PRUDENTIAL FINANCIAL INC – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TABLE OF CONTENTS


                                                                                                Page
  Overview                                                                                           69
  COVID-19                                                                                           70
  Impact of a Low Interest Rate Environment                                                          71
  Results of Operations                                                                              74
  Consolidated Results of Operations                                                                 74
  Segment Results of Operations                                                                      75
  Segment Measures                                                                                   77
  Impact of Foreign Currency Exchange Rates                                                          77
  Accounting Policies & Pronouncements                                                               80
  Results of Operations by Segment                                                                   81
  PGIM                                                                                               81
  U.S. Businesses                                                                                    85
  Retirement                                                                                         86
  Group Insurance                                                                                    87
  Individual Annuities                                                                               88
  Individual Life                                                                                    93
  Assurance IQ                                                                                       94
  International Businesses                                                                           95
  Corporate and Other                                                                                98
  Divested and Run-off Businesses                                                                    98
  Closed Block Division                                                                              99
  Income Taxes                                                                                      100

Experience-Rated Contractholder Liabilities, Assets Supporting Experience-Rated
Contractholder Liabilities and Other Related Investments

                        100
  Valuation of Assets and Liabilities                                                               102
  General Account Investments                                                                       103
  Liquidity and Capital Resources                                                                   121
  Ratings                                                                                           131



Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") addresses the consolidated financial condition of Prudential
Financial, Inc. ("Prudential," "Prudential Financial," "PFI," or "the Company")
as of March 31, 2022, compared with December 31, 2021, and its consolidated
results of operations for the three months ended March 31, 2022 and 2021. You
should read the following analysis of our consolidated financial condition and
results of operations in conjunction with the MD&A, the "Risk Factors" section,
and the audited Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2021, as well as the
statements under "Forward-Looking Statements," and the Unaudited Interim
Consolidated Financial Statements included elsewhere in this Quarterly Report on
Form 10-Q.
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                                    Overview

Prudential Financial, a financial services leader with approximately $1.620
trillion of assets under management as of March 31, 2022, has operations
primarily in the United States of America ("U.S."), Asia, Europe and Latin
America. Through our subsidiaries and affiliates, we offer a wide array of
financial products and services, including life insurance, annuities,
retirement-related services, mutual funds and investment management. We offer
these products and services to individual and institutional customers through
one of the largest distribution networks in the financial services industry.

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

We attribute financing costs to each segment based on the amount of financing
used by each segment, excluding financing costs associated with corporate debt,
which are reflected in our Corporate and Other operations. The net investment
income of each segment includes earnings on the amount of capital that
management believes is necessary to support the risks of that segment.

In October 2021, we announced the creation of Retirement Strategies, a new U.S.
business that will serve the retirement needs of both individual and
institutional customers. This business will bring the financial solutions and
capabilities of our Individual Annuities business together with the
institutional investment and pension solutions offered through our Retirement
business. The new leadership team continues to make decisions around the
business's operating structure. When this new structure is finalized and
operational, the presentation of our segment results may be modified to conform
to this new structure.

Management expects that results will continue to benefit from our differentiated
mix of market-leading businesses that complement each other to provide
competitive advantages, earnings diversification and capital benefits from a
balanced risk profile. We believe we are well-positioned to tap into market
opportunities to meet the evolving needs of individual customers, workplace
clients, and society at large. Our mix of high-quality protection, retirement
and investment management businesses enables us to offer solutions that cover a
broad range of financial needs and to engage with our clients through multiple
channels, including the ability to sell solutions across a broad socio-economic
spectrum through Assurance IQ's digital platform. We aim to expand our
addressable market, build deeper and longer-lasting relationships with customers
and clients, and meaningfully improve their financial wellness. While challenges
have existed in the form of a sustained low interest rate environment, interest
rates have begun to rise from historically low levels. In the short term, rising
interest rates will cause a decrease in our assets under management and
associated fee income in our fee-based businesses, while over the longer term,
rising interest rates will drive an increase in investment income from higher
portfolio reinvestment rates.

In order to further increase our competitive advantage, we are working to
enhance the experience of our customers and the capabilities of our businesses,
which we expect will also help us realize improved margins. In 2019, we launched
programs in pursuit of these objectives that have resulted and will continue to
result in multi-year investments in technology, systems and employee reskilling,
as well as severance and related charges. For the three months ended March 31,
2022, we incurred approximately $25 million of costs in connection with these
programs. We expect these programs will generate significant expense
efficiencies over several years that will mitigate the impact from increases in
other expenses due to inflation and business growth initiatives. For the three
months ended March 31, 2022, the Company estimates that these programs generated
cost savings of approximately $170 million and, as of March 31, 2022, we remain
on track to accumulate approximately $750 million of annual run-rate cost
savings by the end of 2023.

Annually during the second quarter of each year, we perform a comprehensive
review of actuarial assumptions. As part of this review, we may update these
assumptions and make refinements to our models based upon emerging experience,
future expectations and other data, including any observable market data. For
additional information, see "-Accounting Policies & Pronouncements-Application
of Critical Accounting Estimates" below as well as the Company's Annual Report
on Form 10-K for the year ended December 31, 2021.

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COVID-19

Since the first quarter of 2020, the COVID-19 pandemic has caused extreme stress
and disruption in the global economy and financial markets and elevated
mortality and morbidity for the global population. The COVID-19 pandemic
impacted our results of operations in the current period and is expected to
impact our results of operations in future periods.

The Company has taken several measures to manage the impacts of this crisis. The
actual and expected impacts of these events and other items are included in the
following update:

•Outlook.

U.S. Businesses:

The United States has experienced multiple waves of COVID-19, with the severity
of each wave depending on such factors as seasonality, varying levels of
population immunity, and the evolution of the virus itself into different
variants. Throughout the course of the pandemic, deaths from COVID-19 in the
United States have ranged from a few hundred to several thousand per day. In
December 2021, the Omicron variant emerged in the U.S. and quickly became the
dominant strain, causing many more infections but with a smaller percentage of
infections resulting in hospitalizations and deaths compared to prior waves,
though still causing deaths to spike during the first quarter of 2022. Vaccines
and other therapeutics, such as antiviral treatments, are now widely available
and non-pharmaceutical interventions, such as mandatory social distancing and
mask wearing, are being relaxed in most communities; however, the future
evolution of the virus, among other factors, could cause the actual course of
the pandemic and its impact on our business to differ from our current
expectations.

Specific outlook considerations for certain of our U.S. businesses include the
following:

Retirement. As many of the products in our Institutional Investment Products
business assume longevity risk, elevated levels of mortality resulting from
COVID-19 may continue to contribute to higher levels of underwriting gains.

Group Insurance. We anticipate that COVID-19 will continue to contribute in the
near-term to elevated levels of mortality resulting in increased life insurance
claims. In addition, we are continuing to monitor the potential impact of the
pandemic on our disability business, overall sales volumes, and the utilization
of our workplace benefit offerings.

Individual Life. We expect COVID-19 to continue to contribute in the near-term
to elevated levels of mortality, resulting in increased life insurance claims.

International Businesses:

Our Japanese operations experienced an elevated level of COVID-19 claims due to
the spread of the Omicron variant in the first quarter of 2022. In response to
this spread, Japanese authorities enacted control measures, which disrupted
sales and agent recruiting while these measures were in place; however, these
restrictions were subsequently lifted towards the end of the quarter. Although
we have seen signs of improvement across all key markets, the situation remains
fluid and COVID-19 might impact future claims and sales depending on the state
of the pandemic in the geographic markets in which we operate. We believe our
needs-based selling and death protection focus are even more valuable to
consumers based on the global experience of COVID-19 and will help support the
continued long-term growth of our businesses.

•Results of Operations. See "-Results of Operations" and "-Results of Operations
by Segment" for a discussion of results for the first quarter of 2022.

•Investment Portfolio. The economy continues to recover and remains on a path to
re-opening. Credit migration and defaults were low in 2021 and have remained
limited in 2022. The sectors most impacted from COVID-19 have started to recover
but could be influenced by periods of volatility due to the possibility of
additional variants emerging.

•Sales and Flows. See "-Segment Results of Operations" for a discussion of sales
and flows in each of our segments.

•Underwriting Results. Through the first three months of 2022, we estimate that
COVID-19 had a significant net negative impact on our underwriting results
reflecting unfavorable mortality impacts in our Group Insurance, Individual Life
and International businesses, partially offset by favorable mortality impacts in
our Retirement business. For the
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second quarter of 2022, the Company expects underwriting results to be adversely
impacted by approximately $40 million in our U.S. Businesses, predominantly in
our Group Insurance business, and approximately $25 million in our International
Businesses; however, the ultimate impact on our underwriting results will depend
on various factors including: an insured's age; geographic concentration;
insured versus uninsured populations among the fatalities; the transmissibility
and virulence of the virus, including the potential for further mutation; and
the ongoing acceptance and efficacy of the vaccines and other therapeutics.

•Risk Management. Prudential has a robust risk management framework that seeks
to ensure we can fulfill our customer, regulatory, and other stakeholder
obligations under a range of stress scenarios by maintaining the appropriate
balance between the Company's resources and risks. We evaluate the Company's
exposure to stress under four lenses (economic, STAT, GAAP, and liquidity).

Our risk management framework incorporates severe to very severe stresses across
equities, interest rates, credit migration and defaults, currencies and
mortality. This framework includes a specific "pandemic and sell-off" scenario
with a mortality calamity (1.5 extra deaths per 1,000 lives in the first year)
based on a modern-day interpretation of the 1918 Spanish Flu experience that is
aligned with most regulatory frameworks. The stress scenario assumes an even
distribution of increased mortality across the population, which is more
adversely impactful to the Company than our current understanding of COVID-19
mortality, which is skewed toward older ages. As the COVID-19 pandemic continues
to unfold, we continue to update our analysis and take management actions in
response to this specific event.

As of March 31, 2022, the COVID-19 pandemic has not reached the most severe
levels of financial impacts included in the Company's stress testing. In
addition, the net mortality impact of COVID-19 has been moderated by the balance
between our mortality exposure (such as in our Individual Life and Group
Insurance businesses) and our offsetting longevity exposure (such as in our
Retirement business), and is influenced by the age distribution of U.S. COVID-19
mortality. The future evolution of the virus, among other factors, could cause
the actual course of the pandemic to differ from our current expectations.

•Risk Factors. The COVID-19 pandemic has adversely impacted our results of
operations, financial position, investment portfolio, new business opportunities
and operations, and these impacts are expected to continue. For additional
information on the risks to our business posed by the COVID-19 pandemic, see
"Risk Factors" included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2021.

•Business Continuity. Throughout the COVID-19 pandemic, we have been executing
our business continuity protocols to ensure our employees are safe and able to
serve our customers. This included effectively transitioning the vast majority
of our employees to remote work arrangements. In March 2022, our offices were
reopened to employees and we expect that most of our workforce will adopt a
hybrid arrangement for the foreseeable future.

We believe all of our businesses can sustain long-term hybrid or fully remote
work arrangements while ensuring that critical business operations are
sustained. In addition, we are managing COVID-19 related impacts on third-party
provided services, and do not anticipate significant interruption in critical
operations.

Impact of a Low Interest Rate Environment

As a global financial services company, market interest rates are a key driver
of our results of operations and financial condition. Changes in interest rates
can affect our results of operations and/or our financial condition in several
ways, including favorable or adverse impacts to:
•investment-related activity, including: investment income returns, net interest
margins, net investment spread results, new money rates, mortgage loan
prepayments and bond redemptions;
•hedging costs and other risk mitigation activities;
•insurance reserve levels, market experience true-ups and amortization of both
deferred policy acquisition costs ("DAC") and value of business acquired
("VOBA");
•customer account values, including their impact on fee income;
•fair value of, and possible impairments on, intangible assets such as goodwill;
•product offerings, design features, crediting rates and sales mix; and
•policyholder behavior, including surrender or withdrawal activity.

For more information on interest rate risks, see "Risk Factors-Market Risk"
included in our Annual Report on Form 10-K for the year ended December 31, 2021.

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See below for discussions related to the current interest rate environments in
our two largest markets, the U.S. and Japan; the composition of our insurance
liabilities and policyholder account balances; and the hypothetical impacts to
our investment related results if these interest rate environments are
sustained.

U.S. Operations excluding the Closed Block Division

Interest rates in the U.S. have experienced a sustained period of historically
low levels with certain benchmarks reaching significant lows in recent years,
while increasing more recently. Although more recent impacts of inflation in the
U.S., along with other varying market conditions and events, make uncertain the
timing, amount and impact of any monetary policy decisions by the Federal
Reserve, changes in interest rates may impact our reinvestment yields, primarily
for our investments in fixed maturity securities and commercial mortgage
loans. As interest rates decline, our reinvestment yield may be below our
overall portfolio yield, resulting in an unfavorable impact to earnings.
Conversely, as interest rates rise, our reinvestment yield may exceed the
overall portfolio yield resulting in a favorable impact to earnings.

For the general account supporting our U.S. Businesses and our Corporate and
Other operations, we estimate annual principal payments and prepayments that we
would be required to reinvest to be approximately 5.6% of the fixed maturity
security and commercial mortgage loan portfolios through 2023. The portion of
the general account attributable to these operations has approximately $224
billion of such assets (based on net carrying value and including assets
classified as "held-for-sale") as of March 31, 2022. The average portfolio yield
for fixed maturity securities and commercial mortgage loans is approximately
3.7% as of March 31, 2022.

Included in the $224 billion of fixed maturity securities and commercial
mortgage loans are approximately $174 billion that are subject to call or
redemption features at the issuer's option and have a weighted average interest
rate of approximately 4%. Of this $174 billion, approximately 51% contain
provisions for prepayment premiums. If we reinvest scheduled payments or
prepayments (not subject to a prepayment fee) at rates below the current
portfolio yield, including in some cases at rates below those guaranteed under
our insurance contracts, future operating results will be impacted to the extent
we do not, or are unable to, reduce crediting rates on in-force blocks of
business, or effectively utilize other asset/liability management strategies
described below, in order to maintain current net interest margins.

The following table sets forth the insurance liabilities and policyholder
account balances of our U.S. operations excluding the Closed Block Division, by
type, for the date indicated:

                                                                                     As of
                                                                                 March 31, 2022
                                                                                 (in billions)
Long-duration insurance products with fixed and guaranteed terms               $           150

Contracts with adjustable crediting rates subject to guaranteed minimums

                 61
Participating contracts where investment income risk ultimately accrues to
contractholders                                                                             13
Total                                                                          $           224



The $150 billion above relates to long-duration products such as group
annuities, structured settlements and other insurance products that have fixed
and guaranteed terms, for which underlying assets may have to be reinvested at
interest rates that are lower than portfolio rates. We seek to mitigate the
impact of a prolonged low interest rate environment on these contracts through
asset/liability management, as discussed further below.

The $61 billion above relates to contracts with crediting rates that may be
adjusted over the life of the contract, subject to guaranteed minimums. Although
we may have the ability to lower crediting rates for those contracts above
guaranteed minimums, our willingness to do so may be limited by competitive
pressures. The following table sets forth the related account values by range of
guaranteed minimum crediting rates and the related range of the difference, in
basis points ("bps"), between rates being credited to contractholders as of
March 31, 2022, and the respective guaranteed minimums.

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                                                Account Values with 

Adjustable Crediting Rates Subject to Guaranteed Minimums:

                                                                                                                 Greater than
                                                          1-49               50-99             100-150               150
                                      At                bps above          bps above          bps above           bps above
                                  guaranteed           guaranteed          guaranteed         guaranteed          guaranteed
                                   minimum               minimum            minimum            minimum             minimum              Total
                                                                                ($ in billions)
Range of Guaranteed Minimum
Crediting Rates:
Less than 1.00%                $        1.1           $      1.1          $     0.1          $     0.0          $      0.0           $    2.3
1.00% - 1.99%                           4.3                 13.4                1.9                0.8                 2.4               22.8
2.00% - 2.99%                           1.3                  0.0                1.2                1.4                 3.3                7.2
3.00% - 4.00%                          25.7                  0.0                1.7                0.7                 0.1               28.2
Greater than 4.00%                      0.8                  0.0                0.0                0.0                 0.0                0.8
Total(1)                       $       33.2           $     14.5          $     4.9          $     2.9          $      5.8           $   61.3
Percentage of total                      54   %               24  %               8  %               5  %                9   %            100  %


 __________

(1)Includes approximately $0.52 billion related to contracts that impose a
market value adjustment if the invested amount is not held to maturity.

The remaining $13 billion of insurance liabilities and policyholder account
balances in these operations relates to participating contracts for which the
investment income risk is expected to ultimately accrue to contractholders. The
crediting rates for these contracts are periodically adjusted based on the
return earned on the related assets.

Assuming a hypothetical scenario where the average 10-year U.S. Treasury rate is
2.50% (which is reasonably consistent with recent rates) for the period from
April 1, 2022 through March 31, 2023 (and credit spreads remain unchanged from
average levels experienced during the first quarter 2022), we estimate that the
impact to net investment income of reinvesting activities, including scheduled
maturities and estimated prepayments of fixed maturities and commercial mortgage
and other loans (excluding assets supporting participating contracts), would be
between $0 million and $(20) million over this period.

In order to mitigate the unfavorable impact that a low interest rate environment
has on our net interest margins, we employ a proactive asset/liability
management program, which includes strategic asset allocation and hedging
strategies within a disciplined risk management framework. These strategies seek
to match the characteristics of our products, and to closely approximate the
interest rate sensitivity of the assets with the estimated interest rate
sensitivity of the product liabilities. Our asset/liability management program
also helps manage duration gaps, currency and other risks between assets and
liabilities through the use of derivatives. We adjust this dynamic process as
products change, as customer behavior changes and as changes in the market
environment occur. As a result, our asset/liability management process has
permitted us to manage the interest rate risk associated with our products
through several market cycles. Our interest rate exposure is also mitigated by
our business mix, which includes lines of business for which fee-based and
insurance underwriting earnings play a more prominent role in product
profitability. We also regularly examine our product offerings and their
profitability. As a result, we may reprice certain products and discontinue
sales of other products that do not meet our profit expectations.

Closed Block Division

Substantially all of the $55 billion of general account assets in the Closed
Block division support obligations and liabilities relating to the Closed Block
policies only. See Note 7 to the Unaudited Interim Consolidated Financial
Statements for additional information on the Closed Block.

International Insurance Operations

While our international insurance operations have experienced a low interest
rate environment for many years, the current reinvestment yields for certain
blocks of business in our international insurance operations are generally lower
than the current portfolio yield supporting these blocks of business. In recent
years, the Bank of Japan's monetary policy has resulted in even lower and, at
times, negative yields for certain tenors of government bonds. Our international
insurance operations employ a proactive asset/liability management program in
order to mitigate, to the extent possible, the unfavorable impact that the
current interest rate environment has on our net interest margins. In
conjunction with this program, we have not purchased negative yielding assets to
support the portfolio and we continue to purchase long-term bonds with tenors of
30 years or greater. Additionally, our diverse product portfolio in terms of
currency mix and premium payment structure allows us to further mitigate the
negative impact from this low interest rate environment. We also regularly
examine our product offerings and their profitability. As a result, we may
reprice certain products, adjust commissions for certain products and
discontinue sales of other products that do not meet our profit expectations.
The impact of these actions and the introduction of certain new products
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has resulted in an increase in sales of U.S. dollar-denominated products
relative to products denominated in other currencies. For additional information
on sales within our international insurance operations, see "-International
Businesses-Sales Results," below.

The following table sets forth the insurance liabilities and policyholder
account balances of our Japanese operations, by type, for the date indicated:

                                                                                     As of
                                                                                 March 31, 2022
                                                                                 (in billions)
Insurance products with fixed and guaranteed terms                             $           137

Contracts with a market value adjustment if invested amount is not held to
maturity

                                                                                    25

Contracts with adjustable crediting rates subject to guaranteed minimums

                10
Total                                                                          $           172



The $137 billion is primarily comprised of long-duration insurance products that
have fixed and guaranteed terms- for which underlying assets may have to be
reinvested at interest rates that are lower than current portfolio yields. The
remaining insurance liabilities and policyholder account balances include $25
billion related to contracts that impose a market value adjustment if the
invested amount is not held to maturity and $10 billion related to contracts
with crediting rates that may be adjusted over the life of the contract, subject
to guaranteed minimums. Most of the current crediting rates on these contracts,
however, are at or near contractual minimums. Although we have the ability in
some cases to lower crediting rates for those contracts that are above
guaranteed minimum crediting rates, the majority of this business has interest
crediting rates that are determined by formula.

Assuming a hypothetical scenario where the average 30-year Japanese Government
Bond yield is 0.90% and the 10-year U.S. Treasury rate is 2.50% (which is
reasonably consistent with recent rates) for the period from April 1, 2022
through March 31, 2023 (and credit spreads remain unchanged from average levels
experienced during the first quarter 2022), we estimate that there would be no
material impact to net investment income of reinvesting activities, including
scheduled maturities and estimated prepayments of fixed maturities and
commercial mortgage and other loans (excluding assets supporting participating
contracts), over this period.