PRUDENTIAL FINANCIAL INC

The Closed Block division includes certain in-force traditional domestic participating life insurance and annuity products and assets that are used for the payment of benefits and policyholder dividends on these policies (collectively, the “Closed Block”), as well as certain related assets and liabilities. We no longer offer these traditional domestic participating policies. See Note 16 to the Consolidated Financial Statements for additional information.

Each year, the Board of Directors of The Prudential Insurance Company of America (“PICA”) determines the dividends payable on participating policies for the following year based on the experience of the Closed Block, including investment income, net realized and unrealized investment gains (losses), mortality experience and other factors. Although the Closed Block experience for dividend action decisions is based upon statutory results, at the time the Closed Block was established, we developed, as required by U.S. GAAP, an actuarial calculation of the timing of the maximum future earnings from the policies included in the Closed Block. Actual cumulative earnings, as required by U.S. GAAP, reflect the recognition of realized investment gains and losses in the current period, as well as changes in assets and related liabilities that support the Closed Block policies. If actual cumulative earnings in any given period are greater than the cumulative earnings we expected, we record this excess as a policyholder dividend obligation. Additionally, any accumulated net unrealized investment gains that have arisen subsequent to the establishment of the Closed Block are reflected as a policyholder dividend obligation, with a corresponding amount reported in AOCI, while any accumulated net unrealized investment losses are reflected as a reduction of the policyholder dividend obligation, to the extent the overall policyholder dividend obligation is otherwise positive.

We will subsequently pay this excess to Closed Block policyholders as an additional dividend unless it is otherwise offset by future Closed Block performance that is less favorable than we originally expected. The policyholder dividends we charge to expense within the Closed Block division will include any change in our policyholder dividend obligation that we recognize for the excess of actual cumulative earnings in any given period over the cumulative earnings we expected in addition to the actual policyholder dividends declared by the Board of Directors of PICA. If actual cumulative earnings fall below expected cumulative earnings in future periods, earnings volatility in the Closed Block division, which is primarily due to changes in investment results, may not be offset by changes in the cumulative earnings policyholder dividend obligation. For a discussion of the Closed Block division’s realized investment gains (losses), net, see “—General Account Investments.”

As of December 31, 2024, the excess of actual cumulative earnings over the expected cumulative earnings was $2,096 million; however, due to the accumulation of net unrealized investment losses in excess of this amount, the policyholder dividend obligation balance as of December 31, 2024 was reduced to zero.

The following table sets forth the Closed Block division’s results for the periods indicated:

Income (loss) Before Income Taxes and Equity in Earnings of Joint Ventures and Other Operating Entities

2024 to 2023 Annual Comparison. Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities decreased $13 million. Net investment activity results decreased, primarily reflecting higher realized investment losses from the sale of fixed income securities and lower other income driven by unfavorable changes in the market value of fixed income and equity securities. These decreases were partially offset by higher net investment income driven by non-coupon investments. As a result of these and other factors, a $777 million reduction in the policyholder dividend obligation was recorded in 2024, compared to a $335 million reduction in 2023.

2024 to 2023 Annual Comparison. Revenues decreased $379 million primarily driven by higher realized investment losses and lower other income, partially offset by higher net investment income, as discussed above.

Benefits and expenses decreased $366 million primarily driven by a decrease in dividends to policyholders, reflecting a higher reduction in the policyholder dividend obligation due to changes in cumulative earnings and other factors, as discussed above.