PRUDENTIAL FINANCIAL INC

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

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

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

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

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

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

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

2022 to 2021 Annual Comparison. Revenues decreased $384 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $203 million. This decrease was primarily driven by lower policy charges and fee income, driven by the absence of a benefit from the recapture of previously reinsured liabilities in 2021, which was mostly offset by reserve changes in policyholders’ benefits, as well as the impact of unfavorable equity markets on account values. Also contributing to the decrease was lower net investment income driven by lower income on non-coupon investments, partially offset by business growth and higher interest rates. These decreases were partially offset by higher premiums due to lower ceded reinsurance from the recapture in 2021, as discussed above, which was mostly offset in policyholders’ benefits below.

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

The following table sets forth Individual Life’s annualized new business premiums, as defined under “—Results of Operations—Segment Measures” above, by distribution channel and product, for the periods indicated:

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

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