PRUDENTIAL FINANCIAL INC
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
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Jun 30, 2024 · Filed Aug 2, 2024
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13. Closed Block
- CLOSED BLOCK
On December 18, 2001, the date of demutualization, The Prudential Insurance Company of America (“PICA”) established a closed block for certain in-force participating insurance policies and annuity products, along with corresponding assets used for the payment of benefits and policyholders’ dividends on these products, (collectively the “Closed Block”), and ceased offering these participating products. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block division. For additional information regarding the Closed Block, see Note 16 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
As of June 30, 2024 and December 31, 2023, the Company recognized a policyholder dividend obligation of $2,627 million and $2,873 million, respectively, to Closed Block policyholders for the excess of actual cumulative earnings over expected cumulative earnings. Additionally, accumulated net unrealized investment gains (losses) were reflected as a policyholder dividend obligation of $(2,567) million and $(2,081) million at June 30, 2024 and December 31, 2023, respectively, with a corresponding amount reported in AOCI.
As of June 30, 2024, the Closed Block has sufficient funds to make guaranteed policy benefit payments and there is no expectation that assets outside of the Closed Block will be needed to fund future payments. The excess of Closed Block liabilities over Closed Block assets as of the end of the reporting period shown in the table below is a reasonable measure of the margin in the reported liabilities compared to best estimate liabilities assuming the current dividend scale. Closed Block liabilities and assets designated to the Closed Block, as well as maximum future earnings to be recognized from these liabilities and assets, are as follows:
| June 30,2024 | December 31,2023 | |
|---|---|---|
| (in millions) | ||
| Closed Block liabilities | ||
| Future policy benefits | $42,965 | $43,587 |
| Policyholders’ dividends payable | 641 | 648 |
| Policyholders’ dividend obligation | 60 | 792 |
| Policyholders’ account balances | 4,424 | 4,500 |
| Other Closed Block liabilities | 3,771 | 3,605 |
| Total Closed Block liabilities | 51,861 | 53,132 |
| Closed Block assets | ||
| Fixed maturities, available-for-sale, at fair value | 29,317 | 30,314 |
| Fixed maturities, trading, at fair value | 725 | 887 |
| Equity securities, at fair value | 1,861 | 1,970 |
| Commercial mortgage and other loans | 7,679 | 7,769 |
| Policy loans | 3,407 | 3,479 |
| Other invested assets | 4,816 | 4,513 |
| Short-term investments | 583 | 232 |
| Total investments | 48,388 | 49,164 |
| Cash and cash equivalents | 398 | 993 |
| Accrued investment income | 415 | 421 |
| Other Closed Block assets | 276 | 138 |
| Total Closed Block assets | 49,477 | 50,716 |
| Excess of reported Closed Block liabilities over Closed Block assets | 2,384 | 2,416 |
| Portion of above representing accumulated other comprehensive income (loss): | ||
| Net unrealized investment gains (losses) | (2,732) | (2,241) |
| Allocated to policyholder dividend obligation | 2,567 | 2,081 |
| Future earnings to be recognized from Closed Block assets and Closed Block liabilities | $2,219 | $2,256 |
Information regarding the policyholder dividend obligation is as follows:
| (in millions) | |
|---|---|
| Balance, December 31, 2023 | $792 |
| Impact from earnings allocable to policyholder dividend obligation | (246) |
| Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation | (486) |
| Balance, June 30, 2024 | $60 |
Closed Block revenues and benefits and expenses are as follows for the periods indicated:
| Three Months EndedJune 30, | Six Months EndedJune 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| (in millions) | ||||
| Revenues | ||||
| Premiums | $433 | $430 | $842 | $836 |
| Net investment income | 506 | 498 | 1,019 | 977 |
| Realized investment gains (losses), net | (174) | (113) | (299) | (130) |
| Other income (loss) | 43 | 140 | 207 | 240 |
| Total Closed Block revenues | 808 | 955 | 1,769 | 1,923 |
| Benefits and Expenses | ||||
| Policyholders’ benefits | 604 | 610 | 1,188 | 1,182 |
| Interest credited to policyholders’ account balances | 29 | 29 | 59 | 59 |
| Dividends to policyholders | 162 | 292 | 437 | 594 |
| General and administrative expenses | 67 | 71 | 134 | 144 |
| Total Closed Block benefits and expenses | 862 | 1,002 | 1,818 | 1,979 |
| Closed Block revenues, net of Closed Block benefits and expenses, before income taxes | (54) | (47) | (49) | (56) |
| Income tax expense (benefit) | (73) | (54) | (88) | (86) |
| Closed Block revenues, net of Closed Block benefits and expenses and income taxes | $19 | $7 | $39 | $30 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.