Includes equity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Equity securities, at fair value.” (2) The notional and fair value of equity-based derivatives and the fair value of embedded derivatives are also reflected in amounts under “Market Risk Related to Interest Rates” above, and are not cumulative.
For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of Foreign Currency Exchange Rates—Impact of products denominated in non-local currencies on U.S. GAAP earnings” above.
For certain of our international insurance operations outside of Japan, we elect to not hedge the risk of changes in our equity investments due to foreign exchange rate movements. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of Foreign Currency Exchange Rates—Impact of products denominated in non-local currencies on U.S. GAAP earnings” above.
Market Risk Related to Interest Rates We perform liability-driven investing and engage in careful asset/liability management. Asset/liability mismatches create the risk that changes in liability values will differ from the changes in the value of the related assets.
Asset/liability mismatches create the risk that changes in liability values will differ from the changes in the value of the related assets.
For example, for our variable annuities business , potential living benefit claims resulting from more severe market conditions are hedged using derivative instruments. • Management of portfolio concentration risk. For example, ongoing monitoring and management at the enterprise level of key rate, currency and other concentration risks support diversification efforts to mitigate exposure to individual markets and sources of risk.
For example, for our variable annuities business , potential living benefit claims resulting from more severe market conditions are hedged using derivative instruments. • Management of portfolio concentration risk.
Removed
As a result of the adoption of ASU 2018-12 in the first quarter of 2023, the following tables have been updated to reflect the current impacts on hypothetical changes in fair value based on the new accounting standard.
Added
For example, ongoing monitoring and management at the enterprise level of key rate, currency and other concentration risks support diversification efforts to mitigate exposure to individual markets and sources of risk. 132 Table of Contents Market Risk Related to Interest Rates We perform liability-driven investing and engage in careful asset/liability management.
Removed
For certain of our international insurance operations outside of Japan, we elect to not hedge the risk of changes in 141 Table of Contents our equity investments due to foreign exchange rate movements.
Added
Prior period amounts have been updated to conform to current period presentation. (2) Includes assets classified as “Fixed maturities, available-for-sale, at fair value,” “Assets supporting experience-rated contractholder liabilities, at fair value” and “Fixed maturities, trading, at fair value.” Approximately $304 billion and $310 billion as of December 31, 2024 and 2023, respectively, of fixed maturities are classified as available-for-sale.

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