PRUDENTIAL FINANCIAL INC
For the period ended Mar 31, 2025. Filed May 1, 2025.
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Mar 31, 2025 · Filed May 1, 2025
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20. Related Party Transactions
- RELATED PARTY TRANSACTIONS
In September 2023, the Company invested approximately $200 million, and acquired a 20% equity interest as a limited partner, in Prismic, a Bermuda-exempted limited partnership that owns all of the outstanding capital stock of Prismic Re, a licensed Bermuda-based life and annuity reinsurance company. Also in September 2023, the Company entered into an agreement with Prismic Re to reinsure approximately $9 billion of reserves for certain structured settlement annuity contracts issued by PICA, a wholly-owned subsidiary of the Company. These contracts represent approximately 70% of the Company’s in-force structured settlement annuities business. Separately, the Company, through PGIM, entered into an investment management agreement with Prismic to manage a large portion of Prismic Re's assets.
In March 2025, the Company entered into an agreement with Prismic Re International, a wholly-owned subsidiary of Prismic, to reinsure approximately $7 billion of reserves for certain USD-denominated Japanese whole life policies originated by the Company’s Japanese affiliates. In connection with this transaction, the Company invested an additional $134 million in Prismic to maintain its 20% equity interest in Prismic. PGIM also provides investment management services on a large portion of Prismic Re International’s assets.
As the investment in Prismic is accounted for under the equity method, Prismic, Prismic Re and Prismic Re International are considered related parties. The following tables summarize the impacts to the Company’s financial statements related to the agreements that the Company entered with Prismic, Prismic Re and Prismic Re International.
The related party balances with Prismic, Prismic Re and Prismic Re International impacted the Company’s balance sheet as of the periods indicated as follows:
| March 31,2025 | December 31,2024 | |
|---|---|---|
| (in millions) | ||
| Reinsurance recoverables and deposit receivables | $15,313 | $9,084 |
| Other assets | $186 | $187 |
| Reinsurance and funds withheld payables (includes $56 and $(91) of embedded derivatives at fair value at March 31, 2025 and December 31, 2024, respectively) | $7,880 | $7,796 |
| Accumulated other comprehensive income (loss) | $(148) | $(139) |
The Company has agreed to guarantee Prismic Re's reimbursement obligations on letters of credit that may be obtained by Prismic Re from third-party financial institutions to support Prismic Re’s obligations under the reinsurance agreement with the Company for a total amount up to $2.0 billion as of both March 31, 2025 and December 31, 2024. As part of the transaction with Prismic Re International, the Company provided an $80 million,10-year contingent debt facility, where the Company may be required to purchase subordinated debt from certain subsidiaries of Prismic in the event their capital ratio falls below a predetermined level. See Note 21 for additional information on the Company’s guarantees and commitments.
The related party activity with Prismic, Prismic Re and Prismic Re International impacted the Company’s results of operations and cash flows for the periods indicated as follows:
| Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| (in millions) | ||
| Premiums | $(3) | $(4) |
| Asset management and service fees | 13 | 9 |
| Other income (loss) | 61 | 39 |
| Realized investment gains(losses), net | (237) | 204 |
| Policyholders’ benefits | (71) | (71) |
| Change in estimates of liability for future policy benefits | (3) | (4) |
| Amortization of deferred policy acquisition costs | (1) | 0 |
| General and administrative expenses | 3 | 11 |
| Income (loss) from related parties, before income taxes | (94) | 312 |
| Other comprehensive income (loss), before tax | (9) | 132 |
| Total comprehensive income (loss), before tax | $(103) | $444 |
| Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| (in millions) | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
| Realized investment (gains) losses, net | $237 | $(204) |
| Change in: | ||
| Deferred policy acquisition costs | $(1) | $0 |
| Reinsurance related-balances | $(192) | $(186) |
| Other, net | $(3) | $3 |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Other, net | $91 | $92 |
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