PRUDENTIAL FINANCIAL INC

The results of our International Businesses’ operations are translated on the basis of weighted average monthly exchange rates, inclusive of the effects of the intercompany arrangement discussed in “—Results of Operations—Impact of Foreign Currency Exchange Rates” above. To provide a better understanding of operating performance within the International Businesses, where indicated below, we have analyzed our results of operations excluding the effect of the year over year change in foreign currency exchange rates. Our results of operations, excluding the effect of foreign currency fluctuations, were derived by translating foreign currencies to USD at uniform exchange rates for all periods presented, including for constant dollar information discussed below. For our Japan operations, we used an exchange rate of 110 yen per USD. In addition, for constant dollar information discussed below, activity denominated in USD is generally reported based on the amounts as transacted in USD. Annualized new business premiums presented on a constant exchange rate basis in the “Sales Results” section below reflect translation based on these same uniform exchange rates.

The following table sets forth the International Businesses’ operating results for the periods indicated:

2023 to 2022 Annual Comparison. Adjusted operating income from our Life Planner operations increased $56 million, including a net unfavorable impact of $44 million from currency fluctuations. Both periods also include the impact of our annual reviews and update of assumptions and other refinements, which resulted in a $5 million net charge in both 2023 and 2022.

Excluding the impact of currency fluctuations, as well as the impact from our annual reviews and update of assumptions and other refinements as discussed above, adjusted operating income from our Life Planner operations increased $100 million. This increase primarily reflects higher net investment spread results, driven by higher reinvestment rates and higher income on non-coupon investments, as well as higher underwriting results, primarily due to business growth in Brazil. These impacts were partially offset by higher variable expenses, largely driven by business growth in Brazil.

Adjusted operating income from our Gibraltar Life and Other operations decreased $78 million, including a net favorable impact of $12 million from currency fluctuations. Both periods also include the impact of our annual reviews and update of assumptions and other refinements, which resulted in a $18 million net benefit in 2023 compared to a $14 million net charge in 2022.

Excluding the impact of currency fluctuations, as well as the impact from our annual reviews and update of assumptions and other refinements as discussed above, adjusted operating income from our Gibraltar Life and Other operations decreased $122 million. This decrease primarily reflects lower net investment spread results, driven by unfavorable derivative settlements and the decline in business in force, partially offset by higher income on non-coupon investments. Also contributing to the decrease were lower underwriting results, primarily driven by the decline of business in force, partially offset by less unfavorable morbidity and mortality experience. These impacts were partially offset by higher earnings from joint venture investments.

2022 to 2021 Annual Comparison. Adjusted operating income from our Life Planner operations decreased $38 million, including a net favorable impact of $13 million from currency fluctuations. Both periods also include the impact of our annual reviews and update of assumptions and other refinements, which resulted in a $5 million net charge in 2022 compared to a $6 million net benefit in 2021.

Excluding the impact of currency fluctuations, as well as the impact from our annual reviews and update of assumptions and other refinements as discussed above, adjusted operating income from our Life Planner operations decreased $40 million. This decrease primarily reflects lower net investment spread results, driven by lower income on non-coupon investments and higher operating expenses, largely driven by business growth in Brazil, partially offset by higher underwriting results, primarily driven by business growth in Brazil.

Adjusted operating income from our Gibraltar Life and Other operations decreased $489 million, including a net unfavorable impact of $20 million from currency fluctuations. Both periods also include the impact of our annual reviews and update of assumptions and other refinements, which resulted in a $14 million net charge in 2022 compared to a $21 million net charge in 2021.

Excluding the impact of currency fluctuations, as well as the impact from our annual reviews and update of assumptions and other refinements, as discussed above, adjusted operating income from our Gibraltar Life and Other operations decreased $476 million. This decrease primarily reflects lower net investment spread results, driven by lower income on non-coupon investments and lower prepayment fee income, as well as unfavorable derivative settlements and the decline in business in force. Also contributing to the decrease were lower underwriting results, primarily driven by the decline of business in force, and lower earnings from joint venture investments.

2023 to 2022 Annual Comparison. Revenues from our Life Planner operations increased $55 million, including a net unfavorable impact of $195 million from currency fluctuations and a net benefit of $82 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues increased $168 million, primarily reflecting higher net investment income driven by higher reinvestment rates and higher income on non-coupon investments. This increase was partially offset by lower premiums, primarily attributable to the decline of business in force in Japan, partially offset by business growth in Brazil.

Benefits and expenses from our Life Planner operations decreased $1 million, including a net favorable impact of $151 million from currency fluctuations and a net charge of $82 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $68 million, primarily reflecting higher interest credited on policyholders’ account balances, and unfavorable changes in estimates of the liability for future policy benefits. These increases were partially offset by lower policyholder benefits, including changes in reserves, due to the decline of business in force, as discussed above.

Revenues from our Gibraltar Life and Other operations decreased $384 million, including a net unfavorable impact of $30 million from currency fluctuations and a net benefit of $214 million from our annual reviews and update of assumptions and other refinements. Excluding this item, revenues decreased $568 million, primarily reflecting lower premiums and policy charges and fee income attributable to the decline of business in force, and lower realized investment gains from unfavorable derivative settlements. These decreases were partially offset by higher net investment income driven by higher income on non-coupon investments.

Benefits and expenses from our Gibraltar Life and Other operations decreased $306 million, including a net favorable impact of $42 million from currency fluctuations and a net benefit of $182 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses decreased $446 million, primarily reflecting lower policyholders’ benefits, including changes in reserves, due to the decline of business in force, as discussed above, and less unfavorable morbidity and mortality experience, partially offset by higher interest credited on policyholders’ account balances.

2022 to 2021 Annual Comparison. Revenues from our Life Planner operations decreased $628 million, including a net unfavorable impact of $577 million from currency fluctuations and a net charge of $39 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues decreased $12 million, primarily reflecting lower other income and net investment income, driven by lower income on non-coupon investments, partially offset by higher premiums and policy charges and fee income, driven by business growth in Brazil.

Benefits and expenses from our Life Planner operations decreased $590 million, including a net favorable impact of $590 million from currency fluctuations and a net benefit of $28 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $28 million, primarily reflecting higher operating expenses, higher interest credited on policyholders’ account balances and higher amortization, including write-offs of deferred policy acquisition costs related to unfavorable policyholder behavior. These increases were partially offset by lower policyholders’ benefits, including changes in reserves, driven by the decline of business in force in Japan.

Revenues from our Gibraltar Life and Other operations decreased $1,247 million, including a net unfavorable impact of $916 million from currency fluctuations and a net charge of $8 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues decreased $323 million, primarily reflecting lower premiums due to the decline of business in force, and lower net investment income driven by lower income on non-coupon investments and lower prepayment fee income. Also contributing to the decrease were lower realized investment gains from unfavorable derivative settlements and lower other income from a decline in earnings from joint venture investments.

Benefits and expenses from our Gibraltar Life and Other operations decreased $758 million, including a net favorable impact of $896 million from currency fluctuations and a net benefit of $15 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $153 million, primarily driven by unfavorable changes in estimates of the liability for future policy benefits, and higher amortization, including write-offs of deferred policy acquisition costs related to unfavorable policyholder behavior. These increases were partially offset by lower policyholders’ benefits, including changes in reserves, driven by the decline of business in force.

The following table sets forth annualized new business premiums, as defined under “—Results of Operations—Segment Measures” above, on an actual and constant exchange rate basis for the periods indicated:

The amount of annualized new business premiums and the sales mix in terms of types and currency denomination of products for any given period can be significantly impacted by several factors, including but not limited to: the addition of new products, discontinuation of existing products, changes in credited interest rates for certain products and other product modifications, changes in premium rates, changes in interest rates or fluctuations in currency markets, changes in tax laws, changes in life insurance regulations or changes in the competitive environment. Sales volume may increase or decrease prior to certain of these changes becoming effective, and then fluctuate in the other direction following such changes.

Our diverse product portfolio in Japan, in terms of currency mix and premium payment structure, allows us to adapt to changing market and competitive dynamics, including the low interest rate environment. We regularly examine our product offerings and their related profitability and, as a result, we have repriced or discontinued sales of certain products that do not meet our profit expectations. The impact of these actions, coupled with the introduction of certain new products, has generally resulted in an increase in sales of products denominated in USD relative to products denominated in other currencies.

2023 to 2022 Annual Comparison. The table below presents annualized new business premiums on a constant exchange rate basis, by product category and distribution channel, for the periods indicated:

(1)Includes retirement income, endowment and savings variable life.

(2)Includes single-payment market value adjusted investment contracts and single-payment whole life products.

Annualized new business premiums, on a constant exchange rate basis, from our Life Planner operations increased $151 million, primarily driven by higher life product sales in Brazil. In Japan, higher USD-denominated single premium investment contract sales were partially offset by lower USD-denominated recurring premium life and retirement product sales.

Annualized new business premiums, on a constant exchange rate basis, from our Gibraltar Life and Other operations increased $156 million. Bank channel, Independent Agency and Life Consultants sales increased $89 million, $40 million and $27 million, respectively, all reflecting higher USD-denominated single premium investment contract sales, partially offset by lower USD-denominated recurring premium life product sales. Independent Agency sales also reflect higher accident and health product sales, partially offset by lower retirement product sales.

2022 to 2021 Annual Comparison. The table below presents annualized new business premiums on a constant exchange rate basis, by product category and distribution channel, for the periods indicated:

(1)Includes retirement income, endowment and savings variable life.

(2)Includes single-payment market value adjusted investment contracts and single-payment whole life products. 2021 also includes annuity products.

Annualized new business premiums, on a constant exchange rate basis, from our Life Planner operations increased $35 million, primarily driven by higher life product sales in Brazil and Argentina. In Japan, higher sales of USD-denominated market value adjusted investment contacts, driven by higher interest rates, were partially offset by lower sales of USD-denominated retirement products.

Annualized new business premiums, on a constant exchange rate basis, from our Gibraltar Life and Other operations decreased $99 million. Bank channel sales decreased $150 million reflecting lower USD-denominated life product sales, partially offset by higher sales of USD-denominated market value adjusted investment contacts, driven by higher interest rates. Life Consultants sales increased $50 million reflecting higher sales of USD-denominated market value adjusted investment contacts, driven by rising interest rates, partially offset by lower USD-denominated life product sales. Independent Agency sales increased $1 million, primarily driven by higher sales of life products and USD-denominated endowment products, largely offset by the absence of accident & health product sales made to a single large client in 2021 and lower sales of investment contracts.

Sales Force

The following table sets forth the number of Life Planners and Life Consultants for the periods indicated:

2023 to 2022 Comparison. The number of Life Planners decreased by 68, driven by a decrease of 136 in our Japan operations, primarily reflecting our selective recruiting efforts and continued challenges with higher resignations. Life Planners in our other operations increased by 68, primarily reflecting an increase in Brazil. The number of Gibraltar Life Consultants decreased by 13, reflecting a decline in the first half of 2023 from continued recruiting challenges, partially offset by favorable recruitment in the second half of the year.

2022 to 2021 Comparison. The number of Life Planners decreased by 100, driven by a decrease of 120 in our Japan operations, primarily reflecting our selective recruiting efforts and higher resignations. Life Planners in our other operations increased by 20, primarily reflecting an increase in Brazil. The number of Gibraltar Life Consultants decreased by 279, primarily reflecting continued recruiting challenges and higher resignations due to more selective retention standards.