PRUDENTIAL FINANCIAL INC

Results of Operations by Segment

PGIM

•In December 2023, we completed the acquisition of a majority stake in Deerpath Capital Management, LP (“Deerpath”), a leading U.S.-based private credit and direct lending manager with approximately $5 billion in assets under management.

•In July 2024, the Company decided to exit PGIM Wadhwani LLP (“PGIMW”), our London-based managed futures investment management firm. The results of PGIMW, beginning in the second quarter of 2024, are reflected in Divested and Run-off Businesses included within our Corporate and Other operations.

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

(1)Certain of PGIM’s investment activities are based in currencies other than the U.S. dollar and are therefore subject to foreign currency exchange rate risk. The financial results of PGIM include the impact of an intercompany arrangement with our Corporate and Other operations designed to mitigate the impact of exchange rate changes on PGIM’s U.S. dollar-equivalent earnings. For additional information regarding this intercompany arrangement, see “—Results of Operations—Impact of Foreign Currency Exchange Rates,” above.

(2)Includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods.

Three Month Comparison. Adjusted operating income increased $30 million, primarily reflecting higher asset management fees, net of related expenses, and higher other related revenues, net of related expenses. These impacts were partially offset by lower service, distribution and other revenues.

Nine Month Comparison. Adjusted operating income increased $75 million, primarily reflecting higher asset management fees, net of related expenses, and higher other related revenues, net of related expenses. These impacts were partially offset by higher compensation expenses, as well as lower service, distribution and other revenues.

Revenues and Expenses

The following table sets forth PGIM’s revenues, presented on a basis consistent with the table above under “—Operating Results,” by type:

(1)Consists of fees from: individual mutual funds and variable annuities and variable life insurance separate account assets; funds invested in proprietary mutual funds through our defined contribution plan products; and third-party sub-advisory relationships. Revenues from fixed annuities and the fixed-rate accounts of variable annuities and variable life insurance are included in the general account.

(2)Includes mortgage origination revenues from our commercial mortgage origination and servicing business.

Three Month Comparison. Revenues increased $45 million. Asset management fees increased, primarily reflecting equity market appreciation, the impact of lower interest rates and strong investment performance, as well as the impact of the Deerpath acquisition. Other related revenues were favorable, primarily reflecting higher commercial mortgage origination revenues driven by higher loan production, as well as higher seed and co-investments results driven by strong investment performance, partially offset by lower incentive fees. These increases were partially offset by lower service, distribution and other revenues, primarily reflecting lower revenues from certain consolidated funds (which were fully offset by lower expenses related to noncontrolling interests in these funds).

Expenses increased $15 million, primarily reflecting higher compensation expenses due to business growth, including the impact of the Deerpath acquisition, and increases related to certain long-term employee compensation plans tied to investment performance. These increases were partially offset by lower operating expenses. Variable expenses were relatively flat, reflecting an increase in overall segment earnings offset by lower revenues from certain consolidated funds, as discussed above.

Nine Month Comparison. Revenues increased $251 million. Asset management fees increased, primarily reflecting equity market appreciation and strong investment performance, as well as the impact of the Deerpath acquisition. Other related revenues were favorable, primarily reflecting higher incentive fees due to the impact of the Deerpath acquisition and strong investment performance, higher commercial mortgage origination revenues driven by higher loan production, and higher seed and co-investments results driven by strong investment performance.

Expenses increased $176 million, primarily reflecting higher compensation expenses due to business growth, including the impact of the Deerpath acquisition, and increases related to certain long-term employee compensation plans tied to investment performance. The increase also reflects higher variable expenses related to performance-based incentive fees and an increase in overall segment earnings.

Assets Under Management

The following table sets forth assets under management by asset class as of the dates indicated:

(1)“Public equity” represents stock ownership interest in a corporation or partnership (excluding hedge funds) or real estate investment trust. “Public fixed income” represents debt instruments that pay interest and usually have a maturity (excluding mortgages). “Real estate” includes direct real estate equity and real estate mortgages. “Private credit and other alternatives” includes private credit, private equity, hedge funds and other alternative strategies. “Multi-asset” includes funds or products that invest in more than one asset class, balancing equity and fixed income funds and target date funds.

(2)Primarily includes assets related to certain annuity, variable life, retirement and group life products in our U.S. Businesses and Corporate and Other operations, and certain general account assets in our International Businesses. These assets are not directly managed by PGIM, but rather are invested in non-proprietary funds or are managed by either the divisions themselves or by our Chief Investment Officer Organization.

The following table sets forth assets under management by source as of the dates indicated:

(1)“Institutional customers” consist of third-party institutional assets and group insurance contracts. “Retail customers” consist of individual mutual funds and variable annuities and variable life insurance separate account assets, funds invested in proprietary mutual funds through our defined contribution plan products, and third-party sub-advisory relationships. “General account” also includes fixed annuities and the fixed-rate accounts of variable annuities and variable life insurance.

(2)Primarily includes assets related to certain annuity, variable life, retirement and group life products in our U.S. Businesses and Corporate and Other operations, and certain general account assets in our International Businesses. These assets are not directly managed by PGIM, but rather are invested in non-proprietary funds or are managed by either the divisions themselves or by our Chief Investment Officer organization.

The following table sets forth the component changes in PGIM’s assets under management for the periods indicated:

(1)Represents assets that PGIM manages for the benefit of other reporting segments within the Company. Additions and withdrawals of these assets are attributable to third-party product inflows and outflows in other reporting segments.

(2)Includes income reinvestment, where applicable.

PGIM’s assets under management as of September 30, 2024 increased $181 billion in comparison to the prior year quarter, primarily driven by the impact of lower interest rates, equity market appreciation and strong investment performance. PGIM’s assets under management as of September 30, 2024 increased $102 billion in comparison to the prior year end, primarily driven by equity market appreciation, the impact of lower interest rates, strong investment performance and fixed income net inflows.

Private Capital Deployment

Private capital deployment is indicative of the pace and magnitude of capital that is invested and will result in future revenues that may include management fees, transaction fees, incentive fees and servicing revenues, as well as future costs to manage these assets.

Private capital deployment represents the gross value of private capital invested in real estate debt and equity, and private credit and equity asset classes. Assets under management resulting from private capital deployment are included in “Real estate” and “Private credit and other alternatives” in the “—Assets Under Management— by asset class table” above. As of September 30, 2024, these asset classes increased $9.7 billion compared to December 31, 2023, primarily reflecting private capital net inflows and market appreciation.

Private capital deployment includes PGIM’s real estate agency debt business, which consists of agency commercial mortgage loans that are originated and sold to third-party investors. PGIM continues to service these loans; however, they are not included in assets under management.

The following table sets forth PGIM’s private capital deployed by asset class for the periods indicated:

Seed and Co-Investments

As of September 30, 2024 and December 31, 2023, PGIM had approximately $1,114 million and $1,088 million of seed investments and $523 million and $443 million of co-investments at carrying value, respectively, primarily consisting of public fixed income, public equity, real estate investments, and private credit and other alternatives.

U.S. Businesses

The following table sets forth the operating results for our U.S. Businesses for the periods indicated:

Three Month Comparison. Adjusted operating income for our U.S. Businesses increased by $20 million primarily due to:

•Higher underwriting results, primarily reflecting favorable mortality experience and the impact of the first quarter 2024 reinsurance transaction of certain guaranteed universal life policies in our Individual Life business; and

•Higher net investment spread results, primarily reflecting higher reinvestment rates and business growth, partially offset by lower income on non-coupon investments and the impact of assets transferred as part of the first quarter 2024 reinsurance transaction, as discussed above.

Partially offsetting these increases were:

•Higher expenses, primarily driven by higher operating expenses in our Group Insurance and Institutional Retirement Strategies businesses and higher amortization of acquisition costs in our Individual Retirement Strategies business driven by business growth.

Nine Month Comparison. Adjusted operating income for our U.S. Businesses increased by $213 million primarily due to:

•Higher net investment spread results, primarily reflecting higher reinvestment rates and business growth, partially offset by the impact of assets transferred as part of the first quarter 2024 reinsurance transaction, as discussed above;

•Higher underwriting results, primarily reflecting favorable mortality experience and the impact of the first quarter 2024 reinsurance transaction, as discussed above, as well as more favorable mortality experience in our Group Insurance business; and

•A favorable comparative net impact from our annual reviews and update of assumptions and other refinements, primarily reflecting a net benefit from these updates in the second quarter of 2024 in our Institutional Retirement Strategies business, partially offset by a net charge in our Individual Life business.

Partially offsetting these increases were:

•Higher expenses, primarily driven by higher operating expenses in our Group Insurance and Institutional Retirement Strategies businesses and higher amortization of acquisition costs in our Individual Retirement Strategies business driven by business growth; and

•Lower fee income, net of distribution expenses, primarily in our Individual Retirement Strategies business due to a reduction in account values resulting from net outflows, partially offset by favorable equity markets.