PRUDENTIAL FINANCIAL INC

Business Update

•In March 2024, the Company entered into a definitive agreement with Grupo ST S.A. to sell Prudential of Argentina (“POA”). Effective in the first quarter of 2024, the results of POA and the impact of its sale were reflected in the Divested and Run-off Businesses that are included within our Corporate and Other operations. The transaction, which did not have a material impact on the Company’s results, was completed in May 2024.

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 129 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:

Three Month Comparison. Adjusted operating income from our Life Planner operations decreased $63 million, including a net unfavorable impact of $12 million from currency fluctuations. Excluding this item, adjusted operating income decreased $51 million, primarily reflecting lower underwriting results, driven by the decline of business in force in Japan and unfavorable mortality experience, partially offset by the growth of business in force in Brazil. The decrease also reflects higher variable expenses driven by business growth in Brazil.

Adjusted operating income from our Gibraltar Life and Other operations increased $18 million, including a net favorable impact of $8 million from currency fluctuations. Excluding this item, adjusted operating income increased $10 million, primarily reflecting higher earnings from joint ventures and other operating entities, higher net investment spread results driven by higher income on non-coupon investments, partially offset by lower underwriting results primarily driven by the decline of business in force in Japan.

Nine Month Comparison. Adjusted operating income from our Life Planner operations decreased $127 million, including a net unfavorable impact of $34 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 $56 million net charge in 2024 compared to a $5 million net charge in 2023.

Excluding these items, adjusted operating income decreased $42 million, reflecting lower underwriting results, primarily due to the decline in business in force in Japan, partially offset by the growth of business in force in Brazil. Also contributing to the decrease were higher expenses, including higher variable expenses driven by business growth in Brazil. These decreases were partially offset by higher net investment spread results driven by higher reinvestment rates, partially offset by lower income on non-coupon investments.

Adjusted operating income from our Gibraltar Life and Other operations increased $56 million, including a net favorable impact of $17 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 $1 million net benefit in 2024 compared to a $18 million net benefit in 2023.

Excluding these items, adjusted operating income increased $56 million, primarily reflecting higher earnings from joint ventures and other operating entities, higher net investment spread results, primarily driven by higher income on non-coupon investments, and lower operating expenses. These increases were partially offset by lower underwriting results, driven by the decline of business in force in Japan.

Three Month Comparison. Revenues from our Life Planner operations decreased $112 million, including a net unfavorable impact of $44 million from currency fluctuations. Excluding this item, revenues decreased $68 million, primarily reflecting lower premiums attributable to the decline of business in force in Japan, partially offset by the growth of business in force in Brazil. This decrease was partially offset by higher net investment income driven by higher reinvestment rates and portfolio growth.

Benefits and expenses of our Life Planner operations decreased $49 million, including a net favorable impact of $32 million from currency fluctuations. Excluding this item, benefits and expenses decreased $17 million, primarily reflecting lower policyholder benefits, including changes in reserves, due to the decline of business in force in Japan, as discussed above. This decrease was partially offset by higher interest credited to policyholders’ account balances reflecting growth in both variable and investment products in Japan, as well as higher general and administrative expenses driven by business growth in Brazil.

Revenues from our Gibraltar Life and Other operations decreased $37 million, including a net unfavorable impact of $19 million from currency fluctuations. Excluding this item, revenues decreased $18 million, primarily reflecting lower premiums due to the decline of business in force, as well as higher investment losses from unfavorable derivative settlements. These decreases were partially offset by higher net investment income driven by higher reinvestment rates and portfolio growth, and higher earnings from joint ventures and other operating entities.

Benefits and expenses of our Gibraltar Life and Other operations decreased $55 million, including a net favorable impact of $27 million from currency fluctuations. Excluding this item, benefits and expenses decreased $28 million, primarily reflecting lower policyholders’ benefits, including changes in reserves, due to the decline of business in force, as discussed above. This decrease was partially offset by higher interest credited to policyholders’ account balances, reflecting growth in investment products in Japan.

Nine Month Comparison. Revenues from our Life Planner operations decreased $200 million, including a net unfavorable impact of $253 million from currency fluctuations and a net benefit of $74 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues decreased $21 million, primarily reflecting lower premiums attributable to the decline of business in force in Japan, partially offset by the growth of business in force in Brazil, and lower investment gains from less favorable derivative settlements. These decreases were partially offset by higher net investment income driven by portfolio growth and higher reinvestment rates, and higher policy charges and fee income reflecting growth in both variable and investment products in Japan.

Benefits and expenses of our Life Planner operations decreased $73 million, including a net favorable impact of $219 million from currency fluctuations and a net charge of $125 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $21 million, primarily reflecting higher interest credited to policyholders’ account balances, reflecting growth in both variable and investment products in Japan, unfavorable changes in estimates of the liability for future policy benefits, and higher general and administrative expenses driven by business growth in Brazil. These increases were partially offset by lower policyholder benefits, including changes in reserves, due to the decline of business in force in Japan, as discussed above.

Revenues from our Gibraltar Life and Other operations decreased $462 million, including a net unfavorable impact of $203 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, revenues decreased $177 million, primarily reflecting lower premiums attributable to ceded reinsurance, which is mostly offset in policyholders’ benefits below, and to the decline of business in force, as well as higher investment losses from unfavorable derivative settlements. These decreases were partially offset by higher net investment income from higher income on non-coupon investments, portfolio growth and higher reinvestment rates, as well as higher earnings from joint ventures and other operating entities.

Benefits and expenses of our Gibraltar Life and Other operations decreased $518 million, including a net favorable impact of $220 million from currency fluctuations and a net benefit of $65 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses decreased $233 million, primarily reflecting lower policyholders’ benefits, including changes in reserves, due to ceded reinsurance and the decline of business in force, as discussed above, and lower general and administrative expenses. These decreases were partially offset by higher interest credited on policyholders’ account balances, reflecting growth in investment products in Japan.

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 reprice or discontinue 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.

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, single-payment whole life products and recurring-payment annuity products.

Three Month Comparison. Annualized new business premiums, on a constant exchange rate basis, from our Life Planner operations increased $31 million, primarily driven by Japan, reflecting higher investment contract, retirement and life product sales. Also contributing to the increase were higher life product sales in Brazil.

Annualized new business premiums, on a constant exchange rate basis, from our Gibraltar Life and Other operations increased $90 million. Bank and Independent Agency channel sales increased $42 million and $40 million, respectively, both reflecting higher investment contract sales, partially offset by lower life product sales. Life Consultant sales increased $8 million, reflecting higher retirement product sales, partially offset by lower life product sales.

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

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

Nine Month Comparison. Annualized new business premiums, on a constant exchange rate basis, from our Life Planner operations increased $79 million, primarily driven by Japan, reflecting higher investment contract and retirement product sales. Also contributing to the increase were higher life product sales in Brazil.

Annualized new business premiums, on a constant exchange rate basis, from our Gibraltar Life and Other operations increased $119 million. Independent Agency and Bank channel sales increased $83 million and $70 million, respectively, reflecting higher investment contract sales, partially offset by lower life product sales. Independent Agency also reflects lower accident and health product sales. Life Consultant sales decreased $34 million, reflecting lower investment contract and life product sales, partially offset by higher retirement product sales.