Prudential Financial, Inc.

Company Overview

Business Model: Prudential Financial, Inc. (PFI) is a global financial services leader and active global investment manager. Through its subsidiaries and affiliates, the Company offers a diverse range of products and services, including life insurance, annuities, retirement-related products and services, mutual funds, and investment management, to individual and institutional customers across the United States, Asia, Europe, and Latin America. Its principal operations are structured into PGIM (global investment management), U.S. Businesses (Retirement Strategies, Group Insurance, Individual Life), International Businesses, the Closed Block division, and Corporate and Other operations.

Market Position: Prudential Financial, Inc. held approximately $1.512 trillion of assets under management as of December 31, 2024. The Company is a leader in pension risk management and stable value within its Institutional Retirement Strategies segment. In Japan, the Company operates in a mature but competitive market, with opportunities in product innovation and multiple distribution channels. In Brazil, it aims to enhance market presence in a continuously growing life insurance market. Competitive advantages across segments include brand recognition, financial strength, diverse product offerings, innovative product features, risk management strategies, distribution platforms, and customer service.

Recent Strategic Developments:

• Prismic Life Reinsurance, Ltd. (Prismic Re) Launch: In September 2023, Prudential Financial, Inc., in partnership with Warburg Pincus and institutional investors, launched Prismic Re, a Bermuda-based life and annuity reinsurance company. Prudential Financial, Inc. made an initial equity investment of approximately $200 million for a 20% interest in Prismic Life Holding Company LP (Prismic).
• Structured Settlement Annuities Reinsurance: In September 2023, the Company reinsured approximately $9 billion, or 70%, of reserves related to its structured settlement annuities business with Prismic Re. A $200 million restructuring charge was recorded in the fourth quarter of 2023 related to organizational structure changes.
• Deerpath Capital Management, LP Acquisition: In December 2023, Prudential Financial, Inc. acquired a majority stake in Deerpath Capital Management, LP, a U.S.-based private credit and direct lending manager with approximately $5 billion in assets under management, integrating it into PGIM.
• Guaranteed Universal Life Reinsurance: In July 2023, the Company agreed with Somerset Reinsurance Ltd. to reinsure approximately 30% of its statutory reserves on its in-force guaranteed universal life block of business, which closed in March 2024, effective January 1, 2024. In August 2024, it agreed with Wilton Reassurance Company and Wilton Reinsurance Bermuda Limited (Wilton Re) to reinsure approximately 40% of the remaining statutory reserves on this block, which closed in December 2024, effective October 1, 2024.
• USD-Denominated Japanese Whole Life Reinsurance: In December 2024, the Company agreed with Prismic Life Reinsurance International, Ltd. to reinsure approximately $7 billion of reserves for certain USD-denominated Japanese whole life policies, subject to regulatory approvals.
• Divestitures: The Company exited PGIM Wadhwani LLP in July 2024, transferring its results to Divested and Run-off Businesses. It committed to exit Assurance IQ, LLC (AIQ) in Q1 2024, with results reflected in Divested and Run-off Businesses from Q1 2024. Prudential of Argentina (POA) was sold to Grupo ST S.A. in May 2024, with results transferred to Divested and Run-off Businesses in Q1 2024.

Geographic Footprint: Prudential Financial, Inc. operates extensively in the United States, Asia (primarily Japan, China, India, Indonesia), Europe (United Kingdom, Ireland), and Latin America (Brazil, Mexico, Chile). Strategic investments are also held in Ghana, Kenya, and South Africa. As of December 31, 2024, commercial mortgage and agricultural property loans were concentrated in California (28%), Texas (7%), and Florida (6%), with international exposure in Europe (6%), Mexico (2%), Asia (1%), and Australia (1%).

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 33.1%
• Operating Margin: 4.6%
• Net Margin: 3.9%

Investment in Growth:

• R&D Expenditure: Not explicitly disclosed as a separate line item.
• Capital Expenditures: Not explicitly disclosed as a separate line item.
• Strategic Investments: Initial equity investment of approximately $200 million in Prismic Life Holding Company LP in September 2023.

Business Segment Analysis

PGIM

Financial Performance:

• Revenue: $4,092 million (+12.5% YoY)
• Operating Margin: 21.4%
• Key Growth Drivers: Strong investment performance, broadening distribution channels, and providing asset management services to Prismic Life Reinsurance, Ltd. Product Portfolio:
• Public fixed income, public equity, real estate debt and equity, private credit and other alternatives, multi-asset class strategies.
• Mutual funds, ETFs, separately managed accounts, UCITS, local asset management in Taiwan and India, and a joint venture in China. Market Dynamics:
• Competition from numerous asset managers and financial institutions based on investment performance, strategy, talent, organizational stability, client relationships, price, terms, execution, and borrower relationships.
• Profitability is impacted by macro market movements, ability to achieve investment returns above benchmarks, and ability to attract and retain client investments. Sub-segment Breakdown:
• Asset Management Fees: $3,179 million (+8.9% YoY)
  • Institutional customers: $1,530 million (+5.7% YoY)
  • Retail customers: $1,153 million (+13.7% YoY)
  • General account: $496 million (+8.5% YoY)
• Other Related Revenues: $430 million (+74.1% YoY), including $202 million in incentive fees and $135 million from seed and co-investments.
• Assets Under Management (AUM): $1,375.2 billion (+5.9% YoY) as of December 31, 2024.
  • Third-party flows: $13.6 billion (2024)
  • Affiliated flows: $24.1 billion (2024)
  • Market appreciation: $60.6 billion (2024)
• Private Capital Deployed: $43.3 billion (+37.0% YoY) in 2024.

Retirement Strategies

Financial Performance:

• Revenue: $33,320 million (+114.1% YoY)
• Operating Margin: 10.9%
• Key Growth Drivers: Expanding access to retirement security, broadening distribution, focusing on pension risk transfer and international reinsurance markets for Institutional Retirement Strategies, and pivoting to less interest rate-sensitive products with protected growth through technology-enabled channels for Individual Retirement Strategies. Product Portfolio:
• Institutional: Payout Annuities (pension risk transfer, longevity reinsurance), Stable Value (investment-only, Guaranteed Investment Contracts, Funding Agreements), other group annuities, structured settlements.
• Individual: Indexed Variable Annuities (Prudential FlexGuard®, Prudential FlexGuard® Income), Traditional Variable Annuities (Prudential Premier® Investment Variable Annuity, Prudential MyRock® Advisor Variable Annuity), Fixed Annuities (PruSecure®, SurePath®, SurePath® Income, Prudential Fixed Annuity with Daily Advantage Income Benefit®, Prudential WealthGuardSM Multi-Year Guaranteed Annuity, Prudential Immediate Income Annuity). Market Dynamics:
• Institutional: Competition from large insurance companies, asset managers, and diversified financial institutions based on pricing, structuring capabilities, innovative solutions, and execution.
• Individual: Competition from other providers of retirement savings and accumulation products, including large insurance/financial services companies and private equity firms. Sub-segment Breakdown:
• Institutional Retirement Strategies:
  • Adjusted Operating Income: $1,856 million (+9.5% YoY)
  • Revenue: $28,195 million (+155.6% YoY)
  • Account Values (net of reinsurance ceded): $279,191 million (+8.0% YoY) as of December 31, 2024.
  • Additions: $36,331 million (2024)
• Individual Retirement Strategies:
  • Adjusted Operating Income: $1,763 million (-3.0% YoY)
  • Revenue: $5,125 million (+13.1% YoY)
  • Account Values (net of reinsurance ceded): $127,120 million (+7.8% YoY) as of December 31, 2024.
  • Sales: $14,067 million (+84.2% YoY) in 2024.

Group Insurance

Financial Performance:

• Revenue: $6,427 million (+2.3% YoY)
• Operating Margin: 4.9%
• Key Growth Drivers: Diversifying portfolio by expanding Premier Market and Association segments, growing voluntary supplemental health, and entering the medical stop loss market (effective January 1, 2025). Product Portfolio:
• Group Life Insurance (employer-paid, employee-paid, member-paid term life, group universal life, group variable universal life, accidental death and dismemberment, group corporate/bank/trust-owned life insurance).
• Group Disability Insurance & Other (short-term/long-term group disability, supplemental health solutions, plan administration/absence management, medical stop loss insurance). Market Dynamics:
• Competition from many large, well-established life and health insurance providers.
• Primary competitive advantages: brand recognition, financial strength, diverse product offerings, customer relationships, and overall experience. Operational Metrics:
• Total Group Insurance Benefits Ratio: 82.7% (2024)
• Total Group Insurance Administrative Operating Expense Ratio: 15.7% (2024)
• Annualized New Business Premiums: $550 million (+3.6% YoY) in 2024.

Individual Life

Financial Performance:

• Revenue: $6,195 million (-1.3% YoY)
• Operating Margin: -3.3%
• Key Growth Drivers: Making life insurance solutions more accessible, growing accumulation and simplified protection options, and diversifying product mix to limit interest rate sensitivity. Product Portfolio:
• Variable Life, Universal Life, Term Life, Final Expense Insurance. Market Dynamics:
• Mature market with many large, well-established life insurance companies.
• Competition based on price, service (underwriting speed/ease), distribution channel relationships, brand recognition, and financial strength. Operational Metrics:
• Annualized New Business Premiums: $906 million (+22.9% YoY) in 2024.
  • Variable Life: $687 million
  • Term Life: $134 million
  • Universal Life: $85 million

International Businesses

Financial Performance:

• Revenue: $17,925 million (-4.1% YoY)
• Operating Margin: 17.3%
• Key Growth Drivers: Strengthening Japan position, expanding in select high-growth emerging markets, enhancing existing operations, and exploring acquisitions. Product Portfolio:
• Life Insurance Protection Products (traditional whole life, term insurance, protection-oriented variable life, USD-denominated, bundled health/savings).
• Retirement Products (retirement income, savings-oriented variable life, endowments).
• Investment Products (USD- and yen-denominated investment contracts in Japan, single-pay, variable/indexed annuities).
• Accident and Health Products (accidental death/dismemberment, hospitalization, surgeries, cancer/dread diseases, waiver of premium). Market Dynamics:
• Japan: Mature, competitive pricing with opportunities for product innovation (savings/income, health products) and multiple distribution channels. Intense competition for sales personnel and third-party distribution.
• Brazil: Continuous growth in life insurance market with opportunities to enhance market presence.
• General competition based on customer service, needs-based selling, distribution capabilities, and financial strength. Sub-segment Breakdown:
• Life Planner:
  • Adjusted Operating Income: $1,870 million (-6.5% YoY)
  • Revenue: $9,352 million (-2.5% YoY)
• Gibraltar Life and Other:
  • Adjusted Operating Income: $1,236 million (+4.5% YoY)
  • Revenue: $8,573 million (-5.6% YoY)
• Annualized New Business Premiums (actual exchange rate): $2,122 million (+1.7% YoY) in 2024.
• Sales Force: 12,879 total sales force members in 2024.

Closed Block Division

Financial Performance:

• Revenue: $3,287 million (-10.4% YoY)
• Operating Margin: -3.4%
• Key Growth Drivers: The strategy is to maintain the Closed Block as required by the Plan of Reorganization. No new policies have been added since demutualization in 2001. Product Portfolio:
• In-force traditional domestic participating life insurance and annuity products. Market Dynamics:
• Established in connection with the demutualization in 2001, it includes in-force products and assets used for benefits, policyholder dividends, expenses, and taxes.
• As of December 31, 2024, the excess of actual cumulative earnings over expected was $2,096 million; however, the policyholder dividend obligation balance was reduced to zero due to accumulated net unrealized investment losses.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $1,000 million (8.6 million shares) in 2024.
• Dividend Payments: $1,892 million ($5.20 per share) in 2024.
• Dividend Yield: Not explicitly disclosed.
• Future Capital Return Commitments: The Board of Directors authorized repurchases of up to $1.0 billion of outstanding Common Stock from January 1, 2025, through December 31, 2025. A cash dividend of $1.35 per share was declared on February 4, 2025, payable March 13, 2025.

Balance Sheet Position:

• Cash and Equivalents: $18,497 million (2024)
• Total Debt: $20,140 million (2024)
• Net Cash Position: -$1,643 million (2024)
• Credit Rating: Prudential Financial, Inc. holds long-term senior debt ratings of "A" from S&P and Moody’s, "A-" from Fitch, and "a-" from A.M. Best, all with a stable outlook. Its primary life insurance companies (The Prudential Insurance Company of America, Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey) hold financial strength ratings of "A+" from A.M. Best, "AA-" from S&P and Fitch, and "Aa3" from Moody’s, also with a stable outlook.
• Debt Maturity Profile: Contractual maturities of long-term debt for 2024 include $536 million in 2026, $287 million in 2027, $390 million in 2028, $95 million in 2029, and $17,879 million in 2030 and thereafter, totaling $19,187 million. The weighted average interest rate on outstanding Medium-Term Notes, Senior Notes, and InterNotes® Retail Notes (including hedging) was 4.43% for 2024.

Cash Flow Generation:

• Operating Cash Flow: $8,502 million (2024)
• Free Cash Flow: Not explicitly disclosed.
• Cash Conversion Metrics: Not explicitly disclosed.

Operational Excellence

Production & Service Model: Prudential Financial, Inc. leverages a mutually-reinforcing business system designed for higher growth, less market-sensitivity, and increased nimbleness. Its operations involve offering life insurance, annuities, retirement-related products and services, mutual funds, and investment management. Service delivery methods vary by segment, including proprietary sales forces (e.g., Life Planners in International Businesses, Prudential Advisors), third-party intermediaries (broker-dealers, banks, independent financial planners), and digital platforms.

Supply Chain Architecture: Key Suppliers & Partners:

• Reinsurance Partners: Prismic Life Reinsurance, Ltd., AuguStar Life Insurance Company, Somerset Reinsurance Ltd., Wilton Reassurance Company, Wilton Reinsurance Bermuda Limited, Great-West Life & Annuity Insurance Company, Empower entities, Union Hamilton. These partnerships are crucial for risk transfer, capital management, and business disposition.
• Distribution Partners: Third-party broker-dealers, banks/wirehouses, independent financial planners, Independent Marketing Organizations, actuarial consultants, third-party brokers for pension risk transfer, and employee benefit brokers and consultants.
• Technology Partners: Not explicitly named, but the Company emphasizes technology-enabled channels and digital marketing affiliates.

Facility Network:

• Headquarters: Owned building at 751 Broad Street, Newark, New Jersey.
• Manufacturing/Home Offices: U.S. business and home office functions are conducted in owned and leased locations. International Businesses own and lease home offices in Japan, Brazil, and Mexico. PGIM’s international operations lease home offices in Japan, Taiwan, the United Kingdom, India, and Ireland.
• Research & Development: Not explicitly detailed as separate facilities, but R&D focus is on product innovation.
• Distribution: Field offices are maintained in Japan, Brazil, and Mexico.
• Environmental Initiatives: Environmental programs are underway at domestic home offices to reduce emissions and expand energy efficiency. Waste diversion measures are being developed for home office properties in Brazil and Japan. The Prudential Tower in Newark, New Jersey, has LEED Gold Certification.

Operational Metrics:

• Group Insurance Benefits Ratios: Group life 86.9% (2024), Group disability 71.8% (2024), Total Group Insurance 82.7% (2024).
• Group Insurance Administrative Operating Expense Ratios: Group life 11.6% (2024), Group disability 26.6% (2024), Total Group Insurance 15.7% (2024).
• International Businesses Sales Force: 12,879 total sales force members (Life Planners and Gibraltar Life Consultants) in 2024.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Proprietary sales force (e.g., Prudential Advisors, Life Planners in Japan, Brazil, Mexico), Institutional Relationship Group for PGIM.
• Channel Partners: Third-party intermediaries (broker-dealers, banks/wirehouses, independent financial planners, Independent Marketing Organizations), actuarial consultants, third-party brokers, employee benefit brokers and consultants, and Independent Agency Distribution Channel in International Businesses.
• Digital Platforms: Digital marketing affiliates and technology-enabled channels for certain products.

Customer Portfolio: Enterprise Customers:

• Institutional Customers: Plan sponsors in the U.S. and U.K. for retirement products, institutional clients, professional associations, and affinity groups for group insurance.
• Strategic Partnerships: Collaborations with Warburg Pincus for Prismic Life Reinsurance, Ltd., and various reinsurance partners.
• Customer Concentration: Not explicitly disclosed.

Geographic Revenue Distribution:

• United States: $48,568 million (69.0% of total revenue) in 2024.
• Japan: $13,760 million (19.5% of total revenue) in 2024.
• Other countries: $8,077 million (11.5% of total revenue) in 2024.
• Growth Markets: Focus on select high-growth emerging markets within International Businesses, including Brazil, Mexico, Chile, China, India, Indonesia, Ghana, Kenya, and South Africa.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The financial services industry is characterized by evolving customer demographics (e.g., millennial, multicultural), demand for cost-effective and technology-enabled solutions, and a shift from defined benefit to defined contribution retirement plans. An aging global population drives demand for higher-yielding investments and personalized retirement solutions. Japan's aging population specifically drives demand for retirement, investment, and health products, while Brazil's growing middle class increases demand for diverse life insurance. The market is subject to macro market movements, interest rate fluctuations, and foreign currency volatility.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Asset Managers and Financial Institutions: Numerous global and regional asset managers and diversified financial institutions compete with PGIM based on investment performance, strategy, talent, and client relationships.
• Insurance Companies: Many large, well-established life and health insurance providers compete across U.S. Businesses and International Businesses, based on price, service, distribution, brand, and financial strength.
• Private Equity Firms: Compete in the retirement savings and accumulation products market.

Emerging Competitive Threats:

• New entrants and disruptive technologies, particularly in digital distribution and AI applications, pose evolving threats.

Competitive Response Strategy: Prudential Financial, Inc. aims to become less market-sensitive, de-risk through strategic reinsurance transactions, and deliver sustainable long-term growth by investing in products and solutions. This includes broadening distribution, expanding into new markets (e.g., medical stop loss), diversifying product mixes to limit interest rate sensitivity, and leveraging its global investment management capabilities.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Interest Rate Risk: Changes in interest rates can affect product profitability, AUM fees, and strategic investments. The Company manages asset/liability duration mismatches, earnings compression, and reinvestment risk.
• Equity Market Risk: Fluctuations in equity prices can impact product profitability, AUM fees, and the value of equity investments.
• Foreign Currency Exchange Risk: Volatility in foreign currency exchange rates can affect unhedged earnings and capital, particularly for yen-based businesses.
• Technology Disruption: Risks of obsolescence and the need for continuous innovation to meet evolving customer interaction and investment portfolio needs.
• Competitive Landscape: Intense competition across all segments, requiring continuous product innovation, strong distribution, and effective risk management.
• Climate Change: Exposure to climate-related financial risks, with ongoing initiatives to reduce emissions and expand energy efficiency.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Third-Party Dependency: Reliance on third-party vendors, joint ventures, and distributors introduces risks related to their performance, cybersecurity, and compliance.
• Reinsurance Counterparty Risk: Potential for default by third-party reinsurers, leaving Prudential Financial, Inc. liable for transferred risks. Business Continuation:
• System and Data Disruption: Risks from inadequate or failed processes/systems, human error, cyber-attacks, insider threats, infrastructure outages, and workforce unavailability. Information Security:
• Cybersecurity: Exposure to cyber-attacks, ransomware, and data breaches, with potential for significant costs and reputational damage. The Company maintains an information security program and incident response plan.

Financial & Regulatory Risks

Market & Financial Risks:

• Investment Risk: Potential for loss due to credit quality deterioration, counterparty default, illiquid investments, and valuation methodologies.
• Insurance Risk: Adverse deviation from insurance assumptions (mortality, morbidity, policyholder behavior) can impact profitability.
• Liquidity Risk: Inability to meet near-term obligations, driven by derivative collateral calls, asset-liability mismatches, and insurance cash flows.
• Credit & Liquidity: The Company was in compliance with all debt covenants as of December 31, 2024 and 2023. Regulatory & Compliance Risks:
• Comprehensive Regulation: Subject to extensive U.S. federal and state, and international regulations (e.g., Dodd-Frank, ERISA, SEC Regulation Best Interest, NAIC standards, Japan FSA, Bermuda Monetary Authority).
• Fiduciary Rules: Evolving fiduciary standards (e.g., DOL Fiduciary Rule, SEC Regulation Best Interest) impact sales practices and compliance costs.
• Capital Standards: Requirements like Risk-Based Capital (RBC) in the U.S. and Solvency Margin Ratio (SMR) in Japan, with ongoing development of Economic Solvency Ratio (ESR) in Japan.
• Privacy, Data Protection and Cybersecurity Regulation: Compliance with GDPR, CCPA, CPRA, and state-specific insurance data security laws.
• Artificial Intelligence: Evolving regulatory standards for AI use in underwriting and pricing.
• Taxation: Impact of U.S. Tax Cuts and Jobs Act of 2017, Inflation Reduction Act of 2022 (CAMT, excise tax on stock repurchases), and international tax initiatives (OECD Pillar Two, Bermuda corporate income tax).

Geopolitical & External Risks

Geopolitical Exposure:

• Foreign Government Policies: Risks from pension reforms, geopolitical tensions, and sanctions in international operating regions.
• Trade Relations: Impact of trade tensions and policy changes on global operations. External Events:
• Pandemics: Potential for business disruption and adverse impacts on mortality/morbidity experience.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Product Innovation: Focus on developing innovative product features and solutions, particularly in retirement income, savings, and health products in International Businesses, and protected growth products in Individual Retirement Strategies.
• Digital Transformation: Investment in technology-enabled channels and digital marketing affiliates to enhance customer access and experience. Innovation Pipeline:
• New product launches include Prudential WealthGuardSM Multi-Year Guaranteed Annuity (August 2023) and expansion into the medical stop loss market (effective January 1, 2025).

Intellectual Property Portfolio:

• Patent Strategy: Protection of innovation through federal business method patents, copyright, and trade secret controls.
• Service Marks: Key service marks include “Prudential,” the “Prudential logo,” and the “Rock” symbol.
• Licensing Programs: An agreement with Prudential plc (U.K.) and M&G plc (U.K.) restricts the use of “Prudential” and “Pru” names/marks outside the Americas, necessitating the use of the “Rock” symbol with alternative word marks in these regions.

Technology Partnerships:

• Strategic Alliances: Investment in Prismic Life Holding Company LP for reinsurance capabilities.
• Research Collaborations: Not explicitly detailed.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Board of Directors oversees human capital resources, diversity and inclusion, and corporate culture. Succession planning is implied through the extensive internal experience of the executive leadership team.

Board Composition: The Board of Directors oversees human capital resources, diversity and inclusion, and corporate culture. Specific details on independence, expertise areas, or committee structure are incorporated by reference to the Proxy Statement.

Human Capital Strategy

Workforce Composition:

• Total Employees: 38,196 (as of December 31, 2024)
  • U.S.: 14,087
  • Non-U.S.: 24,109
• Geographic Distribution: Employees are distributed across the U.S. and non-U.S. regions.
• Skill Mix: Not explicitly detailed, but employees have access to on-demand learning, coaching circles, and live learning events.

Talent Management: Acquisition & Retention:

• Hiring Strategy: In 2024, approximately 1,900 positions were filled in the U.S., with 37% filled internally.
• Retention Metrics: The annual turnover rate among the U.S. workforce in 2024 was 15.3%, with voluntary turnover at 4.7%. The 2024 global employee engagement survey (EQ Survey) had an 89% response rate.
• Employee Value Proposition: Compensation is market-based, tied to performance, and aligned with shareholder interests. The Company offers defined benefit and defined contribution plans.

Diversity & Development:

• Diversity Metrics: Not explicitly detailed.
• Development Programs: Employees are required to participate in training on code of conduct, security, safety, social media, and digital communication.
• Culture & Engagement: The Board of Directors oversees diversity and inclusion, and corporate culture.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Environmental programs are underway at domestic home offices to reduce emissions.
• Carbon Neutrality: Not explicitly detailed.
• Renewable Energy: Not explicitly detailed.

Supply Chain Sustainability:

• Supplier Engagement: Not explicitly detailed.
• Responsible Sourcing: Not explicitly detailed.

Social Impact Initiatives:

• Community Investment: Not explicitly detailed.
• Product Impact: Not explicitly detailed.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends:
  • PGIM: Higher compensation expense typically in the first quarter.
  • Individual Life: Lowest underwriting gains in the first quarter, highest in the third quarter.
  • International Businesses: Highest premiums in the first quarter, lowest in the fourth quarter.
  • Corporate & Other: Higher compensation expense typically in the first quarter.
  • All Businesses: Impact of annual assumption updates in the second quarter (excluding PGIM), and typically higher expenses in the fourth quarter.
• Economic Sensitivity: PGIM's profitability is impacted by macro market movements. U.S. Businesses benefit from sustained higher interest rates. International Businesses, especially in Japan, are impacted by low interest rates and yen fluctuations.
• Industry Cycles: Not explicitly detailed.

Planning & Forecasting: Demand forecasting, inventory management, and capacity planning are not explicitly detailed.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• U.S. Insurance Regulation: Subject to state insurance laws, with The Prudential Insurance Company of America domiciled in New Jersey. Financial regulations include dividend payment limitations, Risk-Based Capital (RBC) requirements, Principle-Based Reserving (PBR) for life insurance, and specific New York State Department of Financial Services (NY DFS) reserve requirements.
• International Insurance Regulation: Operations supervised by authorities in Japan (Financial Services Agency - FSA), Bermuda (Bermuda Monetary Authority - BMA), Brazil, and Mexico. Subject to Solvency Margin Ratio (SMR) in Japan, with the FSA developing an Economic Solvency Ratio (ESR).
• U.S. Investment and Retirement Products: Subject to federal/state securities/fiduciary laws and ERISA. The SECURE Act and SECURE 2.0 promote retirement plan coverage and savings.
• Derivatives Regulation: Dodd-Frank Wall Street Reform and Consumer Protection Act established a framework for over-the-counter derivatives markets.
• Fiduciary Rules and Other Standards of Care: Subject to the DOL Fiduciary Rule (currently stayed due to legal challenges), SEC Regulation Best Interest, NAIC Standard of Care for annuities, and Japan's "Principles for Customer-Oriented Business Conduct."

Trade & Export Controls:

• Export Restrictions: Subject to U.S. export controls and international sanctions.
• Sanctions Compliance: Compliance with sanctioned entity restrictions and monitoring.

Legal Proceedings:

• The aggregate range of reasonably possible losses in excess of accruals for litigation and regulatory matters was less than $250 million as of December 31, 2024.
• Key litigations closed in 2024 include City of Warren v. PFI, et al. (securities litigation) and LIBOR litigation.
• The SEC investigation into variable product sales and replacement activity concluded in September 2024 with no enforcement action recommended.
• Cho v. PICA, et al. (ERISA) had a summary judgment granted in favor of Prudential Financial, Inc. in December 2024, with an appeal filed in January 2025.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 15.8% (2024), 20.0% (2023), 14.7% (2022).
• U.S. Federal Statutory Income Tax Rate: 21% for 2024, 2023, and 2022.
• Geographic Tax Planning: Subject to OECD Global Anti-Base Erosion Model Rules (Pillar Two) for a 15% global minimum tax, adopted by the EU and UK for 2024, and announced for 2025 by Japan, Hong Kong, and Singapore. The Government of Bermuda enacted a 15% corporate income tax effective January 1, 2025. Japan's national corporate statutory tax rate is 23.2%, with a proposed 4% surtax effective April 1, 2026, increasing the rate to about 24.1%.
• Tax Reform Impact: The U.S. Tax Cuts and Jobs Act of 2017 (Tax Act of 2017) reduced the corporate tax rate, revised methodologies for tax reserves, and introduced GILTI and BEAT. The Inflation Reduction Act of 2022 imposes a 15% alternative minimum tax on corporations (CAMT) and a 1% excise tax on stock repurchases, effective after December 31, 2022.
• Unrecognized Tax Benefits: $132 million as of December 31, 2024. Approximately $86 million for prior year audit cycles attributable to a Section 952 election for Brazil affiliates may be paid within 12 months.

Insurance & Risk Transfer

Risk Management Framework: Prudential Financial, Inc. utilizes an integrated risk management framework that addresses investment, insurance, market, liquidity, operational, model, and strategic risks.

Insurance Coverage: Not explicitly detailed in terms of specific policies or coverage limits.

Risk Transfer Mechanisms:

• Reinsurance: The Company regularly enters into third-party and affiliated reinsurance agreements to transfer risk, reduce exposure and volatility, provide capacity, facilitate disposition, and for capital management.
  • Ceded Reinsurance: Used across Corporate and Other (certain retirement products), Retirement Strategies (structured settlement annuities, variable annuity business, fixed indexed annuities), Group Insurance (most products), Individual Life (mortality risk, guaranteed universal life block), and International Businesses (mortality/morbidity risk).
  • Assumed Reinsurance: Used in Retirement Strategies (international reinsurance pension risk transfer, variable annuity business acquisition, certain annuity products) and Individual Life (The Hartford’s individual life insurance business acquisition).
• Hedging Strategies: Employed to manage market risks, including interest rate risk, equity price risk, and foreign currency exchange rate risk. A yen hedging strategy is used to preserve the relative contribution of yen-based business to overall return on equity.
• Contractual Risk Allocation: Indemnification agreements for serviced mortgage loans and guarantees for third-party assets are used to transfer risk.