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Consolidated Financial Statements – Form 8-K

Prudential Financial, Inc. (PRU)
As Adjusted for the Adoption of Long-Duration Targeted Improvements
Quarterly Financial Supplement
Fourth Quarter 2022
Reference is made to Prudential Financial, Inc.'s (PFI) filings with the Securities and Exchange Commission for general information, and consolidated financial information. All financial information in this document is unaudited.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
TABLE OF CONTENTS
Page
Individual Retirement Strategies Sales Results and Account Values
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
Effective January 1, 2023, Prudential Financial, Inc. (the "Company") adopted Accounting Standards Update 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts ("ASU 2018-12" or "LDTI"), which provides new authoritative guidance impacting the accounting and disclosure requirements for long-duration insurance and investment contracts issued by the Company. The Company adopted this guidance using the modified retrospective transition method, where permitted, for changes to the liability for future policy benefits and deferred policy acquisition costs and related balances, and the retrospective transition method, as required, for market risk benefits. The Company applied this guidance as of the transition date of January 1, 2021, and retrospectively adjusted prior period amounts for years 2021 and 2022 to reflect the new guidance.
The impacts to the 2021 and 2022 data reflected in this Quarterly Financial Supplement are being voluntarily provided and are for comparative purposes only. Updates to the original Quarterly Financial Supplement furnished as part of the Company's fourth quarter 2022 earnings materials are highlighted in yellow herein.
This revised Quarterly Financial Supplement for fourth quarter 2022 also reflects two segment reporting changes made by the Company effective January 1, 2023, which do not impact its consolidated financial statements in any of the periods presented:
• Assurance IQ no longer represents a separately reportable segment and is now included within the Company's Corporate and Other operations.
• Prudential Advisors, the Company's proprietary nationwide distribution business which was previously included in the Company's Individual Life segment is now included within the Company's Corporate and Other operations.
The historical results presented herein have been updated to reflect this new presentation.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
FINANCIAL METRICS SUMMARY
(in millions, except per share and retuon equity data)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Earnings
Adjusted operating income (loss) before income taxes:
PGIM 188 206 219 230 1,643 843 -49%
U.S. Businesses 813 573 615 710 3,667 2,711 -26%
International Businesses 951 692 748 814 3,732 3,205 -14%
Corporate and Other (416) (321) (415) (525) (1,810) (1,677) 7%
Total adjusted operating income before income taxes 1,536 1,150 1,167 1,229 7,232 5,082 -30%
Income taxes, applicable to adjusted operating income 345 255 271 297 1,529 1,168 -24%
After-tax adjusted operating income 1,191 895 896 932 5,703 3,914 -31%
Income (loss) attributable to Prudential Financial, Inc. (493) (1,010) (92) (52) 8,868 (1,647) -119%
Retuon Equity
Operating Retuon Average Equity (based on adjusted operating income) (1) 12.0 % 9.4 % 9.8 % 10.5 % 15.1 % 10.4 %
Retuon Average Equity (based on net income (loss)) -6.7 % -13.3 % -1.2 % -0.7 % 34.1 % -5.4 %
Distributions to Shareholders
Dividends paid 462 457 454 449 1,821 1,822 -%
Share repurchases 375 375 375 375 2,500 1,500 -40%
Total capital returned 837 832 829 824 4,321 3,322 -23%
Per Share Data
Net income (loss) (diluted) (2) (1.33) (2.71) (0.26) (0.16) 22.40 (4.49) -120%
Adjusted Operating Income (diluted) 3.10 2.34 2.37 2.49 14.40 10.31 -28%
Shareholder dividends 1.20 1.20 1.20 1.20 4.60 4.80 4%
Book value 76.77 82.92 82.83 82.48 77.12 82.48 7%
Book value excluding AOCI and FX (3) 102.09 97.91 96.41 94.69 104.89 94.69 -10%
Shares Outstanding
Weighted average number of common shares (basic) 376.1 374.4 371.0 367.6 387.2 372.3 -4%
Weighted average number of common shares (diluted) 379.1 377.1 373.1 369.4 390.1 374.7 -4%
End of period common shares (basic) 375.7 372.6 369.1 366.0 376.3 366.0 -3%
End of period common shares (diluted) 381.5 377.9 373.8 370.9 383.7 370.9 -3%
__________
(1) Operating Retuon Average Equity (based on adjusted operating income) is a non-GAAP measure and represents adjusted operating income after-tax, annualized for interim periods, divided by average Prudential Financial, Inc. equity excluding accumulated other comprehensive income and adjusted to remove amounts included for foreign currency exchange rate remeasurement as described on page 3.
(2) For the three months ended December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022 and for the year ended December 31, 2022 weighted average shares for basic earnings per share is used for calculating diluted earnings per share because dilutive shares and dilutive earnings per share are not applicable when a net loss is reported. As a result of the net loss attributable to Prudential Financial available to holders of Common Stock for the three months ended December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, and for the year ended December 31, 2022 all potential stock options and compensation programs were considered antidilutive.
(3) AOCI represents accumulated other comprehensive income and FX represents the remeasurement of foreign currency. See page 3 for further details.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
FINANCIAL HIGHLIGHTS
(in millions, except per share data)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
Earnings per share of Common Stock (diluted):
After-tax adjusted operating income 3.10 2.34 2.37 2.49 14.40 10.31
Reconciling items:
Realized investment gains (losses), net, and related charges and adjustments (4.54) (6.47) (3.33) (2.50) 0.67 (16.88)
Change in value of market risk benefits, net of related hedging gains (losses) (0.80) (1.88) (0.16) 1.70 1.70 9.13 (1.18)
Market experience updates 0.32 0.98 0.34 0.07 0.05 1.71
Divested and Run-off Businesses:
Closed Block division 0.07 0.04 (0.06) (0.11) 0.41 (0.05)
Other Divested and Run-off Businesses (0.71) 1.32 (0.14) (0.08) 1.97 0.39
Difference in earnings allocated to participating unvested share-based payment awards 0.03 0.01 0.02 0.02 (0.12) 0.07
Other adjustments (1) (0.04) - (0.03) (2.47) (2.85) (2.51)
Total reconciling items, before income taxes (5.67) (6.00) (3.36) (3.37) 9.26 (18.45)
Income taxes, not applicable to adjusted operating income (1.24) (0.95) (0.73) (0.72) 1.26 (3.65)
Total reconciling items, after income taxes (4.43) (5.05) (2.63) (2.65) 8.00 (14.80)
Net income (loss) attributable to Prudential Financial, Inc. (1.33) (2.71) (0.26) (0.16) 22.40 (4.49)
Weighted average number of outstanding common shares (basic) 376.1 374.4 371.0 367.6 387.2 372.3
Weighted average number of outstanding common shares (diluted) 379.1 377.1 373.1 369.4 390.1 374.7
For earnings per share of Common Stock calculation:
Net income (loss) attributable to Prudential Financial, Inc. (493) (1,010) (92) (52) 8,868 (1,647)
Less: Earnings allocated to participating unvested share-based payment awards 7 6 6 6 131 25
Net income (loss) attributable to Prudential Financial, Inc. for earnings per share of Common Stock calculation (500) (1,016) (98) (58) 8,737 (1,672)
After-tax adjusted operating income 1,191 895 896 932 5,703 3,914
Less: Earnings allocated to participating unvested share-based payment awards 17 11 12 12 85 52
After-tax adjusted operating income for earnings per share of Common Stock calculation 1,174 884 884 920 5,618 3,862
___________
(1) Represents adjustments not included in the above reconciling items, including goodwill impairments that resulted in charges in the fourth quarter of December 31, 2022 and years ended December 31, 2022 and 2021 related to Assurance IQ. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
OTHER FINANCIAL HIGHLIGHTS
(in millions, except per share data)
2021 2022
4Q 1Q 2Q 3Q 4Q
Capitalization Data (1):
Senior Debt:
Short-term Debt 722 544 558 767 775
Long-term Debt 11,003 11,082 11,008 10,810 10,814
Junior Subordinated Long-term Debt 7,619 8,607 8,604 9,088 9,094
Prudential Financial, Inc. Equity:
Including accumulated other comprehensive income 29,590 29,289 31,334 30,962 30,593
Excluding accumulated other comprehensive income (2) 39,083 37,842 36,037 35,192 34,399
Amount included above for remeasurement of foreign currency (3) (1,164) (1,107) (962) (847) (723)
Excluding accumulated other comprehensive income and adjusted to remove amount
included for remeasurement of foreign currency (3) 40,247 38,949 36,999 36,039 35,122
Book Value per Share of Common Stock:
Including accumulated other comprehensive income 77.12 76.77 82.92 82.83 82.48
Excluding accumulated other comprehensive income (2) 101.86 99.19 95.36 94.15 92.74
Amount included above for remeasurement of foreign currency (3) (3.03) (2.90) (2.55) (2.26) (1.95)
Excluding accumulated other comprehensive income and adjusted to remove amount
included for remeasurement of foreign currency (3) 104.89 102.09 97.91 96.41 94.69
End of period number of common shares (diluted) 383.7 381.5 377.9 373.8 370.9
Common Stock Price Range (based on closing price):
High 114.00 121.38 121.06 105.49 110.21
Low 100.05 102.05 91.33 85.78 89.19
Close 108.24 118.17 95.68 85.78 99.46
Common Stock market capitalization (1) 40,731 44,396 35,650 31,661 36,402
__________
(1) As of end of period.
(2) Foreign currency translation adjustments and the cumulative impact of foreign currency exchange rate remeasurement, except for those items remeasured through net income (loss), are a component of accumulated other comprehensive income.
(3) Includes the cumulative impact of net gains and losses resulting from foreign currency exchange rate remeasurement and associated realized investment gains and losses included in net income (loss) and currency translation adjustments corresponding to realized investment gains and losses.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
OPERATIONS HIGHLIGHTS
2021 2022
4Q 1Q 2Q 3Q 4Q
Assets Under Management and Administration (in billions) (1)(2):
PGIM:
Institutional customers 629.4 593.7 560.7 536.3 549.2
Retail customers 401.4 364.7 314.3 298.1 299.6
General account 493.0 456.2 382.4 371.8 379.6
Total PGIM 1,523.8 1,414.6 1,257.4 1,206.2 1,228.4
U.S. Businesses 163.1 151.9 132.2 123.4 126.7
International Businesses 12.8 13.8 13.6 13.8 16.1
Corporate and Other 42.6 39.8 6.4 6.1 6.1
Total assets under management 1,742.3 1,620.1 1,409.6 1,349.5 1,377.3
Assets under administration 382.5 370.7 145.9 139.4 157.4
Total assets under management and administration 2,124.8 1,990.8 1,555.5 1,488.9 1,534.7
Distribution Representatives (1):
Prudential Advisors 2,846 2,835 2,817 2,774 2,616
International Life Planners 6,024 6,056 5,924 5,972 5,924
Gibraltar Life Consultants 7,100 7,022 6,910 6,861 6,821
Prudential Advisor Productivity (in thousands) 106 76 83 78 108
__________
(1) As of end of period.
(2) At fair market value.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINED STATEMENTS OF OPERATIONS
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 7,149 5,995 15,322 5,904 31,493 34,370 9%
Policy charges and fee income 1,223 869 1,083 1,100 5,194 4,275 -18%
Net investment income 3,413 3,241 3,047 3,483 14,160 13,184 -7%
Asset management fees, commissions and other income 1,517 2,852 1,628 1,719 7,385 7,716 4%
Total revenues 13,302 12,957 21,080 12,206 58,232 59,545 2%
Benefits and expenses (1):
Insurance and annuity benefits 7,963 7,135 15,925 6,614 34,561 37,637 9%
Change in estimates of liability for future policy benefits (67) 909 59 50 14 951 6693%
Interest credited to policyholders' account balances 645 654 628 735 2,646 2,662 1%
Interest expense 364 401 407 417 1,474 1,589 8%
Deferral of acquisition costs (572) (513) (531) (539) (2,523) (2,155) 15%
Amortization of acquisition costs 353 345 355 328 1,420 1,381 -3%
General and administrative expenses 3,080 2,876 3,070 3,372 13,408 12,398 -8%
Total benefits and expenses 11,766 11,807 19,913 10,977 51,000 54,463 7%
Adjusted operating income before income taxes 1,536 1,150 1,167 1,229 7,232 5,082 -30%
Income taxes, applicable to adjusted operating income 345 255 271 297 1,529 1,168 -24%
After-tax adjusted operating income 1,191 895 896 932 5,703 3,914 -31%
Reconciling items:
Realized investment gains (losses), net, and related charges and adjustments (1,721) (2,438) (1,243) (924) 260 (6,326) -2533%
Change in value of market risk benefits, net of related hedging gains (losses) (304) (710) (58) 629 3,562 (443) -112%
Market experience updates 121 371 125 25 20 642 3110%
Divested and Run-off Businesses:
Closed Block division 27 16 (21) (40) 158 (18) -111%
Other Divested and Run-off Businesses (271) 499 (53) (29) 769 146 -81%
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests (29) 44 (33) (18) (54) (36) 33%
Other adjustments (2) (17) - (10) (912) (1,112) (939) 16%
Total reconciling items, before income taxes (2,194) (2,218) (1,293) (1,269) 3,603 (6,974) -294%
Income taxes, not applicable to adjusted operating income (489) (374) (282) (302) 466 (1,447) -411%
Total reconciling items, after income taxes (1,705) (1,844) (1,011) (967) 3,137 (5,527) -276%
Income (loss) before income taxes and equity in earnings of operating joint ventures (658) (1,068) (126) (40) 10,835 (1,892) -117%
Income tax expense (benefit) (144) (119) (11) (5) 1,995 (279) -114%
Income (loss) before equity in earnings of operating joint ventures (514) (949) (115) (35) 8,840 (1,613) -118%
Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests 21 (61) 23 (17) 28 (34) -221%
Income (loss) attributable to Prudential Financial, Inc. (493) (1,010) (92) (52) 8,868 (1,647) -119%
Earnings attributable to noncontrolling interests (13) (7) (16) 8 70 (28) -140%
Net income (loss) (506) (1,017) (108) (44) 8,938 (1,675) -119%
Less: Income (loss) attributable to noncontrolling interests (13) (7) (16) 8 70 (28) -140%
Net income (loss) attributable to Prudential Financial, Inc. (493) (1,010) (92) (52) 8,868 (1,647) -119%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments; investment gains, net of losses, on assets supporting experience-rated contractholder liabilities, change in value of market risk benefits, net of related hedging gains (losses), revenues of Divested and Run-off Businesses, and changes in the fair value of contingent consideration associated with the Assurance IQ acquisition, and include revenues representing equity in earnings of operating joint ventures other than those classified as Divested and Run-off Businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses; change in experience-rated contractholder liabilities due to asset value changes, benefits and expenses of Divested and Run-off Businesses, and certain components of acquisitions, including the Assurance IQ acquisition which are recognized as compensation expense over the requisite service periods and include charges for income attributable to noncontrolling interests. Revenues and Benefits and expenses exclude market experience updates. See pages 36, 37, 38 and 39 for reconciliation.
(2) Represents adjustments not included in the above reconciling items, including goodwill impairments related to Assurance IQ that resulted in charges of $903 million pre-tax and $713 million after-tax in the fourth quarter and year ended December 31, 2022, and $1,060 million pre-tax and $837 million after-tax in the year ended December 31, 2021. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
CONSOLIDATED BALANCE SHEETS
(in millions)
12/31/2021 03/31/2022 06/30/2022 09/30/2022 12/31/2022
Assets:
Investments:
Fixed maturities, available-for-sale, at fair value
(net of allowance for credit losses $114; $192; $109; $151; $138) (amortized cost $333,459; $332,640; $319,003; $325,957; $335,447) 372,410 344,957 306,655 295,841 307,719
Fixed maturities, held-to-maturity, at amortized cost, net of allowance for credit losses
(net of allowance for credit losses $5; $4; $3; $2; $2) (fair value $1,803; $1,679; $1,475; $1,371; $1,455) 1,514 1,432 1,280 1,199 1,296
Fixed maturities, trading, at fair value
(amortized cost $8,741; $8,262; $7,354; $7,268; $7,303) 8,823 7,724 6,272 5,690 5,951
Assets supporting experience-rated contractholder liabilities, at fair value 3,358 3,184 2,785 2,580 2,844
Equity securities, at fair value
(cost $5,815; $4,872; $4,502; $5,378; $5,306) 8,574 7,397 6,402 6,882 7,150
Commercial mortgage and other loans
(net of allowance for credit losses $119; $121; $196; $218; $203) 58,666 59,304 56,840 56,896 56,745
Policy loans 10,386 10,207 10,024 9,920 10,046
Other invested assets
(net of allowance for credit losses $2; $2; $1; $1; $1) 21,833 21,540 21,310 21,050 21,099
Short-term investments
(net of allowance for credit losses $0; $0; $0; $5; $6) 6,635 4,592 6,828 5,181 4,591
Total investments 492,199 460,337 418,396 405,239 417,441
Cash and cash equivalents 12,888 14,086 14,359 20,104 17,251
Accrued investment income 2,855 2,838 2,798 2,888 3,012
Deferred policy acquisition costs 19,763 19,868 20,092 20,038 20,546
Value of business acquired 778 723 590 560 621
Market risk benefits asset 944 920 869 806 800
Income tax assets 670 135 - - -
Other assets
(net of allowance for credit losses $19; $20; $21; $21; $26) (1) 165,222 152,932 36,158 32,912 31,679
Separate account assets 246,145 229,621 205,613 194,525 197,679
Total assets 941,464 881,460 698,875 677,072 689,029
Liabilities:
Future policy benefits 324,942 297,793 266,090 255,135 261,773
Policyholders' account balances 123,042 122,690 130,408 131,533 135,624
Market risk benefits liability 10,175 8,079 7,293 6,488 5,864
Securities sold under agreements to repurchase 10,185 9,085 8,006 8,223 6,589
Cash collateral for loaned securities 4,251 4,771 5,741 5,865 6,100
Income tax liabilities - - 70 403 277
Senior short-term debt 722 544 558 767 775
Senior long-term debt 11,003 11,082 11,008 10,810 10,814
Junior subordinated long-term debt 7,619 8,607 8,604 9,088 9,094
Other liabilities
(net of allowance for credit losses $21; $19; $18; $17; $18) (1) 172,784 158,939 23,235 22,386 22,518
Notes issued by consolidated variable interest entities 274 260 232 218 374
Separate account liabilities 246,145 229,621 205,613 194,525 197,679
Total liabilities 911,142 851,471 666,858 645,441 657,481
Equity:
Accumulated other comprehensive loss (9,493) (8,553) (4,703) (4,230) (3,806)
Other equity 39,083 37,842 36,037 35,192 34,399
Total Prudential Financial, Inc. equity 29,590 29,289 31,334 30,962 30,593
Noncontrolling interests 732 700 683 669 955
Total equity 30,322 29,989 32,017 31,631 31,548
Total liabilities and equity 941,464 881,460 698,875 677,072 689,029
__________
(1) December 31, 2021 and March 31, 2022 balances include the carrying amounts of Assets and Liabilities "held-for-sale" related to the April 2022 dispositions of the Full Service Retirement Business and a portion of Individual Retirement Strategies' Traditional Variable Annuity Block of Business.
Page 6
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINING BALANCE SHEETS
(in millions)
As of December 31, 2022
Consolidated PFI Closed Block Division PFI Excluding Closed Block Division PGIM U.S. Businesses International Businesses Corporate and Other
Assets:
Total investments 417,441 48,858 368,583 3,811 179,299 165,831 19,642
Deferred policy acquisition costs 20,546 181 20,365 - 11,809 8,941 (385)
Other assets 53,363 1,895 51,468 4,498 27,009 12,019 7,942
Separate account assets 197,679 - 197,679 40,055 161,267 - (3,643)
Total assets 689,029 50,934 638,095 48,364 379,384 186,791 23,556
Liabilities:
Future policy benefits 261,773 44,414 217,359 - 99,948 109,018 8,393
Policyholders' account balances 135,624 4,606 131,018 - 75,928 46,903 8,187
Debt 20,683 - 20,683 1,726 7,850 84 11,023
Other liabilities 41,722 3,479 38,243 2,813 20,238 11,497 3,695
Separate account liabilities 197,679 - 197,679 40,055 161,267 - (3,643)
Total liabilities 657,481 52,499 604,982 44,594 365,231 167,502 27,655
Equity:
Accumulated other comprehensive income (loss) (3,806) (214) (3,592) (145) (3,034) 1,590 (2,003)
Other equity 34,399 (1,363) 35,762 2,613 17,103 17,668 (1,622)
Total Prudential Financial, Inc. equity 30,593 (1,577) 32,170 2,468 14,069 19,258 (3,625)
Noncontrolling interests 955 12 943 1,302 84 31 (474)
Total equity 31,548 (1,565) 33,113 3,770 14,153 19,289 (4,099)
Total liabilities and equity 689,029 50,934 638,095 48,364 379,384 186,791 23,556
As of December 31, 2021
Consolidated PFI Closed Block Division PFI Excluding Closed Block Division PGIM U.S. Businesses International Businesses Corporate and Other
Assets:
Total investments 492,199 58,800 433,399 4,808 191,754 204,475 32,362
Deferred policy acquisition costs 19,763 196 19,567 - 11,127 8,821 (381)
Other assets (1) 183,357 991 182,366 4,828 69,701 10,697 97,140
Separate account assets 246,145 - 246,145 42,019 207,229 - (3,103)
Total assets 941,464 59,987 881,477 51,655 479,811 223,993 126,018
Liabilities:
Future policy benefits 324,942 45,586 279,356 - 110,737 155,714 12,905
Policyholders' account balances 123,042 4,737 118,305 - 60,372 49,528 8,405
Debt 19,344 - 19,344 1,698 8,113 166 9,367
Other liabilities (1) 197,669 11,090 186,579 4,192 73,571 9,310 99,506
Separate account liabilities 246,145 - 246,145 42,019 207,229 - (3,103)
Total liabilities 911,142 61,413 849,729 47,909 460,022 214,718 127,080
Equity:
Accumulated other comprehensive income (loss) (9,493) (46) (9,447) (48) 1,425 (7,782) (3,042)
Other equity 39,083 (1,392) 40,475 2,721 18,272 17,020 2,462
Total Prudential Financial, Inc. equity 29,590 (1,438) 31,028 2,673 19,697 9,238 (580)
Noncontrolling interests 732 12 720 1,073 92 37 (482)
Total equity 30,322 (1,426) 31,748 3,746 19,789 9,275 (1,062)
Total liabilities and equity 941,464 59,987 881,477 51,655 479,811 223,993 126,018
______________
(1) Balances include the carrying amounts of Assets and Liabilities "held-for-sale" related to the April 2022 dispositions of the Full Service Retirement Business and a portion of Individual Retirement Strategies' Traditional Variable Annuity Block of Business.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
SHORT-TERM AND LONG-TERM DEBT - UNAFFILIATED
(in millions)
As of December 31, 2022 As of December 31, 2021
Senior Debt Senior Debt
Short-term Debt Long-term Debt Junior Subordinated Long-term Debt Total Debt Short-term Debt Long-term Debt Junior Subordinated Long-term Debt Total Debt
Borrowings by use of proceeds:
Capital Debt 100 4,877 9,094 14,071 98 4,975 7,619 12,692
Operating Debt 511 5,583 - 6,094 420 5,650 - 6,070
Limited recourse and non-recourse borrowing 164 354 - 518 204 378 - 582
Total Debt 775 10,814 9,094 20,683 722 11,003 7,619 19,344
As of December 31, 2022 As of December 31, 2021
The Prudential The Prudential
Prudential Insurance Company Other Prudential Insurance Company Other
Financial, Inc. of America (1)(2) Affiliates Total Debt Financial, Inc. of America (1)(2) Affiliates Total Debt
Borrowings by sources:
Capital Debt 13,579 445 47 14,071 12,096 444 152 12,692
Operating Debt 5,608 486 - 6,094 5,602 468 - 6,070
Limited recourse and non-recourse borrowing - 179 339 518 - 274 308 582
Total Debt 19,187 1,110 386 20,683 17,698 1,186 460 19,344
__________
(1) Includes Prudential Funding, LLC.
(2) Capital Debt at The Prudential Insurance Company of America includes $345 million of surplus notes as of December 31, 2022 and $344 million as of December 31, 2021.
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Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - PGIM
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums - - - - - - -
Policy charges and fee income - - - - - - -
Net investment income (4) (14) 56 56 157 94 -40%
Asset management fees, commissions and other income 930 843 851 904 4,336 3,528 -19%
Total revenues 926 829 907 960 4,493 3,622 -19%
Benefits and expenses (1):
Insurance and annuity benefits - - - - - - -
Change in estimates of liability for future policy benefits - - - - - - -
Interest credited to policyholders' account balances - - - - - - -
Interest expense 6 10 14 27 25 57 128%
Deferral of acquisition costs (1) - (1) - (5) (2) 60%
Amortization of acquisition costs 1 1 1 - 6 3 -50%
General and administrative expenses 732 612 674 703 2,824 2,721 -4%
Total benefits and expenses 738 623 688 730 2,850 2,779 -2%
Adjusted operating income before income taxes 188 206 219 230 1,643 843 -49%
Total revenues 926 829 907 960 4,493 3,622 -19%
Less: Passthrough distribution revenue 19 29 19 19 120 86 -28%
Less: Revenue associated with consolidations 15 (21) 8 31 71 33 -54%
Total adjusted revenues (2) 892 821 880 910 4,302 3,503 -19%
Adjusted operating margin (2)(3) 21.1 % 25.1 % 24.9 % 25.3 % 38.2 % 24.1 %
__________
(1) Revenues exclude realized investment gains, net of losses. Benefits and expenses include charges for income attributable to noncontrolling interests and exclude certain components of the consideration for acquisitions.
(2) Not calculated in accordance with GAAP. Adjusted revenue excludes passthrough distribution revenue and revenue associated with consolidations. Adjusted operating income before income taxes as a percentage of total adjusted revenues.
(3) Reported Operating Margin based on total revenues is 23.9%, 24.2%, 24.8%, and 20.3% for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively, and 23.2% and 36.6% for the years ended December 31, 2022 and December 31, 2021, respectively.
Page 9
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
PGIM - SUPPLEMENTARY REVENUE AND ASSETS UNDER MANAGEMENT INFORMATION
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Supplementary Revenue Information (in millions):
Analysis of revenues by type:
Asset management fees 809 756 742 725 3,302 3,032 -8%
Other related revenues (1) 19 17 80 113 403 229 -43%
Service, distribution and other revenues 98 56 85 122 788 361 -54%
Total PGIM revenues 926 829 907 960 4,493 3,622 -19%
Analysis of asset management fees by source:
Institutional customers 363 357 364 359 1,439 1,443 -%
Retail customers 301 274 256 250 1,275 1,081 -15%
General account 145 125 122 116 588 508 -14%
Total asset management fees 809 756 742 725 3,302 3,032 -8%
Supplementary Assets Under Management Information (at fair market value) (in billions):
December 31, 2022
Public Equity Public Fixed Income Real Estate Private Credit and Other Alternatives Multi-Asset Total
Institutional customers 48.3 396.3 73.4 30.0 1.2 549.2
Retail customers 95.8 131.3 2.0 0.9 69.6 299.6
General account 3.7 249.2 54.2 72.5 - 379.6
Total 147.8 776.8 129.6 103.4 70.8 1,228.4
December 31, 2021
Public Equity Public Fixed Income Real Estate Private Credit and Other Alternatives Multi-Asset Total
Institutional customers 63.9 470.3 61.9 26.7 6.6 629.4
Retail customers 147.9 171.8 1.9 0.8 79.0 401.4
General account 4.4 338.6 68.8 81.2 - 493.0
Total 216.2 980.7 132.6 108.7 85.6 1,523.8
__________
(1) Other related revenues, net of related expenses are $51 million, $47 million, $2 million, and $8 million for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively, and $108 million and $262 million for the years ended December 31, 2022 and December 31, 2021, respectively.
Page 10
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
PGIM - SUPPLEMENTARY ASSETS UNDER MANAGEMENT INFORMATION
(in billions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
Institutional Customers - Assets Under Management (at fair market value):
Beginning assets under management 568.0 536.9 539.7 516.6 550.2 568.0
Additions 16.8 24.6 16.4 13.8 78.4 71.6
Withdrawals (16.5) (16.5) (15.8) (19.8) (67.5) (68.6)
Change in market value (34.2) (46.5) (22.1) 17.0 5.1 (85.8)
Net money market flows 4.4 (3.4) (0.9) (0.7) (4.7) (0.6)
Other (1.6) 44.6 (0.7) 2.0 6.5 44.3
Ending assets under management 536.9 539.7 516.6 528.9 568.0 528.9
Affiliated institutional assets under management 56.8 21.0 19.7 20.3 61.4 20.3
Total assets managed for institutional customers at end of period 593.7 560.7 536.3 549.2 629.4 549.2
Net institutional additions (withdrawals), excluding money market activity 0.3 8.1 0.6 (6.0) 10.9 3.0
Retail Customers - Assets Under Management (at fair market value):
Beginning assets under management 265.8 238.7 204.0 192.2 252.5 265.8
Additions 20.2 16.1 13.5 16.5 89.5 66.3
Withdrawals (24.8) (24.4) (18.1) (22.2) (89.4) (89.5)
Change in market value (22.5) (33.0) (5.5) 4.2 16.8 (56.8)
Net money market flows 0.6 0.3 - 1.0 0.7 1.9
Other (0.6) 6.3 (1.7) - (4.3) 4.0
Ending assets under management 238.7 204.0 192.2 191.7 265.8 191.7
Affiliated retail assets under management 126.0 110.3 105.9 107.9 135.6 107.9
Total assets managed for retail customers at end of period 364.7 314.3 298.1 299.6 401.4 299.6
Net retail additions (withdrawals), excluding money market activity (4.6) (8.3) (4.6) (5.7) 0.1 (23.2)
Page 11
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINED STATEMENTS OF OPERATIONS - U.S. BUSINESSES
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 3,172 2,896 12,038 2,895 16,910 21,001 24%
Policy charges and fee income 1,155 793 1,013 1,028 4,932 3,989 -19%
Net investment income 1,998 1,801 1,729 1,989 7,933 7,517 -5%
Asset management fees, commissions and other income 616 2,139 641 584 2,615 3,980 52%
Total revenues 6,941 7,629 15,421 6,496 32,390 36,487 13%
Benefits and expenses (1):
Insurance and annuity benefits 4,470 4,352 13,020 4,021 21,615 25,863 20%
Change in estimates of liability for future policy benefits (79) 887 21 (9) (11) 820 7555%
Interest credited to policyholders' account balances 421 445 413 508 1,716 1,787 4%
Interest expense 198 214 197 165 788 774 -2%
Deferral of acquisition costs (258) (251) (254) (253) (1,247) (1,016) 19%
Amortization of acquisition costs 207 206 213 195 836 821 -2%
General and administrative expenses 1,169 1,203 1,196 1,159 5,026 4,727 -6%
Total benefits and expenses 6,128 7,056 14,806 5,786 28,723 33,776 18%
Adjusted operating income before income taxes 813 573 615 710 3,667 2,711 -26%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments; investment gains, net of losses, on assets supporting experience-rated contractholder liabilities, and change in value of market risk benefits, net of related hedging gains (losses). Benefits and expenses exclude charges related to realized investment gains, net of losses; change in experience-rated contractholder liabilities due to asset value changes, and include charges for income attributable to noncontrolling interests. Revenues and Benefits and expenses exclude market experience updates..
Page 12
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - U.S. BUSINESSES - RETIREMENT STRATEGIES
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 1,695 1,432 10,576 1,419 11,124 15,122 36%
Policy charges and fee income 483 380 346 344 2,141 1,553 -27%
Net investment income 1,230 1,070 1,028 1,243 4,846 4,571 -6%
Asset management fees, commissions and other income 436 1,965 489 450 1,890 3,340 77%
Total revenues 3,844 4,847 12,439 3,456 20,001 24,586 23%
Benefits and expenses (1):
Insurance and annuity benefits 2,243 2,336 11,042 2,004 13,136 17,625 34%
Change in estimates of liability for future policy benefits (78) (466) 18 2 (175) (524) -199%
Interest credited to policyholders' account balances 158 175 143 232 674 708 5%
Interest expense 8 15 (10) (53) 32 (40) -225%
Deferral of acquisition costs (82) (85) (83) (79) (394) (329) 16%
Amortization of acquisition costs 98 94 100 81 381 373 -2%
General and administrative expenses 551 597 574 522 2,396 2,244 -6%
Total benefits and expenses 2,898 2,666 11,784 2,709 16,050 20,057 25%
Adjusted operating income before income taxes 946 2,181 655 747 3,951 4,529 15%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, and change in value of market risk benefits, net of related hedging gains (losses). Benefits and expenses exclude charges related to realized investment gains, net of losses. Revenues and Benefits and expenses exclude market experience updates.
Page 13
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - U.S. BUSINESSES - RETIREMENT STRATEGIES - INSTITUTIONAL RETIREMENT STRATEGIES
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 1,657 1,427 10,558 1,395 11,041 15,037 36%
Policy charges and fee income 8 9 11 6 35 34 -3%
Net investment income 968 892 824 969 3,921 3,653 -7%
Asset management fees, commissions and other income 114 94 75 109 544 392 -28%
Total revenues 2,747 2,422 11,468 2,479 15,541 19,116 23%
Benefits and expenses (1):
Insurance and annuity benefits 2,178 2,310 11,028 1,960 12,995 17,476 34%
Change in estimates of liability for future policy benefits (83) (457) 12 (6) (179) (534) -198%
Interest credited to policyholders' account balances 80 75 100 139 356 394 11%
Interest expense 4 (2) 6 7 14 15 7%
Deferral of acquisition costs (2) (3) (11) (5) (22) (21) 5%
Amortization of acquisition costs 3 3 2 3 16 11 -31%
General and administrative expenses 52 64 63 49 229 228 -%
Total benefits and expenses 2,232 1,990 11,200 2,147 13,409 17,569 31%
Adjusted operating income before income taxes 515 432 268 332 2,132 1,547 -27%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, and change in value of market risk benefits, net of related hedging gains (losses). Benefits and expenses exclude charges related to realized investment gains, net of losses.
Page 14
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - RETIREMENT STRATEGIES - INSTITUTIONAL RETIREMENT STRATEGIES SALES RESULTS AND ACCOUNT VALUES
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
Beginning total account value 245,720 239,102 234,594 238,313 243,387 245,720
Additions 2,278 3,700 13,518 12,277 21,967 31,773
Withdrawals and benefits (4,899) (3,560) (3,691) (4,248) (20,825) (16,398)
Change in market value, interest credited and interest income (1,570) (2,389) (553) 402 1,881 (4,110)
Other (1) (2,427) (2,259) (5,555) 5,074 (690) (5,167)
Ending total account value 239,102 234,594 238,313 251,818 245,720 251,818
Net additions (withdrawals) (2,621) 140 9,827 8,029 1,142 15,375
Amounts included in ending total account value above:
Investment-only stable value wraps 68,582 71,125 71,168 69,521 70,207 69,521
International reinsurance (2) 81,816 74,021 68,581 83,910 82,406 83,910
Group annuities and other products 88,704 89,448 98,564 98,387 93,107 98,387
Ending total account value 239,102 234,594 238,313 251,818 245,720 251,818
__________
(1) Other activity includes the effect of foreign exchange rate changes associated with our United Kingdom international reinsurance business; net presentation of receipts and payments related to funding agreements backed commercial paper which typically have maturities of less than 90 days, and changes in asset balances for externally-managed accounts.
(2) Represents notional amounts based on present value of future benefits under international reinsurance contracts.
Page 15
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - U.S. BUSINESSES - RETIREMENT STRATEGIES - INDIVIDUAL RETIREMENT STRATEGIES
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 38 5 18 24 83 85 2%
Policy charges and fee income 475 371 335 338 2,106 1,519 -28%
Net investment income 262 178 204 274 925 918 -1%
Asset management fees, commissions and other income 322 1,871 414 341 1,346 2,948 119%
Total revenues 1,097 2,425 971 977 4,460 5,470 23%
Benefits and expenses (1):
Insurance and annuity benefits 65 26 14 44 141 149 6%
Change in estimates of liability for future policy benefits 5 (9) 6 8 4 10 150%
Interest credited to policyholders' account balances 78 100 43 93 318 314 -1%
Interest expense 4 17 (16) (60) 18 (55) -406%
Deferral of acquisition costs (80) (82) (72) (74) (372) (308) 17%
Amortization of acquisition costs 95 91 98 78 365 362 -1%
General and administrative expenses 499 533 511 473 2,167 2,016 -7%
Total benefits and expenses 666 676 584 562 2,641 2,488 -6%
Adjusted operating income before income taxes 431 1,749 387 415 1,819 2,982 64%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, and change in value of market risk benefits, net of related hedging gains (losses). Benefits and expenses exclude charges related to realized investment gains, net of losses.
Page 16
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - RETIREMENT STRATEGIES - INDIVIDUAL RETIREMENT STRATEGIES SALES RESULTS AND ACCOUNT VALUES (1)
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
Actively-Sold Protected Investment and Income Product Sales (2):
FlexGuard Suite 1,405 1,451 1,080 1,062 5,740 4,998
Investment Only VA (3) 89 63 46 31 454 229
Fixed 24 67 249 397 245 737
Total 1,518 1,581 1,375 1,490 6,439 5,964
Actively-Sold Protected Investment and Income Solutions (2):
Beginning total account value 18,819 19,455 18,526 19,099 11,336 18,819
Sales 1,518 1,581 1,375 1,490 6,439 5,964
Full surrenders and death benefits (89) (95) (94) (148) (248) (426)
Sales, net of full surrenders and death benefits 1,429 1,486 1,281 1,342 6,191 5,538
Partial withdrawals and other benefit payments (138) (119) (124) (158) (489) (539)
Net flows 1,291 1,367 1,157 1,184 5,702 4,999
Change in market value, interest credited, and other (654) (2,294) (581) 930 1,777 (2,599)
Policy charges (1) (2) (3) (5) 4 (11)
Ending total account value, gross 19,455 18,526 19,099 21,208 18,819 21,208
Reinsurance ceded (481) (514) (637) (817) (477) (817)
Ending total account value, net 18,974 18,012 18,462 20,391 18,342 20,391
Discontinued Traditional VA and Guaranteed Living Benefit Block (4):
Beginning total account value 163,486 149,339 104,612 96,691 164,944 163,486
Sales 25 17 14 7 160 63
Full surrenders and death benefits (2,099) (1,465) (1,131) (994) (10,153) (5,689)
Sales, net of full surrenders and death benefits (2,074) (1,448) (1,117) (987) (9,993) (5,626)
Partial withdrawals and other benefit payments (1,329) (875) (852) (1,075) (5,223) (4,131)
Net flows (3,403) (2,323) (1,969) (2,062) (15,216) (9,757)
Change in market value and other (5) (9,893) (41,786) (5,340) 4,809 17,411 (52,210)
Policy charges (851) (618) (612) (624) (3,653) (2,705)
Ending total account value 149,339 104,612 96,691 98,814 163,486 98,814
__________
(1) Prior period amounts have been reclassified to conform to current period presentation.
(2) Includes Prudential FlexGuard and FlexGuard Income, Prudential Premier Investment (PPI), MyRock and all Fixed Annuity products. Excludes discontinued traditional variable annuities and guaranteed living benefits.
(3) Represents variable annuities without guaranteed living benefits including Prudential Premier Investment (PPI) and MyRock.
(4) Includes Prudential Highest Daily Income, Prudential Defined Income and other legacy variable products with and without guaranteed minimum income and withdrawal benefits.
(5) Includes impact from the sale of a Traditional Variable Annuity Block of Business in second quarter of 2022.
Page 17
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - RETIREMENT STRATEGIES - INDIVIDUAL RETIREMENT STRATEGIES ACCOUNT VALUE ACTIVITY
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
Account Values in General Account (1):
Beginning balance 20,062 20,928 19,430 20,170 13,843 20,062
Premiums and deposits (2) 1,366 1,458 1,300 1,437 5,852 5,561
Full surrenders and death benefits (106) (225) (86) (87) (395) (504)
Premiums and deposits net of full surrenders and death benefits 1,260 1,233 1,214 1,350 5,457 5,057
Partial withdrawals and other benefit payments (174) (124) (131) (167) (654) (596)
Net flows 1,086 1,109 1,083 1,183 4,803 4,461
Change in market value, interest credited and other (3) 72 (2,461) (240) 619 1,437 (2,010)
Net transfers (to) from separate account (2) (292) (145) (102) 92 (20) (447)
Policy charges (2) - (1) (1) (1) (1) (3)
Ending balance, gross 20,928 19,430 20,170 22,063 20,062 22,063
Reinsurance ceded (481) (514) (637) (817) (477) (817)
Ending balance, net 20,447 18,916 19,533 21,246 19,585 21,246
Account Values in Separate Account (1):
Beginning balance 162,243 147,866 103,708 95,620 162,437 162,243
Premiums and deposits (2) 177 140 89 60 747 466
Full surrenders and death benefits (2,082) (1,335) (1,139) (1,055) (10,006) (5,611)
Premiums and deposits net of full surrenders and death benefits (1,905) (1,195) (1,050) (995) (9,259) (5,145)
Partial withdrawals and other benefit payments (1,293) (870) (845) (1,066) (5,058) (4,074)
Net flows (3,198) (2,065) (1,895) (2,061) (14,317) (9,219)
Change in market value, interest credited and other (2)(3) (10,619) (41,619) (5,681) 5,120 17,751 (52,799)
Net transfers (to) from general account (2) 292 145 102 (92) 20 447
Policy charges (2) (852) (619) (614) (628) (3,648) (2,713)
Ending balance 147,866 103,708 95,620 97,959 162,243 97,959
__________
(1) Premiums and deposits, and surrenders and withdrawals, are classified within the general account and separate account for purposes of this presentation based on the allocation of customer funds. For example, premiums allocated by customers to separate account investments at the time of sale, while remitted through the company's general account, are shown as separate account premium in this display, rather than as general account premium and transfers to the separate account.
(2) Prior period amounts have been reclassified to conform to current period presentation.
(3) Includes impact from the sale of a Traditional Variable Annuity Block of Business in second quarter of 2022.
Page 18
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - RETIREMENT STRATEGIES - INDIVIDUAL RETIREMENT STRATEGIES LIVING BENEFIT FEATURES
(in millions)
2021 2022
4Q 1Q 2Q 3Q 4Q
ACCOUNT VALUE AND NET AMOUNT AT RISK (1):
Variable Annuity Account Values
Guaranteed minimum accumulation benefits 1,702 1,543 546 503 501
Guaranteed minimum withdrawal benefits 302 271 112 102 105
Guaranteed minimum income benefits 2,444 2,202 1,631 1,519 1,561
Guaranteed minimum withdrawal & income benefits - risk retained by Prudential 135,293 123,571 87,601 80,866 82,718
Guaranteed minimum withdrawal & income benefits - externally reinsured 3,303 3,068 2,660 2,446 2,482
Total 143,044 130,655 92,550 85,436 87,367
Account Values by Product Design Type
Account Values with Auto-Rebalancing Feature - risk retained by Prudential 113,110 103,805 73,070 67,654 69,365
Account Values with Auto-Rebalancing Feature - externally reinsured 3,303 3,068 2,660 2,446 2,482
Account Values without Auto-Rebalancing Feature 26,631 23,782 16,820 15,336 15,520
Total 143,044 130,655 92,550 85,436 87,367
Net Amount at Risk by Product Design Type
Net Amount at Risk with Auto-Rebalancing Feature - risk retained by Prudential 2,931 4,485 5,754 8,174 7,152
Net Amount at Risk without Auto-Rebalancing Feature 409 734 1,526 2,372 2,075
Total 3,340 5,219 7,280 10,546 9,227
__________
(1) At end of period.
Page 19
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - RETIREMENT STRATEGIES - INDIVIDUAL RETIREMENT STRATEGIES DEATH BENEFIT FEATURES
(in millions)
2021 2022
4Q 1Q 2Q 3Q 4Q
ACCOUNT VALUE AND NET AMOUNT AT RISK (1):
Variable Annuity Account Values
Retuof net deposits:
Account value 132,265 120,838 84,119 77,643 79,436
Net amount at risk 199 311 640 1,483 987
Minimum return, anniversary contract value, or maximum contract value:
Account value 29,121 26,565 19,122 17,751 18,071
Net amount at risk 2,055 3,187 4,529 5,363 4,733
Account Values by Product Design Type
Account Values with Auto-Rebalancing Feature 116,413 106,873 75,730 70,100 71,847
Account Values without Auto-Rebalancing Feature 44,973 40,530 27,511 25,294 25,660
Total 161,386 147,403 103,241 95,394 97,507
Net Amount at Risk by Product Design Type
Net Amount at Risk with Auto-Rebalancing Feature 1,066 1,910 2,961 3,779 3,269
Net Amount at Risk without Auto-Rebalancing Feature 1,188 1,588 2,208 3,067 2,451
Total 2,254 3,498 5,169 6,846 5,720
__________
(1) At end of period.
Page 20
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - U.S. BUSINESSES - GROUP INSURANCE
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 1,219 1,209 1,215 1,231 4,888 4,874 -%
Policy charges and fee income 176 150 170 185 695 681 -2%
Net investment income 124 117 121 117 538 479 -11%
Asset management fees, commissions and other income 20 20 19 22 98 81 -17%
Total revenues 1,539 1,496 1,525 1,555 6,219 6,115 -2%
Benefits and expenses (1):
Insurance and annuity benefits 1,353 1,144 1,196 1,221 5,478 4,914 -10%
Change in estimates of liability for future policy benefits - - - - - - -%
Interest credited to policyholders' account balances 36 39 37 41 171 153 -11%
Interest expense 1 1 1 1 3 4 33%
Deferral of acquisition costs (2) - (1) - (3) (3) -%
Amortization of acquisition costs (2) 1 2 1 9 2 -78%
General and administrative expenses 268 257 260 276 1,014 1,061 5%
Total benefits and expenses 1,654 1,442 1,495 1,540 6,672 6,131 -8%
Adjusted operating income (loss) before income taxes (115) 54 30 15 (453) (16) 96%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.
Page 21
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - GROUP INSURANCE SUPPLEMENTARY INFORMATION
(dollar amounts in millions, or as otherwise noted)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
Annualized New Business Premiums:
Group life 180 26 67 10 265 283
Group disability 130 17 36 13 221 196
Total 310 43 103 23 486 479
Future Policy Benefits (1):
Group life 2,630 2,471 2,366 2,551 2,824 2,551
Group disability 3,066 3,089 3,098 3,106 3,030 3,106
Total 5,696 5,560 5,464 5,657 5,854 5,657
Policyholders' Account Balances (1):
Group life 5,997 5,984 5,889 5,751 6,175 5,751
Group disability 137 133 125 131 131 131
Total 6,134 6,117 6,014 5,882 6,306 5,882
Separate Account Liabilities (1):
Group life 25,938 23,772 22,789 23,513 27,097 23,513
Group Life Insurance:
Gross premiums, policy charges and fee income (2) 1,054 1,103 1,050 1,121 4,163 4,328
Earned premiums 916 888 885 899 3,672 3,588
Earned policy charges and fee income 153 126 145 164 610 588
Benefits ratio (3) 104.3 % 87.6 % 91.2 % 90.2 % 102.5 % 93.4 %
Administrative operating expense ratio 10.7 % 10.7 % 10.9 % 10.9 % 11.3 % 10.8 %
Persistency ratio 96.3 % 96.4 % 96.0 % 95.9 %
Group Disability Insurance:
Gross premiums, policy charges and fee income (2) 340 344 356 361 1,308 1,401
Earned premiums 303 321 330 332 1,216 1,286
Earned policy charges and fee income 23 24 25 21 85 93
Benefits ratio (3) 73.4 % 73.0 % 72.5 % 74.2 % 83.8 % 73.3 %
Administrative operating expense ratio 31.1 % 32.2 % 30.3 % 31.6 % 32.1 % 31.3 %
Persistency ratio 92.8 % 92.4 % 90.9 % 90.6 % 93.4 % 90.6 %
Total Group Insurance:
Benefits ratio (3) 97.0 % 83.9 % 86.4 % 86.2 % 98.2 % 88.4 %
Administrative operating expense ratio 15.7 % 15.9 % 15.9 % 15.9 % 16.3 % 15.8 %
Net face amount of policies in force (in billions) (4) 2,021 2,068 2,103 2,126 2,004 2,126
__________
(1) As of end of period.
(2) Before returns of premiums to participating policyholders for favorable claims experience.
(3) Benefits ratios excluding the impact of the annual assumption updates and other refinements in the second quarter. Benefits ratios including these impacts for Group Life, Group Disability, and Total Group Insurance are 87.0%, 75.5%, and 84.10% for the three months ended June 30, 2022, respectively. Benefits ratios including these impacts for Group Life, Group Disability, and Total Group Insurance are 93.3%, 73.9%, 88.5% for the twelve months ended December 31, 2022.
(4) At end of period; net of reinsurance.
Page 22
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - STATEMENTS OF OPERATIONS - INDIVIDUAL LIFE
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 258 255 247 245 898 1,005 12%
Policy charges and fee income 496 263 497 499 2,096 1,755 -16%
Net investment income 644 614 580 629 2,549 2,467 -3%
Asset management fees, commissions and other income 160 154 133 112 627 559 -11%
Total revenues 1,558 1,286 1,457 1,485 6,170 5,786 -6%
Benefits and expenses (1):
Insurance and annuity benefits 874 872 782 796 3,001 3,324 11%
Change in estimates of liability for future policy benefits (1) 1,353 3 (11) 164 1,344 720%
Interest credited to policyholders' account balances 227 231 233 235 871 926 6%
Interest expense 189 198 206 217 753 810 8%
Deferral of acquisition costs (174) (166) (170) (174) (850) (684) 20%
Amortization of acquisition costs 111 111 111 113 446 446 -%
General and administrative expenses 350 349 362 361 1,616 1,422 -12%
Total benefits and expenses 1,576 2,948 1,527 1,537 6,001 7,588 26%
Adjusted operating income (loss) before income taxes (18) (1,662) (70) (52) 169 (1,802) -1166%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses. Revenues and Benefits and expenses exclude market experience updates.
Page 23
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
U.S. BUSINESSES - INDIVIDUAL LIFE SUPPLEMENTARY INFORMATION
(in millions, or as otherwise noted)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
ANNUALIZED NEW BUSINESS PREMIUMS (1):
Term life 24 23 24 22 115 93
Universal life 22 22 23 25 102 92
Variable life 104 110 103 107 538 424
Total 150 155 150 154 755 609
ANNUALIZED NEW BUSINESS PREMIUMS BY DISTRIBUTION CHANNEL (1):
Prudential Advisors 35 33 33 32 149 133
Third party distribution 115 122 117 122 606 476
Total 150 155 150 154 755 609
ACCOUNT VALUE ACTIVITY:
Policyholders' Account Balances (2):
Beginning balance 31,304 31,314 31,274 31,400 30,490 31,304
Premiums and deposits 670 622 642 647 3,123 2,581
Surrenders and withdrawals (424) (437) (348) (478) (1,872) (1,687)
Net sales 246 185 294 169 1,251 894
Benefit payments (60) (60) (51) (51) (250) (222)
Net flows 186 125 243 118 1,001 672
Interest credited and other 175 262 314 426 1,459 1,177
Net transfers from separate account 168 98 89 98 409 453
Policy charges (519) (525) (520) (520) (2,055) (2,084)
Ending balance 31,314 31,274 31,400 31,522 31,304 31,522
Separate Account Liabilities:
Beginning balance 48,133 45,226 38,931 37,250 41,428 48,133
Premiums and deposits 658 700 671 684 2,856 2,713
Surrenders and withdrawals (238) (237) (242) (179) (1,092) (896)
Net sales 420 463 429 505 1,764 1,817
Benefit payments (146) (116) (171) (102) (578) (535)
Net flows 274 347 258 403 1,186 1,282
Change in market value, interest credited and other (2,699) (6,231) (1,532) 2,188 7,134 (8,274)
Net transfers to general account (168) (98) (89) (98) (409) (453)
Policy charges (314) (313) (318) (324) (1,206) (1,269)
Ending balance 45,226 38,931 37,250 39,419 48,133 39,419
NET FACE AMOUNT IN FORCE (in billions) (3):
Term life 299 298 297 296 299 296
Universal life 98 99 99 98 99 98
Variable life 149 144 143 145 152 145
Total 546 541 539 539 550 539
__________
(1) Excludes corporate-owned life insurance.
(2) Includes fixed rate funds, alliance deposits, supplementary contracts and deferred revenues on variable products.
(3) At end of period; net of reinsurance. Net Face Amount In Force excludes certain policies considered to be non-core business drivers impacting Adjusted Operating Income for Individual Life. Policies within the Closed Block division are not reported through Individual Life.
Page 24
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINED STATEMENTS OF OPERATIONS - INTERNATIONAL BUSINESSES
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 3,985 3,099 3,291 3,016 14,619 13,391 -8%
Policy charges and fee income 83 90 83 84 323 340 5%
Net investment income 1,297 1,286 1,112 1,271 5,403 4,966 -8%
Asset management fees, commissions and other income 113 (20) 132 89 541 314 -42%
Total revenues 5,478 4,455 4,618 4,460 20,886 19,011 -9%
Benefits and expenses (1):
Insurance and annuity benefits 3,500 2,780 2,905 2,589 12,970 11,774 -9%
Change in estimates of liability for future policy benefits 12 22 38 59 25 131 424%
Interest credited to policyholders' account balances 190 175 180 193 795 738 -7%
Interest expense 3 5 11 16 6 35 483%
Deferral of acquisition costs (320) (278) (285) (295) (1,327) (1,178) 11%
Amortization of acquisition costs 155 150 150 141 616 596 -3%
General and administrative expenses 987 909 871 943 4,069 3,710 -9%
Total benefits and expenses 4,527 3,763 3,870 3,646 17,154 15,806 -8%
Adjusted operating income before income taxes 951 692 748 814 3,732 3,205 -14%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on assets supporting experience-rated contractholder liabilities, change in value of market risk benefits, net of related hedging gains (losses) and include revenues representing equity in earnings of operating joint ventures. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to noncontrolling interests. Revenues and Benefits and expenses exclude market experience updates.
Page 25
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - INTERNATIONAL BUSINESSES - LIFE PLANNER
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 2,105 1,619 1,689 1,540 7,419 6,953 -6%
Policy charges and fee income 47 40 41 47 192 175 -9%
Net investment income 574 555 435 555 2,244 2,119 -6%
Asset management fees, commissions and other income 74 50 79 91 314 294 -6%
Total revenues 2,800 2,264 2,244 2,233 10,169 9,541 -6%
Benefits and expenses (1):
Insurance and annuity benefits 1,805 1,445 1,432 1,310 6,562 5,992 -9%
Change in estimates of liability for future policy benefits 11 (25) 8 13 11 7 -36%
Interest credited to policyholders' account balances 48 43 44 48 190 183 -4%
Interest expense 2 3 6 7 4 18 350%
Deferral of acquisition costs (168) (137) (137) (136) (654) (578) 12%
Amortization of acquisition costs 77 76 75 68 306 296 -3%
General and administrative expenses 447 416 386 430 1,768 1,679 -5%
Total benefits and expenses 2,222 1,821 1,814 1,740 8,187 7,597 -7%
Adjusted operating income before income taxes 578 443 430 493 1,982 1,944 -2%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on assets supporting experience-rated contractholder liabilities and include revenues representing equity in earnings of operating joint ventures. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to noncontrolling interests. Revenues and Benefits and expenses exclude market experience updates.
Page 26
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - INTERNATIONAL BUSINESSES - GIBRALTAR LIFE AND OTHER
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums 1,880 1,480 1,602 1,476 7,200 6,438 -11%
Policy charges and fee income 36 50 42 37 131 165 26%
Net investment income 723 731 677 716 3,159 2,847 -10%
Asset management fees, commissions and other income 39 (70) 53 (2) 227 20 -91%
Total revenues 2,678 2,191 2,374 2,227 10,717 9,470 -12%
Benefits and expenses (1):
Insurance and annuity benefits 1,695 1,335 1,473 1,279 6,408 5,782 -10%
Change in estimates of liability for future policy benefits 1 47 30 46 14 124 786%
Interest credited to policyholders' account balances 142 132 136 145 605 555 -8%
Interest expense 1 2 5 9 2 17 750%
Deferral of acquisition costs (152) (141) (148) (159) (673) (600) 11%
Amortization of acquisition costs 78 74 75 73 310 300 -3%
General and administrative expenses 540 493 485 513 2,301 2,031 -12%
Total benefits and expenses 2,305 1,942 2,056 1,906 8,967 8,209 -8%
Adjusted operating income before income taxes 373 249 318 321 1,750 1,261 -28%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on assets supporting experience-rated contractholder liabilities, change in value of market risk benefits, net of related hedging gains (losses) and include revenues representing equity in earnings of operating joint ventures. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to noncontrolling interests. Revenues and Benefits and expenses exclude market experience updates.
Page 27
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
INTERNATIONAL BUSINESSES - SALES RESULTS AND SUPPLEMENTARY INFORMATION
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022
Actual exchange rate basis (1):
Net premiums, policy charges and fee income:
Japan - Prudential of Japan 1,943 1,448 1,496 1,341 6,903 6,228
Japan - Gibraltar Life 1,916 1,530 1,644 1,513 7,331 6,603
Emerging Markets 209 211 234 246 708 900
Total 4,068 3,189 3,374 3,100 14,942 13,731
Annualized new business premiums:
Japan - Prudential of Japan 200 159 138 160 747 657
Japan - Gibraltar Life 205 231 198 244 1,000 878
Emerging Markets 56 67 77 84 193 284
Total 461 457 413 488 1,940 1,819
Annualized new business premiums by distribution channel:
Life Planners 256 226 215 244 940 941
Gibraltar Life Consultants 100 140 125 156 485 521
Banks 52 33 34 49 318 168
Independent Agency 53 58 39 39 197 189
Total 461 457 413 488 1,940 1,819
Constant exchange rate basis (2):
Net premiums, policy charges and fee income:
Japan - Prudential of Japan 2,058 1,597 1,703 1,568 7,089 6,926
Japan - Gibraltar Life 2,029 1,730 1,883 1,724 7,530 7,366
Emerging Markets 221 211 248 260 767 940
Total 4,308 3,538 3,834 3,552 15,386 15,232
Annualized new business premiums:
Japan - Prudential of Japan 208 174 160 186 758 728
Japan - Gibraltar Life 207 240 206 254 1,005 907
Emerging Markets 57 66 81 90 202 294
Total 472 480 447 530 1,965 1,929
Annualized new business premiums by distribution channel:
Life Planners 265 240 241 276 960 1,022
Gibraltar Life Consultants 101 145 130 162 487 538
Banks 52 33 34 49 318 168
Independent Agency 54 62 42 43 200 201
Total 472 480 447 530 1,965 1,929
__________
(1) Translated based on applicable average exchange rates for the period shown.
(2) Foreign denominated activity translated to U.S. dollars at uniform exchange rates for all periods presented, including Japanese yen 104 per U.S. dollar. U.S. dollar-denominated activity is included based on the amounts as transacted in U.S. dollars.
Page 28
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
INTERNATIONAL BUSINESSES - SALES RESULTS AND SUPPLEMENTARY INFORMATION
2021 2022
4Q 1Q 2Q 3Q 4Q
Face amount of individual policies in force at end of period (in billions) (1)(2):
(Constant exchange rate basis)
Japan - Prudential of Japan 386 385 384 381 379
Japan - Gibraltar Life 357 355 348 345 340
Emerging Markets 40 42 42 45 47
Total 783 782 774 771 766
Number of individual policies in force at end of period (in thousands) (3):
Japan - Prudential of Japan 4,405 4,436 4,447 4,455 4,463
Japan - Gibraltar Life 6,907 6,868 6,805 6,765 6,713
Emerging Markets 652 664 682 704 726
Total 11,964 11,968 11,934 11,924 11,902
International life insurance individual policy persistency:
Life Planner:
13 months 93.1 % 92.8 % 92.7 % 92.4 % 92.4 %
25 months 86.7 % 85.9 % 85.4 % 85.6 % 85.3 %
Gibraltar Life (4):
13 months 95.9 % 95.9 % 95.7 % 95.5 % 95.2 %
25 months 89.9 % 90.1 % 90.2 % 90.8 % 90.8 %
Number of Life Planners at end of period:
Japan 4,566 4,557 4,481 4,481 4,446
All other countries 1,458 1,499 1,443 1,491 1,478
Total Life Planners 6,024 6,056 5,924 5,972 5,924
Gibraltar Life Consultants 7,100 7,022 6,910 6,861 6,821
__________
(1) Foreign denominated activity translated to U.S. dollars at uniform exchange rates for all periods presented, including Japanese yen 104 per U.S. dollar. U.S. dollar-denominated activity is included based on the amounts as transacted in U.S. dollars.
(2) Net of reinsurance.
(3) Direct business only; policy count includes annuities.
(4) Reflects business sold by Life Consultants and Independent Agents.
Page 29
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
STATEMENTS OF OPERATIONS - CORPORATE AND OTHER
(in millions)
2022 Year-to-date
1Q 2Q 3Q 4Q 2021 2022 % change
Revenues (1):
Premiums (8) - (7) (7) (36) (22) 39%
Policy charges and fee income (15) (14) (13) (12) (61) (54) 11%
Net investment income 122 168 150 167 667 607 -9%
Asset management fees, commissions and other income (142) (110) 4 142 (107) (106) 1%
Total revenues (43) 44 134 290 463 425 -8%
Benefits and expenses (1):
Insurance and annuity benefits (7) 3 - 4 (24) - 100%
Change in estimates of liability for future policy benefits - - - - - - -%
Interest credited to policyholders' account balances 34 34 35 34 135 137 1%
Interest expense 157 172 185 209 655 723 10%
Deferral of acquisition costs 7 16 9 9 56 41 -27%
Amortization of acquisition costs (10) (12) (9) (8) (38) (39) -3%
General and administrative expenses 192 152 329 567 1,489 1,240 -17%
Total benefits and expenses 373 365 549 815 2,273 2,102 -8%
Adjusted operating loss before income taxes (416) (321) (415) (525) (1,810) (1,677) 7%
Adjusted operating income (loss) before income taxes comprised as follows:
Investment income 27 50 38 62 175 177 1%
Interest expense on debt (198) (209) (213) (209) (827) (829) -%
Long-term and deferred compensation expense (46) 12 (11) (15) (82) (60) 27%
Other (2) (199) (174) (229) (363) (1,076) (965) 10%
Adjusted operating loss before income taxes (416) (321) (415) (525) (1,810) (1,677) 7%
__________
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments; changes in the fair value of contingent consideration associated with the Assurance IQ acquisition. Benefits and expenses exclude charges related to realized investment gains, net of losses and goodwill impairment and certain components of the Assurance IQ acquisition which are recognized as compensation expense over the requisite service periods. Revenues and Benefits and expenses include consolidating adjustments.
(2) Includes pension and employee benefits and other corporate activities, including consolidating adjustments.
Page 30
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
INVESTMENT PORTFOLIO COMPOSITION
(in millions)
December 31, 2022 December 31, 2021
Closed PFI Excluding Closed PFI Excluding
Total Block Closed Block Division Total Block Closed Block Division
Portfolio Division Amount % of Total Portfolio Division Amount % of Total
Fixed maturities:
Public, available-for-sale, at fair value 242,246 21,140 221,106 60.8 % 305,035 28,167 276,868 65.0 %
Public, held-to-maturity, at amortized cost, net of allowance (1) 1,229 - 1,229 0.3 % 1,413 - 1,413 0.3 %
Private, available-for-sale, at fair value 64,745 8,931 55,814 15.4 % 66,897 10,237 56,660 13.3 %
Private, held-to-maturity, at amortized cost, net of allowance (1) 67 - 67 0.0 % 101 - 101 0.1 %
Fixed maturities, trading, at fair value 5,738 900 4,838 1.3 % 8,610 1,137 7,473 1.8 %
Assets supporting experience-rated contractholder liabilities, at fair value 2,844 - 2,844 0.8 % 3,358 - 3,358 0.8 %
Equity securities, at fair value 6,404 1,733 4,671 1.3 % 7,875 2,288 5,587 1.3 %
Commercial mortgage and other loans, at book value, net of allowance 56,608 7,926 48,682 13.4 % 57,387 8,241 49,146 11.6 %
Policy loans, at outstanding balance 10,046 3,637 6,409 1.8 % 10,386 3,815 6,571 1.5 %
Other invested assets, net of allowance (2) 17,531 4,254 13,277 3.7 % 16,843 4,358 12,485 2.9 %
Short-term investments, net of allowance 4,573 337 4,236 1.2 % 6,600 557 6,043 1.4 %
Subtotal (3) 412,031 48,858 363,173 100.0 % 484,505 58,800 425,705 100.0 %
Invested assets of other entities and operations (4) 5,410 - 5,410 7,694 - 7,694
Total investments 417,441 48,858 368,583 492,199 58,800 433,399
Fixed Maturities by Credit Quality (3)(5): December 31, 2022 December 31, 2021
PFI Excluding Closed Block Division PFI Excluding Closed Block Division
Gross Gross Gross Gross
Amortized Unrealized Unrealized Allowance for Fair Amortized Unrealized Unrealized Allowance for Fair
Cost Gains Losses Credit Losses Value % of Total Cost Gains Losses Credit Losses Value % of Total
Public Fixed Maturities:
NAIC Rating (6)
1 189,939 6,918 18,145 - 178,712 80.8 % 195,493 27,963 595 - 222,861 80.5 %
2 39,388 534 5,212 - 34,710 15.7 % 38,830 5,254 148 - 43,936 15.9 %
Subtotal - High or Highest Quality Securities 229,327 7,452 23,357 - 213,422 96.5 % 234,323 33,217 743 - 266,797 96.4 %
3 5,416 66 625 - 4,857 2.2 % 6,313 429 196 - 6,546 2.4 %
4 2,362 39 287 1 2,113 1.0 % 2,642 88 66 1 2,663 0.9 %
5 614 10 141 8 475 0.2 % 620 45 14 3 648 0.2 %
6 318 9 63 25 239 0.1 % 249 14 19 30 214 0.1 %
Subtotal - Other Securities 8,710 124 1,116 34 7,684 3.5 % 9,824 576 295 34 10,071 3.6 %
Total 238,037 7,576 24,473 34 221,106 100.0 % 244,147 33,793 1,038 34 276,868 100.0 %
Private Fixed Maturities:
NAIC Rating (6)
1 16,111 126 2,145 - 14,092 25.2 % 12,433 941 71 - 13,303 23.5 %
2 36,773 406 4,307 - 32,872 58.9 % 31,607 2,029 260 - 33,376 58.9 %
Subtotal - High or Highest Quality Securities 52,884 532 6,452 - 46,964 84.1 % 44,040 2,970 331 - 46,679 82.4 %
3 5,522 38 538 - 5,022 9.0 % 5,966 287 39 - 6,214 11.0 %
4 2,654 11 148 - 2,517 4.5 % 2,833 106 74 8 2,857 5.0 %
5 1,307 7 117 16 1,181 2.1 % 769 23 33 24 735 1.3 %
6 160 22 1 51 130 0.3 % 185 19 1 28 175 0.3 %
Subtotal - Other Securities 9,643 78 804 67 8,850 15.9 % 9,753 435 147 60 9,981 17.6 %
Total 62,527 610 7,256 67 55,814 100.0 % 53,793 3,405 478 60 56,660 100.0 %
_____________
(1) On an amortized cost basis, net of allowance, as of December 31, 2022, includes $1,149 million (fair value, $1,299 million) and $67 million (fair value, $71 million) of public and private fixed maturities, respectively, classified as "1" highest quality and $80 million (fair value, $85 million) and $0 million (fair value, $0 million) of public and private fixed maturities, respectively, classified as "2" high quality securities based on the NAIC designations. On an amortized cost basis, net of allowance, as of December 31, 2021, includes $1,324 million (fair value, $1,594 million) and $101 million (fair value, $110 million) of public and private fixed maturities, respectively, classified as "1" highest quality and $89 million (fair value, $99 million) and $0 million (fair value, $0 million) of public and private fixed maturities, respectively, classified as "2" high quality securities based on the NAIC designations.
(2) Other invested assets consist of investments in limited partnerships and limited liability companies ("LPs/LLCs"), investment real estate held through direct ownership, derivative instruments and other miscellaneous investments.
(3) Excludes (i) assets of our investment management operations, including assets managed for third parties, (ii) derivative operations and (iii) those assets classified as "Separate account assets" on our balance sheet. Also excludes assets "held-for-sale" of $40,669 million as of December 31, 2021.
(4) Includes invested assets of our investment management and derivative operations. Excludes assets of our investment management operations that are managed for third parties and those assets classified as "Separate account assets" on our balance sheet.
(5) Excludes fixed maturity securities classified as trading.
(6) Reflects equivalent ratings for investments of the international operations. Includes, as of December 31, 2022 and 2021, 422 securities with amortized cost of $4,836 million (fair value $4,610 million) and 617 securities with amortized cost of $4,547 million (fair value $4,596 million), respectively, that have been categorized based on expected NAIC designations pending receipt of SVO ratings.
Page 31
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
INVESTMENT PORTFOLIO COMPOSITION - JAPANESE INSURANCE OPERATIONS AND EXCLUDING JAPANESE INSURANCE OPERATIONS (1)
(in millions)
December 31, 2022 December 31, 2021
Amount % of Total Amount % of Total
Japanese Insurance Operations (2):
Fixed maturities:
Public, available-for-sale, at fair value 112,013 68.4 % 146,600 72.2 %
Public, held-to-maturity, at amortized cost, net of allowance 1,229 0.7 % 1,413 0.7 %
Private, available-for-sale, at fair value 19,268 11.8 % 21,079 10.4 %
Private, held-to-maturity, at amortized cost, net of allowance 67 0.0 % 101 0.1 %
Fixed maturities, trading, at fair value 612 0.4 % 839 0.4 %
Assets supporting experience-rated contractholder liabilities, at fair value 2,844 1.7 % 3,328 1.6 %
Equity securities, at fair value 1,806 1.1 % 2,187 1.1 %
Commercial mortgage and other loans, at book value, net of allowance 18,080 11.0 % 19,969 9.8 %
Policy loans, at outstanding balance 2,607 1.6 % 2,726 1.3 %
Other invested assets (3) 5,272 3.2 % 4,203 2.1 %
Short-term investments, net of allowance 100 0.1 % 692 0.3 %
Total 163,898 100.0 % 203,137 100.0 %
December 31, 2022 December 31, 2021
Amount % of Total Amount % of Total
Excluding Japanese Insurance Operations (2):
Fixed maturities:
Public, available-for-sale, at fair value 109,093 54.8 % 130,268 58.5 %
Public, held-to-maturity, at amortized cost - 0.0 % - 0.0 %
Private, available-for-sale, at fair value 36,546 18.3 % 35,581 16.0 %
Private, held-to-maturity, at amortized cost - 0.0 % - 0.0 %
Fixed maturities, trading, at fair value 4,226 2.1 % 6,634 3.0 %
Assets supporting experience-rated contractholder liabilities, at fair value - 0.0 % 30 0.0 %
Equity securities, at fair value 2,865 1.4 % 3,400 1.6 %
Commercial mortgage and other loans, at book value, net of allowance 30,602 15.4 % 29,177 13.1 %
Policy loans, at outstanding balance 3,802 1.9 % 3,845 1.7 %
Other invested assets, net of allowance (3) 8,005 4.0 % 8,282 3.7 %
Short-term investments, net of allowance 4,136 2.1 % 5,351 2.4 %
Total (4) 199,275 100.0 % 222,568 100.0 %
__________
(1) Excludes Closed Block division.
(2) Excludes assets classified as "Separate account assets" on our balance sheet.
(3) Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments.
(4) Excludes assets "held-for-sale" of $40,669 million as of December 31, 2021.
Page 32
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
INVESTMENT RESULTS (1)
(in millions)
Three Months Ended December 31
2022
Investment Income Realized Gains (Losses)
Yield (5) Amount
General Account (2)
Fixed maturities (3) 3.97 % 2,873 (185)
Equity securities 4.17 % 48 -
Commercial mortgage and other loans 3.82 % 458 (47)
Policy loans 4.40 % 69 -
Short-term investments and cash equivalents 4.63 % 169 -
Gross investment income before investment expenses 3.89 % 3,617 (232)
Investment expenses -0.12 % (192) -
Subtotal 3.77 % 3,425 (232)
Other investments (3) 153 (804)
Investment results of other entities and operations (4) 64 (17)
Less, investment income related to adjusted operating income reconciling items (159)
Total 3,483 (1,053)
Twelve Months Ended December 31
2022 2021
Investment Income Realized Gains (Losses) Investment Income Realized Gains (Losses)
Yield (5) Amount Yield (5) Amount
General Account (2)
Fixed maturities (3) 3.71 % 10,867 (1,086) 3.72 % 11,005 1,464
Equity securities 2.59 % 123 - 2.32 % 118 -
Commercial mortgage and other loans 3.73 % 1,807 (137) 4.00 % 1,966 81
Policy loans 4.52 % 283 - 4.65 % 310 -
Short-term investments and cash equivalents 2.75 % 371 (5) 0.48 % 59 (1)
Gross investment income before investment expenses 3.68 % 13,451 (1,228) 3.65 % 13,458 1,544
Investment expenses -0.14 % (631) - -0.15 % (495) -
Subtotal 3.54 % 12,820 (1,228) 3.50 % 12,963 1,544
Other investments (3) 952 (2,110) 1,870 1,569
Investment results of other entities and operations (4) 289 239 954 104
Less, investment income related to adjusted operating income reconciling items (877) (1,627)
Total 13,184 (3,099) 14,160 3,217
__________
(1) Excludes Closed Block division.
(2) Excludes commercial loans and assets supporting experience-rated contractholder liabilities where the investment results generally accrue to contractholders, assets of our investment management operations, including assets that are managed for third parties and assets classified as "Separate account assets" on our balance sheet.
(3) Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading, which are included in "Other investments." Realized gains (losses) for "Other investments" includes changes in fair value of product-related and other derivatives and embedded derivatives.
(4) Includes invested income of commercial loans, assets supporting experience-rated contractholder liabilities where the investment results generally accrue to contractholders and investment management operations.
(5) Yields are based on net investment income as reported under U.S. GAAP and as such do not include certain interest-related items, such as settlements of duration management swaps which are included in realized investment gains and losses and included in adjusted operating income. For interim periods, yields are annualized. The denominator in the yield percentage is based on quarterly average carrying values for all asset types except for fixed maturities which are based on amortized cost, net of allowance. The denominator in the yield percentage includes assets "held-for-sale" as of March 31, 2022 and December 31, 2021. Amounts for fixed maturities, short-term investments and cash equivalents are also netted for securities lending activity (i.e., income netted for rebate expenses and asset values netted for security lending liabilities). A yield is not presented for other investments as it is not considered a meaningful measure of investment performance. Yields exclude investment income and assets related to commercial loans and assets supporting experience-rated contractholder liabilities where the investment results generally accrue to contractholders and investment income and assets related to other investments.
Page 33
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
INVESTMENT RESULTS - JAPANESE INSURANCE OPERATIONS
(in millions)
Three Months Ended December 31
2022
Investment Income Realized Gains (Losses)
Yield (1) Amount
Japanese Insurance Operations:
Fixed maturities (2) 2.80 % 968 (1)
Equity securities 6.05 % 26 -
Commercial mortgage and other loans 3.66 % 165 (10)
Policy loans 3.85 % 24 -
Short-term investments and cash equivalents 4.08 % 13 (1)
Gross investment income before investment expenses 2.96 % 1,196 (12)
Investment expenses -0.13 % (84) -
Subtotal 2.83 % 1,112 (12)
Other investments (2) 66 (87)
Total 1,178 (99)
Twelve Months Ended December 31
2022 2021
Investment Income Realized Gains (Losses) Investment Income Realized Gains (Losses)
Yield (1) Amount Yield (1) Amount
Japanese Insurance Operations:
Fixed maturities (2) 2.75 % 3,831 232 2.72 % 3,921 271
Equity securities 3.59 % 67 - 3.52 % 76 -
Commercial mortgage and other loans 3.67 % 686 (22) 3.92 % 768 33
Policy loans 3.90 % 99 - 4.05 % 114 -
Short-term investments and cash equivalents 3.75 % 31 (3) 0.48 % 4 -
Gross investment income before investment expenses 2.89 % 4,714 207 2.88 % 4,883 304
Investment expenses -0.14 % (281) - -0.14 % (241) -
Subtotal 2.75 % 4,433 207 2.74 % 4,642 304
Other investments (2) 208 (2,164) 457 (391)
Total 4,641 (1,957) 5,099 (87)
__________
(1) Yields are based on net investment income as reported under U.S. GAAP and as such do not include certain interest-related items, such as settlements of duration management swaps which are included in realized investment gains and losses and included in adjusted operating income. For interim periods, yields are annualized. The denominator in the yield percentage is based on quarterly average carrying values for all asset types except for fixed maturities which are based on amortized cost, net of allowance. Amounts for fixed maturities, short-term investments and cash equivalents are also netted for securities lending activity (i.e., income netted for rebate expenses and asset values netted for security lending liabilities). A yield is not presented for other investments as it is not considered a meaningful measure of investment performance. Yields exclude investment income and assets related to commercial loans and assets supporting experience-rated contractholder liabilities where the investment results generally accrue to contractholders and investment income and assets related to other investments.
(2) Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading, which are included in "Other investments." Realized gains (losses) for "Other investments" includes changes in fair value of product-related and other derivatives and embedded derivatives.
Page 34
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
INVESTMENT RESULTS - EXCLUDING JAPANESE INSURANCE OPERATIONS (1)
(in millions)
Three Months Ended December 31
2022
Investment Income Realized Gains (Losses)
Yield (4) Amount
Excluding Japanese Insurance Operations (2):
Fixed maturities (3) 5.04 % 1,905 (184)
Equity securities 3.10 % 22 -
Commercial mortgage and other loans 3.91 % 293 (37)
Policy loans 4.77 % 45 -
Short-term investments and cash equivalents 4.54 % 156 1
Gross investment income before investment expenses 4.61 % 2,421 (220)
Investment expenses -0.10 % (108) -
Subtotal 4.51 % 2,313 (220)
Other investments (3) 87 (717)
Total 2,400 (937)
Twelve Months Ended December 31
2022 2021
Investment Income Realized Gains (Losses) Investment Income Realized Gains (Losses)
Yield (4) Amount Yield (4) Amount
Excluding Japanese Insurance Operations (2):
Fixed maturities (3) 4.56 % 7,036 (1,318) 4.68 % 7,084 1,193
Equity securities 1.95 % 56 - 1.44 % 42 -
Commercial mortgage and other loans 3.77 % 1,121 (115) 4.05 % 1,198 48
Policy loans 4.94 % 184 - 5.09 % 196 -
Short-term investments and cash equivalents 2.70 % 340 (2) 0.48 % 55 (1)
Gross investment income before investment expenses 4.31 % 8,737 (1,435) 4.30 % 8,575 1,240
Investment expenses -0.14 % (350) - -0.15 % (254) -
Subtotal 4.17 % 8,387 (1,435) 4.15 % 8,321 1,240
Other investments (3) 744 54 1,413 1,960
Total 9,131 (1,381) 9,734 3,200
__________
(1) Excludes Closed Block division.
(2) Excludes commercial loans and assets supporting experience-rated contractholder liabilities where the investment results generally accrue to contractholders, assets of our investment management operations, including assets that are managed for third parties and assets classified as "Separate account assets" on our balance sheet.
(3) Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading, which are included in "Other investments." Realized gains (losses) for "Other investments" includes changes in fair value of product-related and other derivatives and embedded derivatives.
(4) Yields are based on net investment income as reported under U.S. GAAP and as such do not include certain interest-related items, such as settlements of duration management swaps which are included in realized investment gains and losses and included in adjusted operating income. For interim periods, yields are annualized. The denominator in the yield percentage is based on quarterly average carrying values for all asset types except for fixed maturities which are based on amortized cost, net of allowance. The denominator in the yield percentage includes assets "held-for-sale" as of March 31, 2022 and December 31, 2021. Amounts for fixed maturities, short-term investments and cash equivalents are also netted for securities lending activity (i.e., income netted for rebate expenses and asset values netted for security lending liabilities). A yield is not presented for other investments as it is not considered a meaningful measure of investment performance. Yields exclude investment income and assets related to commercial loans and assets supporting experience-rated contractholder liabilities where the investment results generally accrue to contractholders and investment income and assets related to other investments.
Page 35
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINED STATEMENTS OF OPERATIONS - AOI TO U.S. GAAP RECONCILIATION OF REVENUES AND BENEFITS AND EXPENSES
(in millions)
Three Months Ended December 31, 2022
Reconciling Items
Adjusted Operating Income (Loss) basis (1) Total realized investment gains (losses), net, and related charges and adjustments Change in value of market risk benefits, net of related hedging gains (losses) Market experience updates Closed Block Division Other Divested and Run-off Businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Other adjustments (2) U.S. GAAP
Revenues:
Premiums 5,904 - - 1 451 108 - - 6,464
Policy charges and fee income 1,100 77 - 21 - - - - 1,198
Net investment income 3,483 (5) - - 468 164 - - 4,110
Realized investment gains (losses), net 169 (1,200) - - (339) (27) - - (1,397)
Asset management fees, commissions and other income 1,550 78 - - 174 646 (19) - 2,429
Change in value of market risk benefits, net of related hedging gains (losses) - - 629 - - - - - 629
Total revenues 12,206 (1,050) 629 22 754 891 (19) - 13,433
Benefits and Expenses:
Insurance and annuity benefits 6,614 (128) - 5 678 842 - - 8,011
Change in estimates of liability for future policy benefits 50 13 - (7) - 1 - - 57
Interest credited to policyholders' account balances 735 (20) - - 30 53 - - 798
Interest expense 417 - - - 5 (2) - - 420
Deferral of acquisition costs (539) - - - - - - - (539)
Amortization of acquisition costs 328 9 - (1) 4 1 - - 341
Goodwill impairment - - - - - - - 903 903
General and administrative expenses 3,372 - - - 77 25 (1) 9 3,482
Total benefits and expenses 10,977 (126) - (3) 794 920 (1) 912 13,473
(1) See page 40 for a definition of adjusted operating income.
(2) Represents adjustments not included in the above reconciling items, including goodwill impairments related to Assurance IQ that resulted in charges of $903 million pre-tax and $713 million after-tax in the fourth quarter December 31, 2022. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration.
Page 36
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINED STATEMENTS OF OPERATIONS - AOI TO U.S. GAAP RECONCILIATION OF REVENUES AND BENEFITS AND EXPENSES
(in millions)
Twelve Months Ended December 31, 2022 Twelve Months Ended December 31, 2021
Reconciling Items Reconciling Items
Adjusted Operating Income (Loss) basis (1) Total realized investment gains (losses), net, and related charges and adjustments Change in value of market risk benefits, net of related hedging gains (losses) Market experience updates Closed Block Division Other Divested and Run-off Businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Other adjustments (2) U.S. GAAP Adjusted Operating Income (Loss) basis (1) Total realized investment gains (losses), net, and related charges and adjustments Change in value of market risk benefits, net of related hedging gains (losses) Market experience updates Closed Block Division Other Divested and Run-off Businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Other adjustments (2) U.S. GAAP
Revenues:
Premiums 34,370 - - (1) 1,699 407 - - 36,475 31,493 - - - 1,789 668 - - 33,950
Policy charges and fee income 4,275 120 - 162 - 58 - - 4,615 5,194 (9) - (8) - 256 - - 5,433
Net investment income 13,184 (23) - - 1,976 900 - - 16,037 14,160 (40) - - 2,500 1,667 - - 18,287
Realized investment gains (losses), net 847 (4,706) - - (270) (378) - - (4,507) 652 516 - - 807 140 - - 2,115
Asset management fees, commissions and other income 6,869 (1,475) - - (447) (279) 2 - 4,670 6,733 279 - - 851 111 (109) - 7,865
Change in value of market risk benefits, net of related hedging gains (losses) - - (443) - - 34 - - (409) - - 3,562 - - 35 - - 3,597
Total revenues 59,545 (6,084) (443) 161 2,958 742 2 - 56,881 58,232 746 3,562 (8) 5,947 2,877 (109) - 71,247
Benefits and expenses:
Insurance and annuity benefits 37,637 207 - (6) 2,543 633 - - 41,014 34,561 56 - (10) 5,340 918 - - 40,865
Change in estimates of liability for future policy benefits 951 154 - (475) - 24 - - 654 14 (3) - (18) - (28) - - (35)
Interest credited to policyholders' account balances 2,662 (156) - - 121 (434) - - 2,193 2,646 390 - - 125 270 - - 3,431
Interest expense 1,589 - - - 9 (2) - - 1,596 1,474 - - - - 4 - - 1,478
Deferral of acquisition costs (2,155) - - - - - - - (2,155) (2,523) - - - - (2) - - (2,525)
Amortization of acquisition costs 1,381 37 - - 14 1 - - 1,433 1,420 42 - - 14 6 - - 1,482
Goodwill impairment - - - - - - - 903 903 - - - - - - - 1,060 1,060
General and administrative expenses 12,398 - - - 289 374 38 36 13,135 13,408 1 - - 310 940 (55) 52 14,656
Total benefits and expenses 54,463 242 - (481) 2,976 596 38 939 58,773 51,000 486 - (28) 5,789 2,108 (55) 1,112 60,412
__________
(1) See page 40 for a definition of adjusted operating income.
(2) Represents adjustments not included in the above reconciling items, including goodwill impairments related to Assurance IQ that resulted in charges of $903 million pre-tax and $713 million after-tax in the year ended December 31, 2022, and $1,060 million pre-tax and $837 million after-tax in the year ended December 31, 2021. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration.
Page 37
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINED STATEMENTS OF OPERATIONS - AOI TO U.S. GAAP RECONCILIATION OF REVENUES AND BENEFITS AND EXPENSES
(in millions)
Three Months Ended March 31, 2022 Three Months Ended June 30, 2022
Reconciling Items Reconciling Items
Adjusted Operating Income (Loss) basis (1) Total realized investment gains (losses), net, and related charges and adjustments Change in value of market risk benefits, net of related hedging gains (losses) Market experience updates Closed Block Division Other Divested and Run-off Businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Other adjustments (2) U.S. GAAP Adjusted Operating Income (Loss) basis (1) Total realized investment gains (losses), net, and related charges and adjustments Change in value of market risk benefits, net of related hedging gains (losses) Market experience updates Closed Block Division Other Divested and Run-off Businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Other adjustments (2) U.S. GAAP
Revenues:
Premiums 7,149 - - - 409 131 - - 7,689 5,995 - - (1) 443 40 - - 6,477
Policy charges and fee income 1,223 (22) - 41 - 57 - - 1,299 869 32 - 73 - 1 - - 975
Net investment income 3,413 (10) - - 554 401 - - 4,358 3,241 (4) - - 520 181 - - 3,938
Realized investment gains (losses), net 168 (1,177) - - 100 (135) - - (1,044) 260 (1,642) - - (60) (194) - - (1,636)
Asset management fees, commissions and other income 1,349 (461) - - (98) (950) (17) - (177) 2,592 (647) - - (374) 712 65 - 2,348
Change in value of market risk benefits, net of related hedging gains (losses) - - (304) - - 34 - - (270) - - (710) - - - - - (710)
Total revenues 13,302 (1,670) (304) 41 965 (462) (17) - 11,855 12,957 (2,261) (710) 72 529 740 65 - 11,392
Benefits and expenses:
Insurance and annuity benefits 7,963 49 - 8 835 155 - - 9,010 7,135 132 - (17) 409 92 - - 7,751
Change in estimates of liability for future policy benefits (67) 9 - (88) - 1 - - (145) 909 132 - (283) - 19 - - 777
Interest credited to policyholders' account balances 645 (21) - - 30 (594) - - 60 654 (95) - - 31 54 - - 644
Interest expense 364 - - - - 1 - - 365 401 - - - - - - - 401
Deferral of acquisition costs (572) - - - - - - - (572) (513) - - - - - - - (513)
Amortization of acquisition costs 353 14 - - 3 1 - - 371 345 8 - 1 4 - - - 358
General and administrative expenses 3,080 - - - 70 245 12 17 3,424 2,876 - - - 69 76 21 - 3,042
Total benefits and expenses 11,766 51 - (80) 938 (191) 12 17 12,513 11,807 177 - (299) 513 241 21 - 12,460
__________
(1) See page 40 for a definition of adjusted operating income.
(2) Represents adjustments not included in the above reconciling items. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration, and goodwill impairments.
Page 38
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
COMBINED STATEMENTS OF OPERATIONS - AOI TO U.S. GAAP RECONCILIATION OF REVENUES AND BENEFITS AND EXPENSES
(in millions)
Three Months Ended September 30, 2022
Reconciling Items
Adjusted Operating Income (Loss) basis (1) Total realized investment gains (losses), net, and related charges and adjustments Change in value of market risk benefits, net of related hedging gains (losses) Market experience updates Closed Block Division Other Divested and Run-off Businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Other adjustments (2) U.S. GAAP
Revenues:
Premiums 15,322 - - (1) 396 128 - - 15,845
Policy charges and fee income 1,083 33 - 27 - - - - 1,143
Net investment income 3,047 (4) - - 434 154 - - 3,631
Realized investment gains (losses), net 250 (687) - - 29 (22) - - (430)
Asset management fees, commissions and other income 1,378 (445) - - (149) (687) (27) - 70
Change in value of market risk benefits, net of related hedging gains (losses) - - (58) - - - - - (58)
Total revenues 21,080 (1,103) (58) 26 710 (427) (27) - 20,201
Benefits and expenses:
Insurance and annuity benefits 15,925 154 - (2) 621 (456) - - 16,242
Change in estimates of liability for future policy benefits 59 - - (97) - 3 - - (35)
Interest credited to policyholders' account balances 628 (20) - - 30 53 - - 691
Interest expense 407 - - - 4 (1) - - 410
Deferral of acquisition costs (531) - - - - - - - (531)
Amortization of acquisition costs 355 6 - - 3 (1) - - 363
General and administrative expenses 3,070 - - - 73 28 6 10 3,187
Total benefits and expenses 19,913 140 - (99) 731 (374) 6 10 20,327
__________
(1) See page 40 for a definition of adjusted operating income.
(2) Represents adjustments not included in the above reconciling items. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration, and goodwill impairments.
Page 39
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
KEY DEFINITIONS AND FORMULAS
1. Adjusted operating income before income taxes:
Adjusted operating income is a non-GAAP measure used by the Company to evaluate segment performance and to allocate resources. Adjusted operating income excludes "Realized investment gains (losses), net," as adjusted, and related charges and adjustments. A significant element of realized investment gains and losses are impairments and credit-related and interest rate-related gains and losses. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as interest rate-related gains or losses, is largely subject to our discretion and influenced by market opportunities as well as our tax and capital profile.
Realized investment gains (losses) within certain businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income generally excludes realized investment gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset-liability management program related to the risk of those products. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are designated as trading. Adjusted operating income also excludes investment gains and losses on assets supporting experience-rated contractholder liabilities and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately accrue to contractholders. Additionally, adjusted operating income excludes the changes in fair value of equity securities that are recorded in net income.
Adjusted operating income excludes "Change in value of market risk benefits, net of related hedging gains (losses)", which reflects the impact from changes in current market conditions, and market experience updates, reflecting the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which we believe enhances the understanding of underlying performance trends. Adjusted operating income also excludes the results of Divested and Run-off Businesses, which are not relevant to our ongoing operations and discontinued operations and earnings attributable to noncontrolling interests, each of which is presented as a separate component of net income under GAAP. Additionally, adjusted operating income excludes other items, such as certain components of the consideration for acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration, and goodwill impairments. Earnings attributable to noncontrolling interests is presented as a separate component of net income under GAAP and excluded from adjusted operating income.
Adjusted operating income does not equate to "Net income" as determined in accordance with U.S. GAAP. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and our definition of adjusted operating income may differ from that used by other companies. The items above are important to an understanding of our overall results of operations. However, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses. Trends in the underlying profitability of our businesses can be more clearly identified without the fluctuating effects of the items described above.
2. After-tax adjusted operating income:
Adjusted operating income before taxes, as defined above, less the income tax effect applicable to adjusted operating income before taxes. The tax effect associated with pre-tax adjusted operating income is based on applicable IRS and foreign tax regulations inclusive of pertinent adjustments.
3. Annualized New Business Premiums:
Premiums from new sales that are expected to be collected over a one year period. Group insurance annualized new business premiums exclude new premiums resulting from rate changes on existing policies, from additional coverage issued under our Servicemembers' Group Life Insurance contract, and from excess premiums on group universal life insurance that build cash value but do not purchase face amounts. Group insurance annualized new business premiums include premiums from the takeover of claim liabilities. Excess (unscheduled) and single premium business for the company's domestic individual life and international operations are included in annualized new business premiums based on a 10% credit. Amounts ascribed to Gibraltar Life Consultants include production by captive agents associated with the Japan operation.
4. Assets Under Administration:
Fair market value of assets in client accounts and mortgage servicing assets, which are reported on an unpaid principal balance basis, that are not included in Assets Under Management. Prudential does not receive a management fee on these assets, but may receive a fee for executing trades, custody or record keeping services, or servicing the mortgage loans. In addition, fair market value of assets for which Prudential provides non-discretionary investment advice and receives a fee.
5. Assets Under Management:
Fair market value of assets directly managed by Prudential or joint ventures of which Prudential has at least 50% ownership, and assets invested in investment options included in the Company's products that are managed by third party sub-advised managers at the discretion of Prudential. This includes externally managed modified coinsurance for both Hartford and Allstate. It also includes the fair value of derivatives used in various portfolio management strategies related to the portfolio's invested assets, regardless of the hedge accounting designation, but excludes direct hedges of product liabilities and expenses.
6. Book value per share of Common Stock:
Equity attributed to Prudential Financial, Inc. divided by the number of common shares outstanding at end of period, on a diluted basis. Book value per share excluding Accumulated Other Comprehensive Income (Loss) ("AOCI") and adjusted to remove amount included for remeasurement of foreign currency exchange rate is a non-GAAP measure. This non-GAAP measure augments the understanding of our financial position by providing a measure of net worth that is primarily attributable to our business operations, separate from the portion that is affected by capital and currency market conditions including the removal of the associated accounting impacts of the remeasurement of certain insurance liabilities and investments that are marked to market through AOCI under GAAP. However, book value per share excluding AOCI and adjusted to remove the amount included for foreign currency exchange rate remeasurement is not a substitute for book value per share including AOCI determined in accordance with GAAP, and the adjustments made to derive the measure are important to an understanding of our overall financial position.
Page 40
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
KEY DEFINITIONS AND FORMULAS
7. Borrowings - Capital Debt:
Debt utilized to meet the capital requirements of our business.
8. Borrowings - Operating Debt:
Debt utilized for business funding to meet specific purposes, which may include activities associated with our PGIM and Assurance IQ businesses. Operating debt also consists of debt issued to finance specific portfolios of investment assets, the proceeds from which will service the debt. Specifically, this includes assets supporting reserve requirements under Regulation XXX and Guideline AXXX, as well as funding for institutional and insurance company portfolio cash flow timing differences.
9. Divested and Run-off Businesses:
Businesses that have been or will be sold or exited, including businesses that have been placed in wind down status that do not qualify for "discontinued operations" accounting treatment under U.S. GAAP.
10. Earned Premiums:
The portion of a premium, net of any amount ceded, that represents coverage already provided or that belongs to the insurer based on the part of the policy period that has passed.
11. General Account:
Includes assets of the insurance companies for which the Company bears the investment risk. These generally include assets supporting "Future Policy Benefits" and "Policyholders' Account Balances". General account assets also include assets of the parent company, Prudential Financial, Inc. and excludes assets recognized for statutory purposes that are specifically allocated to a separate account.
12. Gibraltar Life:
Includes results from the Japan operation.
13. Gibraltar Life Consultants:
Captive insurance agents for Gibraltar Life.
14. Group Insurance Benefits Ratios:
Ratio of policyholder benefits to earned premiums, policy charges and fee income.
15. Group Life Insurance and Group Disability Insurance Administrative Operating Expense Ratios:
Ratio of administrative operating expenses (excluding commissions) to gross premiums, and net policy charges and fee income.
16. Individual Retirement Strategies Account Values in General Account and Separate Account:
Amounts represent the breakdown of invested customer funds in annuities either written or reinsured by the Company.
17. Individual Retirement Strategies - Net Amounts at Risk:
Living Benefit Features - For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance.
Death Benefit Features - Net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date.
18. Insurance and Annuity Benefits:
Total death benefits, annuity benefits, disability benefits, other policy benefits, and losses paid or incurred, under insurance and annuity contracts, plus the change in reserves for future policy benefits, losses and loss adjustment expenses.
19. International Life Planners:
Captive insurance Advisors in our Life Planner operations.
Page 41
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
KEY DEFINITIONS AND FORMULAS
20. Non-recourse and Limited-recourse Debt:
Limited and non-recourse borrowing is where the debt holder is only entitled to collect against the assets pledged to the debt as collateral or has very limited rights to collect against other assets.
21. Other Related Revenues:
Other related revenues include incentive fees, transaction fees, seed and co-investment results, and commercial mortgage revenues.
22. PGIM Asset Under Management Classifications:
Public Equity - Represents stock ownership interest in a corporation or partnership (excluding hedge funds) or real estate investment trust.
Public Fixed Income - Represents debt instruments that pay fixed interest and usually have a maturity (excluding mortgages).
Real Estate - Includes direct real estate equity and real estate mortgages.
Private Credit and Other Alternatives - Includes private credit, private equity, hedge funds and other alternative strategies.
Multi-Asset - Includes funds or products that invest in more than one asset class, balancing equity and fixed income funds and target date funds.
23. Policy Persistency - Group Insurance:
Percentage of the premiums in force at the end of the prior year that are still in force at the end of the period (excluding Servicemembers' Group Life Insurance and Prudential Employee Benefit Plan).
24. Policy Persistency - International Businesses:
13 month persistency represents the average percentage of face amount of policies that are still in force at their 13th policy month. 25 month persistency represents the average percentage of face amount of policies that are still in force at their 25th policy month.
25. Prudential Advisors:
Captive financial professionals in our insurance operations in the United States.
26. Prudential Advisor Productivity:
Commissions on new sales of all products by Prudential Advisors financial professionals under contract for the entire period, divided by the number of those financial professionals. Excludes commissions on new sales by financial professionals hired or departed during the period. For interim reporting periods, the productivity measures are annualized.
27. Prudential Financial, Inc. Equity:
Amount of capital assigned to each of the Company's segments for purposes of measuring segment adjusted operating income before income taxes, established at a level which management considers necessary to support the segment's risks. Represents all of Prudential Financial, Inc. equity that is not attributable to noncontrolling interests.
28. Separate Accounts:
Assets of our insurance companies allocated under certain policies and contracts that are segregated from the general account and other separate accounts. The policyholder or contractholder predominantly bears the risk of investments held in a separate account.
29. Wrap-Fee Products:
Investment products generating asset-based fees in which the funds of the customer are generally invested in other investment products such as mutual funds.
Page 42
Prudential Financial, Inc.
Quarterly Financial Supplement
Fourth Quarter 2022
RATINGS AND INVESTOR INFORMATION
FINANCIAL STRENGTH RATINGS
as of April 13, 2023
Standard & Fitch
A.M. Best* Poor's Moody's* Ratings*
The Prudential Insurance Company of America A+ AA- Aa3 AA-
PRUCO Life Insurance Company A+ AA- Aa3 AA-
PRUCO Life Insurance Company of New Jersey A+ AA- NR AA-
The Prudential Life Insurance Co., Ltd. (Prudential of Japan) NR A+ NR NR
Gibraltar Life Insurance Company, Ltd. NR A+ NR NR
The Prudential Gibraltar Financial Life Insurance Co. Ltd. NR A+ NR NR
CREDIT RATINGS:
as of April 13, 2023
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 A+
PRICOA Global Funding I:
Long-Term Senior Debt aa- AA- Aa3 AA-
* NR indicates not rated.
INVESTOR INFORMATION:
Corporate Office:
Prudential Financial, Inc.
751 Broad Street
Newark, New Jersey 07102
Common Stock:
Common Stock of Prudential Financial, Inc. is traded on the New York Stock Exchange under the symbol PRU.
For more information, please visit our website at investor.prudential.com.
Page 43

Disclaimer

Prudential Financial Inc. published this content on 13 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 April 2023 20:20:15 UTC.

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