PRUDENTIAL FINANCIAL INC

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Direct Compensation Components

Annually, the Committee reviews a competitive analysis of total direct compensation for the NEOs. Based on this evaluation, the Committee may selectively adjust the base salary, annual incentive award target, and long-term incentive award target amounts of the NEOs. In determining any adjustments, the Committee takes into account the following factors: level of experience and impact in the role; changes in market data; and compensation positioning overall and by component. Executives new to their current roles are positioned toward the lower end of their competitive range while executives with more experience are generally positioned at the higher end of the applicable range.

Base Salary

Base salary is the principal fixed component of the total direct compensation of our executive officers, including the NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s performance and contributions. Effective March 1, 2024, Messrs. Lowrey and Falzon and Ms. Feeney received a base salary

increase of $100,000, $80,000 and $25,000 respectively, to maintain the competitive positioning of their compensation packages relative to external peers.

Annual Incentive Awards

The Committee reviews the structure of the Annual Incentive Program at least once per year, including the enterprise-wide metrics, targets, and standard adjustments that comprise our formulaic framework. The Committee selects metrics that it believes provide a balanced view of the Company’s performance each year, with targets that are linked to the Company’s financial plan and strategic objectives.

The funding of the annual incentive award for each NEO and most of our U.S.-based, non-investment professional population is determined by applying the Final Performance Factor to each individual’s annual incentive target for the performance year. The Final Performance Factor is derived from a formulaic calculation using the metrics and targets established by the Committee at the outset of the performance period.

Guided by our pay for performance philosophy, each individual’s actual annual incentive award may be higher or lower than the calculated level of funding, recognizing differences in individual performance. At the most senior levels, including and especially for our NEOs, we typically apply less differentiation, reflecting our belief that our senior leadership team has a collective responsibility for the performance outcomes selected by the Committee for the year. For the 2024 performance year, our NEOs’ annual incentive award targets were reviewed and some were increased to position their award opportunities relative to external peers.

Each NEO’s award opportunity range is $0 to a maximum of 1.5 times the individual’s target for each performance year.

Pre-Established 2023 and 2024 Annual Incentive Award Opportunity Ranges

Calculating the 2023 Final Performance Factor for Our Annual Incentive Program

The Committee’s principal consideration in determining annual incentive awards was the 2023 Final Performance Factor of 1.023, representing the weighted average of the four metrics selected by the Committee for:

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EPS, on an AOI basis, assessed relative to our pre-established target (the “EPS Factor”)

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ROE as compared to the median ROE achieved by the Performance Peer Group (the “Relative ROE Factor”)

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Total Operating Expenses compared to our plan for 2023 (the “Operating Expense Factor”)

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Change in Customer Experience versus the prior year (the “Customer Experience Factor”)

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For the Annual Incentive Program, we use information for 2023 AOI, EPS, and Operating Expenses, that we estimate as of January 2024.

Standard Adjustments

We make standard adjustments to estimated EPS and ROE under our formulaic framework that may vary from year to year and may have a net positive or negative impact on our estimates. For 2023, these standard adjustments resulted in a net positive impact to EPS and ROE.

Annually, based on Company-specific data, industry data, and the current long-term economic outlook, we update our actuarial assumptions on long-term market returns and customer behavioral expectations (e.g., mortality, morbidity, and

lapses). These updates and related refinements result in a cumulative revaluation of our reserves and other actuarial balances. While GAAP requires these updates to be reported in the current period, they are not representative of annual performance since they relate to outcomes in both prior and future years. For these reasons, they are excluded from EPS under the Annual Incentive Program (regardless of whether they are positive or negative). In 2023, the adjustments to account for these updates decreased EPS under the Annual Incentive Program by approximately $0.03.

We limit the impact of variable investment income on the calculation of EPS under the Annual Incentive Program. We do so by excluding earnings from non-coupon investments and prepayment fee and call premium income that are outside of a range of-10% to +10% from that assumed in our annual financial plan. For 2023, this adjustment increased EPS under the Annual Incentive Program by approximately $0.47 as these earnings fell short of our expectations by more than 10%.

In 2023, we excluded the unplanned costs and reduced earnings from de-risking transactions and the launch of Prismic. As a result we increased EPS under the Annual Incentive Program by approximately $0.16.

We also excluded the impacts of certain tax law changes affecting us (which resulted in a decrease to EPS under the Annual Incentive Program of approximately $0.08) and an adjustment related to the implementation of new GAAP accounting for long-duration insurance contracts (which resulted in an increase of approximately $0.04).

Other items not considered representative of operating results or included in our annual financial plan are also excluded from EPS under the program. In 2023, we excluded the net costs of unplanned debt issuances and restructuring costs from organizational changes, which increased EPS under the Annual Incentive Program by approximately $0.78.

In the aggregate, these standard adjustments under our preset formulaic framework had a net positive effect of $1.34, increasing EPS under the Annual Incentive Program from $11.51 to $12.85.

Using EPS and ROE as adjusted above, the calculation of our final performance factor is illustrated below. The rows shaded in blue indicate our results against the pre-established scales for each metric and the final performance factor.

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(1)

Interpolated on a straight line basis between the data points

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(2)

Weighted Average of the EPS, Relative ROE, Operating Expense, and the Customer Experience Factors

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Long-Term Incentive Program

In order to motivate and reward our executive officers for their contributions toward achieving our business objectives, long-term incentives comprise the majority of each NEO’s target total direct compensation opportunity, which is linked to our multiyear ROE, adjusted book value and Common Stock performance.

In February 2024, the Committee established a target long-term award opportunity for each of the NEOs. To set these long-term award targets, the Committee considered:

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a competitive market analysis of the NEO’s total compensation and the portion of total compensation provided as long-term incentives, relative to similar roles at companies in our Compensation Peer Group;

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the Company’s and each NEO’s individual performance and his or her expected future contributions;

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the NEO’s level of experience in his or her role; and

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retention considerations.

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The values at target of long-term incentives granted to our NEOs in February 2024 are depicted in the table below. 75% of each NEO’s grant was delivered in performance shares and 25% was delivered in restricted stock units (“RSUs”). The number of performance shares (at target) and RSUs awarded to an NEO is determined by dividing the value of the award by the closing market price of our Common Stock on the grant date.

Long-Term Incentive Program Vehicle Mix

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Performance Shares

Performance shares align the majority of our NEOs’ long-term incentives to the achievement of goals that are established each year to drive long-term performance. The Committee selects metrics for the performance shares program that it believes will provide a balanced indication of the Company’s success over each ensuing three-year period. Since February 2021, the Committee selected ROE relative to the median performance of our Performance Peer Group and growth in adjusted book value per share (“BVPS”) relative to our expectations with an opportunity to earn 0-1.50 times the target number of shares. Additionally, for performance shares granted in February 2021, we incorporated inclusion and diversity goals which apply a +/-10% modifier to the plan for our NEOs and other senior leaders.

Mid-Cycle Adjustment to Outstanding Performance Share Awards

Within our performance shares program, the Company’s results relative to pre-established BVPS growth targets for each three-year performance period determine 50% of the shares of Common Stock earned. We calculate BVPS as discussed under “Formulaic Framework for Incentive Programs” above and as shown in Appendix A. Growth in adjusted BVPS is the average of the annual growth rates for each year in the performance period, which is then compared against the target for the corresponding performance period. For grants made in 2021, 2022 and 2023, the three-year average BVPS growth target was set at 7%, 8%, and 7%, respectively. The Committee determined at the time of each grant—and continues to believe—​that these target levels were set appropriately, reflecting challenging growth rates that could be achieved with focused effort and successful execution from our executives.

The Committee also established minimum threshold and maximum performance levels, along with a framework for standard adjustments to our calculation of BVPS, at the time of each grant, based on its then-current understanding and expectation of the Company’s business plan, performance on key business drivers, Prudential’s historical results, and relevant external factors, including interest rates. However, these pre-established performance levels did not contemplate the possibility or impact of rapid and significant changes in interest rates, such as occurred in 2022 and 2023. For Prudential, the unprecedented nature of market events led to an outsized, negative impact on our BVPS. The Committee views the resulting impact on the Company’s BVPS as non-economic in nature, driven primarily by the short-term accounting treatment for derivatives, and not adequately reflective of the long-term positive impact expected for our business from rising interest rates. This aspect of our program design ran counter to our primary intent of measuring factors within management’s control.

Following an extensive review of our performance shares program over the course of 2023—including engaging with our major institutional investors and other stakeholders with a member of the Committee present—and in consultation with FW Cook, the Committee presented to our Board of Directors proposed modifications to our performance share program.

The proposal aimed to remedy and improve the design of our program, both retroactively for outstanding awards and going forward for future awards, by:

incorporating into the definition of BVPS an adjustment to exclude the impact of outsized interest rate changes—either positive or negative—on interest rate-sensitive items used to calculate BVPS;

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lowering the threshold for a partial payout attributable to the BVPS growth component of performance share awards; and

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capping the potential payout attributable to the BVPS growth component of awards granted in 2021 and 2022 to no higher than target.

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The Board of Directors approved these modifications in January 2024 after determining that these actions were warranted, reasonable, and consistent with our shareholders’ best interests, for the following reasons:

the earn-out factor of 0.948 calculated after the application of these modifications yields a payout that is better aligned with relative TSR;

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solidifying the definition of BVPS to account for the possibility of significant interest rate volatility strengthens the integrity of future awards and the viability of using BVPS as a metric in our incentive programs;

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capping potential payouts at target for grants made in 2021 and 2022 and excluding potential future positive outsized interest rate impacts guards against the possibility of “windfall” payouts;

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lowering the threshold level required for a partial payout more closely aligns our design with that of other insurance companies with BVPS as a metric in their long-term incentive programs; and

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modifying these terms of the performance shares program restores the retentive and motivational value of our executives’ outstanding and future awards so that they continue to drive commitment and results.

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The compensation cost of the in-flight modification was approximately $66 million, $64 million of which will be recorded in the first quarter of 2024. While the Committee considered several alternative approaches, it determined the actions taken will strengthen the integrity and viability of performance share awards with BVPS growth as a metric. Both the Committee and Prudential’s leadership team are committed to taking proper precautionary measures in the design of incentive programs and limiting any consideration of adjustments to in-flight plans to only extraordinary and unforeseen circumstances, when accompanied by a compelling rationale.

Performance Share Awards

The NEOs currently have three performance share awards outstanding:

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(1)

Interpolated on a straight-line basis between the data points displayed.

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Calculating the Final Performance Shares Earn-Out Factor for the 2021-2023 Performance Period

In February 2024, the NEOs received payouts with respect to the performance share awards that were granted in February 2021 for the 3-year performance period ended December 31, 2023. These awards were paid at 0.948 times the target number of shares initially awarded. Following the modifications to our performance shares program, the calculation of the final earn-out factor is detailed below, including an illustration of what the factor would have been under the initial (pre-modification) design. The rows shaded in blue indicate our results against the pre-established scales for each metric and the final earn-out factor.

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(1)

Average of Relative ROE and BVPS Growth Factors

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The final performance share payouts to the NEOs in February 2024 for the 2021-2023 performance period were:

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Restricted Stock Units (RSUs)

NEOs receive 25% of their long-term incentive awards in RSUs. RSUs vest in equal annual installments over three years.

Retirement Plans

We view retirement benefits as a key component of our executive compensation program because they encourage long-term service. Accordingly, we offer our employees, including the NEOs, a comprehensive benefits program that provides the opportunity to accumulate retirement income. This program includes both defined benefit and defined contribution plans, as well as two supplemental retirement plans that allow highly compensated employees (that is, employees whose compensation exceeds the limits established by the Internal Revenue Code for covered compensation and benefit levels) to receive the same benefits they would have earned if not for these limitations. Further, we sponsor three supplemental executive retirement plans (“SERPs”) for certain eligible executive officers, including the NEOs, to offset the potential loss or forfeiture of retirement benefits under certain limited circumstances or to provide additional benefits to certain key executives. For descriptions of these plans, including their titles, see “Pension Benefits.”

We also maintain the Prudential Insurance Company of America Deferred Compensation Plan (the “Deferred Compensation Plan”). We offer this plan to our executive officers, including the NEOs, as a competitive practice. For a description of this plan, see “Nonqualified Deferred Compensation.”

Periodically, we compare the competitiveness of our benefits programs for our employees, including retirement benefits, against those provided by other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median of the competitive market when compared to other employers.

Severance and Change in Control Arrangements

Our Board has adopted a policy prohibiting us from entering into any severance or change-in-control agreement with any of our executive officers, including the NEOs, that provides for payments and benefits that exceed 2.99 times the sum of the executive officer’s base salary and most recently earned annual incentive award, without shareholder approval or ratification. We do not provide excise tax payments, reimbursements, or “gross-ups” to any of our executive officers.

While our other executive officers are eligible for severance payments in the event of an involuntary termination of employment without “cause,” our CEO is not a participant in the severance program (discussed below) providing this benefit.

To enable us to offer competitive total compensation packages to our executive officers, as well as to promote the ongoing retention of these individuals when considering potential transactions that may create uncertainty as to their future employment with us, we offer certain post-employment payments and benefits to our executive officers, including the NEOs, upon the occurrence of several specified events. These payments and benefits are provided under two separate programs:

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the Prudential Severance Plan (the “Severance Plan”); and

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Change in Control Program.

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We have not entered into individual employment agreements with our NEOs. Instead, the rights of our NEOs with respect to post-employment compensation upon specific events, including death, disability, severance or retirement, or a change in control of the Company, are covered by these two programs.

We use plans, rather than individually negotiated agreements, to provide severance and change-in-control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of these arrangements from time to time. An employment agreement would require that the affected NEO consent to any changes. Second, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate severance or other employment separation payments and benefits on a case-by-case basis. In addition, it assures our NEOs that the severance payments and benefits they receive are comparable to one another.

As previously noted, our executive officers, including the NEOs, except for our CEO, are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause.” These executive officers and our CEO are also eligible for “double-trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our equity awards are also designed to be “double-trigger,” so long as such awards are allowed to continue in effect following any change in control transaction on substantially equivalent terms and conditions to those applicable prior to such transaction.

The payment of these awards at target achievement rewards the executive officer for his or her expected performance prior to the change-in-control transaction.

For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control.”

Perquisites and Other Personal Benefits

We generally do not provide our executive officers, including the NEOs, with perquisites or other personal benefits, except for the use of Company aircraft, Company-provided cars and drivers, and, in the case of our CEO and Vice Chairman, security services. These items are provided because we believe that they serve a necessary business purpose and represent an immaterial element of our executive compensation program. The cost allocated to the personal use of Company-provided cars and drivers, including commuting expenses, and the incremental cost associated with the security services, to the extent not reimbursed to us, are reported in the Summary Compensation Table. Our executive officers, including the NEOs, are required to reimburse us for the incremental cost of any personal use of Company aircraft.

We do not provide tax reimbursements or any other tax payments with respect to perquisites, including excise tax “gross-ups,” to any of our executive officers.

Other Compensation-Related Policies

In addition to the other components of our executive compensation program, we maintain the policies described below. These policies are consistent with evolving best practices and help confirm that our executive compensation program does not encourage our executive officers to engage in behaviors that are beyond our ability to effectively identify and manage risk.

Clawback Policy

In 2023, in response to a new SEC rule and related NYSE listing standards, we adopted a new clawback policy that replaced our previously existing clawback policy.

Our new clawback policy covers all executive officers (including the NEOs), applies to all incentive-based compensation (including stock options and other equity awards) paid to or in respect of an executive officer, and includes separate triggers for financial restatements and improper conduct (including failure to report). The policy provides that if the Company is required to undertake a restatement of any financial statements filed with the SEC, the Board is required, subject to limited exceptions, to seek reimbursement of incentive-based compensation received by any executive officer during the three-year period immediately preceding the restatement to the extent such compensation would have been lower had it been determined based on such restated financial results. Additionally, if an executive officer engages in improper conduct that either has had, or could reasonably be expected to have, a significant adverse reputational or economic impact on the Company or any of its affiliates or divisions, then the Board may, in its sole discretion, after evaluating the associated costs and benefits, seek to recover all or any portion of the incentive-based compensation paid to any such executive officer during the three-year period preceding, or the occurrence of the improper conduct.

The policy also requires us to disclose to our shareholders, not later than the filing of the next proxy statement, the action taken by the Board, or the Board’s decision not to take action, with regard to compensation recovery following the occurrence of a restatement or improper conduct, so long as such event has been previously disclosed in our SEC filings.

For purposes of the policy, a “restatement” means any required accounting restatement (occurring after the effective date of the policy) of any of the Company’s consolidated financial statements that have been filed with the SEC, due to material non-compliance with any financial reporting requirement under the Exchange Act or the Securities Act of 1933, as amended, to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. “Improper conduct” means willful misconduct (including, but not limited to, fraud, bribery or other illegal acts) or gross negligence, which, in either case, includes any failure to report properly, or to take appropriate remedial action with respect to, such misconduct or gross negligence by another person.

We did not apply either our previous clawback policy or our new clawback policy during 2023.

Other Long-Term Compensation Recovery Policies

We maintain a “resignation notice period” requirement as part of the terms and conditions of all long-term incentive awards granted to certain designated grades of executives, including the NEOs. The requirement is intended to reduce the adverse and disruptive effect of a sudden voluntary departure of an executive subject to the requirement, and requires him or her to provide notice for a specified period prior to the effective date of a voluntary resignation, or otherwise risk forfeiting his or her outstanding long-term incentive awards.

The terms and conditions of long-term incentive awards also provide for forfeiture in the event a recipient violates applicable non-solicitation or noncompetition agreements.

Stock Ownership Guidelines

We have adopted stock ownership guidelines for our executive officers to encourage them to build their ownership position in our Common Stock over time by direct market purchases, making investments available through the PESP and the Deferred Compensation Plan, and retaining shares they earn under their long-term incentive awards. The guidelines are framed in terms of stock value as a percentage of base salary.

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Each of the NEOs has met his or her ownership guideline. Under the current stock ownership guidelines, once an executive officer attains his or her individual ownership level, he or she will remain in compliance with the guidelines despite future changes in our stock price and base salary, as long as his or her holdings do not decline below the number of shares at the time the stock ownership guidelines were met.

Stock Retention Requirements

We have adopted stock retention requirements for our executive officers. Each executive officer is required to retain 50% of the net shares (after payment of the applicable exercise price (if any), fees, and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold such shares until the later of one year following the date of acquisition of such shares (even if this one-year holding period extends beyond termination of employment) or the date that he or she satisfies our stock ownership guidelines.

Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities

Our Board has adopted a policy prohibiting all employees, including the NEOs, and members of the Board from engaging in any hedging transactions with respect to any of our equity securities held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) designed to hedge or offset any decrease in the market value of such equity securities.

Our Board has also adopted a policy prohibiting our Section 16 officers and members of the Board from pledging, or using as collateral, our securities to secure personal loans or other obligations, and includes holding shares of our Common Stock in a margin account.