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 $14,126 million (fair value, $14,137 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 September 30, 2024 and December 31, 2023, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance of $25,471 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 $895 million and $991 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of September 30, 2024, the $25,921 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 securities. 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 securities.

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 September 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 September 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 $14,126 million (fair value, $14,137 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 $146 million and $(90) million for the nine months ended September 30, 2024 and 2023, respectively.

(2)Amounts represent securities actively marketed for sale, securities where it is more likely than not the Company will be required to sell prior to the recovery of the amortized cost basis andwrite-downs on credit adverse securities.

(3)Excludes activity from non-cash related proceeds due to the timing of trade settlements of$1 million for the nine months ended September 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 the three and nine months ended September 30, 2023, there was a $2 million net release in the allowance for credit losses for fixed maturities, 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 September 30, 2024, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions within the consumer non-cyclical, consumer cyclical and energy sectors within corporate securities due to adverse projected cash flows. For the three months ended September 30, 2023, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to a net release in the capital goods and utility sectors within corporate securities due to investment restructurings.

For the nine months ended September 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 non-cyclical, consumer cyclical and energy sectors within corporate securities due to adverse projected cash flows, partially offset by a net release within foreign government securities. For the nine months ended September 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 foreign government securities due to adverse projected cash flows. Partially offsetting the additions was a net release within the capital goods and utility sectors within corporate securities.

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

(2)As a percentage of amortized cost,100% of the portfolio consisted of public securities as of both September 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 $(47) million and $(27) million during the three months ended September 30, 2024 and 2023, respectively, and $326 million and $341 million during the nine months ended September 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 $543 million and $(295) million during the three months ended September 30, 2024 and 2023, respectively, and $216 million and $(190) million during the nine months ended September 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 $179 million and $(276) million during the three months ended September 30, 2024 and 2023, respectively, and $822 million and $300 million during the nine months ended September 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 September 30, 2024 and December 31, 2023, the net carrying value of these loans was $1,098 million and $519 million, respectively.

As of September 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 (29%), Texas (7%) and New York (5%), 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 September 30, 2024, the net addition to the allowance for credit losses on commercial mortgage and other loans was primarily due to an increase in the loan-specific reserve related to agricultural property loans. For the three months ended September 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 related to commercial mortgage loans within the office sector and increases to the portfolio reserve to reflect declining market conditions.

For the nine months ended September 30, 2024, the net addition to the allowance for credit losses on commercial mortgage and other loans was primarily due to increases in the loan-specific reserves related to agricultural property loans and commercial mortgage loans within the office sector along with the establishment of loan-specific reserves for both the collateralized and uncollateralized consumer loan portfolios. For the nine months ended September 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 related to commercial mortgage loans within the office sector and increases to the portfolio reserve 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. The amount, timing and extent of modifications granted and subsequent performance are considered in determining any allowance for credit losses.

The following tables set forth the amortized cost basis of loan modifications made to borrowers experiencing financial difficulties for the dates indicated:

The modifications added less thanone year to the weighted average life in both the commercial mortgage and agricultural property loan portfolios.

During both the three and nine months ended September 30, 2023, the Company did not modify any loans to borrowers experiencing financial difficulties.

For the nine months ended September 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 September 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 September 30, 2024, there wereno loans in this category accruing interest.

(2)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 $11 million and less than $1 million for the three months ended September 30, 2024 and 2023, respectively, and $12 million and less than $1 million for the nine months ended September 30, 2024 and 2023, respectively. Loans on non-accrual status that did not have a related allowance for credit losses were $138 million and $126 million as of September 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 September 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 September 30, 2024 and December 31, 2023, real estate held through direct ownership had mortgage debt of $151 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 $1 million and less than $1 million for the three months ended September 30, 2024 and 2023, respectively, and $1 million and less than $1 million for the nine months ended September 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 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.

(2)Prior period has been revised to conform to current period presentation.

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.