PRUDENTIAL FINANCIAL INC

Business Updates

•Effective in the first quarter of 2025, consistent with changes to the Company’s internal management structure, our International Businesses are reflected as a single operating and reportable segment, which is how the CODM now assesses its performance and allocates resources. Prior to the first quarter of 2025, our International Businesses consisted of the Life Planner and Gibraltar Life and Other operating segments, each of which was a reportable segment under U.S. GAAP. The change has been applied retrospectively and did not have any impact on the Company’s Unaudited Interim Consolidated Financial Statements contained herein or to any previously issued financial statements.

•In December 2024, the Company entered into an agreement with Prismic Life Reinsurance International, Ltd. (“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. The transaction was completed in March 2025 with an effective date of March 1, 2025. See Note 12 to the Unaudited Interim Consolidated Financial Statements for additional information.

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 143 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 increased $59 million, including an unfavorable comparative net impact of $9 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 net charge of $2 million in the second quarter of 2025, compared to a net charge of $55 million in the second quarter of 2024.

Excluding these items, adjusted operating income increased $15 million, primarily reflecting higher underwriting results, driven by business growth in Brazil, and higher earnings on joint ventures and other operating entities. Also contributing to the increase were higher net investment spread results, primarily driven by an increase in income on non-coupon investments, partially offset by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. These variances were partially offset by lower surrender charges, as well as higher variable expenses, primarily due to business growth in Brazil, and higher operating expenses.

Six Month Comparison. Adjusted operating income increased $11 million, including an unfavorable comparative net impact of $17 million from currency fluctuations. Excluding the impact of currency fluctuations, as well as the impact from our annual reviews and update of assumptions and other refinements as discussed above, adjusted operating income decreased $25 million, primarily reflecting lower surrender charges, higher variable expenses due to business growth in Brazil, and lower net investment spread results, driven by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. These variances were partially offset by higher underwriting results, primarily driven by business growth in Brazil.

Three Month Comparison. Revenues decreased $113 million, including a favorable comparative net impact of $63 million from currency fluctuations, and an unfavorable comparative net impact of $207 million from our annual reviews and update of assumptions and other refinements. Excluding these items, revenues increased $31 million, primarily reflecting higher income on non-coupon investments and higher earnings from joint ventures and other operating entities. Net investment income also increased, driven by higher reinvestment rates and growth in both variable and investment products in Japan, partially offset by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. Lower premiums attributable to the decline of traditional life insurance business in force in Japan were partially offset by business growth in Brazil.

Benefits and expenses decreased $172 million, including an unfavorable comparative net impact of $72 million from currency fluctuations and a favorable comparative net impact of $260 million from our annual reviews and update of assumptions and other refinements. Excluding these items, benefits and expenses increased $16 million, primarily reflecting higher interest credited to policyholders’ account balances, reflecting growth in both variable and investment products in Japan, as discussed above, and higher general and administrative expenses, driven by business growth in Brazil. These variances were partially offset by lower policyholders’ benefits, including changes in reserves, due to the decline of traditional life insurance business in force in Japan, as discussed above, as well as favorable changes in estimates of the liability for future policy benefits.

Six Month Comparison. Revenues decreased $88 million, including an unfavorable comparative net impact of $36 million from currency fluctuations and the unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding these items, revenues increased $155 million, primarily reflecting higher net investment income, driven by higher reinvestment rates and growth in both variable and investment products in Japan, partially offset by the absence of income on assets related to the reinsurance of certain USD-denominated Japanese whole life policies, as discussed above. Also contributing to the increases were higher income on non-coupon investments and higher earnings from joint ventures and other operating entities. Lower premiums attributable to the decline of traditional life insurance business in force in Japan were partially offset by the absence of the impact from higher ceded reinsurance in the prior year period and business growth in Brazil.

Benefits and expenses decreased $99 million, including a favorable comparative net impact of $19 million from currency fluctuations and the net favorable comparative net impact from our annual reviews and update of assumptions and other refinements, as discussed above. Excluding these items, benefits and expenses increased $180 million, primarily reflecting higher interest credited to policyholders’ account balances, reflecting growth in both variable and investment products in Japan, as discussed above, and higher general and administrative expenses, driven by business growth in Brazil. Also contributing to the increases were higher policyholders’ benefits, including changes in reserves, reflecting the absence of the impact from higher ceded reinsurance in the prior year period, partially offset by the decline of traditional life insurance business in force in Japan, as discussed above. These variances were partially offset by favorable changes in estimates of the liability for future policy benefits.

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 higher sales of products denominated in USD relative to products denominated in other currencies; however, more recently we have experienced an increase in sales of our yen-denominated product offerings as a result of growing demand for these products.

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, increased $20 million. Life Consultant sales increased $29 million, primarily reflecting higher investment contract product sales, and Life Planner sales increased $16 million, primarily reflecting higher investment contract product sales in Japan, and higher life product sales in Brazil. Bank channel sales decreased $17 million, primarily reflecting lower life and investment contract product sales, and Independent Agency and Other sales decreased $8 million, primarily reflecting lower investment contract and retirement product sales, partially offset by higher 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.

Six Month Comparison. Annualized new business premiums, on a constant exchange rate basis, increased $98 million. Life Consultant sales increased $55 million, primarily reflecting higher investment contract and retirement product sales, partially offset by lower life product sales. Life Planner sales increased $47 million, primarily driven by higher investment contract and life product sales in Japan, and higher life product sales in Brazil. Independent Agency and Other sales increased $12 million, primarily reflecting higher life product sales, partially offset by lower investment contract sales. Bank channel sales decreased $16 million, primarily reflecting lower life product sales, partially offset by higher investment contracts product sales.