PRUDENTIAL FINANCIAL INC

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the consolidated financial condition of Prudential Financial, Inc. (“Prudential,” “Prudential Financial,” “PFI,” or “the Company”) as of June 30, 2026, compared with December 31, 2025, and its consolidated results of operations for the three and six months ended June 30, 2026 and 2025. You should read the following analysis of our consolidated financial condition and results of operations in conjunction with the MD&A, the “Risk Factors” section, and the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as well as the statements under “Forward-Looking Statements,” and the Unaudited Interim Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the consolidated financial condition of Prudential Financial, Inc. (“Prudential,” “Prudential Financial,” “PFI,” or “the Company”) as of September 30, 2026, compared with December 31, 2025, and its consolidated results of operations for the three and nine months ended September 30, 2026 and 2025. You should read the following analysis of our consolidated financial condition and results of operations in conjunction with the MD&A, the “Risk Factors” section, and the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as well as the statements under “Forward-Looking Statements,” and the Unaudited Interim Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Prudential Financial, a financial services leader with approximately $1.642 trillion of assets under management as of June 30, 2026, has operations primarily in the United States of America (“U.S.”), Asia, Europe and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. We offer these products and services to individual and institutional customers through one of the largest distribution networks in the financial services industry.

Current wording

Prudential Financial, a financial services leader with approximately $1.616 trillion of assets under management as of September 30, 2026, has operations primarily in the United States of America (“U.S.”), Asia, Europe and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. We offer these products and services to individual and institutional customers through one of the largest distribution networks in the financial services industry. We believe we are a uniquely integrated financial services company, with a competitive position supported by our longstanding brand, broad customer relationships, global distribution capabilities, and a diversified business model that combines liability generation across retirement and protection products with asset management expertise across public and private markets. Together, these capabilities enable us to originate, manage, and allocate capital at scale, meet evolving customer and client needs, and generate earnings and cash flow across market cycles.

Previous wording

These segment reporting changes are being applied retrospectively and do not have an impact on any of the Company’s previously issued Consolidated Financial Statements.

Current wording

These segment reporting changes were applied retrospectively and did not have an impact on any of the Company’s previously issued Consolidated Financial Statements.

Previous wording

Our principal operations now consist of PGIM (our global investment management business), our U.S. Businesses (consisting of Retirement, Group Insurance, Individual Life and U.S. Legacy Products), our International Businesses, the Closed Block division, and our Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under generally accepted accounting principles in the United States of America (“U.S. GAAP”). Our Corporate and Other operations include corporate items and initiatives that are not allocated to business segments as well as the Divested and Run-off Businesses described above.

Current wording

Our principal operations now consist of PGIM (our global investment management business), our U.S. Businesses (consisting of Retirement, Group Insurance, Individual Life and U.S. Legacy Products), our Japan Businesses, the Closed Block division, and our Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under generally accepted accounting principles in the United States of America (“U.S. GAAP”). Our Corporate and Other operations include corporate items and initiatives that are not allocated to business segments as well as the Divested and Run-off Businesses described above.

Previous wording

As previously disclosed, in January 2026, The Prudential Life Insurance Company, Ltd. (“Prudential of Japan”), a Japanese insurance subsidiary of the Company, reported the findings of its internal investigation into incidents of misconduct involving certain employees of Prudential of Japan. In response to these findings, Prudential of Japan is implementing a series of actions which include strengthening oversight of sales practices, governance and risk management, as well as leadership changes. Moreover, in February 2026, following discussions with the Japanese regulator, the Company voluntarily suspended new sales activity at Prudential of Japan for a 90-day period commencing February 9, 2026. In April 2026, the Company announced the voluntary extension of the suspension of new sales for an additional 180 days through November 5, 2026. See Note 21 to the Unaudited Interim Consolidated Financial Statements “—Litigation and Regulatory Matters—Regulatory” for additional information.

Current wording

As previously disclosed, in January 2026, The Prudential Life Insurance Company, Ltd. (“Prudential of Japan”), a Japanese insurance subsidiary of the Company, reported the findings of its internal investigation into incidents of misconduct involving certain employees of Prudential of Japan. In response to these findings, Prudential of Japan has been implementing a series of actions which include strengthening oversight of sales practices, governance and risk management, as well as leadership changes. Moreover, in February 2026, following discussions with the Japan Financial Services Agency (“FSA”), the Company voluntarily suspended new sales activity at Prudential of Japan for a 90-day period commencing February 9, 2026. In April 2026, the Company announced the voluntary extension of the suspension of new sales at Prudential of Japan for an additional 180 days through November 5, 2026.

Previous wording

The suspension of sales resulted in an estimated reduction of $235 million in International Businesses’ pre-tax adjusted operating income through the first six months of 2026. We estimate that the suspension of new sales as extended will result in a reduction of pre-tax adjusted operating income in the range of $525 to $575 million for 2026, inclusive of the six month impact above, and in the range of $400 to $450 million for 2027, reflecting remediation costs associated with sustaining the business, one-time and other operating costs, and lower earnings attributable to the gradual ramp-up of new sales after sales resume. Should the suspension of new sales activities extend beyond November 2026, we estimate that International Businesses’ pre-tax adjusted operating income would be reduced by $50 to $60 million per each additional month. We do not expect a material impact to capital, Economic Solvency Ratios (“ESR”) or cash flows. It is also possible that reputational and other harm resulting from or in connection with this matter will negatively impact our other businesses in Japan beyond Prudential of Japan. We are proactively reviewing the sales practices of Gibraltar Life Insurance Company, which distributes its products through life consultants and independent agencies. Actual results may differ materially from these preliminary expectations, as covered under “Forward-Looking Statements.”

Current wording

The suspension of sales at Prudential of Japan resulted in an estimated reduction of $375 million in Japan Businesses’ pre-tax adjusted operating income through the first nine months of 2026. We now estimate that the suspension of new sales at Prudential of Japan as extended through January 31, 2027 will result in a reduction of pre-tax adjusted operating income of approximately $500 million for 2026, inclusive of the nine month impact above, and in the range of $500 to $550 million for 2027, reflecting remediation costs associated with sustaining the business, one-time and other operating costs, and lower earnings attributable to the gradual ramp-up of new sales after sales resume.

Previous wording

(1)Includes USD-denominated fixed maturities at amortized cost plus any related accrued investment income, as well as USD notional amount of foreign currency derivative contracts outstanding. Note this amount represents only those USD assets serving to hedge the impact of foreign currency volatility on equity. Separate from this program, our Japanese operations also have $92.3 billion and $90.0 billion as of June 30, 2026 and December 31, 2025, respectively, of USD-denominated assets supporting USD-denominated liabilities related to USD-denominated products.

Current wording

(1)Includes USD-denominated fixed maturities at amortized cost plus any related accrued investment income, as well as USD notional amount of foreign currency derivative contracts outstanding. Note this amount represents only those USD assets serving to hedge the impact of foreign currency volatility on equity. Separate from this program, our Japanese operations also have $95.8 billion and $90.0 billion as of September 30, 2026 and December 31, 2025, respectively, of USD-denominated assets supporting USD-denominated liabilities related to USD-denominated products.

Previous wording

The financial results of our International Businesses and PGIM reflect the impact of intercompany arrangements with our Corporate and Other operations pursuant to which these segments’ non-USD-denominated earnings are translated at fixed currency exchange rates that are predetermined during the third quarter of the prior year using forward currency exchange rates. Results of our Corporate and Other operations include differences between the translation adjustments recorded by the segments at the fixed currency exchange rate versus the actual average rate during the period.

Current wording

The financial results of our Japan Businesses, and to a lesser extent, PGIM and Retirement, reflect the impact of intercompany arrangements with our Corporate and Other operations pursuant to which these segments’ non-USD-denominated earnings are translated at fixed currency exchange rates that are predetermined during the third quarter of the prior year using forward currency exchange rates. Results of our Corporate and Other operations include differences between the translation adjustments recorded by the segments at the fixed currency exchange rate versus the actual average rate during the period.

Previous wording

The table below presents, for the periods indicated, the increase (decrease) to revenues and adjusted operating income for our International Businesses, PGIM and Corporate and Other operations, reflecting the impact of these intercompany arrangements.

Current wording

The table below presents, for the periods indicated, the increase (decrease) to revenues and adjusted operating income resulting from these intercompany arrangements.

Previous wording

While our international insurance operations offer products denominated in local currency, several also offer products denominated in non-local currencies. This is most notable in our Japanese operations, which currently offer primarily USD-denominated products, but have also historically offered Australian dollar (“AUD”)-denominated products. The non-local currency-denominated insurance liabilities related to these products are supported by investments denominated in corresponding currencies, including a significant portion designated as available-for-sale. While the impact from foreign currency exchange rate movements on these non-local currency-denominated assets and liabilities is economically matched, differences in the accounting for changes in the value of these assets and liabilities due to changes in foreign currency exchange rate movements have historically resulted in volatility in U.S. GAAP earnings.

Current wording

Our Japan insurance operations offer products denominated in local currency, as well as in non-local currencies, primarily USD-denominated products and historically Australian dollar (“AUD”)-denominated products. The non-local currency-denominated insurance liabilities related to these products are supported by investments denominated in corresponding currencies, including a significant portion designated as available-for-sale. While the impact from foreign currency exchange rate movements on these non-local currency-denominated assets and liabilities is economically matched, differences in the accounting for changes in the value of these assets and liabilities due to changes in foreign currency exchange rate movements have historically resulted in volatility in U.S. GAAP earnings.

Previous wording

As a result, we implemented a structure in certain of our Japanese operations that disaggregated the USD- and AUD-denominated businesses into separate divisions, each with its own functional currency that aligns with the underlying products and investments. The result of this alignment was to reduce differences in the accounting for changes in the value of these assets and liabilities that arise due to changes in foreign currency exchange rate movements. For the USD- and AUD-denominated assets that were transferred under this structure, the net cumulative unrealized investment gains associated with foreign exchange remeasurement that were recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) totaled $0.8 billion and $1.0 billion as of June 30, 2026 and December 31, 2025, respectively, and will be recognized in earnings within “Realized investment gains (losses), net” over time as these assets mature or are sold. Absent the sale of any of these assets prior to their stated maturity, approximately 2% of the $0.8 billion balance as of June 30, 2026 will be recognized throughout the remainder of 2026, approximately 3% will be recognized in 2027, and the remaining balance will be recognized from 2028 through 2051.

Current wording

As a result, we implemented a structure in certain of our Japanese operations that disaggregated the USD- and AUD-denominated businesses into separate divisions, each with its own functional currency that aligns with the underlying products and investments. The result of this alignment was to reduce differences in the accounting for changes in the value of these assets and liabilities that arise due to changes in foreign currency exchange rate movements. For the USD- and AUD-denominated assets that were transferred under this structure, the net cumulative unrealized investment gains associated with foreign exchange remeasurement that were recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) totaled $0.8 billion and $1.0 billion as of September 30, 2026 and December 31, 2025, respectively, and will be recognized in earnings within “Realized investment gains (losses), net” over time as these assets mature or are sold. Absent the sale of any of these assets prior to their stated maturity, less than 1% of the $0.8 billion balance as of September 30, 2026 will be recognized throughout the remainder of 2026, approximately 4% will be recognized in 2027, and the remaining balance will be recognized from 2028 through 2051.

Previous wording

Enterprise Group, our strategic investment in Ghana, has historically utilized the Ghanaian cedi as its functional currency given it is the currency of the primary economic environment in which the entity operates. In the fourth quarter of 2023, Ghana experienced a cumulative inflation rate that exceeded 100% over a 3-year period. As a result, Ghana’s economy was deemed to be highly inflationary, resulting in reporting changes effective January 1, 2024. Under U.S. GAAP, the financial statements of a foreign entity in a highly inflationary economy are to be remeasured as if its functional currency (formerly the Ghanaian cedi) is the reporting currency of its parent reporting entity (the USD) on a prospective basis. While this changed how the results of Enterprise Group were remeasured and/or translated into USD, the impact to our financial statements was not material nor is it expected to have a material impact to our financial statements in future periods given the relative size of the investment.

Current wording

Enterprise Group, our investment in Ghana, reported within Divested and Run-off Businesses in Corporate and Other operations, has historically utilized the Ghanaian cedi as its functional currency given it is the currency of the primary economic environment in which the entity operates. In the fourth quarter of 2023, Ghana experienced a cumulative inflation rate that exceeded 100% over a 3-year period. As a result, Ghana’s economy was deemed to be highly inflationary, resulting in reporting changes effective January 1, 2024. Under U.S. GAAP, the financial statements of a foreign entity in a highly inflationary economy are to be remeasured as if its functional currency (formerly the Ghanaian cedi) is the reporting currency of its parent reporting entity (the USD) on a prospective basis. While this changed how the results of Enterprise Group were remeasured and/or translated into USD, the impact to our financial statements was not material nor is it expected to have a material impact to our financial statements in future periods given the relative size of the investment.