ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Page
Introduction
Executive Summary
Company Overview
Business Outlook
E xternal and Economic Fac tors
Industry Trends
Impact of Changes in the Interest Rate Environment
Impact of Foreign Currency Exchange Rates
Results of Operations
Consolidated Results of Operations
Segment Results of Operations
Segment Measures
Results of Operations by Segment
PGIM
Retirement Strategies
Group Insurance
Individual Life
International Businesses
Corporate and Other
Divested and Run-off Businesses
Closed Block Division
Accounting Policies & Pronouncements
Application of Critical Accounting Estimates
Adoption of New Accounting Pronouncements
Liquidity and Capital Resources
Ratings
General Account Investments
Valuation of Assets and Liabilities
Income Taxes
Risk Management
Certain of the statements included in this section constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Prudential Financial, Inc. and its subsidiaries. Prudential Financial, Inc.’s actual results may differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the “Risk Factors” and “Forward-Looking Statements” sections included herein.
Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, discussions related to the results of operations for the year ended December 31, 2024 in comparison to the year ended December 31, 2023 have been omitted. For such omitted discussions, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
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Introduction
The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations is to provide readers with a foundational understanding of our Company, our consolidated financial statements, and the significant internal and external drivers of our results. The discussion of financial results within is focused on adjusted operating income, which is the Company’s segment-level measure of performance, and provides readers with period-over-period analysis of operating results and significant drivers. In addition to discussing our detailed segment results of operations, we have also provided supplemental information that we believe assists with a greater understanding of our overall financial results.
A brief description of these key informational sections follows:
• “Executive Summary” provides an overview of the Company and its operations, along with recent significant events that have impacted our organizational structure or financial results. This section also provides management’s outlook for each respective business segment.
• “External and Economic Factors” discusses industry trends, including the economic environment and demographics for each of our businesses, and includes a discussion of how the impact of potential changes in either interest rates or foreign currency exchange rates may impact our overall operations and financial position.
• “Accounting Policies & Pronouncements” discusses the accounting policies applied in preparing our consolidated financial statements that management believes are most dependent on the application of estimates and assumptions and which require management’s most difficult, subjective, or complex judgments. This section should be read in conjunction with Note 2 to the Consolidated Financial Statements.
• “Liquidity and Capital Resources” provides information about our liquidity and capital positions, including any significant actions that have impacted, or are expected to impact, these positions. Information is also provided on our insurance companies’ regulatory capital requirements, the sources and uses of our holding company’s cash, and additional information about financing activities of the Company.
• “Ratings” provides information on the ratings for Prudential Financial and certain of its subsidiaries as of the date of this filing.
• “General Account Investments” provides information about the investment objectives, strategies and overall portfolio composition of the general account that supports the liabilities of our insurance companies. Investment results are presented separately for our U.S.-based and Japanese-based operations, our Closed Block division, and our Funds Withheld portfolios, which support liabilities relating to reinsurance agreements where the economic benefits and associated investment risk ultimately inure to the reinsurer. This section should be read in conjunction with Note 3 to the Consolidated Financial Statements.
• “Valuation of Assets and Liabilities” provides additional breakout of the fair value of assets and liabilities for Prudential Financial Inc., excluding those held in the Closed Block division and Funds Withheld portfolios, and separately for the Closed Block division and Funds Withheld portfolios. This section should be read in conjunction with Note 6 to the Consolidated Financial Statements.
• “Income Taxes” provides information about our effective tax rate and unrecognized tax benefits. This section should be read in conjunction with Note 17 to the Consolidated Financial Statements.
• “Risk Management” provides detail about our risk governance structure and the framework for evaluating the risks across the Company. This section should be read in conjunction with “Item 1A. Risk Factors.”
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Executive Summary
Company Overview
Our operations are 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 solutions, 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.
Our principal operations consist of PGIM (our global investment management business), our U.S. Businesses (consisting of our Retirement Strategies, Group Insurance and Individual Life businesses), 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 are composed 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. See “Business—” for a description of our sources of revenue and details on how our profitability is impacted. In addition, our profitability is impacted by our ability to effectively deploy capital, utilize our tax capacity and manage expenses.
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 chief operating decision maker (“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 Consolidated Financial Statements contained herein or to any previously issued financial statements.
Management expects that results will continue to benefit from our mutually-reinforcing business system, which includes a mix of businesses that complement each other to provide competitive advantages, earnings diversification and capital benefits from a balanced risk profile. We believe we are well-positioned to tap into market opportunities to meet the evolving needs of our clients and society at large. Our mix of high-quality protection, retirement and investment management businesses enables us to offer solutions that cover a broad range of financial needs and to engage with our clients through multiple channels.
In September 2023, we, together with Warburg Pincus and a group of institutional investors, launched Prismic Life Reinsurance, Ltd. (“Prismic Re”), a licensed Bermuda-based life and annuity reinsurance company. Through our Corporate and Other operations, we own an approximate 20% equity interest in Prismic Life Holding Company LP (“Prismic”), the Bermuda-exempted limited partnership that owns all of the outstanding capital stock of Prismic Re and Prismic Life Reinsurance International, Ltd. (“Prismic Re International”). We expect the increased reinsurance capacity that this partnership provides to support our vision of expanding access to investing, insurance, and retirement security for people around the world. See Note 15 to the Consolidated Financial Statements for additional information regarding our transactions with Prismic Re and Prismic Re International.
As part of our continuous improvement process, we are working to become a leaner and more agile company by simplifying our management structure, empowering our employees with faster decision-making processes and investing in technology and data platforms. As part of this, we recorded charges of $135 million in the fourth quarter of 2025 and $200 million in the fourth quarter of 2023. These charges, primarily related to our domestic operations and PGIM, were recorded within our Corporate and Other operations and reflect management’s ongoing efforts in evaluating the optimal workforce structure required to deliver on our long-term growth strategy. We expect these continued actions will create operating efficiencies, and provide reinvestment capacity to build capabilities, realize additional efficiencies, strengthen our competitiveness and fuel future growth.
In February 2026, in conjunction with our previously announced internal investigation into employee misconduct in Japan, we voluntarily suspended new sales activity at Prudential of Japan for a 90-day period, commencing February 9, 2026. See “—Litigation and Regulatory Matters—Regulatory” within Note 25 to the Consolidated Financial Statements and “Results of Operations by Segment—International Businesses” below for additional information.
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Business Outlook
We feel confident about our prospects for the future based on the foundation of our integrated and complementary businesses. We are focused on evolving our strategy to transform our market-leading businesses to become a higher growth, more capital efficient company. We plan to continue investing in growth businesses and markets around the world, delivering industry-leading customer and client experiences, and creating the next generation of financial solutions. The businesses drive our company’s performance, value and growth, and are organized around the markets we serve with solutions in investing, insurance, and retirement security.
Specific outlook considerations for each of our businesses include the following:
• PGIM. Our global investment management business, PGIM, is focused on maintaining strong investment performance while leveraging the scale of its approximately $1.466 trillion of assets under management and diversified global operations. We are currently centralizing our distribution channels and unifying our asset management capabilities to better serve our clients and support sustainable growth. In addition, we remain focused on broadening our market share through acquisitions and organic initiatives, including providing asset management services to third-party reinsurers. In addition to serving third-party institutional and retail clients, we provide our U.S. and International businesses with a competitive advantage through our investment expertise across a broad array of asset classes, including public and private asset class capabilities. Underpinning our growth strategy is our ability to continue to deliver robust investment performance and to attract and retain high-caliber investment talent.
• Retirement Strategies. We remain focused on helping customers meet their investment and retirement needs by expanding access to retirement security and broadening distribution through new relationships, platforms and advisors. Our Institutional Retirement Strategies business continues to be focused on providing products that respond to the needs of plan sponsors, retirees, and annuitants while maintaining appropriate pricing and return expectations under changing market conditions. We expect our differentiated capabilities and execution to drive our business momentum in the pension risk transfer and international reinsurance markets; however, we expect that growth will not be linear due to the episodic nature of these transactions. In Individual Retirement Strategies, we continue to execute on our strategic pivot of replacing the intentional run-off of legacy variable annuities with new indexed and fixed annuity products that generate less volatile, and more capital efficient earnings. We continue to focus on expanding our diverse product portfolio and distribution channels to meet more of the growing demand among retail investors for protected growth and lifetime income.
• Group Insurance. We are a leading group benefits provider with a focus on further diversifying our portfolio by expanding our Premier Market and Association segments and growing voluntary supplemental health, including entering the medical stop loss market with coverage effective dates starting from January 1, 2025, while maintaining leadership in the National Market segment. We also continue to focus on deepening employer and participant relationships and investing in a best-in-class customer experience.
• Individual Life. We continue to focus on making life insurance solutions more accessible to financial professionals, partners and customers by providing a broad product portfolio, including growing the amount of accumulation and simplified protection product options, coupled with our multi-channel distribution capabilities. We have taken pricing and product actions to ensure we realize appropriate returns for the current economic environment and to diversify our product mix to further limit our sensitivity to interest rates.
• International Businesses. We remain focused on meeting customers’ evolving protection, retirement, and savings needs as well as maintaining the underlying strength of our distribution channels. Our strategy is to strengthen our position in Japan and we remain committed to optimizing our existing operations.
External and Economic Factors
Industry Trends
Our businesses are impacted by financial markets, economic conditions, regulatory oversight, and a variety of trends that affect the industries in which we compete.
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Financial and Economic Environment:
• PGIM. After a period of significantly increased interest rates and volatile economic conditions in 2022 and 2023, we experienced a modest decline in rates during 2024 and 2025, combined with improved equity market conditions and a slight rebound in the commercial real estate industry. While the economic outlook has improved, interest rate movements remain uncertain and the real estate market is in a modest recovery. We expect that a stabilized or declining rate environment over time will positively impact PGIM, particularly as investors reallocate record-high money market assets to fixed income, real estate, and other higher-yielding asset classes. Conversely, a deterioration in market conditions (e.g., equity market declines, higher interest rates, credit spread widening or real estate value declines) could lead to lower fee-based revenues, incentive fees taking longer to be realized and losses in our seed and co-investments. An economic could also have impacts on real estate prices as well as transaction volumes in certain private asset classes. In addition, the continued shift from active strategies to passive index products, particularly in equities, could present additional headwinds for active managers such as PGIM. We believe PGIM’s uniquely diversified global platform is well positioned to be resilient in the face of market and industry headwinds.
• U.S. Businesses. Through 2021, interest rates in the U.S. had experienced a prolonged period of historically low levels. This was followed by significant increases in 2022 through 2023. While there have been modest declines in 2024 and 2025, rates have sustained higher levels relative to historical periods. We expect that a continued level of relative higher interest rates will benefit our results over time. We continue to monitor current market conditions and the potential impact to our businesses in the event of slowing or negative economic growth. In addition, we are subject to financial impacts associated with movements in equity markets and the evolution of the credit cycle as discussed in “Item 1A. Risk Factors.”
• International Businesses. Interest rates in Japan experienced a prolonged period of historically low levels, negatively impacting our net investment spread results and reinvestment yields; however, beginning in 2024, the Bank of Japan began raising its key short-term interest rates, marking their highest levels since September 1995. We expect that a continued level of higher interest rates will benefit our results over time. In addition, we are subject to financial impacts associated with movements in foreign currency rates, particularly the Japanese yen. Fluctuations in the value of the yen can impact the relative attractiveness to customers of both yen-denominated and non-yen denominated products thereby impacting both sales and surrenders. In addition, we are subject to financial impacts associated with movements in equity markets and the evolution of the credit cycle as discussed in “Item 1A. Risk Factors.” Brazil’s life insurance industry is supported by a stable economic outlook and its long-term growth prospects remain strong as economic conditions show sustained growth.
Demographics:
• PGIM. An aging global population has led to more de-risking across institutional and individual investor portfolios as well as increased demand for higher-yielding investments that deliver income to meet retirement needs. As a result, investors are increasing their allocations to public and private fixed income assets, where PGIM is a global market leader. As employers, particularly in the U.S. and the U.K., continue to transition from defined benefit pensions to defined contribution plans as their primary retirement vehicles, there is a growing need for personalized retirement solutions that can help improve individual retirement security. Asset managers, such as PGIM, will play a critical role in partnering with governments, corporations, and individuals globally to deliver the investment and advice capabilities required to address this challenge.
• U.S. Businesses. Individual customer demographics continue to evolve and new opportunities present themselves in different consumer segments such as the millennial and multicultural markets. Consumer expectations and preferences are changing. We believe existing and potential customers are increasingly looking for cost-effective solutions that they can easily understand and access through technology-enabled devices. At the same time, income protection, wealth accumulation and the needs of retiring baby boomers are continuing to shape the insurance industry. A persistent retirement security gap exists in terms of both savings and protection.
• International Businesses. Japan has an aging population as well as a large pool of household assets invested in low-yielding deposit and savings vehicles. The aging of Japan’s population, along with strains on government pension and healthcare programs, have led to a growing demand for products that provide financial solutions for retirement, investment and wealth transfer, as well as for health-related products. Brazil, the largest country by population in South
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America, is experiencing rising life expectancy and an expanding middle class, along with increasing disposable income and greater financial awareness. These trends drive demand for life insurance products that prioritize financial security, wealth preservation, and retirement planning, and underscore the need for diversified solutions, including protection-oriented, savings, and health related policies.
Regulatory Environment . See “Business—Regulation” for a discussion of regulatory developments that may impact the Company and the associated risks.
Competitive Environment . See “Business—” for a discussion of the competitive environment and the basis on which we compete in each of our segments.
Impact of Changes in the Interest Rate Environment
As a global financial services company, market interest rates are a key driver of our liquidity and capital positions, cash flows, results of operations and financial position. Changes in interest rates can affect these in several ways, including favorable or adverse impacts to:
• investment-related activity, including: investment income returns, net investment spread results, new money rates, mortgage loan prepayments and bond redemptions;
• the valuation of fixed income investments and derivative instruments;
• collateral posting requirements, hedging costs and other risk mitigation activities;
• customer account values and assets under management, including their impacts on fee-related income;
• insurance reserve levels, including market risk benefits (“MRBs”), and market experience true-ups;
• policyholder behavior, including surrender or withdrawal activity;
• product offerings, design features, crediting rates and sales mix; and
• the fair value of, and possible impairments on, intangible assets such as goodwill.
In order to manage the impacts that changes in interest rates have on our net investment spread, we employ a proactive asset/liability management program, which includes strategic asset allocation and hedging strategies within a disciplined risk management framework. These strategies seek to match the liability characteristics of our products and to closely approximate the interest rate sensitivity of assets with that of product liabilities. We also manage duration gaps, currency and other risks between assets and liabilities through the use of derivatives, and adjust these strategies as products, customer behavior, and market conditions evolve. Our interest rate exposure is also mitigated by our business mix, which includes lines of business where fee-based and insurance underwriting earnings play a more prominent role in product profitability. We also regularly examine our product offerings and may reprice or discontinue sales of certain products that do not meet our profit expectations. Additionally, in our Japanese operations, our diverse product portfolio in terms of currency mix and premium payment structure allows us to further manage any impacts from changes in the interest rate environment. For additional information regarding sales within our Japanese operations, see “—International Businesses—Sales Results,” below.
For additional information regarding interest rate risks, see “Item 1A. Risk Factors—Market Risk” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk.”
Impact of Foreign Currency Exchange Rates
Foreign currency exchange rate movements and related hedging strategies
As a U.S.-based company with significant business operations outside the U.S., particularly in Japan, we are subject to foreign currency exchange rate movements that could impact our United States dollar (“USD”)-equivalent shareholder return on equity. We seek to mitigate this impact through various hedging strategies, including holding USD-denominated assets in certain of our foreign subsidiaries.
In order to reduce equity volatility from foreign currency exchange rate movements, we primarily utilize a yen hedging strategy that calibrates the hedge level to preserve the relative contribution of our yen-based business to the Company’s overall return on equity on a leverage neutral basis. We implement this hedging strategy utilizing a variety of instruments, including USD-denominated assets and dual currency and synthetic dual currency investments held locally in our Japanese insurance subsidiaries. The total hedge level may vary based on our periodic assessment of the relative contribution of our yen-based business to the Company’s overall return on equity.
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The table below presents the aggregate amount of instruments that serve to hedge the impact of foreign currency exchange movements on our USD-equivalent shareholder return on equity from our Japanese insurance subsidiaries as of the dates indicated.
December 31,
(in billions)
Foreign currency hedging instruments:
USD-denominated assets associated with yen-based entities(1)
Dual currency and synthetic dual currency investments(2)
Total foreign currency hedges
(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 $90.0 billion and $83.2 billion as of December 31, 2025 and 2024, respectively, of USD-denominated assets supporting USD-denominated liabilities related to USD-denominated products.
(2) Dual currency and synthetic dual currency investments are held by our yen-based entities in the form of fixed maturities and loans with a yen-denominated principal component and USD-denominated interest income. The amounts shown represent the present value of future USD-denominated cash flows.
The USD-denominated investments that hedge the impact of foreign currency exchange rate movements on USD-equivalent shareholder return on equity from our Japanese insurance operations are reported within yen-based entities and, as a result, foreign currency exchange rate movements will impact their value reported within our yen-based Japanese insurance entities. We seek to mitigate the risk that future unfavorable foreign currency exchange rate movements will decrease the value of these USD-denominated investments reported within our yen-based Japanese insurance entities, and therefore negatively impact their equity and regulatory solvency margins, by having our Japanese insurance operations enter into currency hedging transactions with a subsidiary of Prudential Financial. These hedging strategies have the economic effect of moving the change in value of these USD-denominated investments due to foreign currency exchange rate movements from our Japanese yen-based entities to our USD-based entities.
These USD-denominated investments also pay a coupon which is generally higher than what a similar yen-denominated investment would pay. The incremental impact of this higher yield on our USD-denominated investments, as well as our dual currency and synthetic dual currency investments, will vary over time, and is dependent on the duration of the underlying investments as well as interest rate environments in both the U.S. and Japan at the time of the investments.
Impact of intercompany foreign currency exchange rate arrangements on segment results of operations
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.
In addition, specific to our International Businesses where we hedge certain currencies utilizing forward currency contracts with third parties, the results of our Corporate and Other operations also include the impact of any gains or losses recorded from these contracts that settled during the period, which include the impact of any over or under hedging of actual earnings that differ from projected earnings.
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.
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Year Ended December 31,
(in millions)
Segment impacts of intercompany arrangements:
International Businesses
PGIM
Impact of intercompany arrangements(1)
Corporate and Other:
Impact of intercompany arrangements(1)
Settlement gains (losses) on forward currency contracts(2)
Net benefit (detriment) to Corporate and Other
Net impact on consolidated revenues and adjusted operating income
(1) Represents the difference between non-USD-denominated earnings translated on the basis of weighted average monthly currency exchange rates versus fixed currency exchange rates determined in connection with the foreign currency income hedging program.
(2) The total notional amount of these forward currency contracts within our Corporate and Other operations was $0.8 billion as of December 31, 2025, 2024, and 2023.
Impact of products denominated in non-local currencies on U.S. GAAP earnings
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.
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 $1.0 billion and $1.1 billion as of December 31, 2025 and 2024, 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 5% of the $1.0 billion balance as of December 31, 2025 will be recognized in 2026, approximately 3% will be recognized in 2027, and the remaining balance will be recognized from 2028 through 2051.
Highly inflationary economy
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.
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Results of Operations
Consolidated Results of Operations
The following section provides a comparative discussion of our consolidated results of operations on a U.S. GAAP basis for the periods indicated.
Year Ended December 31,
(in millions)
REVENUES
Premiums
Policy charges and fee income
Net investment income
Asset management and service fees
Other income (loss)
Realized investment gains (losses), net
Change in value of market risk benefits, net of related hedging gains (losses)
Total revenues
BENEFITS AND EXPENSES
Policyholders’ benefits
Change in estimates of liability for future policy benefits
Interest credited to policyholders’ account balances
Dividends to policyholders
Amortization of deferred policy acquisition costs
Goodwill impairment
General and administrative expenses
Total benefits and expenses
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF JOINT VENTURES AND OTHER OPERATING ENTITIES
Total income tax expense (benefit)
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF JOINT VENTURES AND OTHER OPERATING ENTITIES
Equity in earnings of joint ventures and other operating entities, net of taxes
NET INCOME (LOSS)
Less: Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.
2025 to 2024 Annual Comparison
“Net income (loss) attributable to Prudential Financial, Inc.” increased $849 million, inclusive of a $546 million unfavorable variance from income taxes, primarily driven by the increase in pre-tax earnings, as described below, and the impact of certain tax law and rate changes in the current year. See “—Income Taxes” for additional information.
On a pre-tax basis, “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” increased $1,447 million, reflecting the following notable items:
“Total revenues” decreased $9,631 million, primarily due to the following:
• “Premiums” — $12,100 million unfavorable variance, primarily reflecting lower pension risk transfer premiums due to lower sales in the current year, with corresponding offsets in “Policyholders’ benefits,” as discussed below; and
• “Realized investment gains (losses), net” — $703 million unfavorable variance, primarily reflecting unfavorable derivative results, excluding Funds Withheld portfolios, as well as unfavorable impacts from Funds Withheld related embedded derivatives, which are offset by changes in the value of the investments in these portfolios that are primarily recorded in “Other income (loss)” or through “Other comprehensive income.” These variances were partially offset by lower losses from the sales of fixed income securities, and less unfavorable impacts from net credit
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losses and impairments. See “—General Account Investments—Realized Investment Gains and Losses” for additional information.
These variances were partially offset by:
• “Net investment income” — $1,564 million favorable variance, primarily reflecting business growth and higher reinvestment rates. See “—General Account Investments—Investment Results” for additional information; and
• “Other income (loss)” — $1,389 million favorable variance, primarily reflecting favorable changes in the market value of fixed income securities designated as trading, including those within our Funds Withheld portfolios, as discussed above.
“Total benefits and expenses” decreased $11,078 million, primarily due to the following:
• “Policyholders’ benefits” — $11,895 million favorable variance, primarily reflecting lower pension risk transfer premiums, as discussed above; and
• “General and administrative expenses” — $330 million favorable variance, net of deferrals, primarily reflecting lower operating expenses, partially offset by higher variable expenses supporting business growth.
These variances were partially offset by:
• “Interest credited to policyholders’ account balances” — $486 million unfavorable variance, primarily reflecting business growth.
Segment Results of Operations
We analyze the performance of our segments and Corporate and Other operations using a measure of segment profitability called adjusted operating income. See “—Segment Measures” below for a discussion of adjusted operating income and its use as a measure of segment operating performance.
Annual Reviews and Update of Assumptions and Other Refinements
During the second quarter of each year, we perform an annual comprehensive review of the assumptions used for estimating future premiums, benefits, and other cash flows, including reviews related to mortality, morbidity, lapse, surrender, and other contractholder behavior assumptions, and economic assumptions, including expected future rates of returns on investments. The Company generally looks to relevant Company experience as the primary basis for these assumptions; however, if relevant Company experience is not available or does not have sufficient credibility, the Company may look to experience of similar blocks of business, either elsewhere within the Company or within the industry. As part of this review, we may update these assumptions and make refinements to our models based upon emerging experience, future expectations and other data, including any observable market data we feel is indicative of a long-term trend. These assumptions are generally reviewed annually unless a material change in our own experience or in industry experience made available to us is observed in an interim period that we feel is also indicative of a long-term trend. Generally, we do not expect trends to change significantly in the short-term and, to the extent these trends may change, we expect such changes to be gradual over the long-term. The impact on our results of operations of changes in these assumptions can be offsetting and we are unable to predict their movement or offsetting impact over time.
Shown below are the impacts on our adjusted operating income from updates of actuarial assumptions and other refinements as discussed above. The information below is presented by each segment and Corporate and Other operations and includes a reconciliation of these impacts to the impacts within income (loss) before income taxes and equity in earnings of joint ventures and other operating entities.
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Year Ended December 31,
(in millions)
Favorable (unfavorable) impact to adjusted operating income before income taxes by segment:
U.S. Businesses:
Retirement Strategies
Group Insurance
Individual Life
Total U.S. Businesses
International Businesses
Corporate and Other
Total segment favorable (unfavorable) impact to adjusted operating income before income taxes
Reconciling items:
Realized investment gains (losses), net, and related charges and adjustments
Change in value of market risk benefits, net of related hedging gains (losses)
Divested and Run-off Businesses:
Closed Block division
Other Divested and Run-off Businesses
Favorable (unfavorable) impact to consolidated income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
Shown below are the adjusted operating income contributions of each segment and Corporate and Other operations for the periods indicated and a reconciliation of this segment measure of performance to “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” as presented in the Consolidated Statements of Operations.
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Year Ended December 31,
(in millions)
Adjusted operating income before income taxes by segment:
PGIM
U.S. Businesses:
Retirement Strategies
Group Insurance
Individual Life
Total U.S. Businesses
International Businesses
Corporate and Other
Total segment adjusted operating income before income taxes
Reconciling items:
Realized investment gains (losses), net, and related charges and adjustments(1)
Change in value of market risk benefits, net of related hedging gains (losses)
Market experience updates
Divested and Run-off Businesses(2):
Closed Block division
Other Divested and Run-off Businesses
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests(3)
Other adjustments(4)
Consolidated income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
(1) See “ — General Account Investments” and Note 23 to the Consolidated Financial Statements for additional information.
(2) Represents the contribution to income (loss) of Divested and Run-off Businesses that have been or will be sold or exited, including businesses that have been placed in wind-down, but did not qualify for “discontinued operations” accounting treatment under U.S. GAAP. See “—Divested and Run-off Businesses” and “—Closed Block Division” for additional information.
(3) Equity in earnings of joint ventures and other operating entities is included in adjusted operating income but excluded from “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” as it is reflected on an after-tax U.S. GAAP basis as a separate line in the Consolidated Statements of Operations. Earnings attributable to noncontrolling interests are excluded from adjusted operating income but included in “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” as they are reflected on a U.S. GAAP basis as a separate line in the Consolidated Statements of Operations. Earnings attributable to noncontrolling interests represent the portion of earnings from consolidated entities that relates to the equity interests of minority investors.
(4) Includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods.
Segment results for 2025 presented above reflect the following:
PGIM. Results for 2025 increased in comparison to 2024, primarily reflecting higher net asset management fees and higher net service, distribution and other revenues, driven by a gain on sale of our asset management business in Taiwan, largely offset by higher expenses, including charges resulting from a business reorganization, and lower net other related revenues.
Retirement Strategies. Results for 2025 decreased in comparison to 2024, inclusive of an unfavorable comparative net imp act from our annual reviews and update of assumptions and other refinements. Excluding this item, results increased, primarily reflecting higher net investment spread results, partially offset by higher expenses and lower net fee income.
Group Insurance. Results for 2025 increased in comparison to 2024, inclusive of a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, results increased, primarily reflecting higher net underwriting results, partially offset by higher expenses.
Individual Life. Results for 2025 increased in comparison to 2024, inclusive of a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding this item, results increased, primarily reflecting higher underwriting results and lower expenses, partially offset by lower net investment spread results.
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International Businesses. Results for 2025 increased in comparison to 2024, inclusive of an unfavorable comparative net impact from foreign currency exchange rates and a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Excluding these items, results increased, primarily reflecting higher net investment spread results and higher underwriting results, partially offset by higher expenses.
Corporate and Other. Results for 2025 were less unfavorable in comparison to 2024, primarily reflecting lower net charges from other corporate activities.
Closed Block Division. Results for 2025 increased in comparison to 2024, primarily reflecting higher net investment activity results, partially offset by changes in the policyholder dividend obligation.
Segment Measures
Adjusted Operating Income. In managing our business, we analyze the operating performance of our segments and our Corporate and Other operations using “adjusted operating income.” Adjusted operating income does not equate to “Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities” or “Net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss we use to evaluate segment performance and allocate resources and, consistent with authoritative guidance, is our measure of segment performance. The adjustments to derive adjusted operating income are important to an understanding of our overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and our definition of adjusted operating income may differ from that used by other companies; however, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses.
See Note 23 to the Consolidated Financial Statements for additional information regarding the presentation of segment results and our definition of adjusted operating income.
Annualized New Business Premiums. In managing our Individual Life, Group Insurance and International Businesses segments, we analyze annualized new business premiums, which do not correspond to revenues under U.S. GAAP. Annualized new business premiums measure the current sales performance of the business, while revenues primarily reflect the renewal persistency of policies written in prior years and net investment income, in addition to current sales. Annualized new business premiums include 10% of first year premiums or deposits from single-payment products in our Individual Life and International Businesses segments. No other adjustments are made for limited-payment contracts.
The amount of annualized new business premiums for any given period can be significantly impacted by several factors, including but not limited to: 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 tax laws, changes in 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.
Assets Under Management. In managing our PGIM segment, we analyze assets under management (which do not correspond directly to U.S. GAAP assets) because the principal source of revenues is fees based on assets under management. Assets under management represent the fair market value or account value of assets that we manage directly for institutional clients, retail clients, and for our general account, as well as assets invested in our products that are managed by third-party managers.
Account Values. In managing our Retirement Strategies segment, we analyze account values, which do not correspond directly to U.S. GAAP assets. Net additions (withdrawals) in our Institutional Retirement Strategies business and sales (redemptions) in our Individual Retirement Strategies business do not correspond to revenues under U.S. GAAP but are used as a relevant measure of business activity.
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Results of Operations by Segment
PGIM
Business Update
• In July 2024, the Company exited 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.
Operating Results
The following table sets forth PGIM’s operating results for the periods indicated:
Year Ended December 31,
(in millions)
Operating results(1):
Revenues
Expenses
Adjusted operating income
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests
Other adjustments(2)
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
(1) Certain of PGIM’s investment activities are based in currencies other than the USD 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 USD-equivalent earnings. For additional information regarding this intercompany arrangement, see “—External and Economic Factors—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.
2025 to 2024 Annual Comparison
Adjusted operating income increased $3 million, primarily reflecting:
• higher net asset management fees; and
• higher net service, distribution and other revenues driven by a gain on the sale of our asset management business in Taiwan.
These variances were largely offset by:
• higher operating expenses, primarily driven by charges resulting from a business reorganization and to support business growth; and
• lower net other related revenues.
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The following table sets forth PGIM’s revenues, presented on a basis consistent with the table above under “—Operating Results,” by type:
Year Ended December 31,
(in millions)
Revenues by type:
Asset management fees by source:
Institutional - Third Party(1)
Retail - Third Party(1)
Affiliated(1)(2)
Total asset management fees
Other related revenues by source:
Incentive fees
Transaction fees
Seed and co-investments
Commercial mortgage(3)
Total other related revenues
Service, distribution and other revenues
Total revenues
(1) Prior period amounts have been updated to conform to current period presentation.
(2) Includes revenues from the Company’s general account assets, as well as certain separate account assets of the Company’s insurance and retirement businesses managed by PGIM.
(3) Includes mortgage origination revenues from our commercial mortgage origination and servicing business.
Revenues increased $139 million, primarily reflecting:
• higher asset management fees, driven by higher average assets under management from the impact of equity market and fixed income appreciation, net inflows and strong investment performance; and
• higher service, distribution and other revenues, primarily reflecting the gain on sale of our asset management business in Taiwan and higher revenues from certain consolidated funds (which were fully offset by higher expenses related to noncontrolling interests in these funds).
These variances were partially offset by:
• lower other related revenues, primarily reflecting lower incentive fees and lower seed and co-investments earnings, driven by less favorable investment performance, partially offset by higher commercial mortgage origination revenues from higher loan production.
Expenses increased $136 million, primarily reflecting:
• higher operating expenses, primarily driven by charges resulting from a business reorganization and to support business growth; and
• higher variable expenses, primarily driven by higher fee-based earnings, and higher revenues from certain consolidated funds, as discussed above, partially offset by lower expenses related to performance-based incentive fees.
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Assets Under Management
The following table sets forth assets under management by asset class as of the dates indicated:
December 31,
(in billions)
Assets Under Management(1) (at fair value):
Public equity
Public fixed income
Real estate
Private credit and other alternatives
Multi-asset
Total PGIM assets under management
Assets under management within other reporting segments(2)
Total PFI assets under management
(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 insurance and retirement 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:
December 31,
(in billions)
Assets Under Management (at fair value):
Institutional - Third Party(1)
Retail - Third Party(1)
Affiliated(1)(2)
Total PGIM assets under management
Assets under management within other reporting segments(3)
Total PFI assets under management
(1) Prior period amounts have been updated to conform to current period presentation.
(2) Includes the Company’s general account assets, as well as certain separate account assets of the Company’s insurance and retirement businesses managed by PGIM.
(3) Primarily includes assets related to certain insurance and retirement 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.
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The following table sets forth the component changes in PGIM’s assets under management for the periods indicated:
December 31,
(in billions)
Beginning assets under management
Institutional third-party flows(1)
Retail third-party flows
Total third-party flows(1)
Affiliated flows(1)(2)
Total net flows(1)
Realizations and distributions(1)(3)
Market appreciation (depreciation)(4)
Foreign exchange rate impact
Net money market activity and other increases (decreases)(1)
Ending assets under management
(1) Prior period amounts have been updated to conform to current period presentation.
(2) 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.
(3) Realizations reflect proceeds from the disposition or monetization of assets from closed end funds and from collateralized loan obligations (“CLOs”). Distributions reflect income and dividend distributions related to certain closed and open ended private alternative funds and CLOs.
(4) Includes income reinvestment, where applicable.
2025 to 2024 Annual Comparison
PGIM’s assets under management increased $91 billion in 2025, primarily driven by fixed income and equity market appreciation, partially offset by realizations and distributions.
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 primarily included in “Real estate” and “Private credit and other alternatives” in the “—Assets Under Management—by asset class table” above. As of December 31, 2025, these assets increased approximately $16.6 billion compared to December 31, 2024, primarily reflecting private capital net inflows, market appreciation and favorable foreign exchange rate impacts, partially offset by realizations and distributions.
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:
December 31,
(in billions)
Private capital deployed:
Real estate debt and equity
Private credit and equity
Total private capital deployed
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Seed and Co-Investments
As of December 31, 2025 and 2024, PGIM had approximately $1,155 million and $1,079 million of seed investments and $375 million and $415 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.
Retirement Strategies
Operating Results
The following table sets forth Retirement Strategies’ operating results for the periods indicated:
Year Ended December 31,
(in millions)
Operating results:
Revenues:
Institutional Retirement Strategies
Individual Retirement Strategies
Total revenues
Benefits and expenses:
Institutional Retirement Strategies
Individual Retirement Strategies
Total benefits and expenses
Adjusted operating income:
Institutional Retirement Strategies
Individual Retirement Strategies
Total adjusted operating income
Realized investment gains (losses), net, and related charges and adjustments
Change in value of market risk benefits, net of related hedging gains (losses)
Market experience updates
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
Our Individual Retirement Strategies business includes both fixed and variable annuities that may include optional guaranteed living benefit riders (e.g., guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”)), and/or optional death benefit riders (e.g., guaranteed minimum death benefits (“GMDB”)). We also offer fixed annuities that provide a guarantee of principal and interest credited at rates we determine (subject to certain contractual minimums) or at rates based upon the performance of an index (subject to caps or participation rates), as well as indexed variable annuities that provide several index crediting strategies and varying levels of downside protection at predetermined levels and durations. The results of our business are generally included in adjusted operating income, with exceptions related to certain guarantees, as discussed below.
Under U.S. GAAP, our guaranteed living and death benefit riders on variable annuities (e.g., GMAB, GMIB, GMWB, GMIWB and GMDB) are accounted for as MRBs and reported at fair value. For purposes of measuring segment performance, adjusted operating income excludes the changes in fair value of MRBs and instead reflects the performance of these riders in net income, net of related hedges, in “Change in value of market risk benefits, net of related hedging gains (losses),” except for the portion of the change attributable to changes in the Company’s non-performance risk (“NPR”) which is recorded in OCI.
Under U.S. GAAP, policyholder liabilities associated with our fixed and variable indexed annuity products are recorded in “Policyholders’ account balances,” and include both the contract value that has accrued to the benefit of the policyholder and the fair value of embedded derivative instruments associated with the index-linked features for these products. The change in
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the liability for these products is measured utilizing a valuation methodology required under U.S GAAP and includes the fair value of all index credits for the current term and future projected renewals of the policy. For the purpose of measuring segment performance, however, adjusted operating income reflects only the change in the liability associated with the current term elected by the policyholder, which is the component of the liability the Company hedges based on current contractual index-crediting terms, and which is offset by the change in the value of the corresponding hedge assets. Adjusted operating income excludes the change in the liability associated with all future projected renewals, which the Company does not hedge, consistent with the Company and policyholder optionality that exists at renewal.
2025 to 2024 Annual Comparison
Adjusted operating income from our Institutional Retirement Strategies business decreased $143 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2025 included a net charge from this update of $32 million, while the results for 2024 included a net benefit of $132 million driven by favorable impacts related to assumptions for mortality.
Excluding this item, adjusted operating income increased $21 million, primarily reflecting:
• higher net investment spread results, driven by an increase in account values due to business growth, partially offset by lower income from derivatives; and
• higher fee income, due to business growth of longevity reinsurance transactions.
These variances were partially offset by:
• higher operating expenses, driven by an update of internal expense allocations.
Adjusted operating income from our Individual Retirement Strategies business decreased $31 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2025 included a net charge from this update of $81 million, mainly due to the establishment of reserves for certain fixed annuity products, while the results for 2024 included a net benefit of $8 million.
Excluding this item, adjusted operating income increased $58 million, primarily reflecting:
• higher net investment spread results, due to growth in indexed variable and fixed annuities and higher income from non-coupon investments, partially offset by the impact of lower short-term interest rates.
This variance was partially offset by:
• lower fee income, net of distribution expenses, due to lower average separate account values driven by net outflows from the run-off of the traditional variable annuity block, partially offset by favorable equity markets; and
• higher amortization costs.
Revenues from our Institutional Retirement Strategies business decreased $11,538 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $11,926 million, primarily reflecting:
• lower pension risk transfer premiums due to the absence of significant sales that occurred in the prior year, with corresponding offsets in policyholders’ benefits, as discussed below.
Benefits and expenses of our Institutional Retirement Strategies business decreased $11,395 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $11,947 million, primarily reflecting:
• lower policyholders’ benefits, including changes in reserves, related to the lower pension risk transfer premiums discussed above .
Revenues from our Individual Retirement Strategies business increased $416 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues increased $408 million, primarily reflecting:
• higher net investment income, from growth in indexed variable and fixed annuities and higher income from non-coupon investments.
This variance was partially offset by:
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• lower asset management and service fees, as well as lower policy charges and fee income due to lower average separate account values, driven by net outflows from the run-off of the traditional variable annuity block, partially offset by favorable equity markets; and
• lower other income, driven by the impact of less favorable short-term interest rates on collateral posted to counterparties.
Benefits and expenses of our Individual Retirement Strategies business increased $447 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $350 million, primarily reflecting:
• higher interest credited to policyholders’ account balances and higher amortization of deferred policy acquisition costs, reflecting business growth.
This variance was partially offset by:
• lower general and administrative expenses.
Account Values
Institutional Retire ment Strategies. Account values are a significant driver of our operating results and are primarily driven by net additions (withdrawals) and the impact of market changes. The investment income and interest we credit to policyholders on our spread-based products varies with the level of general account values. The income we earn on most of our fee-based products varies with the level of fee-based account values as many policy fees are determined by these values.
The following tables set forth account value information of Institutional Retirement Strategies’ products for the periods indicated. Account values include both internally- and externally-managed client balances as the total balances drive revenue for the Institutional Retirement Strategies business. For additional information regarding internally-managed balances, see “—PGIM.”
Year Ended December 31,
(in millions)
Total Institutional Retirement Strategies:
Beginning total account value, gross(1)
Additions(2)
Withdrawals and benefits
Change in market value, interest credited and interest income
Other(3)
Ending total account value, gross
Reinsurance ceded
Ending total account value, net
Amounts included in “Ending account value, net” above:
Investment-only stable value wraps
International reinsurance(4)
Group annuities and other products
Total
Additions by product(2):
Investment-only stable value wraps
International reinsurance
Group annuities and other products
Total
(1) Beginning total account values, net of reinsurance ceded, were $279,191 million, $258,417 million and $251,818 million for the years ended
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December 31, 2025, 2024 and 2023, respectively.
(2) Additions primarily include: group annuities and funded pension reinsurance calculated based on premiums received; longevity reinsurance contracts calculated as the present value of future projected benefits; investment-only stable value contracts calculated as the fair value of customers’ funds held in a client-owned trust; and funding agreements issued calculated based on premiums received.
(3) “ Other” activity includes the effect of foreign exchange rate changes associated with our international reinsurance business and changes in asset balances for externally-managed accounts. For the years ended December 31, 2025, 2024 and 2023, “Other” activity also includes $3,648 million in receipts offset by $3,698 million in payments, $3,148 million in receipts offset by $3,231 million in payments, and $3,557 million in receipts offset by $3,533 million in payments, respectively, related to funding agreements backed by commercial paper that typically have maturities of less than 90 days.
(4) Represents notional amounts based on present value of future benefits under international reinsurance contracts.
2025 to 2024 Annual Comparison
The increase in Institutional Retirement Strategies net account values primarily reflects:
• interest credited on customer funds and an increase in the market value of assets; and
• the positive impact of foreign exchange rate changes.
Individual Retirement Strategies. Account values are a significant driver of our operating results. Since most fees are determined by the level of separate account assets, fee income varies primarily based on the level of account values. Account values are driven by net flows from new business sales, surrenders, withdrawals and benefit payments, policy charges and the impact of positive or negative market value changes.
The following tables set forth account value information of Individual Retirement Strategies’ products for the periods indicated:
Year Ended December 31,
(in millions)
Total Individual Retirement Strategies:
Beginning total account value, gross(1)
Sales
Full surrenders and death benefits
Sales, net of full surrenders and death benefits
Partial withdrawals and other benefit payments
Net flows
Change in market value, interest credited and other activity
Policy charges
Ending total account value, gross
Reinsurance ceded
Ending total account value, net
Amounts included in “Ending account value, net” above:
FlexGuard suite(2)
Variable annuities(3)
Fixed annuities
Total
Sales by product:
FlexGuard suite(2)
Variable annuities(3)
Fixed annuities
Total
(1) Beginning total account values, net of reinsurance ceded, were $127,120 million, $117,911 million, and $119,205 million for the years ended December 31, 2025, 2024 and 2023, respectively.
(2) Includes Prudential FlexGuard and FlexGuard Income index variable annuities.
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(3) Includes Prudential Premier Investment, MyRock and other variable contracts with and without guaranteed minimum income and withdrawal benefits.
2025 to 2024 Annual Comparison
The decrease in Individual Retirement Strategies sales, net of full surrenders and death benefits, primarily reflects:
• higher full surrenders; and
• lower sales of indexed variable annuities products.
The increase in Individual Retirement Strategies net account values primarily reflects:
• market value appreciation.
This variance was partially offset by:
• lower net flows driven by net outflows from the run-off of the traditional variable annuity block, partially offset by net indexed variable and fixed annuity inflows.
Risks and Risk Mitigants
The following is a summary of certain risks associated with Individual Retirement Strategies’ products, certain strategies in mitigating those risks including any updates to those strategies since the previous year-end, and the related financial results.
Fixed Annuity Risks and Risk Mitigants. The primary risk exposure of our fixed annuity products relates to investment risks we bear for providing customers a minimum guaranteed interest rate or an index-linked interest rate required to be credited to the customer’s account value, which include interest rate fluctuations and/or sustained periods of low interest rates, and credit risk related to the underlying investments. We manage these risk exposures primarily through our investment strategies, inclusive of derivatives, and product design features, which include credit rate resetting subject to the minimum guaranteed interest rate as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals. In addition, a portion of our fixed products has a market value adjustment provision that affords protection of lapse in the case of rising interest rates. We also manage these risk exposures through external reinsurance for certain of our fixed annuity products. For additional information regarding our external reinsurance agreements, see Note 15 to the Consolidated Financial Statements.
Indexed Variable Annuity Risks and Risk Mitigants. The primary risk exposure of our indexed variable annuity products relates to the investment risks we bear in order to credit to the customer’s account balance the required crediting rate based on the performance of the elected indices at the end of each term. We manage this risk primarily through our investment strategies, inclusive of derivatives, and product design features, which include credit rate resetting subject to contractual minimums as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals. In addition, our indexed variable annuity strategies have an interim value provision that provides some protection from lapse in the case of rising interest rates.
Variable Annuity Risks and Risk Mitigants. The primary risk exposures of our variable annuity contracts relate to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including capital markets assumptions such as equity market returns, interest rates and market volatility, along with actuarial assumptions such as contractholder mortality, the timing and amount of annuitization and withdrawals, and contract lapses. For these risk exposures, achievement of our expected returns is subject to the risk that actual experience will differ from the assumptions used in the original pricing of these products. We manage our exposure to certain risks driven by fluctuation s in capital markets p rimarily through a combination of (i) Product Design Features, and (ii) our Asset Liability Management Strategy, as discussed below. We also manage these risk exposures through external reinsurance for certain of our variable annuity products. For additional information regarding our external reinsurance agreements, see Note 15 to the Consolidated Financial Statements.
i. Product Design Features:
A portion of the variable annuity contracts that we offered include an automatic rebalancing feature, also referred to as an asset transfer feature. This feature is implemented at the contract level, and transfers assets between certain variable investment sub-accounts selected by the annuity contractholder and, depending on the benefit feature, a fixed-rate account in the general account or a bond fund sub-account within the separate accounts. The objective of the automatic rebalancing feature is to reduce our exposure to equity market risk and market volatility. Other product design features we utilize include, among others, asset allocation restrictions, minimum issuance age requirements and certain limitations on the amount of purchase payments,
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as well as a required minimum allocation to our general account for certain of our products. In addition, there is diversity in our fee arrangements, as certain fees are primarily based on the benefit guarantee amount, the contractholder account value and/or premiums, which helps preserve certain revenue streams when market fluctuations cause account values to decline.
ii. Asset Liability Management (“ALM”) Strategy (including fixed income instruments and derivatives):
We employ an ALM strategy that utilizes a combination of both traditional fixed income instruments and derivatives to meet expected liabilities associated with our annuity guarantees that under U.S. GAAP are considered MRBs. The MRB liability that we hedge consists of expected living and death benefit claims under various market conditions, which are managed using fixed income instruments, derivatives, or a combination thereof. For our Prudential Defined Income (“PDI”) variable annuity, we utilize fixed income instruments to meet expected liabilities. For the portion of our ALM strategy executed with derivatives, we enter into a range of exchange-traded and over-the-counter (“OTC”) equity, interest rate and credit derivatives, including, but not limited to: equity and treasury futures; total return, credit default and interest rate swaps; and options including equity options, swaptions, and floors and caps. The intent of this strategy is to more efficiently manage the capital and liquidity associated with these products while continuing to mitigate fluctuations in net income due to movements in capital markets. To achieve this, we periodically review and recalibrate the ALM strategy by optimizing the mix of derivatives and fixed income instruments to achieve expected outcomes.
Under our ALM strategy, we expect differences in the U.S. GAAP net income impact between the changes in value of the fixed income instruments (either designated as available-for-sale or designated as trading) and derivatives as compared to the changes in the MRB liability these assets support. These differences can be primarily attributed to two distinct areas:
• Different accounting treatment between liabilities and assets supporting those liabilities . Under U.S. GAAP, changes in the fair value of the derivative instruments and fixed income instruments designated as trading, and MRBs, excluding the changes in the Company’s NPR spreads, are immediately reflected in net income, while changes in the fair value of fixed income instruments that are designated as available-for-sale are recorded as unrealized gains (losses) in other comprehensive income.
• General hedge results. For the derivative portion of the ALM strategy, the net hedging impact (the extent to which the changes in value of the hedging instruments offset the change in value of the portion of the MRBs we are hedging) may be impacted by a number of factors, including: cash flow timing differences between our hedging instruments and the corresponding portion of the MRBs we are hedging, basis differences attributable to actual underlying contractholder funds to be hedged versus hedgeable indices, rebalancing costs related to dynamic rebalancing of hedging instruments as markets move, certain elements of the MRBs that may not be hedged (including certain actuarial assumptions), and implied and realized market volatility on the hedge positions relative to the portion of the MRBs we seek to hedge.
Product Specific Risks and Risk Mitigants
For certain living benefit guarantees, claims will primarily represent the funding of contractholder lifetime withdrawals after the cumulative withdrawals have first exhausted the contractholder account value. Due to the age of the in-force block, limited claim payments have occurred to date, and they are not expected to increase significantly within the next five years, based upon current assumptions. The timing and amount of future claims will depend on actual returns on contractholder account value and actual contractholder behavior relative to our assumptions. The majority of our current living benefit guarantees provide for guaranteed lifetime contractholder withdrawal payments inclusive of a “highest daily” contract value guarantee. Our PDI variable annuity complements our variable annuity products with the highest daily benefit and provides for guaranteed lifetime contractholder withdrawal payments but restricts contractholder asset allocation to a single bond fund sub-account within the separate accounts.
The majority of our traditional variable annuity contracts with living benefit guarantees, and contracts with our highest daily living benefit features, include risk mitigants in the form of an automatic rebalancing feature and/or inclusion in our ALM strategy. We may also utilize external reinsurance as a form of additional risk mitigation. The risks associated with the guaranteed benefits of certain legacy products that were sold prior to our development of the automatic rebalancing feature are also managed through our ALM strategy. Certain legacy products with GMAB rider options include the automatic rebalancing feature but are not included in the ALM strategy. For additional information regarding our external reinsurance agreements, see Note 15 to the Consolidated Financial Statements.
For our GMDBs, we provide a benefit payable in the event of death. Our base GMDB is generally equal to a return of cumulative deposits adjusted for any partial withdrawals. Certain products include an optional enhanced GMDB based on the greater of a minimum return on the contract value or an enhanced value. We have retained the risk that the total amount of
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death benefit payable may be greater than the contractholder account value; however, a substantial portion of the account values associated with GMDBs are subject to an automatic rebalancing feature because the contractholder also selected a living benefit guarantee which includes an automatic rebalancing feature. All of the variable annuity account values with living benefit guarantees also contain GMDBs. The living and death benefit features for these contracts cover the same insured life and, consequently, we have insured both the longevity and mortality risk on these contracts.
The following table sets forth the risk management profile of our living benefit guarantees and GMDB features as of the periods indicated:
December 31,
Account Value
% of Total
Account Value
% of Total
Account Value
% of Total
($ in millions)
Living benefit/GMDB features(1):
Both ALM strategy and automatic rebalancing(2)(3)
ALM strategy only(3)
Automatic rebalancing only
External reinsurance(4)
PDI
Other products
Total living benefit/GMDB features
GMDB features and other(5)
Total variable annuity account value, gross
(1) All contracts with living benefit guarantees also contain GMDB features, which cover the same insured contract.
(2) Contracts with living benefits that are included in our ALM strategy and that have an automatic rebalancing feature.
(3) Excludes retained PDI which is presented separately within this table.
(4) Represents contracts subject to reinsurance transactions with external counterp arties. Includes approx imately $8 billion of account values in relation to the PDI reinsurance transaction, and certain Highest Daily Lifetime Income (“HDI”) v.3.0 business for the period April 1, 2015 through December 31, 2016. The HDI contracts with living benefits also have an automatic rebalancing feature. See Note 15 to the Consolidated Financial Statements for additional information.
(5) Includes Prudential FlexGuard, FlexGuard Income and other variable contracts that have a GMDB feature and do not have an automatic rebalancing feature.
Results Excluded from Adjusted Operating Income
The following table provides the net impact to the Consolidated Statements of Operations from the portion of Retirement Strategies’ results excluded from adjusted operating income:
Year Ended December 31,
(in millions)(1)
Results excluded from adjusted operating income:
Change in MRBs, excluding changes in the NPR adjustment(2)
Change in the value of the non-MRB liabilities, excluding changes in the NPR adjustment(3)
Change in the NPR adjustment, excluding changes recognized in OCI
Change in the fair value of hedge assets(4)(5)
Other(6)
Total Individual Retirement Strategies results excluded from adjusted operating income
Total Institutional Retirement Strategies results excluded from adjusted operating income
Total results excluded from adjusted operating income
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(1) Positive amounts represent income; negative amounts represent a loss.
(2) Also excludes related hedging gains (losses), which are included within this table in “Change in the fair value of hedge assets.”
(3) Represents the change in the liability for our fixed and variable indexed annuities, including the fair value of embedded derivative instruments associated with those products, which is measured utilizing a valuation methodology required under U.S. GAAP. The total GAAP liability includes the fair value of all index credits for the current term and all future projected renewals of the policy; however, only changes in the liability associated with the current term elected by the policyholder are included in adjusted operating income, while changes in the liability associated with all future projected renewals of the policy are excluded from adjusted operating income.
(4) Represents the change in fair value of the derivatives utilized to hedge potential claims associated with our variable annuity living and death benefit guarantees.
(5) Results for the year ended 2023 include changes in the fair value of equity derivatives related to the capital hedge program of $(225) million that were intended to protect a portion of the overall capital position of the variable annuities business against its exposure to the equity markets. The capital hedge program was discontinued in the first quarter of 2023.
(6) Includes the changes in duration swaps, DAC amortization, trading gains or losses, and other activity.
For 2025 , the loss of $1,399 million primarily reflects:
• the net impact of interest rate changes on MRBs and other liabilities, net of hedging;
• an unfavorable impact from our annual reviews and update of assumptions and other refinements; and
• losses on foreign currency hedges.
These variances were partially offset by:
• the impact of favorable equity market performance.
Group Insurance
Operating Results
The following table sets forth Group Insurance’s operating results and benefits and administrative expense ratios for the periods indicated:
Year Ended December 31,
($ in millions)
Operating results:
Revenues
Benefits and expenses
Adjusted operating income
Realized investment gains (losses), net, and related charges and adjustments
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
Benefits ratios(1)(2)(3):
Group life
Group disability
Total Group Insurance
Administrative expense ratios(2)(4)(5):
Group life
Group disability
Total Group Insurance
(1) Ratio of policyholder benefits to earned premiums plus policy charges and fee income.
(2) The benefits and administrative expense ratios are measures used to evaluate profitability and efficiency.
(3) Benefits ratios reflect the impacts of our annual reviews and update of assumptions and other refinements. Excluding these impacts, the group life, group disability and total Group Insurance benefits ratios were 84.0%, 76.5% and 81.9% for 2025, respectively, 86.9%, 73.3% and 83.1% for 2024, respectively, and 87.6%, 71.1% and 83.2% for 2023, respectively.
(4) Ratio of operating and variable expenses (excluding commissions) to net premiums plus policy charges and fee income, excluding third-party administrator pass-through fees and expenses.
(5) Prior period ratios have been updated to conform to current period presentation.
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2025 to 2024 Annual Comparison
Adjusted operating income increased $67 million, including a less favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2025 and 2024 included net benefits from this update of $11 million and $25 million, respectively.
Excluding this item, adjusted operating income increased $81 million, primarily reflecting:
• higher underwriting results in our group life business, driven by more favorable mortality experience on non-experience-rated contracts and a positive impact from a reserve refinement for certain experience-rated contracts.
This variance was partially offset by:
• higher variable and operating expenses, largely supporting business growth; and
• lower underwriting results in our group disability business, driven by less favorable claims experience on long-term disability contracts.
Revenues increased $347 million primarily reflecting:
• higher premiums and policy charges and fee income, driven by business growth in both our group life and group disability businesses; and
• lower premium and policy returns, driven by less favorable mortality on experience-rated contracts.
Benefits and expenses increased $280 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses increased $266 million primarily reflecting:
• higher policyholders’ benefits and changes in reserves, driven by business growth and less favorable claims experience on long-term disability contracts; and
• higher general and administrative expenses, driven by business growth.
These variances were partially offset by:
• more favorable mortality experience on non-experience-rated contracts in our group life business.
Sales Results
The following table sets forth Group Insurance’s annualized new business premiums, as defined under “—Segment Measures” above, for the periods indicated:
Year Ended December 31,
(in millions)
Annualized new business premiums(1):
Group life
Group disability
Total
(1) Amounts exclude new premiums resulting from rate changes on existing policies, from additional coverage under our Servicemembers’ Group Life Insurance contract and from excess premiums on group universal life insurance that build cash value but do not purchase face amounts.
2025 to 2024 Annual Comparison
Total annualized new business premiums increased $61 million, primarily reflecting:
• higher sales in the Premier market segment in both our group disability and group life businesses.
This variance was partially offset by
• lower sales in the Association market segment in both our group life and group disability businesses.
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Individual Life
Business Update
• In August 2024, the Company entered into an agreement with Wilton Reassurance Company and Wilton Reinsurance Bermuda Limited (collectively, “Wilton Re”) to reinsure certain guaranteed universal life policies issued by Pruco Life Insurance Company (“Pruco Life”) and Pruco Life Insurance Company of New Jersey (“PLNJ”). These policies represented approximately 40% of the Company’s remaining statutory reserves on its in-force guaranteed universal life block of business, following the close of the reinsurance transaction with Somerset Reinsurance Ltd. (“Somerset Re”) in the first quarter of 2024. The transaction was completed in December 2024 with an effective date of October 1, 2024. These two external reinsurance agreements reduced, in aggregate, the Company’s previously established statutory reserves on its in-force guaranteed universal life block of business by approximately 60%. See Note 15 to the Consolidated Financial Statements for additional information regarding these transactions.
Operating Results
The following table sets forth Individual Life’s operating results for the periods indicated:
Year Ended December 31,
(in millions)
Operating results:
Revenues
Benefits and expenses
Adjusted operating income
Realized investment gains (losses), net, and related charges and adjustments
Market experience updates
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
2025 to 2024 Annual Comparison
Adjusted operating income increased $465 million, including a favorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2025 included a net benefit of $58 million driven by impacts related to assumptions for mortality, policyholder behavior and other reserve refinements, while 2024 included a net charge of $98 million driven by unfavorable impacts related to assumptions for policyholder behavior.
Excluding this item, adjusted operating income increased $309 million, primarily reflecting:
• higher underwriting results, driven by the ongoing favorable impact from the reinsurance transaction with Wilton Re and favorable mortality experience in the current year; and
• lower operating expenses, driven by the absence of costs associated with the reinsurance transactions discussed above as well as from the consolidation of our internal captive reinsurance arrangements in the prior year.
These variances were partially offset by:
• lower net investment spread results, driven by the absence of income from assets related to the reinsurance transaction with Wilton Re and lower income from non-coupon investments. These decreases were partially offset by lower financing costs resulting from both the reinsurance transactions discussed above as well as the consolidation of our internal captive reinsurance arrangements in the prior year, and lower losses from derivatives.
Revenues decreased $65 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, revenues decreased $96 million, primarily reflecting:
• lower investment results, driven by the absence of income from assets related to the reinsurance transaction with Wilton Re and lower income from non-coupon investments, partially offset by lower losses from derivatives.
This variance was partially offset by:
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• higher policy charges and fee income, due to business growth and favorable equity market performance.
Benefits and expenses decreased $530 million. Excluding the impact of our annual reviews and update of assumptions and other refinements, as discussed above, benefits and expenses decreased $405 million, primarily reflecting:
• lower policyholders’ benefits, including changes in reserves, lower interest expense, and lower interest credited on policyholders’ account balances, as a result of the reinsurance transaction with Wilton Re; and
• lower general and administrative expenses, primarily driven by lower operating expenses due to the absence of costs associated with the reinsurance transactions discussed above as well as from the consolidation of our internal captive reinsurance arrangements in the prior year.
Sales Results
The following table sets forth Individual Life’s annualized new business premiums, as defined under “—Results of Operations—Segment Measures” above, by distribution channel and product, for the periods indicated:
Prudential
Advisors
Third
Party
Total
Prudential
Advisors
Third
Party
Total
Prudential
Advisors
Third
Party
Total
(in millions)
Variable Life
Term Life
Universal Life
Total
2025 to 2024 Annual Comparison
Total annualized new business premiums increased $49 million, primarily reflecting:
• higher third-party universal life and term life sales; and
• higher Prudential Advisors variable life sales.
International Businesses
Business Updates
• 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, in consultation with the Japanese regulator, the Company voluntarily suspended new sales activity at Prudential of Japan for a 90-day period commencing February 9, 2026. See Note 25 to the Consolidated Financial Statements “—Litigation and Regulatory Matters—Regulatory” for additional information. This matter did not have a material impact on our 2025 operating results; however, we estimate that it will result in a reduction of Prudential of Japan's pre-tax adjusted operating income for 2026 in the range of $300 to $350 million, reflecting decreased sales, increased surrenders, and higher costs. Should the suspension of new sales activities extend beyond the initial 90-day period, the effects are expected to be . It is also possible that reputational and other resulting from this matter will impact our other businesses in Japan.
• In January 2026, an agreement was entered into to sell the Company’s 24% equity interest (through a private equity limited partnership managed by LeapFrog Investments) in ICEA Lion Insurance Holdings, Ltd., a Kenya-based insurer and asset manager. The closing of this transaction is subject to regulatory approvals and customary closing conditions.
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• 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 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 15 to the Consolidated Financial Statements for additional information.
• In March 2024, the Company entered into a definitive agreement with Grupo ST S.A. to sell Prudential of Argentina (“POA”). Effective in the first quarter of 2024, the results of POA and the impact of its sale were reflected in the Divested and Run-off Businesses that are included within our Corporate and Other operations. The transaction, which did not have a material impact on the Company’s results, was completed in May 2024.
Operating Results
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 “—External and Economic Factors—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:
Year Ended December 31,
(in millions)
Operating results:
Revenues
Benefits and expenses
Adjusted operating income
Realized investment gains (losses), net, and related charges and adjustments
Change in value of market risk benefits, net of related hedging gains (losses)
Market experience updates
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
2025 to 2024 Annual Comparison
Adjusted operating income increased $141 million, including an unfavorable comparative net impact of $14 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 2025, compared to a net charge of $55 million in 2024.
Excluding these items, adjusted operating income increased $102 million, primarily reflecting:
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• higher net investment spread results, primarily driven by higher income from non-coupon investments, lower losses from derivatives, and portfolio growth in Japan and Brazil;
• higher underwriting results, driven by business growth in Brazil and growth in retirement and savings products in Japan; and
• higher earnings from joint ventures and other operating entities.
These variances were partially offset by:
• higher operating and variable expenses, primarily driven by business growth; and
• the net impact from ceded reinsurance to Prismic Re International.
Revenues increased $223 million, including an unfavorable comparative net impact of $207 million from our annual reviews and update of assumptions and other refinements. Excluding this item, revenues increased $430 million, primarily reflecting:
• higher net investment income, driven by growth in retirement and savings products in Japan and higher reinvestment rates;
• higher income from non-coupon investments;
• lower losses from derivatives;
• higher policy charges and fee income, driven by growth in retirement and savings products in Japan; and
• higher earnings from joint ventures and other operating entities.
These variances were partially offset by:
• lower premiums attributable to the decline of traditional life insurance business in force in Japan, partially offset by the impact of lower ceded reinsurance in the current period and business growth in Brazil; and
• the net impact from ceded reinsurance to Prismic Re International.
Benefits and expenses increased $82 million, including an unfavorable comparative net impact of $14 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 $328 million, primarily reflecting:
• higher interest credited to policyholders’ account balances, reflecting growth in retirement and savings products in Japan; and
• higher general and administrative expenses, including both operating and variable expenses, primarily driven by business growth.
These variances were partially offset by:
• favorable changes in estimates of the liability for future policy benefits; and
• lower policyholders’ benefits, including changes in reserves, due to the decline of traditional life insurance business in force in Japan, partially offset by the impact of lower ceded reinsurance in the current year.
Sales Results
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:
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Year Ended December 31,
(in millions)
Annualized new business premiums:
On an actual exchange rate basis:
On a constant exchange rate basis:
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 from a 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. See “—Business Outlook” and “—External and Economic Factors—Industry Trends” above for additional information regarding product considerations specific to our Japanese operations.
The table below presents annualized new business premiums on a constant exchange rate basis, by product category and distribution channel, for the periods indicated:
Year Ended December 31, 2025
Year Ended December 31, 2024
Life
Accident
Health
Retirement
Investment
Contracts
Total
Life
Accident
Health
Retirement
Investment
Contracts
Total
(in millions)
Life Planner
Life Consultants
Banks
Independent Agency and Other
Total
(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.
2025 to 2024 Annual Comparison
Annualized new business premiums, on a constant exchange rate basis, increased $81 million, primarily reflecting:
• Life Planner sales increased $85 million, primarily driven by higher investment contract and life product sales in Japan, and higher life and accident and health product sales in Brazil;
• Life Consultant sales increased $48 million, driven by higher investment contract and retirement product sales, partially offset by lower life product sales;
• Independent Agency and Other sales increased $2 million, primarily driven by higher life product sales, mostly offset by lower investment contract sales; and
• Bank channel sales decreased $54 million, driven by lower life and investment contract product sales.
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Sales Force
The following table sets forth the number of Life Planners and Life Consultants for the periods indicated:
Year Ended December 31,
Life Planners:
Japan
All other countries
Life Consultants
Total
2025 to 2024 Annual Comparison
• The number of Life Planners increased by 200, primarily driven by an increase in Brazil reflecting business growth.
• The number of Life Consultants increased by 139, reflecting favorable recruitment and lower resignations.
Corporate and Other
Operating Results
Corporate and Other includes corporate operations, after allocations to our business segments, and Divested and Run-off Businesses other than those that qualify for “discontinued operations” accounting treatment under U.S. GAAP. The following table sets forth Corporate and Other’s operating results for the periods indicated:
Year Ended December 31,
(in millions)
Operating results:
Investment income
Interest expense on debt
Pension and employee benefits
Other corporate activities
Adjusted operating income
Realized investment gains (losses), net, and related charges and adjustments
Market experience updates
Divested and Run-off Businesses
Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
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2025 to 2024 Annual Comparison
The loss from Corporate and Other operations, on an adjusted operating income basis, decreased $209 million primarily reflecting:
• lower net charges from other corporate activities, primarily driven by lower net costs related to corporate initiatives and long-term compensation plans, and lower expenses driven by an update of internal expense allocations, partially offset by organizational charges in the current year;
• higher investment income results, primarily driven by higher income from non-coupon investments; and
• favorable pension and employee benefits results, primarily driven by higher earnings from our pension and post-retirement plans from higher expected returns on plan assets and lower service costs.
These variances were partially offset by:
• higher interest expense on debt, largely driven by the absence of income offsets from the termination of an affiliated financing agreement resulting from the reinsurance transactions in Individual Life in 2024.
For purposes of calculating pension income from our pension plans for the year ended December 31, 2026, we decreased the discount rate from 5.85% to 5.55% as of December 31, 2025. The expected rate of return on plan assets decreased from 8.00% in 2025 to 7.75% in 2026. The assumed rate of increase in compensation will remain unchanged at 6.25% in 2026. Giving effect to the foregoing changes and other factors, we expect income from our pension plans in 2026 to be approximately $50 million to $55 million lower than 2025 levels. This decrease is primarily driven by the lower expected rate of return on plan assets and the lower discount rate.
For purposes of calculating postretirement income for the year ended December 31, 2026, we decreased the discount rate from 5.70% to 5.25% as of December 31, 2025. The expected rate of return on plan assets decreased from 6.50% in 2025 to 6.25% in 2026. Giving effect to the foregoing changes and other factors, we expect postretirement income in 2026 to be approximately $5 million to $10 million higher than 2025 levels. This increase is primarily driven by favorable equity returns on plan assets in the current year.
In 2026, pension and other postretirement benefit service costs related to active employees will continue to be allocated to our business segments. For further information regarding our pension and postretirement plans, see Note 19 to the Consolidated Financial Statements.
Divested and Run-off Businesses
Divested and Run-off Businesses Included in Corporate and Other
Income from our Divested and Run-off Businesses includes results from several 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 U.S. GAAP. The results of these Divested and Run-off Businesses are reflected in our Corporate and Other operations but are excluded from adjusted operating income. A summary of the results of the Divested and Run-off Businesses reflected in our Corporate and Other operations is as follows for the periods indicated:
Year Ended December 31,
(in millions)
Long-Term Care
Other(1)
Total Divested and Run-off Businesses income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
(1) Effective second quarter of 2024, the results of PGIMW are excluded from PGIM’s adjusted operating results and are included herein.
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2025 to 2024 Annual Comparison
Long-Term Care. Results decreased $215 million, including an unfavorable comparative net impact from our annual reviews and update of assumptions and other refinements. Results for 2025 included a $7 million net charge, while results for 2024 included a $111 million net benefit from these updates.
Excluding this item, results decreased $97 million , primarily reflecting:
• less favorable impacts from changes in the market value of equity securities; and
• lower underwriting results driven by the absence of favorable changes in estimates of the liability for future policy benefits resulting from premium rate increases in the prior year.
These variances were partially offset by:
• higher income from non-coupon investments; and
• lower net realized investment losses from derivatives and sales of fixed income securities.
Other Divested and Run-off Businesses. Results increased $292 million, primarily reflecting:
• the absence of impairments and charges related to management’s decisions to exit Assurance IQ (“AIQ”) and PGIM Wadhwani LLP (and their subsequent classifications as divested businesses in the first and second quarters of 2024, respectively); and
• favorable results related to the Full Service Retirement business.
Closed Block Division
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 that have arisen subsequent to the establishment of the Block are reflected as a policyholder dividend obligation, with a corresponding amount reported in AOCI, while any accumulated net unrealized investment are reflected as a reduction of the policyholder dividend obligation, to the extent the overall policyholder dividend obligation is otherwise .
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, 2025, the excess of actual cumulative earnings over the expected cumulative earnings was $1,635 million, which was recorded as a policyholder dividend obligation. 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. As of December 31, 2025, net unrealized investment losses have arisen subsequent to the establishment of the Closed Block due to the impacts of higher interest rates on the market value of fixed maturities available-for-sale. The impact of these net unrealized investment losses has been reflected as a decrease to the policyholder dividend obligation of $1,064 million at December 31, 2025, with a corresponding amount reported in AOCI.
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Operating Results
The following table sets forth the Closed Block division’s results for the periods indicated:
Year Ended December 31,
(in millions)
U.S. GAAP results:
Revenues
Benefits and expenses
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities
2025 to 2024 Annual Comparison
Income (loss) before income taxes and equity in earnings of joint ventures and other operating entities increased by $45 million, primarily reflecting:
• higher net investment activity results, primarily driven by lower realized investment losses from the sale of fixed income securities, partially offset by unfavorable changes in the market value of derivatives.
As a result of this and other factors, a $461 million reduction in the policyholder dividend obligation was recorded in 2025, compared to a $777 million reduction in 2024.
Revenues increased $464 million, primarily reflecting:
• lower realized investment losses, as discussed above.
Benefits and expenses increased $419 million, primarily reflecting:
• higher dividends to policyholders, reflecting a lower reduction in the policyholder dividend obligation due to changes in cumulative earnings and other factors.
Accounting Policies & Pronouncements
Application of Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews the estimates and assumptions used in the preparation of the Company’s financial statements. If management determines that modifications to assumptions and estimates are appropriate given current facts and circumstances, the Company’s results of operations and financial position as reported in the Consolidated Financial Statements could change significantly.
The following sections discuss the accounting policies applied in preparing our financial statements that management believes are most dependent on the application of estimates and assumptions and require management’s most difficult, subjective, or complex judgments.
Insurance Liabilities
Future Policy Benefits
Future Policy Benefit Reserves, including Unpaid Claims and Claim Adjustment Expenses
We establish reserves for future policy benefits to, or on behalf of, policyholders using methodologies prescribed by U.S. GAAP. See Note 2 to the Consolidated Financial Statements for additional information regarding the reserving methodologies used.
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The assumptions used in establishing reserves are generally based on the Company’s experience, industry experience, and/or other factors, as applicable. We update our actuarial assumptions, such as mortality, morbidity, retirement and policyholder behavior assumptions, annually unless a material change in our own experience or in industry experience made available to us is observed in an interim period that we feel is indicative of a long-term trend. Generally, we do not expect trends to change significantly in the short-term and, to the extent these trends may change, we expect such changes to be gradual over the long term.
We perform an annual comprehensive review of the assumptions used for estimating future premiums, benefits, and other cash flows, including reviews related to mortality, morbidity, lapse, surrender, and other contractholder behavior assumptions, and economic assumptions, including expected future rates of returns on investments. The Company generally looks to relevant Company experience as the primary basis for these assumptions. If relevant Company experience is not available or does not have sufficient credibility, the Company may look to experience of similar blocks of business, either elsewhere within the Company or within the industry. As part of this review, we may update these assumptions and make refinements to our models based upon emerging experience, future expectations and other data, including any observable market data we feel is indicative of a long-term trend. The impact on our results from operations of changes in these assumptions can be offsetting and we are unable to predict their movement or impact over time.
Mortality rate assumptions are generally based on Company experience, sometimes blending Company experience with an industry table when Company experience alone is not sufficiently credible. The Company sets mortality and morbidity assumptions that vary by major type of business. Within types of business, rates vary by age and gender. The Company applies an adjustment for future mortality improvement, consistent with observed long-term trends of population mortality over time. Lapse and surrender assumptions are based on Company and industry experience, where available. The Company sets rates that vary by product type, taking into account features specific to the product.
The quarterly adjustments for market performance referred to above reflect the impact of changes to our estimate of future rates of returns on investments to reflect actual fund performance and market conditions. A portion of returns on investments for our variable life contracts are dependent upon the total rate of return on assets held in separate account investment options. This rate of return influences the fees we earn and expected claims to be paid on variable life contracts, as well as other sources of profit. Returns that are higher than our expectations for a given period produce higher than expected account balances, which increase the future fees we expect to earn on variable life contracts and decrease expected claims to be paid on variable life contracts. The opposite occurs when returns are lower than our expectations.
The weighted average rate of return assumptions used in developing estimated market returns consider many factors specific to each product type, including asset durations, asset allocations, and other factors. With regard to equity market assumptions, the near-term future rate of return assumption used in evaluating liabilities for future policy benefits for certain of our products, primarily our domestic and international variable life insurance products, is generally updated each quarter and is derived using a reversion to the mean approach, a common industry practice. Under this approach, we consider historical equity returns and adjust projected equity returns over an initial future period of five years (the “near-term”) so that equity returns converge to the long-term expected rate of return. If the near-term projected future rate of return is greater than our near-term maximum future rate of return of 15.0%, we use our maximum future rate of return. If the near-term projected future rate of return is lower than our near-term minimum future rate of return of 0%, we use our minimum future rate of return. As of December 31, 2025, our domestic variable life insurance businesses assume an 8.0% long-term equity expected rate of return and a 2.3% near-term mean reversion equity expected rate of return, and our international variable life insurance business assumes a 5.5% long-term equity expected rate of return and a 0% near-term mean reversion equity expected rate of return.
With regard to interest rate assumptions used in evaluating liabilities for future policy benefits for certain of our products, we update the long-term and near-term future rates used to project fixed income returns annually and quarterly, respectively. As a result of our 2025 annual reviews and update of assumptions and other refinements, we kept our long-term expectation of the 10-year U.S. Treasury rate unchanged and continue to grade to a rate of 3.5% over ten years, and increased our long-term expectation of the 10-year Japanese Government Bond yield by 25 basis points and now grade to a rate of 1.5% over ten years. As part of our quarterly market experience updates, we update our near-term projections of interest rates to reflect changes in current rates. For additional information regarding discount rates used to establish the liability for future policy benefits, see Note 2 to the Consolidated Financial Statements.
The following paragraphs provide additional details about the material reserves we have established:
International Businesses. The reserves for future policy benefits of our International Businesses, which as of December 31, 2025, represented 36% of our total future policy benefit reserves, primarily relate to non-participating whole life and term life products and endowment contracts, and are generally calculated using the net premium valuation methodology. The
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primary assumptions used in determining expected future benefits and expenses include mortality, lapse, morbidity, and interest rate assumptions. Reserves also include claims reported but not yet paid, and claims incurred but not yet reported. In addition, future policy benefit reserves for certain contracts also include amounts related to our deferred profit liability.
Institutional Retirement Strategies. The reserves for future policy benefits of our Institutional Retirement Strategies segment, which as of December 31, 2025, represented 32% of our total future policy benefit reserves, primarily relate to our non-participating life contingent group annuity and structured settlement products and are generally calculated using the net premium valuation methodology. The primary assumptions used in establishing these reserves include mortality, retirement, and interest rate assumptions. In addition, future policy benefit reserves for certain contracts also include amounts related to our deferred profit liability.
Individual Life. The reserves for future policy benefits of our Individual Life segment, which as of December 31, 2025, represented 11% of our total future policy benefit reserves, primarily relate to term life and universal life products. For term life contracts, the future policy benefit reserves are generally calculated using the net premium valuation methodology. The primary assumptions used in determining expected future benefits and expenses include mortality, lapse, and interest rate assumptions. For universal life products, which include universal life contracts that contain no-lapse guarantees, reserves for future policy benefits are established using current best estimate assumptions and are based on the benefit ratio. The primary assumptions used in establishing these reserves generally include mortality, lapse, and premium pattern, as well as interest rate and equity market return assumptions. Reserves also include claims reported but not yet paid, and claims incurred but not yet reported.
Closed Block Division. The future policy benefit reserves for the traditional participating life insurance products of the Closed Block division, which as of December 31, 2025, represented 16% of our total future policy benefit reserves are determined using the net premium valuation methodology. In applying this method, we use mortality assumptions to determine our expected future benefits and expected future premiums, and apply an interest rate to determine the present value of both of these amounts. The mortality assumptions are based on standard industry mortality tables that were used to determine the cash surrender value of the policies, and the interest rates used are the interest rates used to calculate the cash surrender value of the policies.
Other. Reserves for future policy benefits in our Individual Retirement Strategies segment, Group Insurance segment, and our Corporate and Other operations, represent a small portion of total reserves and are established using methodologies and assumptions specific to each business: Individual Retirement Strategies reserves, less than 1% of total reserves, primarily cover life-contingent payout annuities; Group Insurance reserves, approximately 2% of total reserves, relate to group life and disability benefits; and Corporate and Other reserves, about 3% of total reserves, primarily support long-term care products.
Policyholders’ Account Balances
Policyholders’ account balances liability represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability includes amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. For additional information regarding the valuation of these embedded derivatives, see Note 6 to the Consolidated Financial Statements.
Market Risk Benefits (“MRBs”)
Market risk benefit liabilities (or assets) represent contracts or contract features that provide protection to the contractholder and expose the Company to other than nominal capital market risk. The liability (or asset) for MRBs is estimated using a fair value measurement methodology. The fair value of these MRBs is based on assumptions a market participant would use in valuing market risk benefits. The Company estimates that a hypothetical change to its own credit risk of plus 50 and minus 50 basis points (“bps”) would result in an increase and a decrease to OCI of $535 million and $575 million, respectively. For additional information regarding the valuation of MRBs, see Note 6 to the Consolidated Financial Statements.
Sensitivities for Insurance Assets and Liabilities
The following table summarizes the aggregate impact that could result on each of the listed financial statement balances from changes in certain key assumptions. The figures below are presented in aggregate for the Company. The information below is for illustrative purposes and includes only the hypothetical impact on December 31, 2025 balances of changes in a single assumption and not changes in any combination of assumptions. Additionally, the illustration of the insurance assumption impacts below reflects a parallel shift in the insurance assumptions across the Company; however, these may be non-parallel in practice and only applicable to specific businesses. Changes in current assumptions could result in impacts to financial statement balances that are in excess of the amounts illustrated. A description of the estimates and assumptions used in
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the preparation of each of these financial statement balances is provided above. Changes to the insurance cash flow assumptions are reflected in net income through the retrospective unlocking method for traditional long duration, limited-payment and universal life type products.
The impacts presented within this table exclude the impacts of our asset liability management strategy, which seeks to offset the changes in the balances presented within this table and is primarily composed of investments and derivatives. See further below for a discussion of the estimates and assumptions involved with the application of U.S. GAAP accounting policies for these instruments and “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” for hypothetical impacts on related balances as a result of changes in certain significant assumptions. The impacts presented within this table are also net of reinsurance. See Note 15 to the Consolidated Financial Statements for additional information regarding our material reinsurance agreements.
Increase (Decrease) in Net Income due to changes in Future Policy Benefits, Market Risk Benefits(1), and Policyholders' Account Balances, Net of Reinsurance
(in millions)
Hypothetical change in current assumptions:
Long-term interest rate:
Increase by 25 bps
Decrease by 25 bps
Long-term equity expected rate of return:
Increase by 50 bps
Decrease by 50 bps
Mortality:
Increase by 1%
Decrease by 1%
Lapse(2):
Increase by 10%
Decrease by 10%
Long-term care disability claim incidence:
Increase by 5%
Decrease by 5%
(1) “Market risk benefits” reflects the net impact of market risk benefit assets and liabilities prior to hedging.
(2) Assumes the same shock across all products; however, we would not expect lapse rates of different products to move uniformly.
Other Accounting Policies
Goodwill
We test goodwill for impairment on an annual basis as of December 31 and more frequently if events or circumstances indicate the potential for impairment is more likely than not. The goodwill impairment analysis is performed at the reporting unit level, which is the same as, or one level below, our operating segments. As of December 31, 2025, the goodwill is allocated to PGIM and International Businesses. Although the accounting guidance provides for an optional qualitative assessment for testing goodwill impairment, the Company performed the quantitative test for its reporting units and compared each reporting unit’s estimated fair value to its carrying value as of December 31, 2025. The carrying value represents the capital that the business would require if operating as a standalone entity.
The fair value of PGIM as of December 31, 2025 was estimated by utilizing a market approach based on an earnings multiple. The average of forward earnings multiples of comparable publicly traded companies based on independent analysts’ consensus estimates for each company’s forecasted earnings was applied to PGIM’s forecasted results, and an implied control premium was added. The fair value for International Businesses was also estimated using a similar approach. The estimated fair values of both PGIM and International Businesses exceeded their carrying values, resulting in no goodwill impairment as of December 31, 2025.
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Estimating the fair value of reporting units is a subjective process that involves the use of significant estimates by management. Unanticipated changes in business performance or the regulatory environment, market declines and other events impacting the fair value of the reporting units with assigned goodwill, or increases in the level of equity required to support these businesses, could cause goodwill impairment charges in future periods. For additional information regarding goodwill, see Note 2 and Note 10 to the Consolidated Financial Statements.
Valuation of Investments, Including Derivatives, Measurement of Allowance for Credit Losses, and the Recognition of Other-than-Temporary Impairments
Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, equity securities, other invested assets, and derivative financial instruments. Management believes the following accounting policies related to investments, including derivatives, are most dependent on the application of estimates and assumptions. Each of these policies is discussed further within other relevant disclosures related to investments and derivatives, as referenced below:
• Valuation of investments, including derivatives;
• Measurement of the allowance for credit losses on fixed maturity securities classified as available-for-sale, commercial mortgage loans, and other loans; and
• Recognition of other-than-temporary impairments (“OTTI”) for equity method investments and wholly-owned investment real estate.
We present at fair value in the statements of financial position our debt security investments classified as available-for-sale, investments classified as trading such as our assets supporting experience-rated contractholder liabilities and certain fixed maturities, equity securities, and certain investments within “Other invested assets,” such as derivatives. For additional information regarding the key estimates and assumptions surrounding the determination of fair value of fixed maturity and equity securities, as well as derivative instruments, embedded derivatives and other investments, see Note 6 to the Consolidated Financial Statements and “—Valuation of Assets and Liabilities—Fair Value of Assets and Liabilities.”
For our investments classified as available-for-sale, the impact of changes in fair value is recorded as an unrealized gain or loss in AOCI, a separate component of equity. For our investments classified as trading and equity securities, the impact of changes in fair value is recorded within “Other income (loss).” Our commercial mortgage and other loans are carried primarily at unpaid principal balances, net of unamortized deferred loan origination fees and expenses and unamortized premiums or discounts and a valuation allowance for losses.
In addition, an allowance for credit losses is measured each quarter for available-for-sale fixed maturity securities and for commercial mortgage and other loans. For additional information regarding our policies with respect to the measurement of credit losses, see Note 2 to the Consolidated Financial Statements.
For equity method investments and wholly-owned investment real estate, the carrying value of these investments is written down or impaired to fair value when a decline in value is considered to be other-than-temporary. See Note 2 to the Consolidated Financial Statements for additional information regarding our OTTI policies.
Pension and Other Postretirement Benefits
We sponsor pension and other postretirement benefit plans covering employees who meet specific eligibility requirements. Our net periodic costs for these plans consider an assumed discount (interest) rate, an expected rate of return on plan assets, expected increases in compensation levels, mortality, and trends in health care costs. Of these assumptions, our expected rate of return assumptions and our discount rate assumptions have historically had the most significant effect on our net period costs associated with these plans.
We determine our expected rate of return on plan assets based upon a building block approach that considers plan asset mix, risk free rates, inflation, real return, term premium, credit spreads, equity risk premium, and capital appreciation, as well as expenses, the effect of active management and the effect of rebalancing for the equity, debt, and real estate asset mix applied on a weighted average basis to our pension asset portfolio. See Note 19 to the Consolidated Financial Statements for our actual asset allocations by asset category and the asset allocation ranges prescribed by our investment policy guidelines for both our pension and other postretirement benefit plans. Our assumed long-term rate of return for 2025 was 8.00% for our domestic pension plans and 6.50% for our other postretirement benefit plans. Given the amount of plan assets as of December 31, 2024, the beginning of the measurement year, if we had assumed an expected rate of return for both our domestic pension and other
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domestic postretirement benefit plans that was 100 bps higher or 100 bps lower than the rates we assumed, the change in our net periodic costs would have been as shown in the table below. The information provided in the table below considers only changes in our assumed long-term rate of return given the level and mix of invested assets at the beginning of the measurement year, without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed long-term rate of return.
For the Year Ended December 31, 2025
Increase/(Decrease) in Net
Periodic Pension Cost
Increase/(Decrease) in Net
Periodic Other Postretirement Cost
(in millions)
Increase in expected rate of return by 100 bps
Decrease in expected rate of return by 100 bps
Foreign pension plans represent 3% of plan assets at the beginning of 2025. An increase in expected rate of return by 100 bps would result in a decrease in net periodic pension costs of $3 million; conversely, a decrease in expected rate of return by 100 bps would result in an increase in net periodic pension costs of $3 million.
We determine our discount rate, used to value the pension and postretirement benefit obligations, based upon rates commensurate with current yields on high quality corporate bonds. See Note 19 to the Consolidated Financial Statements for information regarding the December 31, 2024 methodology we employed to determine our discount rate for 2025. Our assumed discount rate for 2025 was 5.85% for our domestic pension plans and 5.70% for our other domestic postretirement benefit plans. Given the amount of pension and postretirement obligations as of December 31, 2024, the beginning of the measurement year, if we had assumed a discount rate for both our domestic pension and other postretirement benefit plans that was 100 bps higher or 100 bps lower than the rates we assumed, the change in our net periodic costs would have been as shown in the table below. The information provided in the table below considers only changes in our assumed discount rate without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed discount rate.
For the Year Ended December 31, 2025
Increase/(Decrease) in Net
Periodic Pension Cost
Increase/(Decrease) in Net
Periodic Other Postretirement Cost
(in millions)
Increase in discount rate by 100 bps
Decrease in discount rate by 100 bps
Foreign pension plans represent 10% of plan obligations at the beginning of 2025. An increase in discount rate by 100 bps would result in an increase in net periodic pension costs of $0 million; conversely, a decrease in discount rate by 100 bps would result in an increase in net periodic pension costs of $1 million.
Given the application of the authoritative guidance for accounting for pensions, and the deferral and amortization of actuarial gains and losses arising from changes in our assumed discount rate, the change in net periodic pension cost arising from an increase in the assumed discount rate by 100 bps would not always be expected to equal the change in net periodic pension cost arising from a decrease in the assumed discount rate by 100 bps.
For a discussion of our expected rate of return on plan assets and discount rate for our qualified pension plan in 2025, see “—Results of Operations by Segment—Corporate and Other.”
For purposes of calculating pension income from our own qualified pension plan for the year ended December 31, 2026, we decreased the discount rate to 5.55% from 5.85% in 2025. The expected rate of return on plan assets decreased to 7.75% in 2026 from 8.00% in 2025, and the assumed rate of increase in compensation remained unchanged at 6.25%.
In addition to the effect of changes in our assumptions, the net periodic cost or benefit from our pension and other postretirement benefit plans may change due to factors such as actual experience being different from our assumptions, special benefits to terminated employees, or changes in benefits provided under the plans.
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At December 31, 2025, the sensitivity of our domestic and foreign pension and postretirement obligations to a 100 basis point change in discount rate was as follows.
December 31, 2025
Increase/(Decrease) in
Pension
Benefits Obligation
Increase/(Decrease) in
Accumulated Postretirement
Benefits Obligation
(in millions)
Increase in discount rate by 100 bps
Decrease in discount rate by 100 bps
Taxes on Income
Our effective tax rate is based on income, non-taxable and non-deductible items, tax credits, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Inherent in determining our annual tax rate are judgments regarding business plans, planning opportunities and expectations about future outcomes. The Dividend Received Deduction (“DRD”) is a significant reason for the difference between the Company’s effective tax rate and the U.S. federal statutory rate. The DRD is an estimate that incorporates the prior and current year information, as well as the current year’s equity market performance. Both the current estimate of the DRD and the DRD in future periods can vary based on factors such as, but not limited to, changes in the amount of dividends received that are eligible for the DRD, changes in the amount of distributions received from underlying fund investments, changes in the account balances of variable life and annuity contracts, and the Company’s taxable income before the DRD.
An increase or decrease in our effective tax rate by one percentage point would have resulted in a decrease or increase in our 2025 “Total income tax expense (benefit)” of $47 million.
Contingencies
A contingency is an existing condition that involves a degree of uncertainty that will ultimately be resolved upon the occurrence of future events. Accruals for contingencies are required to be established when the future event is probable and its impact can be reasonably estimated, such as in connection with an unresolved legal matter. The initial reserve reflects management’s best estimate of the probable cost of ultimate resolution of the matter and is revised accordingly as facts and circumstances change and, ultimately, when the matter is brought to closure.
Reinsurance
The Company participates in reinsurance arrangements as either the ceding entity or the assuming entity primarily to manage capital, reduce exposure to loss and risk volatility, and provide additional capacity for future growth and diversification. Reinsurance related assets and liabilities include, in part, embedded derivatives and the cost of reinsurance, which require a significant amount of management judgment. See Note 2 to the Consolidated Financial Statements f or additional information regarding reinsurance.
Adoption of New Accounting Pronouncements
There were no new critical accounting estimates resulting from new accounting pronouncements adopted during 2025. See Note 2 to the Consolidated Financial Statements for accounting pronouncements issued but not yet adopted and newly adopted accounting pronouncements.
Liquidity and Capital Resources
Overview
Liquidity refers to the ability to generate sufficient cash resources to meet the payment obligations of the Company. Capital refers to the long-term financial resources available to support the operations of our businesses, fund business growth, and provide a cushion to withstand adverse circumstances. Our ability to generate and maintain sufficient liquidity and capital
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depends on the profitability of our businesses, general economic conditions and our access to the capital markets and the alternate sources of liquidity and capital described herein.
Effective and prudent liquidity and capital management is a priority across the Company. Management monitors the liquidity of Prudential Financial and its subsidiaries on a daily basis and projects borrowing and capital needs over a multi-year time horizon. We use a Risk Appetite Framework (“RAF”) to ensure that all risks taken across the Company align with our capacity and willingness to take those risks. The RAF provides a dynamic assessment of capital and liquidity stress impacts and is intended to ensure that sufficient resources are available to absorb those impacts. We believe that our capital and liquidity resources are sufficient to satisfy the capital and liquidity requirements of Prudential Financial and its subsidiaries.
Our businesses are subject to comprehensive regulation and supervision by domestic and international regulators. These regulations currently include requirements (many of which are the subject of ongoing rule-making) relating to capital and liquidity management. For information regarding these regulatory initiatives and their potential impact on us, see “Business—Regulation” and “Risk Factors.”
From the beginning of 2025 through the date of this report, we took the following significant actions that have impacted, or are expected to impact, our liquidity and capital positions:
• In March, we issued $750 million of 5.200% senior unsecured notes. We intend to use these proceeds for general corporate purposes, which may include refinancing medium-term notes maturing through 2026.
• In March, we entered into a reinsurance 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 our Japanese insurance subsidiaries. We also made an additional equity investment in Prismic of approximately $100 million to maintain our equity interest at approximately 20 percent. The value of the reinsurance transaction is estimated to be $400 million, which includes a release of capital, ceding commission, taxes, and the net present value of future income, of which a portion was used to fund the equity investment in Prismic, with the remaining amount to be released over time.
• In May, we redeemed $1.0 billion of 5.375% junior subordinated notes due 2045.
• In July, we repaid $350 million of 8.300% fixed-rate surplus notes due July 2025.
Capital
Our capital management framework is primarily based on statutory risk-based capital (“RBC”) and solvency margin measures. Due to our diverse mix of businesses and applicable regulatory requirements, we apply certain refinements to the framework that are designed to more appropriately reflect risks associated with our businesses on a consistent basis across the Company.
We believe Prudential Financial’s capitalization and financial profile are consistent with its ratings targets. Our long-term senior debt rating targets for Prudential Financial are “A” for Standard & Poor's Rating Services (“S&P”), Moody's Investor Service, Inc. (“Moody’s”), and Fitch Ratings Inc. (“Fitch”), and “a” for A.M. Best Company (“A.M. Best”). Our financial strength rating targets for our life insurance companies are “AA/Aa/AA” for S&P, Moody’s and Fitch, respectively, and “A+” for A.M. Best. Some entities may currently be rated below these targets, and not all of our insurance company subsidiaries are rated by each of these rating agencies. See “—Ratings” below for a description of the potential impacts of ratings downgrades.
Capital Governance
Our capital management framework is ultimately reviewed and approved by our Board. The Board has authorized our Chief Executive Officer and Chief Financial Officer to approve certain capital actions on behalf of the Company and to further delegate authority with respect to capital actions to appropriate officers, up to specified limits. Any capital commitment that exceeds the authority granted to senior management must be separately authorized by the Board.
In addition, our Capital and Finance Committee (“CFC”) reviews the use and allocation of capital above certain threshold amounts to promote the efficient use of capital, consistent with our strategic objectives, ratings aspirations and other goals and targets. This management committee provides a multi-disciplinary due diligence review of specific initiatives or transactions requiring the use of capital, including mergers and acquisitions. The CFC also reviews our annual capital plan (and updates to
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this plan), as well as our capital, liquidity and financial position, borrowing plans, and related matters prior to the discussion of these items with the Board.
Capitalization
The primary components of the Company’s capitalization consist of equity and outstanding capital debt, including junior subordinated debt. As shown in the table below, as of December 31, 2025, the Company had $49.6 billion in capital, all of which was available to support the aggregate capital requirements of its businesses and its Corporate and Other operations. Based on our assessment of these businesses and operations, we believe this level of capital is consistent with our ratings targets.
December 31,
(in millions)
Equity(1)
Junior subordinated debt (including hybrid securities)
Other capital debt
Total capital
(1) Amounts attributable to Prudential Financial, excluding AOCI.
Insurance Regulatory Capital
We manage PICA, Prudential of Japan, The Gibraltar Life Insurance Company, Ltd. (“Gibraltar Life”), and other significant insurance subsidiaries to regulatory capital levels consistent with our “AA” ratings targets. We utilize the RBC ratio as a primary measure of the capital adequacy of our domestic insurance subsidiaries and the solvency margin ratio as a primary measure of the capital adequacy of our Japanese insurance subsidiaries.
RBC is calculated based on statutory financial statements and risk formulas consistent with the practices of the NAIC. RBC considers, among other things, risks related to the type and quality of the invested assets, insurance related risks associated with an insurer’s products and liabilities, interest rate risks, and general business risks. RBC ratio calculations are intended to assist insurance regulators in measuring an insurer’s solvency and ability to pay future claims. The reporting of RBC measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising, or promotional activities, but is available to the public.
PICA’s RBC ratio as of December 31, 2024, its most recent statutory fiscal year-end and RBC reporting date, was 409%. PICA’s RBC ratio is calculated on a consolidated basis and included Pruco Life Insurance Company (“Pruco Life”), Pruco Life Insurance Company of New Jersey (“PLNJ”), which is a subsidiary of Pruco Life, and Prudential Legacy Insurance Company of New Jersey (“PLIC”).
Although not yet filed, we expect the RBC ratios for PICA and our other domestic insurance subsidiaries as of December 31, 2025 to continue to be above target levels that would support “AA” financial strength ratings.
Similar to the RBC ratios that are employed by U.S. insurance regulators, regulatory authorities in the international jurisdictions in which we operate generally establish some form of minimum solvency margin requirements for insurance companies based on local statutory accounting practices. These solvency margins are a primary measure of the capital adequacy of our international insurance operations. Maintenance of our solvency margins at certain levels is also important to our competitive positioning, as in certain jurisdictions, such as Japan, these solvency margins are required to be disclosed to the public and therefore impact the public perception of an insurer’s financial strength.
The table below presents the solvency margin ratios of our most significant international insurance subsidiaries as of September 30, 2025, the most recent date for which this information is available.
Ratio
Prudential of Japan consolidated(1)
Gibraltar Life consolidated(2)
(1) Includes Prudential Trust Co., Ltd., a subsidiary of Prudential of Japan.
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(2) Includes Prudential Gibraltar Financial Life Insurance Co., Ltd. (“PGFL”), a subsidiary of Gibraltar Life.
Although not yet filed, we expect the solvency margin ratio for each of these subsidiaries to be greater than 700% (3.5 times the regulatory required minimums) as of December 31, 2025.
The Japanese Financial Services Agency (“FSA”) has implemented a new market-based alternative to the solvency margin ratio framework entitled the Economic Solvency Ratio (“ESR”) that applies to our Japanese insurance subsidiaries. The ESR became effective in April 2025, with disclosure under the new framework required later in 2026.
All of our domestic and significant international insurance subsidiaries have capital levels that substantially exceed the minimum level required by applicable insurance regulations. The statutory capital of our insurance companies and our overall capital flexibility could be impacted by, among other things, market conditions and changes in insurance reserves, including those stemming from updates to our actuarial assumptions. Our regulatory capital levels also may be affected in the future by changes to the applicable regulations. For additional information regarding the calculation of RBC and solvency margin ratios, as well as regulatory minimums, see Note 20 to the Consolidated Financial Statements.
Captive Reinsurance Companies
We use captive reinsurance companies to more effectively manage our reserves and capital on an economic basis and to enable the aggregation and transfer of risks. Our captive reinsurance companies assume business from affiliates only. To support the risks they assume, our captives are capitalized to a level we believe is consistent with the “AA” financial strength rating targets of our insurance subsidiaries. All of our captives are subject to internal policies governing their activities. In the normal course of business, we contribute capital to the captives to support business growth and other needs. Prudential Financial has also entered into support agreements with several of the captives in connection with financing arrangements. For a description of captive reinsurance company financing activities, see below under “—Financing Activities—Subsidiary Borrowings—Term and Universal Life Reserve Financing.”
Shareholder Distributions
Share Repurchase Program and Shareholder Dividends
In December 2024, Prudential Financial’s Board of Directors authorized the Company to repurchase, at management’s discretion, up to an aggregate of $1.0 billion of its outstanding Common Stock during the period from January 1, 2025 through December 31, 2025. We utilized the entirety of this $1.0 billion share repurchase authorization in 2025. In December 2025, the Board authorized the Company to repurchase, at management’s discretion, up to $1.0 billion of its outstanding Common Stock during the period from January 1, 2026 through December 31, 2026.
In general, the timing and amount of share repurchases are determined by management based on market conditions and other considerations, including compliance with applicable laws and any increased capital needs of our businesses due to, among other things, credit migration and losses in our investment portfolio, changes in regulatory capital requirements and opportunities for growth and acquisitions. Repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended.
The following table sets forth information about declarations of Common Stock dividends, as well as repurchases of shares of Prudential Financial’s Common Stock, for each of the quarterly periods in 2025 and for the prior four years:
Dividend Amount
Shares Repurchased
Quarterly Period Ended:
Per Share
Aggregate
Shares
Total Cost
(in millions, except per share data)
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
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Dividend Amount
Shares Repurchased
Year Ended:
Per Share
Aggregate
Shares
Total Cost
(in millions, except per share data)
December 31, 2025
December 31, 2024
December 31, 2023
December 31, 2022
December 31, 2021
In addition, on February 3, 2026, Prudential Financial’s Board of Directors declared a cash dividend of $1.40 per share of Common Stock, payable on March 12, 2026 to shareholders of record as of February 17, 2026.
Liquidity
Liquidity management and stress testing are performed on a legal entity basis as the ability to transfer funds between subsidiaries is limited due in part to regulatory restrictions. Liquidity needs are determined through daily and quarterly cash flow forecasting at the holding company and within our operating subsidiaries. We seek to maintain a minimum balance of highly liquid assets to ensure that adequate liquidity is available at Prudential Financial to cover fixed expenses in the event that we experience reduced cash flows from our operating subsidiaries at a time when access to capital markets is also not available.
We seek to mitigate the risk of having limited or no access to financing due to stressed market conditions by generally pre-funding debt in advance of maturity. We mitigate the refinancing risk associated with our debt that is used to fund operating needs by matching the term of debt with the assets financed. To ensure adequate liquidity in stress scenarios, stress testing is performed for our major operating subsidiaries. We seek to further mitigate liquidity risk by maintaining our access to alternative sources of liquidity, as discussed below.
Liquidity of Prudential Financial
The principal sources of funds available to Prudential Financial, the parent holding company, are dividends, returns of capital and loans from subsidiaries, and proceeds from debt issuances and certain stock-based compensation activity. These sources of funds may be supplemented by Prudential Financial’s access to the capital markets as well as the “—Alternative Sources of Liquidity” described below.
The primary uses of funds at Prudential Financial include servicing debt, making capital contributions and loans to subsidiaries, making acquisitions, paying declared shareholder dividends and repurchasing outstanding shares of Common Stock executed under authority from the Board.
As of December 31, 2025, Prudential Financial had highly liquid assets with a carrying value totaling $4,732 million, a decrease of $1,532 million from December 31, 2024. Highly liquid assets predominantly include cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds. We maintain an intercompany liquidity account that is designed to optimize the use of cash by facilitating the lending and borrowing of funds between Prudential Financial and its subsidiaries on a daily basis. Excluding the net borrowings from this intercompany liquidity account, Prudential Financial had highly liquid assets of $3,817 million as of December 31, 2025, a decrease of $824 million from December 31, 2024.
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The following table sets forth Prudential Financial’s principal sources and uses of highly liquid assets, excluding net borrowings from our intercompany liquidity account, for the periods indicated:
Year Ended December 31,
(in millions)
Highly Liquid Assets, beginning of period
Dividends and/or returns of capital from subsidiaries(1)
Affiliated loans/(borrowings) - (capital activities)(2)
Capital contributions to subsidiaries(3)
Total Business Capital Activity(4)
Share repurchases(5)
Common Stock dividends(6)
Total Share Repurchases, Dividends and Business Disposition Activity
Proceeds from the issuance of debt(7)
Repayments of debt
Total Debt Activity
Net interest expense
Affiliated (borrowings)/loans - (operating activities)(8)
Tax cash flows(4)
Other corporate cash flows(4)
Share issuances for employee stock purchases and other(4)
Total Other Activity
Net increase (decrease) in highly liquid assets
Highly Liquid Assets, end of period
(1) 2025 includes $900 million from PICA, $618 million from international insurance subsidiaries, $500 million from Individual Life insurance captives, $202 million from PGIM subsidiaries, and $12 million from other subsidiaries. 2024 includes $1,550 million from PICA, $800 million from a holding company, funded by one of our captive insurance subsidiaries, inclusive of proceeds associated with the reinsurance of a portion of the Company’s guaranteed universal life policies, $585 million from international insurance subsidiaries, $336 million from other subsidiaries, and $61 million from PGIM subsidiaries.
(2) Represents loans to and from subsidiaries made for capital management purposes. 2025 includes $3 million from international insurance subsidiaries. 2024 includes $502 million from international insurance subsidiaries, and $200 million from captive reinsurance subsidiaries.
(3) 2025 includes capital contributions of $363 million to international insurance subsidiaries, $61 million to other subsidiaries, and $6 million to PICA. 2024 includes capital contributions of $240 million to international insurance subsidiaries, $90 million to PGIM subsidiaries (which is completely offset in “Affiliated (borrowings)/loans - (operating activities)” within this table), and $54 million to other subsidiaries.
(4) 2025 “Total Business Capital Activity” includes segment inflows of $2,792 million from U.S. Businesses, $819 million from International Businesses, $509 million from PGIM, and outflows of $2,315 million to Corporate and Other operations. 2024 “Total Business Capital Activity” includes segment inflows of $4,132 million from U.S. Businesses, $1,531 million from International Businesses, $461 million from PGIM, and outflows of $2,474 million to Corporate and Other operations. In addition, Corporate & Other operations had net inflows of $696 million and $893 million, respectively, from “Tax cash flows,” “Other corporate cash flows” and “Share issuances for employee stock purchases and other,” as shown within this table. In addition, $347 million of PICA’s dividend capacity was used to fund the July 2025 maturity of the PICA surplus note.
(5) Excludes cash payments made on trades that settled in the subsequent period.
(6) Includes cash payments made on dividends declared in prior periods.
(7) Includes $369 million and $135 million of proceeds from the issuance of retail medium-term notes that were used exclusively to purchase funding agreements from PICA in 2025 and 2024, respectively.
(8) Represents loans to and from affiliated subsidiaries to support business operating needs. 2025 includes $100 million from captive reinsurance subsidiaries.
Dividends and Returns of Capital from Subsidiaries
Domestic insurance subsidiaries. During 2025, Prudential Financial received dividends of $900 million from PICA. In addition to paying Common Stock dividends, our domestic insurance operations may return capital to Prudential Financial by other means, such as affiliated lending, and reinsurance with Bermuda-based affiliates. In the first quarter of 2025, Prudential Financial received a return of capital of $500 million from a holding company funded by a domestic captive insurance subsidiary.
International insurance subsidiaries . During 2025, Prudential Financial received dividends of $618 million from its international insurance subsidiaries. In addition to paying Common Stock dividends, our international insurance operations may
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return capital to Prudential Financial by other means, such as the repayment of Preferred Stock obligations held by Prudential Financial or other affiliates, affiliated lending, affiliated derivatives and reinsurance with U.S.- and Bermuda-based affiliates.
Other subsidiaries. During 2025, Prudential Financial received dividends of $202 million from PGIM subsidiaries and $12 million from other subsidiaries.
Restriction on dividends and returns of capital from subsidiaries. Our insurance companies are subject to limitations on the payment of dividends and other transfers of funds to Prudential Financial and other affiliates under applicable insurance law and regulation. Further, market conditions could negatively impact capital positions of our insurance companies, which could further restrict their ability to pay dividends. More generally, the payment of dividends by any of our subsidiaries is subject to declaration by their Board of Directors and can be affected by market conditions and other factors.
With respect to our domestic insurance subsidiaries, PICA is permitted to pay ordinary dividends based on calculations specified under New Jersey insurance law, subject to prior notification to the New Jersey Department of Banking and Insurance (“NJDOBI”). Any distributions above this amount in any twelve-month period are considered to be “extraordinary” dividends, and the approval of the NJDOBI is required prior to payment. The laws regulating dividends of the states where our other domestic insurance companies are domiciled are similar, but not identical, to those of New Jersey.
Capital redeployment from our international insurance subsidiaries is subject to local regulatory requirements in the international jurisdictions in which they operate. Our most significant international insurance subsidiaries, Prudential of Japan and Gibraltar Life, are permitted to pay Common Stock dividends based on calculations specified by Japanese law. Dividends in excess of these amounts and other forms of capital distribution may require the prior approval of the FSA. The regulatory fiscal year end for both Prudential of Japan and Gibraltar Life is March 31, 2026, after which time the Common Stock dividend amount permitted to be paid without prior approval from the FSA can be determined.
The ability of our PGIM subsidiaries and the majority of our other operating subsidiaries to pay dividends is largely unrestricted from a regulatory standpoint.
See Note 20 to the Consolidated Financial Statements for information regarding specific dividend restrictions.
Liquidity of Insurance Subsidiaries
We manage the liquidity of our insurance operations to ensure stable, reliable and cost-effective sources of cash flows to meet all of our obligations. Liquidity within each of our insurance subsidiaries is provided by a variety of sources, including portfolios of liquid assets. The investment portfolios of our subsidiaries are integral to the overall liquidity of our insurance operations. We segment our investment portfolios and employ an asset/liability management approach specific to the requirements of each of our product lines. This enhances the discipline applied in managing the liquidity, as well as the interest rate and credit risk profiles, of each portfolio in a manner consistent with the unique characteristics of the product liabilities.
Liquidity is measured against internally-developed benchmarks that take into account the characteristics of both the asset portfolio and the liabilities that they support. We consider attributes of the various categories of liquid assets (for example, type of asset and credit quality) in calculating internal liquidity measures to evaluate our insurance operations’ liquidity under various stress scenarios, including company-specific and market-wide events. We continue to believe that cash generated by ongoing operations and the profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios for each of our insurance subsidiaries.
Cash Flow
The principal sources of liquidity for our insurance subsidiaries are premiums, investment and fee income, investment maturities, sales of investments, and sales associated with our insurance and annuity operations, as well as internal and external borrowings. The principal uses of liquidity include benefits, claims and dividends paid to policyholders, and payments to policyholders and contractholders in connection with surrenders, withdrawals and net policy loan activity. Other uses of liquidity may include commissions, general and administrative expenses, purchases of investments, the payment of dividends to the parent holding company, hedging and reinsurance activity and payments in connection with financing activities.
In each of our major insurance subsidiaries, we believe that the cash flows from operations are adequate to satisfy current liquidity requirements. The continued adequacy of this liquidity will depend upon factors such as future securities market conditions, changes in interest rate levels, policyholder perceptions of our financial strength, policyholder behavior, catastrophic events and the relative safety and attractiveness of competing products, each of which could lead to reduced cash
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inflows or increased cash outflows. Our insurance operations’ cash flows from investment activities result from repayments of principal, proceeds from maturities and sales of invested assets and investment income, net of amounts reinvested. The primary liquidity risks with respect to these cash flows are the risk of default by debtors or bond insurers, our counterparties’ willingness to extend repurchase and/or securities lending arrangements, commitments to invest and market volatility. We closely manage these risks through our credit risk management process and regular monitoring of our liquidity position.
Domestic insurance operations. In managing the liquidity of our domestic insurance operations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions when selecting assets to support these contractual obligations. We use surrender charges and other contract provisions to mitigate the extent, timing and profitability impact of withdrawals of funds by customers. The following table sets forth the liabilities for market risk benefits, future policy benefits and policyholders’ account balances of certain of our domestic insurance subsidiaries as of the dates indicated:
December 31,
(in billions)
PICA
PLIC
Pruco Life
Other(1)
Total market risk benefits, future policy benefits and policyholders’ account balances(2)
(1) Includes the impact of intercompany eliminations.
(2) Amounts are reflected gross of affiliated reinsurance recoverables. See Note 13 to the Consolidated Financial Statements for information regarding cash surrender values associated with policyholders’ account balances.
The liabilities presented above are primarily supported by invested assets in our general account. As noted above, when selecting assets to support these contractual obligations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions. As a result, assets will include both liquid assets, as discussed below, and other assets that we believe adequately support our liabilities.
For PICA and other subsidiaries, the liabilities presented above primarily include annuity reserves and deposit liabilities and individual life insurance policy reserves. Individual life insurance policies may impose surrender charges and policyholders may be subject to a new underwriting process in order to obtain a new insurance policy. PICA’s reserves for group annuity contracts primarily relate to pension risk transfer contracts, which are generally not subject to early withdrawal. For our individual annuity contracts, to encourage persistency, most of our variable and fixed annuities have surrender or withdrawal charges for a specified number of years. In addition, certain fixed annuities impose a market value adjustment if the invested amount is not held to maturity. The living benefit features of our variable annuities also encourage persistency because the potential value of the living benefit is fully realized only if the contract persists.
Gross account withdrawals for our domestic insurance operations’ products in 2025 were generally consistent with our assumptions in asset/liability management, and the associated cash outflows did not have a material adverse impact on our overall liquidity.
International insurance operations. As with our domestic operations, in managing the liquidity of our international insurance operations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions in selecting assets to support these contractual obligations. The following table sets forth the liabilities for market risk benefits, future policy benefits and policyholders’ account balances of certain of our international insurance subsidiaries as of the dates indicated:
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December 31,
(in billions)
Prudential of Japan(1)
Gibraltar Life(2)
Other international insurance subsidiaries, excluding Japan
Other(3)
Total market risk benefits, future policy benefits and policyholders’ account balances(4)
(1) As of December 31, 2025 and 2024, $21.6 billion and $20.3 billion, respectively, of the insurance-related liabilities for Prudential of Japan are associated with USD-denominated products that are coinsured to our domestic insurance operations and supported by USD-denominated assets. As of December 31, 2025 and 2024, $5.6 billion and $4.8 billion, respectively, of the insurance-related liabilities for Prudential of Japan are primarily associated with yen- and USD-denominated products that are coinsured to Gibraltar Reinsurance Company Ltd. (“Gibraltar Re”), a Bermuda-based reinsurance affiliate, and primarily supported by yen- and USD-denominated assets.
(2) As of December 31, 2025 and 2024, $6.8 billion and $6.5 billion, respectively, of the insurance-related liabilities for Gibraltar Life (including PGFL) are associated with U.S. dollar-denominated products that are coinsured to our domestic insurance operations and supported by USD-denominated assets. As of December 31, 2025 and 2024, $31.0 billion and $25.1 billion, respectively, of the insurance-related liabilities for Gibraltar Life (including PGFL) are primarily associated with yen- and USD-denominated products that are coinsured to Gibraltar Re and primarily supported by yen- and USD-denominated assets.
(3) Reflects the impact of intercompany eliminations.
(4) Amounts are reflected gross of affiliated reinsurance recoverables. See Note 13 to the Consolidated Financial Statements for information regarding cash surrender values associated with policyholders’ account balances.
The liabilities presented above are primarily supported by invested assets in our general account. When selecting assets to support these contractual obligations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions. As a result, assets will include both liquid assets, as discussed below, and other assets that we believe adequately support our liabilities.
We believe most of the longer-term recurring pay individual life insurance policies sold by our Japanese operations do not have significant withdrawal risk because policyholders may incur surrender charges and must undergo a new underwriting process to obtain a new insurance policy.
Prudential of Japan and Gibraltar Life sell USD-denominated investment contracts with a market value adjustment feature to mitigate the profitability impact for surrenders, as these contracts may be subject to increased surrenders should the yen depreciate or if interest rates in the U.S. decline relative to Japan. As of December 31, 2025, products with a market value adjustment feature represented $41.5 billion of our Japan operations’ insurance-related liabilities.
Liquid Assets
Liquid assets include cash and cash equivalents, short-term investments, U.S. Treasury securities, fixed maturities that are not designated as held-to-maturity and public equity securities. In addition to access to substantial investment portfolios, our insurance companies’ liquidity is managed through access to a variety of instruments available for funding and/or managing cash flow mismatches, including from time to time those arising from claim levels in excess of projections. Our ability to utilize assets and liquidity between our subsidiaries is limited by regulatory and other constraints. We believe that ongoing operations and the liquidity profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios for each of our insurance subsidiaries.
The following table sets forth the fair value of certain of our domestic insurance operations’ portfolio of liquid assets, as of the dates indicated.
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December 31, 2025
Prudential
Insurance(1)
PLIC
Pruco Life
Total
December 31, 2024
(in billions)
Cash and short-term investments
Fixed maturity investments(2):
High or highest quality
Other than high or highest quality
Subtotal
Public equity securities, at fair value
Total
(1) Represents legal entity view and as such includes both domestic and international activity.
(2) Credit quality is based on NAIC or equivalent rating.
The following table sets forth the fair value of our international insurance operations’ portfolio of liquid assets, as of the dates indicated.
December 31, 2025
Prudential
of Japan
Gibraltar
Life(1)
All
Other(2)
Total
December 31, 2024
(in billions)
Cash and short-term investments
Fixed maturity investments(3):
High or highest quality(4)
Other than high or highest quality
Subtotal
Public equity securities
Total
(1) Includes PGFL.
(2) Represents our international insurance operations, excluding Japan.
(3) Credit quality is based on NAIC or equivalent rating.
(4) As of December 31, 2025, $55.2 billion, or 56%, were invested in government or government agency bonds.
Given the size and liquidity profile of our investment portfolios, we believe that claim experience, including policyholder withdrawals and surrenders, varying from our projections does not constitute a significant liquidity risk. Our ALM process takes into account the expected maturity of investments and expected claim payments as well as the specific nature and risk profile of the liabilities. To the extent we need to pay claims in excess of projections, we may borrow temporarily or sell investments sooner than anticipated to pay these claims, which may result in increased borrowing costs or realized investment gains or losses, including from changes in interest rates or credit spreads. The payment of claims and sale of investments earlier than anticipated would have an impact on the reported level of cash flow from operating, investing, and financing activities, in our financial statements. Historically, there has been no significant variation between the expected maturities of our investments and the payment of claims.
Liquidity associated with other activities
Hedging activities associated with Individual Retirement Strategies
For the portion of our Individual Retirement Strategies’ ALM strategy executed through hedging, we enter into a range of exchange-traded, cleared and other OTC equity and interest rate derivatives in order to hedge certain capital market risks related to more severe market conditions. For a full discussion of our Individual Retirement Strategies’ risk management strategy, see “—Results of Operations by Segment—Retirement Strategies.” This portion of our Individual Retirement Strategies’ ALM strategy requires access to liquidity to meet payment obligations relating to these derivatives, such as payments for periodic settlements, purchases, maturities and terminations. These liquidity needs can vary materially due to, among other items, changes in interest rates, equity markets, mortality and policyholder behavior.
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The hedging portion of our Individual Retirement Strategies’ ALM strategy may also result in derivative related collateral postings to (when we are in a net post position) or from (when we are in a net receive position) counterparties. The net collateral position depends on changes in interest rates and equity markets related to the amount of the exposures hedged. Depending on market conditions, the collateral posting requirements can result in material liquidity needs when we are in a net post position.
Foreign exchange hedging activities
We employ various hedging strategies to manage potential exposure to foreign currency exchange rate movements, particularly those associated with the yen. Our overall yen hedging strategy calibrates the hedge level to preserve the relative contribution of our yen-based business to the Company’s overall return on equity on a leverage neutral basis.
We hold both internal and external hedges primarily to hedge our USD-equivalent equity. These hedges also mitigate volatility in the solvency margins of yen-based subsidiaries resulting from changes in the market value of their USD-denominated investments hedging our USD-equivalent equity attributable to changes in the yen-USD exchange rate.
For additional information regarding our hedging strategy, see “—External and Economic Factors—Impact of Foreign Currency Exchange Rates.”
Cash settlements from these hedging activities result in cash flows between subsidiaries of Prudential Financial and either international-based subsidiaries or external parties. The cash flows are dependent on changes in foreign currency exchange rates and the notional amount of the exposures hedged. For example, a significant yen depreciation over an extended period of time could result in net cash inflows, while a significant yen appreciation could result in net cash outflows. The following tables set forth information about net cash settlements and the net asset or liability resulting from these hedging activities related to the yen and other currencies for the periods indicated.
Year Ended December 31,
Cash Settlements Received (Paid):
(in millions)
Internal Hedges(1)
External Hedges(2)
Total Cash Settlements
As of December 31,
Assets (Liabilities):
(in millions)
Internal Hedges(1)
External Hedges(3)
Total Assets (Liabilities)(4)
(1) Represents internal transactions between international-based and U.S.-based entities. Amounts noted are from the U.S.-based entities’ perspectives.
(2) Includes non-yen related cash settlements received (paid) of ($11) million, primarily denominated in Brazilian real, Australian dollar and Chilean peso and ($9) million, primarily denominated in Brazilian real, Chilean peso and Australian dollar for the years ended December 31, 2025 and 2024, respectively.
(3) Includes non-yen related assets (liabilities) of ($44) million, primarily denominated in Brazilian real, Chilean peso and Australian dollar, and $91 million, primarily denominated in Brazilian real, Chilean peso and Australian dollar, as of December 31, 2025 and 2024, respectively.
(4) As of December 31, 2025, approximately $167 million, $303 million, $291 million and $334 million of the net market values are scheduled to settle in 2026, 2027, 2028 and thereafter, respectively. The net market value of the assets (liabilities) will vary with changing market conditions to the extent there are no corresponding offsetting positions.
PGIM operations
The principal sources of liquidity for our fee-based PGIM businesses include cash flows from asset management, commercial mortgage origination and servicing activities, and internal and external funding facilities. The principal uses of liquidity for our fee-based PGIM businesses include general and administrative expenses, facilitating our commercial mortgage loan business, funding needs of our seed and co-investment portfolio and distributions of dividends and returns of capital to Prudential Financial. The primary liquidity risks for our fee-based PGIM businesses relate to their profitability, which is impacted by market conditions, our investment management performance and client redemptions. We believe the cash flows from our fee-based PGIM businesses are adequate to satisfy the current liquidity requirements of these operations, as well as
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requirements that could arise under reasonably foreseeable stress scenarios, which are monitored through the use of internal measures.
The principal sources of liquidity for our seed and co-investments held in our PGIM businesses are cash flows from investments, cash flows from our fee-based businesses, as described above, borrowing lines from internal sources, including Prudential Financial and Prudential Funding, LLC (“Prudential Funding”), a wholly-owned subsidiary of PICA, and external sources, including PGIM’s limited-recourse credit facility. The principal uses of liquidity for our seed and co-investments include making investments to support business growth and paying interest expense from the internal and external borrowings used to fund those investments. The primary liquidity risks include the inability to sell assets in a timely manner, declines in the value of assets and credit defaults.
Alternative Sources of Liquidity
In addition to asset-based financing as discussed below, Prudential Financial and certain subsidiaries have access to other sources of liquidity, including syndicated, unsecured committed credit facilities, membership in the Federal Home Loan Bank of New York, a funding agreement facility with the Federal Agricultural Mortgage Corporation (“Farmer Mac”), commercial paper programs and contingent financing facilities in the form of facility agreements. For additional information regarding these sources of liquidity, see Note 18 to the Consolidated Financial Statements.
Asset-based Financing
We conduct asset-based or secured financing within our insurance and other subsidiaries, including transactions such as securities lending, committed and uncommitted repurchase agreements and mortgage dollar rolls, to earn spread income, to borrow funds, or to facilitate trading activity. These programs are primarily driven by portfolio holdings of securities that are lendable based on counterparty demand for these securities in the marketplace. The collateral received in connection with these programs is primarily used to purchase securities in the short-term spread portfolios of our insurance entities. Investments held in the short-term spread portfolios include cash and cash equivalents, short-term investments (primarily corporate bonds), mortgage loans, private placements, and other fixed and floating rate structured credit assets (CLOs), with a weighted average life at time of purchase by the short-term portfolios of five years or less. These short-term portfolios are subject to specific investment policy statements, which among other things, do not allow for significant asset/liability interest rate duration mismatch, and are managed to a weighted average maturity that cannot exceed 99 days beyond the weighted average maturity of the lending book, which is overnight.
The following table sets forth our liabilities under asset-based or secured financing programs as of the dates indicated:
December 31, 2025
December 31, 2024
PFI
Excluding
Closed Block Division
Closed
Block Division
Consolidated
PFI
Excluding
Closed Block Division
Closed
Block Division
Consolidated
($ in millions)
Securities sold under agreements to repurchase
Cash collateral for loaned securities
Securities sold but not yet purchased
Total(1)(2)
Portion of above securities that may be returned to the Company overnight requiring immediate return of the cash collateral
Weighted average maturity, in days(3)
(1) The daily average outstanding balance for the years ended December 31, 2025 and 2024 was $14,831 million and $11,196 million, respectively, for PFI excluding the Closed Block division, and $3,359 million and $3,671 million, respectively, for the Closed Block division.
(2) Includes utilization of external funding facilities for PGIM’s commercial mortgage origination business.
(3) Excludes securities that may be returned to the Company overnight.
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As of December 31, 2025, our domestic insurance entities had assets eligible for the asset-based or secured financing programs of $100.6 billion, of which $17.2 billion were on loan. Taking into account market conditions and outstanding loan balances as of December 31, 2025, we believe approximately $14.0 billion of the remaining eligible assets are readily lendable, including approximately $11.6 billion relating to PFI excluding the Closed Block division, of which $3.9 billion relates to certain separate accounts and may only be used for financing activities related to those accounts, and the remaining $2.4 billion relating to the Closed Block division.
Financing Activities
As of December 31, 2025, total short-term and long-term debt of the Company on a consolidated basis was $20.3 billion, an increase of $0.2 billion from December 31, 2024. The following table sets forth total consolidated borrowings of the Company as of the dates indicated. We may, from time to time, seek to redeem or repurchase our outstanding debt securities through open market purchases, individually negotiated transactions or otherwise. Any such actions will depend on prevailing market conditions, our liquidity position and other factors.
December 31, 2025
December 31, 2024
Prudential
Financial
Subsidiaries
Consolidated
Prudential
Financial
Subsidiaries
Consolidated
(in millions)
General obligation short-term debt:
Commercial paper
Current portion of long-term debt
Subtotal
General obligation long-term debt:
Senior debt
Junior subordinated debt (1)
Surplus notes(2)
Subtotal
Total general obligations
Limited and non-recourse borrowings(3)
Short-term debt
Current portion of long-term debt
Long-term debt
Subtotal
Total borrowings
(1) As of December 31, 2025 and 2024, includes $0 million and $1,000 million, respectively, of hybrid securities classified as operating debt.
(2) Amounts are net of assets under set-off arrangements of $15,744 million and $14,748 million as of December 31, 2025 and 2024, respectively. Amounts include credit-linked note structures used to finance Guideline AXXX reserves for business reinsured to Somerset Re in March 2024.
(3) Limited and non-recourse borrowing primarily represents mortgage debt of our subsidiaries that has recourse only to real estate investment property of $216 million and $185 million as of December 31, 2025 and 2024, respectively, and a draw on a credit facility with recourse only to collateral pledged by the Company of $255 million as of both December 31, 2025 and 2024.
As of December 31, 2025 and 2024, the Company was in compliance with all debt covenants related to the borrowings in the table above. For additional information regarding the Company’s short- and long-term debt obligations, see Note 18 to the Consolidated Financial Statements.
Based on the use of proceeds, we classify our borrowings as capital debt and operating debt. Capital debt, which is debt utilized to meet the capital requirements of our businesses, was $14.1 billion and $13.8 billion as of December 31, 2025 and 2024, respectively. Operating debt was $5.7 billion and $5.9 billion as of December 31, 2025 and 2024, respectively, and is utilized for business funding to meet specific purposes, which may include activities associated with our PGIM and AIQ businesses. Operating debt also consists of debt issued to finance specific portfolios of investment assets, the proceeds from which will service the debt. Specifically, this includes assets supporting reserve requirements under Regulation XXX and Guideline AXXX as described below, as well as funding for institutional and insurance company portfolio cash flow timing differences.
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In December 2025, the Company entered into an agreement with an external counterparty that allows for the issuance by PICA of up to $500 million in principal amount of surplus notes in return for a corresponding amount of credit-linked notes issued by a special-purpose wholly owned subsidiary of the Company. As of December 31, 2025, $287 million in principal amount of these surplus notes and credit-linked notes were outstanding. The PICA surplus notes are subordinated to policyholder obligations, and the payment of principal and interest on the surplus notes can only be made with prior insurance regulatory approval. PICA holds these credit-linked notes as assets supporting statutory requirements and can redeem the principal amount of the outstanding credit-linked notes for cash upon the occurrence of specified liquidity stress events affecting PICA. Under the agreements, the external counterparty has agreed to fund any such payments under these credit-linked notes in return for the receipt of fees. To date, no such payments under these credit-linked notes have been required. The surplus notes and credit-linked notes eliminate upon consolidation and are not reflected in the Company’s financial statements.
Prudential Financial Borrowings
Long-term borrowings are conducted primarily by Prudential Financial. It borrows these funds to meet its capital and other funding needs, as well as the capital and funding needs of its subsidiaries. Prudential Financial maintains a shelf registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a “Well-Known Seasoned Issuer” under SEC rules, Prudential Financial’s shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity.
Prudential Financial’s borrowings increased $0.1 billion from December 31, 2024, primarily driven by $750 million in senior unsecured notes issuances and $369 million in retail notes issuances, offset by $1 billion in debt redemptions. In March 2025, the Company issued $750 million in aggregate principal amount of 5.20% senior unsecured notes due in March 2035. In May 2025, the Company redeemed, in full, $1.0 billion in aggregate principal amount of 5.37% junior subordinated notes due in 2045. For additional information regarding long-term debt, see Note 18 to the Consolidated Financial Statements.
Subsidiary Borrowings
Subsidiary borrowings principally consist of commercial paper borrowings by Prudential Funding, asset-based financing and real estate investment financing. Borrowings of our subsidiaries increased $38 million from December 31, 2024.
Term and Universal Life Reserve Financing
For business written prior to the implementation of principle-based reserving, Regulation XXX and Guideline AXXX require domestic life insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other individual life policies with similar guarantees. Many market participants believe that these levels of reserves are excessive relative to the levels reasonably required to maintain solvency for moderately adverse experience. The difference between the statutory reserve and the amount necessary to maintain solvency for moderately adverse experience is considered to be the non-economic portion of the statutory reserve.
We use captive reinsurance subsidiaries to finance the portion of the statutory reserves required to be held by our domestic life insurance companies under Regulation XXX and Guideline AXXX that we consider to be non-economic. The financing arrangements involve the reinsurance of term and universal life business to our captive reinsurers and the issuance of surplus notes by those captives that are treated as capital for statutory purposes. These surplus notes are subordinated to policyholder obligations, and the payment of principal and interest on the surplus notes can only be made with prior insurance regulatory approval.
We have entered into agreements with external counterparties providing for the issuance of surplus notes by our captive reinsurers in return for the receipt of credit-linked notes (“Credit-Linked Note Structures”). Under the agreements, the captive receives in exchange for the surplus notes one or more credit-linked notes issued by a special-purpose affiliate of the Company with an aggregate principal amount equal to the surplus notes outstanding. The captive holds the credit-linked notes as assets supporting Regulation XXX or Guideline AXXX non-economic reserves, as applicable. The captive can redeem the principal amount of the outstanding credit-linked notes for cash upon the occurrence of, and in an amount necessary to remedy, a specified liquidity stress event affecting the captive. Under the agreements, the external counterparties have agreed to fund any such payments under the credit-linked notes in return for the receipt of fees. To date, no such payments under the credit-linked notes have been required. Under these transactions, because valid rights of set-off exist, interest and principal payments on the surplus notes and on the credit-linked notes are settled on a net basis, and the surplus notes are reflected in the Company’s total consolidated borrowings on a net basis. As a result of reinsurance transactions executed with Somerset Re and Wilton Re, we have eliminated Credit-Linked Note Structures supporting Guideline AXXX for our remaining business. In November 2024, we
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restructured a series of internal captive reinsurance arrangements resulting in the consolidation of Credit-Linked Note Structures supporting Regulation XXX.
As of December 31, 2025, we had Credit-Linked Note Structures with an aggregate issuance capacity of $8,000 million, of which $7,660 million was outstanding, as compared to an aggregate issuance capacity of $8,000 million, of which $7,560 million was outstanding, as of December 31, 2024. These amounts exclude credit-linked note structures used to finance Guideline AXXX reserves for business reinsured to Somerset Re in March 2024.
As of December 31, 2025, we also had outstanding an aggregate of $100 million of debt issued for the purpose of financing Regulation XXX non-economic reserves. In addition, as of December 31, 2025, for purposes of financing Guideline AXXX non-economic reserves, one captive had $3,982 million of surplus notes outstanding that were issued to affiliates.
The Company introduced updated versions of its individual life products in conjunction with the requirement to adopt principle-based reserving by January 1, 2020. These updated products are currently priced to support the principle-based statutory reserve level without the need for reserve financing.
Off-Balance Sheet Arrangements
See additional information regarding off-balance sheet arrangements in Note 18 and other commitments in Note 25 to the Consolidated Financial Statements.
We do not have retained or contingent interests in assets transferred to unconsolidated entities, or variable interests in unconsolidated entities or other similar transactions, arrangements or relationships that serve as credit, liquidity or market risk support, that we believe are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or our access to or requirements for capital resources. In addition, we do not have relationships with any unconsolidated entities that are contractually limited to narrow activities that facilitate our transfer of or access to associated assets.
Ratings
Financial strength ratings (which are sometimes referred to as “claims-paying” ratings) and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. Our credit ratings are also important for our ability to raise capital through the issuance of debt and for the cost of such financing. Nationally Recognized Statistical Ratings Organizations continually review the financial performance and financial condition of the entities they rate, including Prudential Financial and its rated subsidiaries.
A downgrade in the credit or financial strength ratings of Prudential Financial or its rated subsidiaries could potentially, among other things, limit our ability to market products, reduce our competitiveness, increase the number or value of policy surrenders and withdrawals, increase our borrowing costs and potentially make it more difficult to borrow funds, adversely affect the availability of financial guarantees, such as letters of credit, cause additional collateral requirements or other required payments under certain agreements, allow counterparties to terminate derivative agreements and/or hurt our relationships with creditors, distributors, or trading counterparties thereby potentially negatively affecting our profitability, liquidity, and/or capital. In addition, we consider our own risk of non-performance in determining the fair value of our liabilities. Therefore, changes in our credit or financial strength ratings may affect the fair value of our liabilities.
Financial strength ratings represent the opinions of rating agencies regarding the financial ability of an insurance company to meet its obligations under an insurance policy. Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its indebtedness. The following table summarizes the ratings for Prudential Financial and certain of its subsidiaries as of the date of this filing:
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Best(1)
Moody’s(3)
Fitch(4)
Last review date
Current outlook
Stable
Stable
Stable
Stable
Financial Strength Ratings:
The Prudential Insurance Company of America
Pruco Life Insurance Company
Pruco Life Insurance Company of New Jersey
The Prudential Life Insurance Company Ltd. (Prudential of Japan)
Gibraltar Life Insurance Company, Ltd.
The Prudential Gibraltar Financial Life Insurance Co. Ltd
Credit Ratings:
Prudential Financial, Inc.:
Short-term borrowings
AMB-1
Long-term senior debt
Junior subordinated long-term debt
bbb
BBB+
Baa1
BBB
The Prudential Insurance Company of America:
Capital and surplus notes
Prudential Funding, LLC:
Short-term debt
AMB-1
Long-term senior debt
PRICOA Global Funding I:
Long-term senior debt
*“NR” indicates not rated.
(1) A.M. Best Company, which we refer to as A.M. Best, financial strength ratings for insurance companies range from “A++ (superior)” to “D (Poor).” A rating of A+ is the second highest of thirteen rating categories. A.M. Best long-term credit ratings range from “aaa (exceptional)” to “c (Poor).” A.M. Best short-term credit ratings range from “AMB-1+,” which represents the strongest ability to repay short-term debt obligations, to “AMB-4 (Questionable).”
(2) Standard & Poor’s Rating Services, which we refer to as S&P, financial strength ratings for insurance companies range from “AAA (extremely strong)” to “D (default).” A rating of AA- is the fourth highest of twenty-two rating categories. S&P’s long-term issue credit ratings range from “AAA (extremely strong)” to “D (default).” S&P short-term ratings range from “A-1 (extremely strong)” to “D (default).”
(3) Moody’s Investors Service, Inc., which we refer to as Moody’s, insurance financial strength ratings range from “Aaa (highest quality)” to “C (lowest).” A rating of Aa3 is the fourth highest of twenty-one rating categories. Numeric modifiers are used to refer to the ranking within the group—with 1 being the highest and 3 being the lowest. These modifiers are used to indicate relative strength within a category. Moody’s long-term credit ratings range from “Aaa (highest)” to “C (default).” Moody’s short-term ratings range from “Prime-1 (P-1),” which represents a superior ability for repayment of short-term debt obligations, to “Prime-3 (P-3),” which represents an acceptable ability for repayment of such obligations. Issuers rated “Not Prime” do not fall within any of the Prime rating categories.
(4) Fitch Ratings Inc., which we refer to as Fitch, financial strength ratings range from “AAA (exceptionally strong)” to “C (distressed).” A rating of AA- is the fourth highest of twenty-one rating categories. Fitch long-term credit ratings range from “AAA (highest credit quality),” which denotes exceptionally strong capacity for timely payment of financial commitments, to “D (default).” Short-term ratings range from “F1+ (highest credit quality)” to “D (default).”
The ratings set forth above reflect current opinions of each rating agency. Each rating should be evaluated independently of any other rating. These ratings are not directed toward shareholders and do not in any way reflect evaluations of the safety and security of the Common Stock. These ratings are reviewed periodically and may be changed at any time by the rating agencies. As a result, we cannot assure stakeholders that we will maintain our current ratings in the future.
Rating agencies use an “outlook” statement for both industry sectors and individual companies.
For an industry, an outlook generally indicates the potential for rating actions among the majority of companies in the sector over the next 12 to 18 months. AM Best, Fitch, Moody’s, and S&P currently have a Stable outlook on the U.S. life insurance sector which implies that the rating agency expects the majority of ratings to remain unchanged.
For a particular company, an outlook generally indicates a medium- or long-term trend (generally six months to two years) in credit fundamentals which, if continued, may lead to a rating change. These indicators are not necessarily a precursor of a rating change nor do they preclude a rating agency from changing a rating at any time without notice. A.M. Best, Fitch, Moody’s and S&P currently have the Company’s ratings on Stable outlook.
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Requirements to post collateral or make other payments because of ratings downgrades under certain agreements, including derivative agreements, can be satisfied in cash or by posting permissible securities held by the subsidiaries subject to the agreements. In addition, a ratings downgrade by A.M. Best to “A-” for our domestic life insurance companies would require PICA to either post collateral or a letter of credit in the amount of approximately $0.8 billion, based on the level of statutory reserves related to the variable annuity business acquired from Allstate. We believe that the posting of such collateral would not be a material liquidity event for PICA .
General Account Investments
We maintain diversified investment portfolios in our general account to support our liabilities to customers as well as our other general liabilities. Investments and other assets that do not support general account liabilities, and are therefore excluded from our general account, are as follows:
• assets of our derivative operations;
• assets of our investment management operations, including investments managed for third parties; and
• those assets classified as “Separate account assets” on our balance sheet.
A portion of our general account investments support customer liabilities reinsured under coinsurance with funds withheld and modified coinsurance arrangements. With these reinsurance arrangements, we retain legal ownership of the assets (collectively, the “Funds Withheld") which remain on our Consolidated Statements of Financial Position, while the economic benefits and investment risk associated with the Funds Withheld assets ultimately inure to the reinsurer. The composition of the Funds Withheld assets is subject to investment guidelines specific to the reinsurance treaties, which may differ from the investment guidelines we set for our General Account, excluding Funds Withheld. The investment guidelines are in place to ensure the investment risks associated with Funds Withheld portfolios are appropriately managed. See Note 15 to the Consolidated Financial Statements for additional information regarding our material reinsurance agreements.
The general account portfolios, excluding Funds Withheld, are managed pursuant to the distinct objectives and investment policy statements of PFI excluding the Closed Block division and Funds Withheld, and of the Closed Block division. The primary investment objectives of PFI excluding the Closed Block division and Funds Withheld include:
• hedging and otherwise managing the market risk characteristics of the major product liabilities and other obligations of the Company;
• optimizing investment income yield within risk constraints over time; and
• for certain portfolios, optimizing total return, including both investment income yield and capital appreciation, within risk constraints over time, while managing the market risk exposures associated with the corresponding product liabilities.
We pursue our objective to optimize investment income yield for PFI excluding the Closed Block division and Funds Withheld over time through:
• the investment of net operating cash flows, including new product premium inflows, and proceeds from investment sales, repayments and prepayments into investments with attractive risk-adjusted yields; and
• the sale of investments, where appropriate, either to meet various cash flow needs or to manage the portfolio's risk exposure profile with respect to duration, credit, currency and other risk factors, while considering the impact on taxes and capital.
The primary investment objectives of the Closed Block division include:
• providing for the reasonable dividend expectations of the participating policyholders within the Closed Block division; and
• optimizing total return, including both investment income yield and capital appreciation, within risk constraints, while managing the market risk exposures associated with the major product liabilities in the Closed Block division.
Our portfolio management approach, while emphasizing our investment income yield and asset/liability risk management objectives, also takes into account the capital and tax implications of portfolio activity and our assertions regarding our ability and intent to hold debt securities to recovery. For a further discussion of our allowance for credit losses, including our
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assertions regarding any intention or requirement to sell debt securities before anticipated recovery, see “—Realized Investment Gains and Losses—Credit Losses” below.
Management of Investments
The Investment Committee of our Board of Directors (“Board”) oversees our proprietary investments, including our general account portfolios excluding Funds Withheld, and regularly reviews performance and risk positions. Our Chief Investment Officer Organization (“CIO Organization”) develops investment policies subject to risk limits proposed by our Risk Management group for the general account portfolios excluding Funds Withheld of our domestic and international insurance subsidiaries and directs and oversees management of the general account portfolios within risk limits approved annually by the Investment Committee.
The CIO Organization, including related functions within our insurance subsidiaries, works closely with product actuaries and Risk Management to understand the characteristics of our products and their associated market risk exposures. This information is incorporated into the development of target asset portfolios that manage market risk exposures associated with the liability characteristics and establish investment risk exposures, within tolerances prescribed by Prudential’s investment risk limits, on which we expect to earn an attractive risk-adjusted return. We develop asset strategies for specific classes of product liabilities and attributed or accumulated surplus, each with distinct risk characteristics. Market risk exposures associated with the liabilities include interest rate risk, which is addressed through the duration characteristics of the target asset mix, and currency risk, which is addressed by the currency profile of the target asset mix. In certain of our smaller markets outside of the U.S. and Japan, capital markets limitations hinder our ability to hedge interest rate exposure to the same extent we do for our U.S. and Japan businesses and lead us to accept a higher degree of interest rate risk in these smaller portfolios. General account portfolios typically include allocations to credit and other investment risks as a means to enhance investment yields and returns over time.
Most of our products can be categorized into the following three classes:
• interest-crediting products for which the rates credited to customers are periodically adjusted to reflect market and competitive forces and actual investment experience, such as fixed annuities and universal life insurance;
• participating individual and experience-rated group products in which customers participate in actual investment and business results through annual dividends, interest or return of premium; and
• products with fixed or guaranteed terms, such as traditional whole life and endowment products, guaranteed investment contracts (“GICs”), funding agreements and payout annuities.
Our total investment portfolio is composed of a number of operating portfolios. Each operating portfolio backs a specific set of liabilities, and the portfolios have a target asset mix that supports the liability characteristics, including duration, cash flow, liquidity needs and other criteria. As of December 31, 2025, the average duration of our domestic general account investment portfolios attributable to PFI excluding the Closed Block division and Funds Withheld, including the impact of derivatives, was between 5 and 6 years. As of December 31, 2025, the average duration of our international general account portfolios attributable to our Japanese insurance operations, including the impact of derivatives, was between 8 and 9 years and represented a blend of yen-denominated and U.S. dollar and Australian dollar-denominated investments, which have distinct average durations supporting the insurance liabilities we have issued in those currencies. Our asset/liability management process has enabled us to manage our portfolios through several market cycles.
We implement our portfolio strategies primarily through investment in a broad range of fixed income assets, including government and agency securities, public and private corporate bonds and structured securities and mortgage loans. In addition, we hold allocations of non-coupon investments, which include equity securities and other invested assets such as limited partnerships and limited liability companies (“LPs/LLCs”), real estate held through direct ownership, derivative instruments, and seed money investments in separate accounts.
We manage our public fixed maturity portfolio to a risk profile directed or overseen by the CIO Organization and Risk Management groups and to a profile that also reflects the market environments impacting both our domestic and international insurance portfolios. The return that we earn on the portfolio will be reflected in investment income and in realized gains or losses on investments.
We use privately-placed corporate debt securities and mortgage loans, which consist of mortgages on diversified properties in terms of geography, property type and borrowers, to enhance the yield on our portfolios and to improve the overall diversification of the portfolios. Private placements typically offer enhanced yields due to an illiquidity premium and generally
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offer enhanced credit protection in the form of covenants. Our origination capability offers the opportunity to lead transactions and gives us the opportunity for better terms, including covenants and call protection, and to take advantage of innovative deal structures.
Derivative strategies are employed in the context of our risk management framework to enhance our ability to manage interest rate and currency risk exposures of the asset portfolio relative to the liabilities and to manage credit and equity positions in the investment portfolios. For a discussion of our risk management process, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” below.
Our portfolio asset allocation reflects our emphasis on diversification across asset classes, sectors and issuers. The CIO Organization, directly and through related functions within the insurance subsidiaries, implements portfolio strategies primarily through Prudential’s PGIM segment. Activities of the PGIM segment on behalf of the general account portfolios are directed and overseen by the CIO Organization and monitored by Risk Management for compliance with investment risk limits.
Portfolio Composition
Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, policy loans and non-coupon investments, which include equity securities and other invested assets such as LPs/LLCs, real estate held through direct ownership, derivative instruments and seed money investments in separate accounts. The composition of our general account reflects, within the discipline provided by our risk management approach, our need for competitive results and the selection of diverse investment alternatives available primarily through our PGIM segment. The size of our portfolio enables us to invest in asset classes that may be unavailable to the typical investor.
The following tables set forth the composition of our general account investment portfolio apportioned between PFI excluding the Closed Block division and Funds Withheld, the Closed Block division, and Funds Withheld as of the dates indicated:
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December 31, 2025
PFI Excluding
Closed Block Division and Funds Withheld
Closed Block Division
Funds Withheld
Total
($ in millions)
Fixed maturities:
Public, available-for-sale, at fair value
Private, available-for-sale, at fair value
Fixed maturities, trading, at fair value
Assets supporting experience-rated contractholder liabilities, at fair value
Equity securities, at fair value
Commercial mortgage and other loans, at book value, net of allowance
Policy loans, at outstanding balance
Other invested assets, net of allowance(1)
Short-term investments, net of allowance
Total general account investments
Invested assets of other entities and operations(2)
Total investments
December 31, 2024
PFI Excluding
Closed Block Division and Funds Withheld
Closed Block Division
Funds Withheld
Total
($ in millions)
Fixed maturities:
Public, available-for-sale, at fair value
Private, available-for-sale, at fair value
Fixed maturities, trading, at fair value
Assets supporting experience-rated contractholder liabilities, at fair value
Equity securities, at fair value
Commercial mortgage and other loans, at book value, net of allowance
Policy loans, at outstanding balance
Other invested assets, net of allowance(1)
Short-term investments, net of allowance
Total general account investments
Invested assets of other entities and operations(2)
Total investments
(1) Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments. For additional information regarding these investments, see “—Other Invested Assets” below.
(2) Includes invested assets of our investment management and derivative operations. Excludes assets of our investment management operations that are managed for third parties and those assets classified as “Separate account assets” on our Consolidated Statements of Financial Position. For additional information regarding these investments, see “—Invested Assets of Other Entities and Operations” below.
The increase in general account investments attributable to PFI excluding the Closed Block division and Funds Withheld in 2025 was primarily due to net business inflows, a net decrease in U.S. interest rates and the translation impact of the U.S. dollar weakening against the yen, partially offset by assets transferred due to the Prismic Re International transaction and an increase in Japan interest rates. For information regarding the methodology used in determining the fair value of our fixed maturities, see Note 6 to the Consolidated Financial Statements.
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As of December 31, 2025 and 2024, 39% and 42%, respectively, of our general account investments attributable to PFI excluding the Closed Block division and Funds Withheld related to our Japanese insurance operations. The following table sets forth the composition of the investments of our Japanese insurance operations’ general account, as of the dates indicated:
December 31,
Japanese Insurance Operations
(in millions)
Fixed maturities:
Public, available-for-sale, at fair value
Private, available-for-sale, at fair value
Fixed maturities, trading, at fair value
Assets supporting experience-rated contractholder liabilities, at fair value
Equity securities, at fair value
Commercial mortgage and other loans, at book value, net of allowance
Policy loans, at outstanding balance
Other invested assets(1)
Short-term investments, net of allowance
Total Japanese general account investments
(1) Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments.
The decrease in general account investments related to our Japanese insurance operations in 2025 was primarily due to the Prismic Re International transaction and an increase in Japan interest rates, partially offset by net business inflows and a decrease in U.S. interest rates.
As of December 31, 2025 , our Japanese insurance operations had $95.7 billion, at carrying value, of investments denominated in U.S. dollars, including $1.7 billion that were hedged to yen through third-party derivative contracts and $86.6 billion that support liabilities denominated in U.S. dollars, with the remainder constituting part of the hedging of foreign currency exchange rate exposure to U.S. dollar-equivalent equity. As of December 31, 2024, our Japanese insurance operations had $88.1 billion, at carrying value, of investments denominated in U.S. dollars, including $1.0 billion that were hedged to yen through third-party derivative contracts and $80.5 billion that support liabilities denominated in U.S. dollars, with the remainder constituting part of the hedging of foreign currency exchange rate exposure of U.S. dollar-equivalent equity. The $7.6 billion increase in the carrying value of U.S. dollar-denominated investments from December 31, 2024 was primarily attributable to portfolio growth as a result of net business inflows and a net decrease in U.S. interest rates, partially offset by the Prismic Re International transaction.
Our Japanese insurance operations had $1.9 billion and $2.5 billion, at carrying value, of investments denominated in Australian dollars that support liabilities denominated in Australian dollars as of December 31, 2025 and 2024, respectively. The $0.6 billion decrease in the carrying value of Australian dollar-denominated investments from December 31, 2024 was primarily attributable to run-off of the portfolio. For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations and a discussion of our yen hedging strategy, see “ —External and Economic Factors —Impact of Foreign Currency Exchange Rates” above.
Investment Results
The following tables set forth the investment results of our general account apportioned between PFI excluding the Closed Block division and Funds Withheld, the Closed Block division and Funds Withheld, for the periods indicated. The yields are based on net investment income as reported under U.S. GAAP and as such do not include certain interest-related items, such as settlements of duration management swaps which are included in “Realized investment gains (losses), net.”
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Year Ended December 31, 2025
PFI Excluding Closed Block Division, Funds Withheld and Japanese Insurance Operations
Japanese Insurance Operations
PFI Excluding Closed Block Division and Funds Withheld
Closed Block Division
Funds Withheld
Total(5)
Yield(1)
Amount
Yield(1)
Amount
Yield(1)
Amount
Amount
Amount
Amount
($ in millions)
Fixed maturities(2)
Assets supporting experience-rated contractholder liabilities
Equity securities
Commercial mortgage and other loans
Policy loans
Short-term investments and cash equivalents
Gross investment income
Investment expenses
Investment income after investment expenses
Other invested assets(3)
Investment results of other entities and operations(4)
Total net investment income
Year Ended December 31, 2024
PFI Excluding Closed Block Division, Funds Withheld and Japanese Insurance Operations
Japanese Insurance Operations
PFI Excluding Closed Block Division and Funds Withheld
Closed Block Division
Funds Withheld
Total(5)
Yield(1)
Amount
Yield(1)
Amount
Yield(1)
Amount
Amount
Amount
Amount
($ in millions)
Fixed maturities(2)
Assets supporting experience-rated contractholder liabilities
Equity securities
Commercial mortgage and other loans
Policy loans
Short-term investments and cash equivalents
Gross investment income
Investment expenses
Investment income after investment expenses
Other invested assets(3)
Investment results of other entities and operations(4)
Total net investment income
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Year Ended December 31, 2023
PFI Excluding Closed Block Division, Funds Withheld and Japanese Insurance Operations
Japanese Insurance Operations
PFI Excluding Closed Block Division and Funds Withheld
Closed Block Division
Funds Withheld
Total(5)
Yield(1)
Amount
Yield(1)
Amount
Yield(1)
Amount
Amount
Amount
Amount
($ in millions)
Fixed maturities(2)
Assets supporting experience-rated contractholder liabilities
Equity securities
Commercial mortgage and other loans
Policy loans
Short-term investments and cash equivalents
Gross investment income
Investment expenses
Investment income after investment expenses
Other invested assets(3)
Investment results of other entities and operations(4)
Total net investment income
(1) The denominator in the yield percentage is based on quarterly average carrying values for all asset types except for fixed maturities which are based on amortized cost, net of allowance. Amounts for fixed maturities, short-term investments and cash equivalents are also netted for securities lending activity (i.e., income netted for rebate expenses and asset values netted for securities lending liabilities). A yield is not presented for other invested assets as it is not considered a meaningful measure of investment performance. Yields exclude investment income and assets related to other invested assets. The year ended December 31, 2024 has been updated to reflect the correction of an error.
(2) Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading, which are included in other invested assets.
(3) Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments, fixed maturities classified as trading and other miscellaneous investments.
(4) Includes net investment income of our investment management operations.
(5) The total yield excluding Funds Withheld was 4.29%, 4.22% and 4.01% for the years ended December 31, 2025, 2024 and 2023, respectively.
The increase in investment income after investment expenses yield attributable to our general account investments, excluding the Closed Block division, Funds Withheld and the Japanese insurance operations’ portfolios for 2025 compared to 2024 was primarily the result of higher fixed income reinvestment rates.
The increase in investment income after investment expenses yield attributable to the Japanese insurance operations’ portfolio for 2025 compared to 2024 was primarily the result of higher fixed income reinvestment rates.
Both the U.S. dollar-denominated and Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts provide a yield that is substantially higher than the yield on comparable yen-denominated fixed maturities. The average amortized cost of U.S. dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was $71.4 billion and $67.0 billion, for the years ended December 31, 2025 and 2024, respectively. The majority of U.S. dollar-denominated fixed maturities support liabilities that are denominated in U.S. dollars. The average amortized cost of Australian dollar-denominated fixed maturities that are not hedged to yen through third-party derivative contracts was $2.0 billion and $3.1 billion, for the years ended December 31, 2025 and 2024, respectively. The majority of Australian dollar-denominated fixed maturities support liabilities that are denominated in Australian dollars. For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations, see “— External and Economic Factors —Impact of Foreign Currency Exchange Rates” above.
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Realized Investment Gains and Losses
The following table sets forth “Realized investment gains (losses), net” of our general account apportioned between PFI excluding the Closed Block division and Funds Withheld, the Closed Block division and Funds Withheld, by investment type for the periods indicated:
Years Ended December 31,
(in millions)
PFI excluding Closed Block Division and Funds Withheld(4):
Realized investment gains (losses), net:
(Addition to) release of allowance for credit losses on fixed maturities
Write-downs on fixed maturities(1)
Net gains (losses) on sales and maturities
Fixed maturity securities(2)
(Addition to) release of allowance for credit losses on loans
Write-downs on mortgage and other loans
Net gains (losses) on sales and maturities
Commercial mortgage and other loans
Derivatives
OTTI losses on other invested assets recognized in earnings
(Addition to) release of allowance for credit losses on other invested assets
Other net gains (losses)
Other
Subtotal
Investment results of other entities and operations(3)
Subtotal — PFI excluding Closed Block Division and Funds Withheld(4)
Closed Block Division:
Realized investment gains (losses), net:
(Addition to) release of allowance for credit losses on fixed maturities
Write-downs on fixed maturities(1)
Net gains (losses) on sales and maturities
Fixed maturity securities(2)
(Addition to) release of allowance for credit losses on loans
Write-downs on mortgage loans
Net gains (losses) on sales and maturities
Commercial mortgage and other loans
Derivatives
OTTI losses on other invested assets recognized in earnings
(Addition to) release of allowance for credit losses on other invested assets
Other net gains (losses)
Other
Subtotal — Closed Block Division
Funds Withheld(4):
Realized investment gains (losses), net:
(Addition to) release of allowance for credit losses on fixed maturities
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Write-downs on fixed maturities(1)
Net gains (losses) on sales and maturities
Fixed maturity securities(2)
Commercial mortgage and other loans
Derivatives
(Addition to) release of allowance for credit losses on other invested assets
Other net gains (losses)
Other
Subtotal — Funds Withheld(4)
PFI realized investment gains (losses), net
(1) Amounts represent write-downs of credit adverse securities, securities where it is more likely than not the Company will be required to sell prior to the recovery of the amortized cost basis and securities actively marketed for sale.
(2) Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading.
(3) Includes “realized investment gains (losses), net” of our investment management operations.
(4) Prior period amounts have been updated to conform to current period presentation.
The following analysis reflects realized gains (losses) attributable to PFI excluding Closed Block Division and Funds Withheld.
2025 to 2024 Annual Comparison. Net losses on sales and maturities of fixed maturity securities were $251 million for the year ended December 31, 2025 primarily driven by net losses on sales in a higher interest rate environment, partially offset by net gains on assets transferred upon execution of the reinsurance transaction with Prismic Re International and the impact of foreign currency exchange rate movements on U.S. dollar-denominated securities that matured or were sold within our International Businesses. Net losses on sales and maturities of fixed maturity securities were $1,037 million for the year ended December 31, 2024 primarily driven by net losses on sales in a higher interest rate environment, partially offset by the impact of foreign currency exchange rate movements on U.S. dollar-denominated securities that matured or were sold within our International Businesses.
Net realized losses on derivative instruments of $1,792 million for the year ended December 31, 2025, primarily included:
• $956 million of net losses on product-related hedge positions and related embedded derivatives including those unfavorably impacted by the annual review and update of assumptions and other refinements within Individual Life; and
• $767 million of losses on foreign currency hedges primarily due to U.S. dollar depreciation versus foreign currencies.
Net realized gains on derivative instruments of $78 million for the year ended December 31, 2024 , primarily included:
• $682 million of net gains on product-related hedge positions and related embedded derivatives;
• $513 million of gains on foreign currency hedges primarily due to U.S. dollar appreciation versus foreign currencies;
• $100 million of gains on synthetic GICs; and
• $94 million of gains on credit default swaps due to credit spreads tightening.
Partially offsetting these gains were:
• $1,311 million of losses on interest rate derivatives due to increases in swap and U.S. Treasury rates.
For a discussion of living benefit guarantees and related hedge positions in our Individual Retirement Strategies business, see “—Results of Operations by Segment—Retirement Strategies” above.
Credit Losses
The level of credit losses generally reflects current and expected economic conditions and is expected to increase when economic conditions worsen and to decrease when economic conditions improve. Historically, the causes of credit losses have been specific to each individual issuer and have not directly resulted in credit losses to other securities within the same industry
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or geographic region. We may also realize additional credit and interest rate-related losses through sales of investments pursuant to our credit risk and portfolio management objectives.
We maintain separate monitoring processes for public and private fixed maturities and create watch lists to highlight securities that require special scrutiny and management. For private placements, our credit and portfolio management processes help ensure prudent controls over valuation and management. We have separate pricing and authorization processes to establish “checks and balances” for new investments. We apply consistent standards of credit analysis and due diligence for all transactions, whether they originate through our own in-house staff or through agents. Our regional offices closely monitor the portfolios in their regions. We set all valuation standards centrally, and we assess the fair value of all investments quarterly. Our public and private fixed maturity investment managers formally review all public and private fixed maturity holdings on a quarterly basis and more frequently when necessary to identify potential credit deterioration whether due to ratings downgrades, unexpected price variances and/or company or industry-specific concerns.
For LPs/LLCs accounted for using the equity method and for wholly-owned investment real estate, the carrying value of these investments is written down or impaired to fair value when a decline in value is considered to be other-than-temporary. For additional information regarding our OTTI policies, see Note 2 to the Consolidated Financial Statements.
General Account Investments of PFI excluding Closed Block Division and Funds Withheld
In the following sections, we provide details about our investment portfolio, excluding investments held in the Closed Block division and the Funds Withheld portfolios. We believe the details of the composition of our investment portfolio excluding Closed Block division and Funds Withheld are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial, Inc. because (1) substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies where the economics inure to those participating policies and not to shareholders of the Company’s Common Stock and (2) the Funds Withheld assets support liabilities relating to reinsurance agreements where the economic benefits and associated investment risk of the Funds Withheld ultimately inure to the reinsurer. See Notes 15 and 16 to the Consolidated Financial Statements for additional information regarding our material reinsurance agreements and the Closed Block division, respectively.
Fixed Maturity Securities
In the following sections, we provide details about our fixed maturity securities portfolio, which excludes fixed maturity securities classified as assets supporting experience-rated contractholder liabilities and classified as trading.
Fixed Maturity Securities by Contractual Maturity Date
The following table sets forth the breakdown of the amortized cost of our fixed maturity securities portfolio by contractual maturity, as of the date indicated:
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December 31, 2025
Amortized
Cost
% of Total
($ in millions)
Corporate & government securities:
Maturing in 2026
Maturing in 2027
Maturing in 2028
Maturing in 2029
Maturing in 2030
Maturing in 2031
Maturing in 2032
Maturing in 2033
Maturing in 2034
Maturing in 2035
Maturing in 2036
Maturing in 2037 and beyond
Total corporate & government securities
Asset-backed securities
Commercial mortgage-backed securities
Residential mortgage-backed securities
Total fixed maturities
Fixed Maturity Securities by Industry
The following table sets forth the composition of the portion of our fixed maturity, available-for-sale portfolio by industry category and the associated gross unrealized gains and losses, as well as the allowance for credit losses (“ACL”), as of the dates indicated:
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December 31, 2025
December 31, 2024
Industry(1)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
ACL
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
ACL
Fair
Value
(in millions)
Corporate securities:
Finance
Consumer non-cyclical
Utility
Capital goods
Consumer cyclical
Foreign agencies
Energy
Communications
Basic industry
Transportation
Technology
Industrial other
Total corporate securities
Foreign government(2)
Residential mortgage-backed(3)
Asset-backed
Commercial mortgage-backed
U.S. Government
State & Municipal
Total fixed maturities, available-for-sale
(1) Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.
(2) As of December 31, 2025 and 2024, based on amortized cost, 89% and 90% represent Japanese government bonds held by our Japanese insurance operations, respectively. No other individual country represented more than 6% and more than 5% of the balance as of December 31, 2025 and 2024, respectively.
(3) As of December 31, 2025 and 2024, based on amortized cost, 96% and 93% were rated A or higher, respectively.
The decrease in net unrealized losses from December 31, 2024 to December 31, 2025 was primarily due to the net impact of decreases in U.S. interest rates, partially offset by increases in Japan interest rates.
Fixed Maturity Securities Credit Quality
The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the investments of insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called “NAIC Designations.” In general, NAIC Designations of “1” highest quality, or “2” high quality, include fixed maturities considered investment grade, which include securities rated Baa3 or higher by Moody’s or BBB- or higher by S&P. NAIC Designations of “3” through “6” generally include fixed maturities referred to as below investment grade, which include securities rated Ba1 or lower by Moody’s and BB+ or lower by S&P. The NAIC Designations for commercial mortgage-backed securities and non-agency residential mortgage-backed securities, including our asset-backed securities collateralized by sub-prime mortgages, are based on security level expected losses as modeled by an independent third party (engaged by the NAIC) and the statutory carrying value of the security, including any purchase discounts or impairment charges previously recognized.
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As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the fixed maturity portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date. Pending receipt of SVO designations, the categorization of these securities by NAIC Designation is based on the expected ratings indicated by internal analysis.
Ratings assigned by nationally recognized rating agencies include S&P, Moody’s, Fitch and Morningstar, Inc. (“Morningstar”). Low issue composite rating uses ratings from the major credit rating agencies or, if these are not available, an equivalent internal rating. For securities where the ratings assigned are not equivalent, the second lowest rating is utilized.
Investments of our international insurance companies are not subject to NAIC guidelines. Investments of our Japanese insurance operations are regulated locally by the FSA. The FSA has its own investment quality criteria and risk control standards. Our Japanese insurance companies comply with the FSA’s credit quality review and risk monitoring guidelines. The credit quality ratings of the investments of our Japanese insurance companies are based on ratings assigned by nationally recognized credit rating agencies, including Moody’s and S&P, or rating equivalents based on ratings assigned by Japanese credit rating agencies.
The following table sets forth our fixed maturity, available-for-sale portfolio by NAIC Designation or equivalent rating, as of the dates indicated:
December 31, 2025
December 31, 2024
NAIC Designation(1)(2)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses(3)
ACL
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses(3)
ACL
Fair
Value
(in millions)
Subtotal High or Highest Quality Securities(4)
Subtotal Other Securities(5)(6)
Total fixed maturities, available-for-sale
(1) Reflects equivalent ratings for investments of the international insurance operations.
(2) As of December 31, 2025 and 2024, 1,482 securities with amortized cost of $9,683 million (fair value, $9,598 million) and 803 securities with amortized cost of $4,147 million (fair value, $3,840 million), respectively, have been categorized based on expected NAIC Designations pending receipt of SVO ratings.
(3) As of December 31, 2025, includes gross unrealized losses of $579 million on public fixed maturities and $194 million on private fixed maturities considered to be other than high or highest quality and, as of December 31, 2024, includes gross unrealized losses of $625 million on public fixed maturities and $428 million on private fixed maturities considered to be other than high or highest quality.
(4) On an amortized cost basis, as of December 31, 2025, includes $230,712 million of public fixed maturities and $69,340 million of private fixed maturities and, as of December 31, 2024, includes $219,914 million of public fixed maturities and $62,935 million of private fixed maturities.
(5) On an amortized cost basis, as of December 31, 2025, includes $7,277 million of public fixed maturities and $12,396 million of private fixed maturities and, as of December 31, 2024, includes $6,706 million of public fixed maturities and $10,617 million of private fixed maturities.
(6) On an amortized cost basis, as of December 31, 2025, securities considered below investment grade based on low issue composite ratings total $16,427 million, or 5% of the total fixed maturities, and include securities considered high or highest quality by the NAIC based on the rules described above.
Asset-Backed and Commercial Mortgage-Backed Securities
The following table sets forth the amortized cost and fair value of asset-backed and commercial mortgage-backed securities within our fixed maturity, available-for-sale portfolio by credit quality, as of the dates indicated:
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December 31, 2025
December 31, 2024
Asset-Backed
Securities(2)
Commercial Mortgage-Backed Securities
Asset-Backed
Securities(2)
Commercial Mortgage-Backed Securities
Low Issue Composite Rating(1)
Amortized Cost
Fair
Value
Amortized Cost
Fair
Value
Amortized Cost
Fair
Value
Amortized Cost
Fair
Value
(in millions)
AAA
BBB
BB and below
Total(3)
(1) The table above provides ratings as assigned by nationally recognized rating agencies as of December 31, 2025 and 2024, including S&P, Moody’s, Fitch and Morningstar .
(2) Includes credit-tranched securities collateralized by loan obligations (“CLOs”), home equity loans, auto loans, education loans and other asset types.
(3) Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading.”
Included in “Asset-backed securities” above are investments in CLOs. The following table sets forth information pertaining to these investments in CLOs within our fixed maturity, available-for-sale portfolio, as of the dates indicated:
December 31, 2025
December 31, 2024
Collateralized Loan Obligations
Low Issue Composite Rating(1)
Amortized Cost
Fair Value
Amortized Cost
Fair Value
(in millions)
AAA
BBB
BB and below
Total(2)(3)
(1) The table above provides ratings as assigned by nationally recognized rating agencies as of December 31, 2025 and 2024, including S&P, Moody’s, Fitch and Morningstar.
(2) There was no allowance for credit losses as of both December 31, 2025 and 2024.
(3) Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading.”
Assets Supporting Experience-Rated Contractholder Liabilities
For information regarding the composition of “Assets supporting experience-rated contractholder liabilities,” see Note 3 to the Consolidated Financial Statements.
Commercial Mortgage and Other Loans
Investment Mix
The following table sets forth the composition of our commercial mortgage and other loans portfolio, as of the dates indicated:
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December 31, 2025
December 31, 2024
(in millions)
Commercial mortgage and agricultural property loans
Residential mortgage loans
Uncollateralized loans
Other collateralized loans
Total recorded investment gross of allowance(1)
Allowance for credit losses
Total commercial mortgage and other loans, net
(1) As a percentage of recorded investment gross of allowance, 99% of these assets were current as of both December 31, 2025 and 2024.
We originate commercial mortgage and agricultural property loans using a dedicated sales and underwriting staff through our various regional offices in the U.S. and international offices primarily in London and Tokyo. All loans are underwritten consistently to our standards using a proprietary quality rating system that has been developed from our industry experience in real estate and mortgage lending.
Residential mortgage loans primarily include fixed-rate, amortizing mortgage loans on rental properties owned by borrowers with FICO scores typically considered prime or above.
Uncollateralized loans primarily represent corporate loans and unsecured consumer loans.
Other collateralized loans include mezzanine real estate debt investments and consumer loans.
Composition of Commercial Mortgage and Agricultural Property Loans
Our commercial mortgage and agricultural property loan portfolio strategy emphasizes diversification by property type and geographic location. The following tables set forth the breakdown of the gross carrying values of commercial mortgage and agricultural property loans by geographic region and property type, as of the dates indicated:
December 31, 2025
December 31, 2024
Gross
Carrying
Value
Total
Gross
Carrying
Value
Total
($ in millions)
Commercial mortgage and agricultural property loans by region:
U.S. Regions(1):
Pacific
South Atlantic
Middle Atlantic
East North Central
West South Central
Mountain
New England
West North Central
East South Central
Subtotal-U.S.
Europe
Mexico
Asia
Other
Total commercial mortgage and agricultural property loans
(1) Regions as defined by the United States Census Bureau.
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December 31, 2025
December 31, 2024
Gross
Carrying
Value
Total
Gross
Carrying
Value
Total
($ in millions)
Commercial mortgage and agricultural property loans by property type:
Industrial
Retail
Office
Apartments/Multi-Family
Agricultural properties
Hospitality
Self-Storage(1)
Health Care Senior Living(1)
Other
Total commercial mortgage and agricultural property loans
(1 ) Prior period amounts have been updated to conform to current period presentation .
Loan-to-value and debt service coverage ratios are measures commonly used to assess the quality of commercial mortgage and agricultural property loans. The loan-to-value ratio compares the amount of the loan to the fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. The debt service coverage ratio compares a property’s net operating income to its debt service payments. Debt service coverage ratios less than 1.0 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt service coverage ratio greater than 1.0 times indicates an excess of net operating income over the debt service payments.
As of December 31, 2025, our commercial mortgage and agricultural property loans had a weighted-average debt service coverage ratio of 2.31 times and a weighted-average loan-to-value ratio of 57%. For those commercial mortgage and agricultural property loans that were originated in 2025, the weighted-average debt service coverage ratio was 1.65 times, and the weighted-average loan-to-value ratio was 59%.
The values utilized in calculating these loan-to-value ratios are developed as part of our periodic reviews of the commercial mortgage and agricultural property loan portfolio, which include internal evaluations of the underlying collateral values. Our periodic reviews also include a credit quality re-rating process, whereby we update the internal quality ratings originally assigned at underwriting based on the proprietary quality rating system mentioned above. As discussed below, the internal credit quality rating is a key input in determining our allowance for credit losses.
As of December 31, 2025, 95% of commercial mortgage, agricultural property and residential mortgage loans were fixed rate loans.
For loans with collateral under construction, renovation or lease-up, projected stabilized values and net operating income are used in the calculation of the loan-to-value and debt service coverage ratios. Our commercial mortgage and agricultural property loan portfolio included $2.7 billion and $1.8 billion of such loans as of December 31, 2025 and 2024, respectively. All else being equal, these loans are inherently riskier than those collateralized by properties that have already stabilized. As of both December 31, 2025 and 2024, there were less than $1 million of allowances related to these loans. In addition, these unstabilized loans are included in the calculation of our portfolio reserve, as discussed below.
The following table sets forth the gross carrying value of our commercial mortgage and agricultural property loans by loan-to-value and debt service coverage ratios, as of the date indicated:
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December 31, 2025
Debt Service Coverage Ratio
Loan-to-Value Ratio
Total
Commercial Mortgage and Agricultural Property
Loans
(in millions)
80% or greater
Total commercial mortgage and agricultural property loans
The following table sets forth the breakdown of our commercial mortgage and agricultural property loans by year of origination, as of the date indicated:
December 31, 2025
Year of Origination
Gross
Carrying
Value
Total
($ in millions)
2018 & Prior
Revolving Loans
Total commercial mortgage and agricultural property loans
Commercial Mortgage and Other Loans by Contractual Maturity Date
The following table sets forth the breakdown of our commercial mortgage and other loans portfolio by contractual maturity, as of the date indicated:
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December 31, 2025
Vintage
Gross
Carrying Value
% of Total
($ in millions)
Maturing in 2026
Maturing in 2027
Maturing in 2028
Maturing in 2029
Maturing in 2030
Maturing in 2031
Maturing in 2032
Maturing in 2033
Maturing in 2034
Maturing in 2035
Maturing in 2036
Maturing in 2037 and beyond
Total commercial mortgage and other loans
Residential Mortgage Loans
Residential mortgage loans primarily include fixed-rate, amortizing mortgage loans on rental properties owned by borrowers with FICO scores typically considered prime or above. The primary credit quality indicator is whether a loan is performing or nonperforming. The Company defines nonperforming residential mortgage loans as those that are 90 days or more past due and/or in nonaccrual status.
All of the loans are currently performing.
Commercial Mortgage and Other Loans Quality
The commercial mortgage and other loans portfolio is monitored on an ongoing basis. If certain criteria are met, loans are assigned to either of the following “watch list” categories:
(1) “Closely Monitored,” which includes a variety of considerations, such as when loan metrics fall below acceptable levels, the borrower is not cooperative or has requested a material modification, or the portfolio manager has directed a change in category; or
(2) “Not in Good Standing,” which includes loans in default or with a high probability of loss of principal, such as when the loan is in the process of foreclosure or the borrower is in bankruptcy.
Our workout and special servicing professionals manage the loans on the watch list.
The current expected credit loss (“CECL”) allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts. The allowance is calculated separately for commercial mortgage loans, agricultural property loans, residential mortgage loans, uncollateralized loans and other collateralized loans.
For commercial mortgage and agricultural property loans, the allowance is calculated using an internally developed CECL model.
Key inputs to the CECL model include unpaid principal balances, internal credit ratings, annual expected loss factors, average lives of the loans adjusted for prepayment considerations, current and historical interest rate assumptions and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate.
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When individual loans no longer have the credit risk characteristics of the commercial mortgage or agricultural property loan pools, they are removed from the pools and are evaluated individually for an allowance. The allowance is determined based on the outstanding loan balance less the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.
For residential mortgage loans, the CECL calculation pools together loans that share similar risk characteristics. The estimated lifetime loss of the pool is calculated from the risk profiles of the loans, including borrower credit score, loan-to-value ratio, property type, and several key attributes of the loan and property including: loan type, loan age, loan performance history, and current performing or nonperforming status. Estimated lifetime loss rates are calculated by weighting projected losses in multiple economic scenarios based on the Company’s view of the current stage of the economic cycle and future economic conditions. The scenario losses are calibrated to industry historical experience of defaults, loss severities, and prepayment rates in multiple economic cycles, reflective of similar loan characteristics. When individual loans become nonperforming, the allowance is determined based on annual expected loss rates for nonperforming loans or the fair value of the collateral if the loan is collateral dependent. The Company defines residential mortgage loans as those that are 90 days or more past due and/or in nonaccrual status.
The CECL allowance for other collateralized and uncollateralized loans carried at amortized cost is determined based on probability of default and loss given default assumptions by sector, credit quality and average lives of the loans.
The following table sets forth the balance of and change in allowance for credit losses for our commercial mortgage and other loans portfolio, as of the dates indicated:
December 31, 2025
December 31, 2024
(in millions)
Allowance, beginning of year
Addition to (release of) allowance for credit losses
Write-downs charged against the allowance
Other
Allowance, end of year
The allowance for credit losses as of December 31, 2025 decreased in comparison to December 31, 2024, primarily related to write-downs against loan-specific reserves within agricultural property loans and commercial mortgage loans in the retail sector, partially offset by an increase in loan-specific reserves within the retail sector.
Equity Securities
The equity securities portfolio consists principally of investments in common and preferred stock of publicly-traded companies, as well as mutual fund shares. The following table sets forth the composition of our equity securities portfolio and the associated gross unrealized gains and losses, as of the dates indicated:
December 31, 2025
December 31, 2024
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in millions)
Mutual funds
Other common stocks
Non-redeemable preferred stocks
Total equity securities, at fair value
The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $483 million and $475 million during the years ended December 31, 2025 and 2024, respectively.
Other Invested Assets
The following table sets forth the composition of “Other invested assets,” as of the dates indicated:
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December 31, 2025
December 31, 2024
(in millions)
LPs/LLCs:
Equity method:
Private equity
Hedge funds
Real estate-related
Subtotal equity method
Fair value:
Private equity
Hedge funds
Real estate-related
Subtotal fair value
Total LPs/LLCs
Real estate held through direct ownership(1)
Total alternative assets
Credit-like instruments(2)
Derivative instruments
Other(3)
Total other invested assets
The following table presents a reconciliation of “Total alternative assets” included in the table above to the “Total alternative assets of operating businesses”:
December 31, 2025
December 31, 2024
(in millions)
Total alternative assets
Less: Divested Businesses(4)
Less: Interests held by unaffiliated investors(5)
Total alternative assets of operating businesses
(1) As of December 31, 2025 and 2024, investment real estate held through direct ownership had mortgage debt of $217 million and $185 million, respectively.
(2) Includes structured debt investments in feeder funds that are consolidated, resulting in the Company reporting the consolidated feeder funds’ proportionate share of the net assets of the master fund within “Other invested assets.” As of December 31, 2025 and 2024, interests held by unaffiliated investors that have been consolidated into the Consolidated Statements of Financial Position were $283 million and $45 million, respectively.
(3) Primarily includes equity investments accounted for under the measurement alternative, tax advantaged investments, leveraged leases and member and activity stock held in the Federal Home Loan Bank of New York. For additional information regarding our holdings in the Federal Home Loan Bank of New York, see Note 18 to the Consolidated Financial Statements.
(4) As of December 31, 2025 and 2024, interests held by Divested Businesses include private equity of $521 million and $520 million, hedge funds of $145 million and $117 million, real estate related of $154 million and $156 million, and investment real estate held through direct ownership of $4 million and $6 million, respectively.
(5) As of December 31, 2025 and 2024, interests held by unaffiliated investors that have been consolidated into the Consolidated Statements of Financial Position include, investment real estate held through direct ownership of $923 million and $741 million, hedge funds of $160 million and $177 million and real estate related of $310 million and $291 million, respectively.
Invested Assets of Other Entities and Operations
“Invested Assets of Other Entities and Operations” presented below includes investments held outside the general account and primarily represents investments associated with our investment management operations and derivative operations. Our derivative operations act on behalf of affiliates primarily to manage interest rate, foreign currency, credit and equity exposures. Assets within our investment management operations that are managed for third parties and those assets classified as “Separate account assets” on our Consolidated Statements of Financial Position are not included.
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December 31, 2025
December 31, 2024
(in millions)
Fixed maturities:
Public, available-for-sale, at fair value(1)
Private, available-for-sale, at fair value
Fixed maturities, trading, at fair value(1)
Equity securities, at fair value
Commercial mortgage and other loans, at fair value
Other invested assets
Short-term investments
Total investments
(1) As of December 31, 2025 and 2024 , balances include investments in CLOs with fair value of $76 million and $224 million, respectively.
Fixed Maturities, Trading
“Fixed maturities, trading, at fair value” is primarily related to assets associated with consolidated variable interest entities (“VIEs”) for which the Company is the investment manager. The assets of the consolidated VIEs are generally offset by liabilities for which the fair value option has been elected. For additional information regarding these consolidated VIEs, see Note 4 to the Consolidated Financial Statements.
Commercial Mortgage and Other Loans
Our investment management operations include our commercial mortgage operations, which provide mortgage origination, investment management and servicing for our general account, institutional clients, the Federal Housing Administration and government-sponsored entities such as Fannie Mae and Freddie Mac.
The mortgage loans of our commercial mortgage operations are included in “Commercial mortgage and other loans.” Derivatives and other hedging instruments related to our commercial mortgage operations are primarily included in “Other invested assets.”
Other Invested Assets
“Other invested assets” primarily include assets of our derivative operations used to manage interest rate, foreign currency, credit, and equity exposures.
Furthermore, other invested assets include strategic investments made as part of our investment management operations. We make these strategic investments in real estate, as well as fixed income, public equity and real estate securities, including controlling interests. Certain of these investments are made primarily for purposes of co-investment in our managed funds and structured products. Other strategic investments are made with the intention to sell or syndicate to investors, including our general account, or for placement in funds and structured products that we offer and manage (seed investments). As part of our investment management operations, we also make loans to our managed funds that are secured by equity commitments from investors or assets of the funds. “Other invested assets” also includes certain assets in consolidated investment funds where the Company is deemed to exercise control over the funds.
Valuation of Assets and Liabilities
Fair Value of Assets and Liabilities
The authoritative guidance related to fair value measurement establishes a framework that includes a three-level hierarchy used to classify the inputs used in measuring fair value. The level in the hierarchy within which the fair value falls is determined based on the lowest level input that is significant to the measurement. The fair values of assets and liabilities classified as Level 3 include at least one significant unobservable input in the measurement. See Note 6 to the Consolidated Financial Statements for an additional description of the valuation hierarchy levels as well as for the balances of assets and liabilities measured at fair value on a recurring basis by hierarchy level presented on a consolidated basis.
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The table below presents the balances of assets and liabilities measured at fair value on a recurring basis, as of the dates indicated, and the portion of such assets and liabilities that are classified in Level 3 of the valuation hierarchy. The table also provides details about these assets and liabilities excluding those held in the Closed Block division and Funds Withheld portfolios. We believe the amounts excluding the Closed Block division and Funds Withheld are most relevant to an understanding of our operations that are pertinent to investors in Prudential Financial Inc. because (1) substantially all Closed Block division assets support obligations and liabilities relating to the Closed Block policies where the economics inure to those participating policies and not to shareholders of the Company’s common stock and (2) the Funds Withheld assets support liabilities relating to reinsurance agreements where the economic benefits and associated investment risk of the Funds Withheld assets ultimately inure to the reinsurer. See Notes 15 and 16 to the Consolidated Financial Statements for additional information regarding our material reinsurance agreements and the Closed Block, respectively.
December 31, 2025
PFI excluding Closed Block Division and Funds Withheld
Closed Block
Division
Funds Withheld
Total at
Fair Value
Total
Level 3(1)
Total at
Fair Value
Total
Level 3(1)
Total at
Fair Value
Total
Level 3(1)
(in millions)
Fixed maturities, available-for-sale
Assets supporting experience-rated contractholder liabilities:
Fixed maturities
Equity securities
All other(2)
Subtotal
Market risk benefit assets
Fixed maturities, trading
Equity securities
Commercial mortgage and other loans
Other invested assets(3)
Short-term investments
Cash equivalents
Reinsurance recoverables and deposit receivables
Separate account assets
Total assets
Market risk benefit liabilities
Policyholders’ account balances
Reinsurance and funds withheld payables
Other liabilities(3)
Notes issued by consolidated variable interest entities (“VIEs”)
Total liabilities
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December 31, 2024
PFI excluding Closed Block Division and Funds Withheld
Closed Block
Division
Funds Withheld
Total at
Fair Value
Total
Level 3(1)
Total at
Fair Value
Total
Level 3(1)
Total at
Fair Value
Total
Level 3(1)
(in millions)
Fixed maturities, available-for-sale
Assets supporting experience-rated contractholder liabilities:
Fixed maturities
Equity securities
All other(2)
Subtotal
Market risk benefit assets
Fixed maturities, trading
Equity securities
Commercial mortgage and other loans
Other invested assets(3)
Short-term investments
Cash equivalents
Reinsurance recoverables and deposit receivables
Separate account assets
Total assets
Market risk benefit liabilities
Policyholders’ account balances
Reinsurance and funds withheld payables
Other liabilities(3)
Notes issued by consolidated variable interest entities (“VIEs”)
Total liabilities
(1) Level 3 assets expressed as a percentage of total assets measured at fair value on a recurring basis for PFI excluding Closed Block division and Funds Withheld, Closed Block division and Funds Withheld totaled 3.1%, 3.6% and 14.9%, respectively, as of December 31, 2025 and 2.4% , 3.3% and 17.3%, respectively, as of December 31, 2024.
(2) “All other” represents cash equivalents and short-term investments.
(3) “Other invested assets” and “Other liabilities” primarily include derivatives. The amounts include the impact of netting subject to master netting agreements.
The determination of fair value, which for certain assets and liabilities is dependent on the application of estimates and assumptions, can have a significant impact on our results of operations and may require the application of a greater degree of judgment depending on market conditions, as the ability to value assets and liabilities can be significantly impacted by a decrease in market activity or a lack of transactions executed in an orderly manner.
Fixed maturity securities included in Level 3 in our fair value hierarchy are generally priced based on internally-developed valuations or indicative broker quotes. For certain private fixed maturity and equity securities, the internal valuation models use significant unobservable inputs and, accordingly, such securities are included in Level 3 in our fair value hierarchy. Level 3 fixed maturity securities for PFI excluding the Closed Block division and Funds Withheld included approximately $1,496 million of public fixed maturities as of December 31, 2025, with values primarily based on indicative broker quotes, and approximately $11,723 million of private fixed maturities, with values primarily based on internally-developed models. Significant unobservable inputs used in their valuation included: issue specific spread adjustments, material non-public financial information, management judgment, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. Separate account assets included in Level 3 in our fair value hierarchy primarily include corporate securities and commercial mortgage loans.
Contracts or contract features reported in “Market risk benefit assets” and “Market risk benefit liabilities” and embedded derivatives reported in “Policyholders’ account balances” that are included in Level 3 of our fair value hierarchy represent
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general account assets and liabilities pertaining to living benefit features of the Company’s variable annuity contracts and the index-linked interest credited features on certain life and annuity products. “Market risk benefit assets” and “Market risk benefit liabilities” are carried at fair value with changes in fair value included in “Change in value of market risk benefits, net of related hedging gains (losses)” except for the portion of the change attributable to changes in the Company’s NPR that is recorded in OCI. Embedded derivatives included in “Policyholders’ account balances” are carried at fair value with changes in fair value included in “Realized investment gains (losses), net.” These assets and liabilities are valued using internally-developed models that require significant estimates and assumptions developed by management. Changes in these estimates and assumptions can have a significant impact on the results of our operations.
For additional information regarding the valuation techniques and the key estimates and assumptions used in our determination of fair value, see Note 6 to the Consolidated Financial Statements.
Income Taxes
The effective tax rate is the ratio of “Total income tax expense (benefit)” divided by “Income before income taxes and equity in earnings of joint ventures and other operating entities.” Our effective tax rate for fiscal years 2025, 2024 and 2023 was 22.6%, 15.8% and 20.0%, respectively. For a reconciliation of the effective tax rate and detailed description of the nature of each significant reconciling item, see Note 17 to the Consolidated Financial Statements.
Unrecognized Tax Benefits
The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest that relate to tax years still subject to review by the Internal Revenue Service or other taxing authorities. The completion of review or the expiration of the U.S. Federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The total unrecognized benefit as of December 31, 2025, 2024 and 2023 was $125 million, $132 million and $133 million, respectively.
Income Tax Expense vs. Income Tax Paid in Cash
Income tax expense recorded under U.S. GAAP routinely differs from the income taxes paid in cash in any given year. Income tax expense recorded under U.S. GAAP is based on income reported in our Consolidated Statements of Operations for the current period and it includes both current and deferred taxes. Income taxes paid during the year include tax installments made for the current year as well as tax payments and refunds related to prior periods.
Risk Management
Overview
We employ a risk governance structure, overseen by senior management and our Board and managed by Risk Management, to provide a common framework for: evaluating the risks embedded in and across our businesses and corporate centers; developing risk appetites; managing these risks; and identifying current and future risk challenges and opportunities. For a discussion of the risks of our businesses, see “Risk Factors.”
Risk Governance Framework
Prudential uses a Three Lines of Defense model of risk management in which the businesses are the primary, or first line, responsible for understanding, assessing, and taking steps to mitigate and manage risk. Each business has a risk governance structure that is supported by a common framework at the enterprise level.
While having different roles, responsibilities, and scope, Risk Management and Compliance together act as the second line, further strengthening Prudential’s management of risk by providing effective challenge, and oversight of management activities and testing and assessing the effectiveness of first line controls. Risk Management, led by the Chief Risk Officer, oversees these risks under the guidance of the Executive Risk Committee (“ERC”) and Enterprise Risk Management Council (“ERMC”). Additionally, Risk Management works with Prudential’s businesses and corporate functions to identify, monitor and manage risks that Prudential may face.
The Audit Department acts as the third line of defense through monitoring and testing to assure that the other lines of defense (first in the business and second in Risk and Compliance) are well-designed and operating as intended. Processes are
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optimized across Prudential’s Three Lines of Defense to strengthen how risk management is performed across the Prudential enterprise while continuing to fulfill the individual mandates of each of the three control functions.
Board of Directors Oversight
Our Board oversees our risk profile and management’s processes for assessing and managing risk, through both the whole Board and its committees. The Board also reviews strategic risks and opportunities facing the Company and its businesses. Other important categories of risk are assigned to designated Board committees that report back to the full Board. In general, the committees oversee the following risks:
• Audit Committee: insurance risk, operational risk, and model risk, as well as risks related to financial controls, legal, regulatory, cyber security and compliance risk;
• Compensation and Human Capital Committee: strategy, reputation and risks regarding human capital management throughout our global businesses; and oversee the assessment of the risks related to the Company’s succession planning, compensation policies and programs applicable to officers and employees, including the review of the assessment results;
• Corporate Governance and Business Ethics Committee: the Company’s overall ethical culture, political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental risk (which includes climate risk), sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability;
• Finance Committee: liquidity risk, risk involving our capital management, the incurrence and repayment of borrowings, the capital structure of the Company, funding of benefit plans and statutory insurance reserves, oversight of Own Risk and Solvency Assessment (“ORSA”) and the Company’s Risk Appetite Framework. The Finance Committee oversees our capital plan and receives regular updates on the sources and uses of capital relative to plan; and
• Investment Committee: investment risk, market risk, and review of investment performance and risk positions. The Investment Committee approves investment and market risk limits based on asset class, issuer, credit quality and geography.
Management Oversight
Our primary risk management committee is the ERC. The ERC is chaired by our Chief Risk Officer and otherwise consists of the Head of U.S. Businesses, Chief Executive Officer of PGIM, Treasurer and Head of Capital Solutions, General Counsel and Head of Corporate Affairs, Chief Financial Officer, Chief Investment Officer, Head of Global Technology and Operations, and Chief Actuary. Our Chief Auditor also attends meetings of the ERC. The ERC oversees the Company’s risk management framework, including the identification, assessment, monitoring and management of risks and how those risks align with the Company’s loss absorption resources. The primary focus of the ERC is the critical analysis of significant quantitative and qualitative risks and the appropriateness and alignment of those risks to the defined risk appetite of the Company.
The ERC is supported by the ERMC, which is also chaired by our Chief Risk Officer and provides a forum for corporate and functional leaders and technical subject matter experts to review and advise decision makers on financial and non-financial risk matters that are of Enterprise significance, providing transparency into the Company’s overall risk profile, assumptions and methodologies used to measure risk exposure and strategies and practices for mitigating risks.
In addition, each of our businesses and corporate functions have forums for leaders to identify, assess, and monitor risk and exposure issues and to review new business activities and initiatives.
Risk Management Oversight
Risk Management manages the risk management framework. The function operates independently and is responsible for recommending policies, limits and standards for all risks. Risk Management oversees these risks under the guidance of the ERC and ERMC. Additionally, Risk Management works with our businesses and corporate areas to identify, monitor and manage risks. The Risk Management infrastructure is generally aligned by risk type (investment, market, liquidity, insurance, model, and operational), with certain groups within Risk Management working across risk types.
Risk Identification
Prudential relies on a combination of activities to ensure that all material risks have been identified and managed as appropriate. The Company conducts risk identification through several processes at the business unit, corporate, senior
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management, and Board levels to provide a “top-down” and “bottom-up” three-dimensional view of risk. Prudential has developed a comprehensive understanding of the risks to its business, both financial and non-financial, and their interdependencies. A risk can have an impact at the product, business, and enterprise levels, and all these considerations and their range of outcomes through a variety of stresses are the focus of Risk Management as well as the enterprise.
• Business Activities: Each business has a forum that allows senior leaders to discuss and evaluate current, new, and emerging risks in their own operations. Businesses are accountable for identifying and managing top risks through the risk governance structure.
• Corporate Function Activities: The corporate functions review the results of the business activities and examine risks from an enterprise view across businesses under normal and stressed conditions. As a result, the corporate functions, particularly Risk Management, use several processes and activities to identify and assess the risks of the Company. Corporate functions manage key risks and initiatives through existing senior leadership team structures.
• Senior Management and the Board: Senior management plays a critical role in reviewing the risk profile of the Company, including identifying impacts to the business strategy and risks in any new strategies under consideration. These risks are discussed with the ERC as appropriate, and with the Board if significant. As discussed above, the Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a full Board and through its committees.
Risk Measurement and Monitoring
Our Risk Appetite Framework is a comprehensive process designed to reasonably ensure that risks taken across the Company align with the Company’s capacity and willingness to take those risks. Using the Risk Appetite Framework, the Company measures, evaluates, and manages its financial risks. The comprehensive models, metrics, and stress scenarios used enable the Company to understand its current risk profile as well as how the risk profile may change over time through varying degrees of stress. The Risk Appetite Framework anchors the risk and capital management processes and supports management and the Board in making well-informed business decisions.
The Risk Appetite Framework is centered around a comprehensive and cohesive stress testing regime which includes a variety of stress scenarios designed to explore outcomes across businesses. This robust stress testing examines the sensitivity of assets and liabilities and how they interact through time to identify places where the Company’s capacity may be challenged by the risks taken. These analytics provide insight into the impact of stress scenarios on capital and liquidity.
Additionally, the Risk Appetite Framework contains qualitative risk appetite statements that help the Company understand and manage risks that are not easily quantifiable.
