PRUDENTIAL FINANCIAL INC

Business Update

•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. The transaction was completed in March 2024 with an effective date of January 1, 2024. See Note 12 to the Unaudited Interim Consolidated Financial Statements for additional information.

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

Three Month Comparison. Adjusted operating income decreased $28 million, including an unfavorable net impact from our annual reviews and update of assumptions and other refinements. Results for the second quarter of 2024 included a net charge of $98 million driven by unfavorable impacts related to assumptions for policyholder behavior, while 2023 included a net charge of $26 million primarily related to model refinements. Excluding this item, adjusted operating income increased $44 million, primarily driven by lower expenses and higher underwriting results reflecting the reinsurance transaction of certain guaranteed universal life policies, as discussed above. These increases were partially offset by lower net investment spread results reflecting the impact from this reinsurance transaction, partially offset by higher reinvestment rates.

Six Month Comparison. Adjusted operating income decreased $47 million, including an unfavorable net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding this item, adjusted operating income increased $25 million primarily reflecting higher underwriting results reflecting the reinsurance transaction, as discussed above. This increase was partially offset by lower net investment spread results reflecting the impacts from this reinsurance transaction, partially offset by higher income on non-coupon investments and higher reinvestment rates.

Three Month Comparison. Revenues decreased $35 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $34 million, primarily driven by realized investment losses, reflecting the ceding of investment results related to the reinsurance transaction, as discussed above. These decreases were partially offset by higher net investment income reflecting higher reinvestment rates, and higher policy charges and net fee income due to business growth.

Benefits and expenses decreased $7 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $78 million, primarily driven by lower policyholders’ benefits, including changes in reserves, as a result of the reinsurance transaction discussed above, partially offset by business growth as well as lower general and administrative expenses.

Six Month Comparison. Revenues increased $18 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $19 million, primarily driven by higher net investment income reflecting higher income on non-coupon investments and higher reinvestment rates as well as higher policy charges and fee income due to business growth. These increases were partially offset by realized investment losses, reflecting the ceding of investment results related to the reinsurance transaction, as discussed above.

Benefits and expenses increased $65 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $6 million, primarily driven by favorable changes in estimates of the liability for future policy benefits and lower interest credited to policyholders’ account balances attributed to the reinsurance transaction, as discussed above. These decreases were largely offset by higher interest expense driven by higher interest rates and higher general and administrative expenses associated with the reinsurance transaction, as discussed above.

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:

Total annualized new business premiums for the second quarter of 2024 increased $6 million reflecting higher Prudential Advisors variable life sales and third-party term life and universal life sales, partially offset by lower third-party variable life sales. Total annualized new business premiums for the first six month of 2024 increased $24 million, primarily reflecting higher third-party term life and universal life sales, as well as higher Prudential Advisors variable life sales.