PRUDENTIAL FINANCIAL INC

3. INVESTMENTS

Fixed Maturity Securities

The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:

(1)Excludes notes with amortized cost of $13,714 million (fair value, $13,714 million), which have been offset with the associated debt under a netting agreement.

(2)Includes credit-tranched securities collateralized by loan obligations, home equity loans, auto loans, education loans and other asset types.

(3)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(1)Excludes notes with amortized cost of $12,370 million (fair value, $12,370 million), which have been offset with the associated debt under a netting agreement.

(2)Includes credit-tranched securities collateralized by loan obligations, education loans, auto loans, home equity loans and other asset types.

(3)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

The following tables set forth the fair value and gross unrealized losses on available-for-sale fixed maturity securities without an allowance for credit losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the dates indicated:

As of June 30, 2024 and December 31, 2023, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance of $34,576 million and $26,879 million, respectively, related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $1,238 million and $991 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of June 30, 2024, the $34,164 million of gross unrealized losses of twelve months or more were concentrated in the finance, consumer non-cyclical and utility sectors within corporate securities as well as in foreign government bonds. As of December 31, 2023, the $26,855 million of gross unrealized losses of twelve months or more were concentrated in the finance, consumer non-cyclical and utility sectors within corporate securities, as well as in foreign government bonds.

In accordance with its policy described in Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at June 30, 2024. This conclusion was based on detailed analysis of the underlying credit and cash flows for each security. Gross unrealized losses are primarily attributable to increases in interest rates, general credit spread widening and foreign currency exchange rate movements. As of June 30, 2024, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the amortized cost basis.

The following table sets forth the amortized cost and fair value of fixed maturities by contractual maturities, as of the date indicated:

(1)Excludes notes with amortized cost of $13,714 million (fair value, $13,714 million), which have been offset with the associated debt under a netting agreement.

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.

The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on write-downs and the allowance for credit losses of fixed maturities, for the periods indicated:

(1)Excludes activity from non-cash related proceeds due to the timing of trade settlementsof $(253) million and $70 million for the six months ended June 30, 2024 and 2023, respectively.

(2)Amounts represent write-downs on credit adverse securities and securities actively marketed for sale.

(3)Excludes activity from non-cash related proceeds due to the timing of trade settlements ofless than $1 million for the six months ended June 30, 2023.

The following tables set forth the activity in the allowance for credit losses for fixed maturity securities, as of the dates indicated:

For both the three and six months ended June 30, 2023, there was no activity in the allowance for credit losses for fixed maturities, held-to-maturity. As of June 30, 2023 the allowance for credit losses was $2 million within foreign corporate fixed maturity securities, held-to-maturity.

For additional information regarding the Company’s methodology for developing its allowance and expected losses, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

For the three months ended June 30, 2024, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to a net release within foreign government bonds, partially offset by net additions in the consumer cyclical and communications sectors within corporate securities due to adverse projected cash flows. For the three months ended June 30, 2023, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the basic industry and technology sectors within corporate securities due to adverse projected cash flows, partially offset by a net release within the consumer non-cyclical sector within corporate securities, as well as in foreign government bonds.

For the six months ended June 30, 2024, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the consumer cyclical and communications sectors within corporate securities due to adverse projected cash flows, partially offset by a net release within foreign government bonds. For the six months ended June 30, 2023, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the communications and technology sectors within corporate securities, as well as in foreign government bonds due to adverse projected cash flows, partially offset by a net release within the utility and capital goods sectors within corporate securities.

The Company didnot have any fixed maturity securities purchased with credit deterioration as of June 30, 2024 or December 31, 2023.

Assets Supporting Experience-Rated Contractholder Liabilities

The following table sets forth the composition of “Assets supporting experience-rated contractholder liabilities,” as of the dates indicated:

(1)As a percentage of amortized cost,99% of the portfolio was considered high or highest quality based on NAIC or equivalent ratings as of both June 30, 2024 and December 31, 2023.

(2)As a percentage of amortized cost,100% of the portfolio consisted of public securities as of both June 30, 2024 and December 31, 2023.

The net change in unrealized gains (losses) from assets supporting experience-rated contractholder liabilities still held at period end, recorded within “Other income (loss),” was $74 million and $234 million during the three months ended June 30, 2024 and 2023, respectively, and $373 million and $368 million during the six months ended June 30, 2024 and 2023, respectively.

Fixed Maturities, Trading

The net change in unrealized gains (losses) from fixed maturities, trading still held at period end, recorded within “Other income (loss),” was $(146) million and $(89) million during the three months ended June 30, 2024 and 2023, respectively, and $(327) million and $105 million during the six months ended June 30, 2024 and 2023, respectively.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $212 million and $279 million during the three months ended June 30, 2024 and 2023, respectively, and $643 million and $576 million during the six months ended June 30, 2024 and 2023, respectively.

Concentrations of Financial Instruments

The Company monitors its concentrations of financial instruments and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any single issuer.

As of the dates indicated, the Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s equity included securities of the U.S. government and certain U.S. government agencies and securities guaranteed by the U.S. government, as well as the securities disclosed below:

The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:

(1)Includes loans which are carried at fair value under the fair value option and are collateralized primarily by apartment complexes. As of June 30, 2024 and December 31, 2023, the net carrying value of these loans was $635 million and $519 million, respectively.

As of June 30, 2024, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States with the largest concentrations in California (30%), Texas (7%) and New York (6%), and included loans secured by properties in Europe (7%), Mexico (2%), Asia (1%) and Australia (1%).

The following tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, for the periods indicated:

For additional information regarding the Company’s methodology for developing its allowance and expected losses, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

For the three months ended June 30, 2024, the net addition to the allowance for credit losses on commercial mortgage and other loans was primarily due to the establishment of general reserves for both the collateralized and uncollateralized consumer loan portfolios. For the three months ended June 30, 2023, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to an increase in loan-specific reserves.

For the six months ended June 30, 2024, the net addition to the allowance for credit losses on commercial mortgage and other loans was primarily due to the establishment of general reserves for both the collateralized and uncollateralized consumer loan portfolios and increases in the loan-specific reserves within the office sector. For the six months ended June 30, 2023, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to an increase in loan-specific reserves and increases to general reserves to reflect declining market conditions.

The following tables set forth key credit quality indicators based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:

For additional information regarding the Company’s commercial mortgage and other loans credit quality monitoring process, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The Company may grant loan modifications in its commercial mortgage and other loan portfolios to borrowers experiencing financial difficulties. These loan modifications may be in the form of principal forgiveness, interest rate reduction, other-than-insignificant payment delay, term extension or some combination thereof.

During the three and six months ended June 30, 2024 commercial mortgage and other loans with an amortized cost of $181 million and $343 million, respectively, were granted a term extension with borrowers experiencing financial difficulties. The modified loans represent less than 1 percent of the portfolio. The modifications added less thanone year to the weighted average life of loans in this portfolio.

During both the three and six months ended June 30, 2023, the Company didnot modify any loans to borrowers experiencing financial difficulties.

For the six months ended June 30, 2024, all commercial mortgage and other loans that were modified to borrowers experiencing financial difficulties were current.

The Company did not have any commitments to lend additional funds to borrowers experiencing financial difficulties on modified loans as of June 30, 2024 and December 31, 2023.

The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:

(1)As of June 30, 2024, there wereno loans in this category accruing interest.

(2)Primarily includes loans for which no credit losses are expected due to U.S. agency guarantees.

(3)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

(1)As of December 31, 2023, there wereno loans in this category accruing interest.

(2)Primarily includes loans for which no credit losses are expected due to U.S. agency guarantees.

(3)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Loans on non-accrual status recognized interest of less than $1 million for both the three months ended June 30, 2024 and 2023 and less than $1 million for both the six months ended June 30, 2024 and 2023. Loans on non-accrual status that did not have a related allowance for credit losses were $137 million and $126 million as of June 30, 2024 and December 31, 2023, respectively.

The Company didnot have any losses on commercial mortgage and other loans purchased with credit deterioration as of June 30, 2024 or December 31, 2023.

The following table sets forth the composition of “Other invested assets,” as of the dates indicated:

(1)As of June 30, 2024 and December 31, 2023, real estate held through direct ownership had mortgage debt of $145 million and $158 million, respectively.

(2)Primarily includes equity investments accounted for under the measurement alternative, strategic investments made by investment management operations, leveraged leases and member and activity stock held in the Federal Home Loan Bank of New York. For additional information regarding the Company’s holdings in the Federal Home Loan Bank of New York, see Note 18 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Accrued Investment Income

The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:

Write-downs on accrued investment income were less than $1 million for both the three months ended June 30, 2024 and 2023 and $1 million and less than $1 million for the six months ended June 30, 2024 and 2023, respectively.

Net Investment Income

The following table sets forth “Net investment income” by investment type, for the periods indicated:

(1)Includes income on credit-linked notes which are reported on the same financial statement line items as related surplus notes, as conditions are met for right to offset.

Realized Investment Gains (Losses), Net

The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:

(1)Excludes fixed maturity securities classified as trading.

Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:

(1)For additional information regarding cash flow and fair value hedges, see Note 5.

(2)Includes net unrealized gains on certain joint ventures that are strategic in nature and are included in “Other assets.”

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. The following table sets forth the composition of “Securities sold under agreements to repurchase,” as of the dates indicated:

The following table sets forth the composition of “Cash collateral for loaned securities” which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:

(1)The Company didnot have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.