PRUDENTIAL FINANCIAL INC - Quarter Report: 2020 March (Form 10-Q)

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(1)	See Note 4 for details of balances associated with variable interest entities.

(2)	March 31, 2020 amounts include the impacts of the January 1, 2020 adoption of ASU 2016-13. See Note 2 for details.

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(1)	Includes the impact from the adoption of ASU 2016-13. See Note 2.

(2)	Includes the impact from the adoption of ASU 2017-08 and 2017-12. See Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for additional information.

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(1)	Excludes notes with amortized cost of $5,616 million (fair value, $5,616 million), which have been offset with the associated debt under a netting agreement.

(2)	Includes credit-tranched securities collateralized by loan obligations, auto loans, education loans, home equity loans and other asset types.

(3)	Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(4)	Excludes notes with amortized cost of $4,998 million (fair value, $5,001 million), which have been offset with the associated debt under a netting agreement.

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(1)	Excludes notes with amortized cost of $4,751 million (fair value, $4,757 million), which have been offset with the associated debt under a netting agreement.

(2)	Includes collateralized loan obligations, auto loans, education loans, home equity and other asset types.

(3)	Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(4)	Represents the amount of unrealized losses remaining in AOCI, from the impairment measurement date. Amount excludes $362 million of net unrealized gains on impaired available-for-sale securities and $1 million of net unrealized gains on impaired held-to-maturity securities relating to changes in the value of such securities subsequent to the impairment measurement date.

(5)	Excludes notes with amortized cost of $4,998 million (fair value, $5,401 million), which have been offset with the associated debt under a netting agreement.

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(1)	As of December 31, 2019, there were no securities classified as held-to-maturity in a gross unrealized loss position.

(1)	Excludes available-for-sale notes with amortized cost of $5,616 million (fair value, $5,616 million) and held-to-maturity notes with amortized cost of $4,998 million (fair value, $5,001 million), which have been offset with the associated debt under a netting agreement.

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(1)	Includes $39 million and $587 million of non-cash related proceeds due to the timing of trade settlements for the three months ended March 31, 2020 and 2019, respectively.

(2)	For the three months ended March 31, 2019, amounts exclude the portion of OTTI amounts remaining in “Other comprehensive income (loss)” (“OCI”), representing any difference between the fair value of the impaired debt security and the net present value of its projected future cash flows at the time of impairment.

(3)	For the three months ended March 31, 2020, amounts represent write-downs on securities approaching maturity related to foreign exchange movements and securities actively marketed for sale.

(4)	Effective January 1, 2020, credit losses on available-for-sale and held-to-maturity fixed maturity securities are recorded within the “allowance for credit losses.”

(5)	Includes $1 million and $0 million of non-cash related proceeds due to the timing of trade settlements for the three months ended March 31, 2020 and 2019, respectively.

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(1)	Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(2)	Includes collateralized loan obligations, auto loans, education loans, home equity and other asset types. Collateralized loan obligations at fair value were $1,009 million and $1,060 million as of March 31, 2020 and December 31, 2019, respectively, all of which were rated AAA.

(3)	As a percentage of amortized cost, 94% of the portfolio was considered high or highest quality based on NAIC or equivalent ratings, as of both March 31, 2020 and December 31, 2019.

(4)	As a percentage of amortized cost, 78% and 77% of the portfolio consisted of public securities as of March 31, 2020 and December 31, 2019, respectively.

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(1)	Includes loans held for sale which are carried at fair value and are collateralized primarily by apartment complexes. As of March 31, 2020 and December 31, 2019, the net carrying value of these loans was $670 million and $228 million, respectively.

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(1)	As of March 31, 2020, there were no loans in this category accruing interest.

(2)	For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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(1)	As of December 31, 2019, there were no loans in this category accruing interest.

(2)	For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(1)	As of March 31, 2020 and December 31, 2019, real estate held through direct ownership had mortgage debt of $548 million and $537 million, respectively.

(2)

Primarily includes strategic investments made by investment management operations, leveraged leases and member and activity stock held in the Federal Home Loan Banks of New York and Boston. For additional information regarding the Company’s holdings in the Federal Home Loan Banks of New York and Boston, see Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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(1)	Includes income on credit-linked notes which are reported on the same financial statement line item as related surplus notes, as conditions are met for right to offset.

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(1)	Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading.

(1)	Effective January 1, 2020, per ASU 2016-13, fixed maturity securities, available-for-sale are no longer required to be disclosed “with OTTI” and “all other.”

(2)	For additional information on cash flow hedges, see Note 5.

(3)	As of March 31, 2020, there were no net unrealized losses on held-to-maturity securities that were previously transferred from available-for-sale. Includes net unrealized gains on certain joint ventures that are strategic in nature and are included in “Other assets.”

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(1)	The Company did not have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.

(1)	The Company did not have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.

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(1)	Total assets of consolidated VIEs reflect $2,663 million and $2,668 million as of March 31, 2020 and December 31, 2019, respectively, related to VIEs whose beneficial interests are wholly-owned by consolidated subsidiaries.

(2)	Recourse is limited to the assets of the respective VIE and does not extend to the general credit of the Company. As of March 31, 2020, the maturities of these obligations were between 4 and 9 years.

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•	To-be-announced (“TBA”) forward contracts, loan commitments, embedded derivatives and synthetic guaranteed investment contracts (“GICs”).

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(1)	“Other” primarily includes derivative contracts used to improve the balance of the Company’s tail longevity and mortality risk. Under these contracts, the Company’s gains (losses) are capped at the notional amount.

(2)	Excludes embedded derivatives and associated reinsurance recoverables which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $28,769 million and $14,035 million as of March 31, 2020 and December 31, 2019, respectively, primarily included in “Future policy benefits.”

(3)	Recorded in “Other invested assets” and “Other liabilities” on the Unaudited Interim Consolidated Statements of Financial Position.

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(1)	There were no material fair value hedging adjustments for hedged assets and liabilities for which hedge accounting has been discontinued.

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(1)	Amounts exclude the excess of collateral received/pledged from/to the counterparty.

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(1)	Net change in AOCI.

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(1)	The NAIC rating designations are based on availability and the lowest ratings among Moody's Investors Service, Inc. ("Moody's"), Standard & Poor’s Rating Services (“S&P”) and Fitch Ratings Inc. (“Fitch”). If no rating is available from a rating agency, a NAIC 6 rating is used.

(2)	Single name CDS may reference to the credit of corporate debt, sovereign debt, and structured finance. Index references NAIC designations are based on the lowest rated single name reference included in the index.

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(1)	“Netting” amounts represent cash collateral of $19,499 million and $6,814 million as of March 31, 2020 and December 31, 2019, respectively.

(2)	Excludes notes with fair value of $5,616 million (carrying amount of $5,616 million) and $4,757 million (carrying amount of $4,751 million) as of March 31, 2020 and December 31, 2019, respectively, which have been offset with the associated payables under a netting agreement.

(3)	Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.

(4)	All other represents cash equivalents and short-term investments.

(5)	Other invested assets excluded from the fair value hierarchy include certain hedge funds, private equity funds and other funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. As of March 31, 2020 and December 31, 2019, the fair values of such investments were $4,131 million and $4,213 million respectively.

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(6)

Separate account assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate, hedge funds and other invested assets. As of March 31, 2020 and December 31, 2019, the fair value of such investments was $23,623 million and $23,557 million, respectively.

(7)

Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Unaudited Interim Consolidated Statements of Financial Position.

(8)

As of March 31, 2020, the net embedded derivative liability position of $27.9 billion includes $0.2 billion of embedded derivatives in an asset position and $28.1 billion of embedded derivatives in a liability position. As of December 31, 2019, the net embedded derivative liability position of $12.8 billion includes $0.7 billion of embedded derivatives in an asset position and $13.5 billion of embedded derivatives in a liability position.

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(1)	Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table.

(2)	Includes assets classified as fixed maturities available-for-sale, assets supporting experience-rated contractholder liabilities and fixed maturities trading.

(3)	Represents multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”), and are amounts used when the Company has determined that market participants would use such multiples when valuing the investments.

(4)	These investments typically use a range of discount rates (10% to 20%), therefore presenting a range, rather than a weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(5)	Changes in the fair value of separate account assets are borne by customers and thus are offset by changes in separate account liabilities on the Company’s Unaudited Interim Consolidated Statements of Financial Position. As a result, changes in value associated with these investments are not reflected in the Company’s Unaudited Interim Consolidated Statements of Operations.

(6)

Future policy benefits primarily represent general account liabilities for the living benefit features of the Company’s variable annuity contracts which are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(7)

Policyholders’ account balances primarily represent general account liabilities for the index-linked interest credited on certain of the Company’s life and annuity products that are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

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(8)

Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. For any given contract, lapse rates vary throughout the period over which cash flows are projected for the purposes of valuing these embedded derivatives.

(9)

The spread over the London Inter-Bank Offered Rate (“LIBOR”) swap curve represents the premium added to the proxy for the risk-free rate (LIBOR) to reflect the Company’s estimates of rates that a market participant would use to value the living benefits in both the accumulation and payout phases and index-linked interest crediting guarantees. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt.

(10)

The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.

(11)

The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of March 31, 2020 and December 31, 2019, the minimum withdrawal rate assumption is 78% and the maximum withdrawal rate assumption may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.

(12)

The range reflects the mortality rates for the vast majority of business with living benefits and other contracts, with policyholders ranging from 45 to 90 years old. While the majority of living benefits have a minimum age requirement, certain other contracts do not have an age restriction. This results in contractholders with mortality rates approaching 0% for certain benefits. Mortality rates may vary by product, age, and duration. A mortality improvement assumption is also incorporated into the overall mortality table.

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(1)	“Other,” for the periods ended March 31, 2020 and March 31, 2019, primarily represent deconsolidation of VIE, reclassifications of certain assets between reporting categories and foreign currency translation.

(2)	Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

(3)	Includes U.S. corporate public, U.S. corporate private, foreign corporate public and foreign corporate private securities.

(4)	Includes asset-backed, commercial mortgage-backed and residential mortgage-backed securities.

(5)

Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Unaudited Interim Consolidated Statements of Financial Position.

(6)	Issuances and settlements for Policyholders’ account balances are presented net in the rollforward. Prior period have been updated to conform to current period presentation.

(7)	Effective January 1, 2020, the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period were added prospectively due to adoption of ASU 2018-13. Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

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(1)	“Netting” amounts represent cash collateral and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting agreement.

(1)	Total realized and unrealized gains (losses) as well as unrealized gains (losses) for assets still held at the end of the period are recorded in “Realized investment gains (losses), net.”

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(2)	Transfers into or out of Level 3 are generally reported at the value as of the beginning of the quarter in which the transfers occur for any such positions still held at the end of the quarter.

(1)	Commercial mortgage loans are valued based on discounted cash flows utilizing market rates or the fair value of the underlying real estate collateral.

(2)

Mortgage servicing rights are valued using a discounted cash flow model. The model incorporates assumptions for servicing revenues, which are adjusted for expected prepayments, delinquency rates, escrow deposit income and estimated loan servicing expenses. The discount rates incorporated into the model are determined based on the estimated returns a market participant would require for this business including a liquidity and risk premium. This estimate includes available relevant data from any active market sales of mortgage servicing rights.

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(1)	As of March 31, 2020, for loans for which the fair value option has been elected, there were no loans in non-accrual status and none of the loans were more than 90 days past due and still accruing.

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(1)	Carrying values presented herein differ from those in the Company’s Unaudited Interim Consolidated Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or are out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments.

(2)	Excludes notes with fair value of $5,001 million (carrying amount of $4,998 million) and $5,401 million (carrying amount of $4,998 million) as of March 31, 2020 and December 31, 2019, respectively, which have been offset with the associated payables under a netting agreement.

(3)	Includes notes with fair value of $10,617 million (carrying amount of $10,614 million) and $10,158 million (carrying amount of $9,749 million) as of March 31, 2020 and December 31, 2019, respectively, which have been offset with the associated receivables under a netting agreement.

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(1)	See Note 2 for more information.

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(1)	The surplus notes have corresponding assets where rights to set-off exist, thereby reducing the amount of surplus notes included in long-term debt.

(2)	Includes $43 million of debt denominated in foreign currency at both March 31, 2020 and December 31, 2019.

(3)	Includes $52 million and $53 million of debt denominated in foreign currency at March 31, 2020 and December 31, 2019, respectively.

(4)	Includes Prudential Financial debt of $7,520 million and $7,518 million at March 31, 2020 and December 31, 2019, respectively. Also includes subsidiary debt of $58 million and $57 million denominated in foreign currency at March 31, 2020 and December 31, 2019, respectively.

(5)	Includes Prudential Financial debt of $18,920 million and $17,430 million at March 31, 2020 and December 31, 2019, respectively.

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(1)	For 2020 certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of their involuntary termination or participation in the Voluntary Separation Program that was offered to eligible U.S.-based employees in 2019.

(1)	Represents net shares issued from treasury pursuant to the Company’s stock-based compensation programs.

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(1)	Includes cash flow hedges of $3,186 million and $832 million as of March 31, 2020 and December 31, 2019, respectively, and $776 million and $811 million as of March 31, 2019 and December 31, 2018, respectively.

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(1)	All amounts are shown before tax.

(2)	Positive amounts indicate gains/benefits reclassified out of AOCI. Negative amounts indicate losses/costs reclassified out of AOCI.

(3)	See Note 5 for additional information on cash flow hedges.

(4)	See table below for additional information on unrealized investment gains (losses), including the impact on deferred policy acquisition and other costs, future policy benefits and policyholders’ dividends.

(5)	See Note 10 for information on employee benefit plans.

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(1)	Allowance for credit losses on available-for-sale fixed maturity securities effective January 1, 2020.

(1)	Includes cash flow hedges. See Note 5 for information on cash flow hedges.

(2)	Includes net unrealized gains (losses) for which an OTTI loss had been previously recognized.

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(1)

For the three months ended March 31, 2020, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because dilutive shares and dilutive earnings per share are not applicable when a net loss is reported. As a result of the net loss attributable to Prudential Financial available to holders of Common Stock for the three months ended March 31, 2020, all potential stock options and compensation programs were considered antidilutive.

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•	Realized investment gains (losses), net, and related adjustments;

•	Charges related to realized investment gains (losses), net;

•	Market experience updates;

•	Divested and Run-off Businesses;

•	Other adjustments; and

•	Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests.

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(1)	Individual Annuities segment results reflect DAC as if the individual annuity business is a stand-alone operation. The elimination of intersegment costs capitalized in accordance with this policy is included in consolidating adjustments within Corporate and Other operations.

(2)	Assurance IQ was acquired by the Company in October 2019. For additional information, see Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(3)	Prior period amounts have been updated to conform to current period presentation.

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(4)	Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income.

(5)	Represents adjustments not included in the above reconciling items. “Other adjustments” include certain components of the consideration for the Assurance IQ acquisition, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration.

(1)	Assurance IQ was acquired by the Company in October 2019. For additional information, see Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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(1)	Assurance IQ was acquired by the Company in October 2019. For additional information, see Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(2)	Prior period amounts have been updated to conform to current period presentation.

(3)	Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income.

(4)	Represents adjustments not included in the above reconciling items. “Other adjustments” include certain components of the consideration for the Assurance IQ acquisition, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration.

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(1)	Includes $39 million and $38 million related to securities repurchase transactions as of March 31, 2020 and December 31, 2019, respectively.

(2)	Includes $38 million and $37 million related to securities repurchase transactions as of March 31, 2020 and December 31, 2019, respectively.

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•	If Variable Profits are less than $900 million, no additional amount is payable.

•	If Variable Profits are greater than $1,300 million, an additional amount of $1,150 million is payable.

•	If Variable Profits are greater than $900 million but less than or equal to $1,300 million, an additional amount is payable equal to the product of (i) the quotient of (A) an amount equal to (1) Variable Profits achieved minus (2) $900 million divided by (B) $400 million and (ii) $1,150 million.

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•	Outlook

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•	Results of Operations. For the three months ended March 31, 2020 we reported a net loss of $(271) million, as unfavorable financial market conditions had a substantial negative effect on the reported results of our businesses. See “Results of Operations” and “Segment Results of Operations” for a discussion of first quarter results.

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Liquidity. As of March 31, 2020, we had $5,293 million in highly liquid assets at Prudential Financial. During the first quarter we took several steps to proactively manage liquidity, including issuing $1.5 billion in senior debt in part to pre-fund 2020 and 2021 maturities. We temporarily suspended Common Stock repurchases beginning April 1, 2020 under our existing repurchase authorization, after repurchasing $500 million of shares of Prudential Financial’s Common Stock in

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Capital Resources. As of March 31, 2020, all of our significant insurance subsidiaries maintained capital levels consistent with their ratings targets. However, market conditions could negatively impact the statutory capital of our insurance companies and constrain our overall capital flexibility. Continued adverse market conditions could require us to take additional management actions for our insurance subsidiaries to maintain capital consistent with their ratings objectives, which may include redeploying financial resources from internal sources or, if markets continue to decline, using available external sources of capital or seeking additional sources. See “Liquidity and Capital Resources—Capital” for a discussion of our capital resources.

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Investment Portfolio. Net unrealized gains (losses) on fixed maturity investments (excluding securities classified as trading) were a net unrealized gain of $40,552 million as of March 31, 2020, compared to a net unrealized gain of $44,891 million as of December 31, 2019. Gross unrealized gains increased from $46,206 million as of December 31, 2019 to $47,677 million as of March 31, 2020 and gross unrealized losses increased from $1,315 million to $7,125 million for the same period. The increase in gross unrealized losses was primarily due to credit spread widening and liquidity concerns. The continued impact of COVID-19 on the global economy and corporate credit may result in credit migration and losses in our investment portfolio. Due to the highly uncertain nature of these conditions, it is not possible to estimate the overall impacts at this time. The sectors most impacted by the COVID-19 crisis include energy, consumer cyclical and retail related investments (see “—General Account Investments” for additional information). Specific to our equity investments in LPs/LLCs where we apply the equity method, we use financial information provided by the investee, generally on a one to three-month lag. As such, as a result of the lag, any unfavorable impacts from these investments that were not recorded in the current period will be reflected in the next reporting period.

•	Sales and Flows. First quarter sales and flows were not significantly impacted by COVID-19. See “Segment Results of Operations” for a discussion of sales and flows in each of our segments.

•	Underwriting Results. First quarter mortality experience was not significantly impacted by COVID-19. See “Segment Results of Operations” for a discussion of mortality experience in each of our segments.

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Expenses. We expect higher expenses of approximately $230 million in 2020 from costs associated with COVID-19, with more than half of this impact being in the second quarter of 2020. These higher expenses are primarily related to agent compensation, as well as technology and third-party vendor capabilities related to remote work functionality and protecting our employees’ health. We also expect some offsets to these higher expenses from lower travel, meeting, meal and entertainment costs. Expenses incurred for the first quarter of 2020 were not significantly impacted by COVID-19.

•	Risk Management. Prudential has a robust risk management framework that seeks to ensure we can fulfill our customer, regulatory, and other stakeholder obligations under a range of stress scenarios by maintaining the appropriate balance between the Company’s resources and risks. We evaluate the Company’s exposure to stress under four lenses (economic, STAT, GAAP, and liquidity).

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•	Risk Factors. The COVID-19 pandemic has adversely impacted our results of operations, financial position, investment portfolio, new business opportunities and operations, and these impacts are expected to continue. For additional information on the risks to our business posed by the COVID-19 pandemic, see “Risk Factors.”

•	Business Continuity. One of the main impacts of the COVID-19 pandemic has been executing our business continuity protocols to ensure our employees are safe and able to serve our customers. This included effectively transitioning the vast majority of our employees to remote work arrangements.

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CARES Act and Other Regulatory Developments. In March, 2020 Congress enacted the CARES Act, which provides $2 trillion in economic stimulus to taxpayers, small businesses, and corporations through various grant and loan programs, tax provisions and regulatory relief. We are analyzing the CARES Act and its potential impact on Prudential, and implementing operational changes necessary in our Retirement, Annuities and PGIM businesses to accommodate the CARES Act.

•	investment-related activity, including: investment income returns, net interest margins, net investment spread results, new money rates, mortgage loan prepayments and bond redemptions;

•	insurance reserve levels, market experience true-ups and amortization of both deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”);

•	customer account values, including their impact on fee income;

•	fair value of, and possible impairments on, intangible assets such as goodwill;

•	product offerings, design features, crediting rates and sales mix; and

•	policyholder behavior, including surrender or withdrawal activity.

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(1)	Includes approximately $0.79 billion related to contracts that impose a market value adjustment if the invested amount is not held to maturity.

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•	$1,383 million unfavorable variance, on a pre-tax basis, from investment related activities that are recorded within “Other income (loss)” for PFI excluding our Divested and Run-off Businesses. These unfavorable impacts were primarily driven by unrealized gains (losses) from equity securities and fixed maturity securities designated as trading;

•	$1,006 million unfavorable variance, on a pre-tax basis, driven by market experience updates primarily from our Individual Annuities and Individual Life businesses; and

•	$809 million unfavorable variance, on a pre-tax basis, reflecting the net impact from changes in the value of our embedded derivatives and related hedge positions associated with certain variable annuities (see “—Results of Operations by Segment—U.S. Businesses—U.S. Individual Solutions Division—Individual Annuities—Variable Annuity Risks and Risk Mitigants” for additional information).

•	$2,444 million favorable variance, on a pre-tax basis, from realized investment gains and losses for PFI excluding our Divested and Run-off Businesses, and excluding the impact of the hedging program associated with certain variable annuities discussed above (see “—General Account Investments” for additional information).

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(1)	Assurance IQ was acquired by the Company in October 2019. For additional information, see Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(2)	Represents “Realized investment gains (losses), net,” and related adjustments. See “—General Account Investments” and Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information. Prior period amounts have been updated to conform to current period presentation.

(3)	Includes charges that represent the impact of realized investment gains (losses), net, on the amortization of DAC and other costs, and on changes in reserves. Also includes charges resulting from payments related to market value adjustment features of certain of our annuity products and the impact of realized investment gains (losses), net, on the amortization of unearned revenue reserves.

(4)

Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

(5)	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 that did not qualify for “discontinued operations” accounting treatment under U.S. GAAP. See “—Divested and Run-off Businesses.”

(6)

Represents adjustments not included in the above reconciling items. “Other adjustments” include certain components of the consideration for the Assurance IQ acquisition, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

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(7)

Equity in earnings of operating joint ventures are included in adjusted operating income but excluded from “Income (loss) before income taxes and equity in earnings of operating joint ventures” as they are reflected on an after-tax U.S. GAAP basis as a separate line in the Unaudited Interim 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 operating joint ventures” as they are reflected on a U.S. GAAP basis as a separate line in the Unaudited Interim 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.

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(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 $60.3 billion and $57.8 billion as of March 31, 2020 and December 31, 2019, 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.

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(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)	As of March 31, 2020 and 2019, the notional amounts of these forward currency contracts within our Corporate and Other operations were $2.4 billion and $2.5 billion, respectively, of which $0.5 billion and $1.2 billion, respectively, were related to our Japanese insurance operations.

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•	DAC, deferred sales inducements (“DSI”) and VOBA;

•	Policyholder liabilities;

•	Goodwill;

•	Valuation of investments including derivatives, measurement of allowance for credit losses, and recognition of other-than-temporary impairments (“OTTI”);

•	Pension and other postretirement benefits;

•	Taxes on income; and

•	Reserves for contingencies, including reserves for losses in connection with unresolved legal matters.

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(1)

Certain of PGIM’s investment activities are based in currencies other than the U.S. dollar 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 U.S. dollar-equivalent earnings. For more information related to this intercompany arrangement, see “—Results of Operations—Impact of Foreign Currency Exchange Rates,” above.

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(1)

Consists of fees from: individual mutual funds and variable annuities and variable life insurance separate account assets; funds invested in proprietary mutual funds through our defined contribution plan products; and third-party sub-advisory relationships. Revenues from fixed annuities and the fixed-rate accounts of variable annuities and variable life insurance are included in the general account.

(2)	Includes mortgage origination revenues from our commercial mortgage origination and servicing business.

(3)	Future revenues will be impacted by the level and diversification of our strategic investments, the commercial real estate market, and other domestic and international markets.

(4)

Prior period amount includes payments from Wells Fargo under an agreement dated as of July 30, 2004, implementing arrangements with respect to money market mutual funds in connection with the combination of our retail securities brokerage and clearing operations with those of Wells Fargo. The agreement extended for ten years from the Wachovia Securities joint venture termination date of December 31, 2009 to December 31, 2019. The revenue from Wells Fargo under this agreement was $16 million for the three months ended March 31, 2019.

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(1)

Prior period amounts have been updated to conform to current period presentation. “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, agricultural debt and equity 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)	Consists of third-party institutional assets and group insurance contracts.

(3)	Consists of individual mutual funds and variable annuities and variable life insurance separate account assets; funds invested in proprietary mutual funds through our defined contribution plan products; and third-party sub-advisory relationships. Fixed annuities and the fixed-rate accounts of variable annuities and variable life insurance are included in the general account.

(4)	Effective first quarter of 2020, certain assets have been reclassified from the U.S. Individual Solutions division to PGIM.

(5)

Primarily include certain assets related to annuity and variable life products in our U.S. Individual Solutions division, retirement and group life products in our U.S. Workplace Solutions division and certain general account assets of 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 our Chief Investment Officer Organization.

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(1)	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.

(2)	Includes income reinvestment, where applicable.

(3)

Includes the effect of foreign exchange rate changes, net money market activity and the impact of acquired business. The impact from foreign currency fluctuations, which primarily impact the general account, resulted in a loss of $1.8 billion and $1.2 billion for the three months ended March 31, 2020 and 2019, respectively; and a gain of less than $0.1 billion for the twelve months ended March 31, 2020.

(4)	Prior period amounts have been updated to conform to current period presentation.

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(1)	Prior period amounts have been updated to conform to current period presentation. For more information, see the “Assets Under Management” table above.

(1)	Assurance IQ was acquired by the Company in October 2019. For additional information, see Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(2)	Prior period amounts have been updated to conform to current period presentation.

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(3)

Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

(4)

Represents adjustments not included in the above reconciling items. “Other adjustments” include certain components of the consideration for the Assurance IQ acquisition, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

•	Lower underwriting results in our Individual Life and Retirement businesses;

•	A favorable impact from changes in market conditions on estimates of profitability in the prior year period, which beginning with the second quarter of 2019 is excluded from adjusted operating income (see Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information);

•	Lower net investment spread results driven by lower income on non-coupon investments and lower investment yields due to a decline in interest rates; and

•	Lower fee income, net of distribution expenses and other associated costs, in our Individual Annuities business.

•	Lower expenses, including costs associated with business initiatives.

(1)	Prior period amounts have been updated to conform to current period presentation.

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(1)	Additions primarily include: group annuities calculated based on premiums received; funding agreements issued; longevity reinsurance contracts calculated as the present value of future projected benefits; and investment-only stable value contracts calculated as the fair value of customers’ funds held in a client-owned trust.

(2)

“Other” activity includes the effect of foreign exchange rate changes associated with our British pounds sterling denominated longevity reinsurance business and changes in asset balances for externally-managed accounts. For the three months ended March 31, 2020 and 2019, “Other” activity also includes $2,752 million in receipts offset by $2,536 million in payments and $611 million in receipts offset by $617 million in payments, respectively, related to funding agreements backed by commercial paper which typically have maturities of less than 90 days.

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(1)	Ratio of policyholder benefits to earned premiums plus policy charges and fee income.

(2)	Ratio of general and administrative expenses (excluding commissions) to gross premiums plus policy charges and fee income.

(3)	The benefit and administrative ratios are measures used to evaluate profitability and efficiency.

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(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.

(1)

Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

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(1)

Includes gross variable and fixed annuities sold as retail investment products. Investments sold through defined contribution plan products are included with such products within our Retirement business. Variable annuity account values were $139.0 billion and $157.9 billion as of March 31, 2020 and 2019, respectively. Fixed annuity account values were $4.9 billion and $4.0 billion as of March 31, 2020 and 2019, respectively.

(2)	Prior period amounts have been reclassified to conform to current period presentation.

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(1)	Positive amount represents income; negative amount represents a loss.

(2)	Net hedging impact represents the difference between the change in fair value of the risk we seek to hedge using derivatives and the change in fair value of the derivatives utilized with respect to that risk.

(3)	Represents risk margins and valuation methodology differences between the economic liability managed by the ALM strategy and the U.S. GAAP liability.

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(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 PDI which is presented separately within this table.

(4)	Represents contracts subject to a reinsurance transaction with an external counterparty covering certain new Highest Daily Lifetime Income (“HDI”) v.3.0 business for the period April 1, 2015 through December 31, 2016. These contracts with living benefits also have an automatic rebalancing feature.

(5)	Includes contracts that have a GMDB feature and do not have an automatic rebalancing feature.

(1)

Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

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(1)

Single pay life premiums and excess (unscheduled) premiums are included in annualized new business premiums based on a 10% credit and represented approximately 5% and 6% of Guaranteed Universal Life and 7% and 6% of Other Universal Life annualized new business premiums for the three months ended March 31, 2020 and 2019, respectively. Prior period percentages have been updated to conform to current period presentation.

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(1)	“Other adjustments” include certain components of the consideration for the Assurance IQ acquisition, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

•

In April 2020, we entered into a definitive agreement with KB Financial Group, Inc., a Korean financial services provider, to sell The Prudential Life Insurance Company of Korea, Ltd. (“POK”) for cash consideration of approximately $1.9 billion at current exchange rates, to be paid at closing. The transaction is consistent with our strategic focus internationally on Japan and higher-growth emerging markets around the world. The transaction is expected to close by the end of 2020, subject to regulatory approvals and customary closing conditions. In the second quarter of 2020, we will report our investment in POK as “held for sale” and expect to recognize a $600 million after-tax charge to earnings to adjust the book value of POK to the market value reflected in the purchase price (see Note 15 to the Unaudited Interim Consolidated Financial Statements for additional information). Effective in the second quarter of 2020, the results of this business and the impact of the anticipated sale will be reflected in the Divested and Run-off Businesses that are included in Corporate and Other. We intend to use the proceeds of the transaction for general corporate purposes.

•	We are exploring strategic options for our Taiwanese insurance business, which may include a sale.

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(1)	Prior period amounts have been updated to conform to current period presentation.

(2)

Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

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(1)	Includes retirement income, endowment and savings variable universal life.

(2)

Single pay life annualized new business premiums, which include 10% of first year premiums, and 3-year limited pay annualized new business premiums, which include 100% of new business premiums, represented 4% and 67%, respectively, of total Japanese bank distribution channel annualized new business premiums, excluding annuity products, for the three months ended March 31, 2020, and 0% and 65%, respectively, of total Japanese bank distribution channel annualized new business premiums, excluding annuity products, for the three months ended March 31, 2019.

(1)	Includes consolidating adjustments.

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(2)

Represents the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which are excluded from adjusted operating income beginning with the second quarter of 2019. The Company had historically recognized these impacts in adjusted operating income. See Note 13 to the Unaudited Interim Consolidated Financial Statements for additional information.

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(1)	Prior period amounts have been reclassified to conform to current period presentation.

(2)

Decreases to contractholder liabilities due to asset value changes are limited by certain floors and therefore do not reflect cumulative declines in recorded asset values of $14 million and $24 million as of March 31, 2020 and 2019, respectively. We have recovered and expect to recover in future periods these declines in recorded asset values through subsequent increases in recorded asset values or reductions in crediting rates on contractholder liabilities.

(3)

Included in the amounts above related to the change in the liability to contractholders as a result of commercial mortgage and other loans are a decrease of $37 million and an increase of $29 million for the three months ended March 31, 2020 and 2019, respectively. As prescribed by U.S. GAAP, changes in the fair value of commercial mortgage and other loans held for investment in our general account, other than when associated with impairments, are not recognized in income in the current period, while the impact of these changes in fair value are reflected as a change in the liability to fully participating contractholders in the current period.

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(1)	Level 3 assets expressed as a percentage of total assets measured at fair value on a recurring basis for PFI excluding the Closed Block division and for the Closed Block division totaled 1.3% and 2.7%, respectively, as of March 31, 2020, and 1.1% and 2.0%, respectively, as of December 31, 2019.

(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.

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(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 balance sheet. For additional information regarding these investments, see “—Invested Assets of Other Entities and Operations” below.

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(1)	Other invested assets consist of investments in LPs/LLCs, investment real estate held through direct ownership, derivative instruments and other miscellaneous investments.

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(1)

For interim periods, yields are annualized. 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.

(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 was 3.55% and 3.71% for the three months ended March 31, 2020 and 2019, respectively.

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(1)	Represents circumstances where we believe credit events or other adverse conditions of the respective issuers have caused or will lead to a deficiency in the contractual cash flows related to the investment. The amount of the impairment or allowance recorded in earnings is the difference between the amortized

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(2)	Represents the difference between the fair value of the debt security and the amortized cost at the time of the write-down.

(3)	Effective January 1, 2020, due to the implementation of ASU 2016-13, OTTI is no longer recorded.

(4)	Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading.

(5)	Includes “realized investment gains (losses), net” of our investment management operations.

(6)	Prior period amounts have been updated to conform to current period presentation.

•	$2,355 million of gains on interest rate derivatives due to decreases in swap and U.S. Treasury rates;

•	$1,113 million of gains on capital hedges due to decreases in equity indices;

•	$1,001 million of gains on foreign currency hedges due to U.S. dollar appreciation versus the euro and British pound and due to USD interest rates declining more than foreign rates; and

•	$33 million of gains for fees earned on fee-based synthetic guaranteed investment contracts (“GICs”);

•	$3,390 million of losses on product-related embedded derivatives and related hedge positions associated with certain variable annuity contracts; and

•	$41 million of losses on credit default swaps primarily due to spreads widening.

•	$1,201 million of losses on product-related embedded derivatives and related hedge positions associated with certain variable annuity contracts; and

•	$487 million of losses on capital hedges due to increases in equity indices;

•	$428 million of gains on interest rate derivatives due to decreases in swap and U.S. Treasury rates;

•	$102 million of gains on foreign currency hedges due to U.S. dollar appreciation;

•	$68 million of gains on credit default swaps primarily due to spreads tightening; and

•	$36 million of gains for fees earned on fee-based synthetic GICs.

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(1)	Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.

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(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 both March 31, 2020 and December 31, 2019, based on amortized cost, 98% represent Japanese government bonds held by our Japanese insurance operations.

(3)	As of both March 31, 2020 and December 31, 2019, based on amortized cost, all were rated A or higher.

(4)	Excluded from the table above are securities held outside the general account in other entities and operations. For additional information regarding investments held outside the general account, see “—Invested Assets of Other Entities and Operations” below.

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(1)	Reflects equivalent ratings for investments of the international insurance operations.

(2)	Includes, as of March 31, 2020 and December 31, 2019, 882 securities with amortized cost of $3,964 million (fair value, $3,780 million) and 796 securities with amortized cost of $3,073 million (fair value, $3,130 million), respectively, that have been categorized based on expected NAIC Designations pending receipt of SVO ratings.

(3)

As of March 31, 2020, includes gross unrealized losses of $1,179 million on public fixed maturities and $661 million on private fixed maturities considered to be other than high or highest quality and, as of December 31, 2019, includes gross unrealized losses of $188 million on public fixed maturities and $103 million on private fixed maturities considered to be other than high or highest quality.

(4)	On an amortized cost basis, as of March 31, 2020, includes $250,593 million of public fixed maturities and $43,530 million of private fixed maturities and, as of December 31, 2019, includes $248,179 million of public fixed maturities and $42,974 million of private fixed maturities.

(5)	On an amortized cost basis, as of March 31, 2020, includes $9,206 million of public fixed maturities and $7,716 million of private fixed maturities and, as of December 31, 2019, includes $9,049 million of public fixed maturities and $7,442 million of private fixed maturities.

(6)	On an amortized cost basis, as of March 31, 2020, securities considered below investment grade based on lowest of external rating agency ratings total $17,975 million, or 6% of the total fixed maturities, and include securities considered high or highest quality by the NAIC based on the rules described above.

(7)	Effective January 1, 2020, due to the implementation of ASU 2016-13, an allowance for credit losses is now presented for available-for-sale securities. Prior period amounts have been updated to exclude held-to-maturity securities to conform to current period presentation.

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(1)	Reflects equivalent ratings for investments of the international insurance operations.

(2)	As of both March 31, 2020 and December 31, 2019, there were no gross unrealized losses on public fixed maturities and private fixed maturities considered to be other than high or highest quality.

(3)	On an amortized cost basis, as of March 31, 2020, includes $1,681 million of public fixed maturities and $223 million of private fixed maturities and, as of December 31, 2019, includes $1,705 million of public fixed maturities and $228 million of private fixed maturities.

(1)	The table above provides ratings as assigned by nationally recognized rating agencies as of March 31, 2020, including S&P, Moody’s, Fitch Ratings, Inc. (“Fitch”) and Morningstar, Inc. (“Morningstar”).

(2)	Includes collateralized loan obligations (“CLOs”), credit-tranched securities collateralized by auto loans, education loans, home equity loans, and other asset types.

(3)	As of both March 31, 2020 and December 31, 2019, based on amortized cost, 97% were securities with vintages of 2013 or later.

(4)	Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading,” as well as securities held outside the general account in other entities and operations.

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(1)	The table above provides ratings as assigned by nationally recognized rating agencies as of March 31, 2020, including S&P, Moody’s, Fitch Ratings, Inc. (“Fitch”) and Morningstar, Inc. (“Morningstar”).

(2)	There was no allowance for credit losses as of March 31, 2020.

(3)	Excludes fixed maturity securities classified as “Assets supporting experience-rated contractholder liabilities” and “Fixed maturities, trading,” as well as securities held outside the general account in other entities and operations.

(1)	As a percentage of recorded investment gross of allowance, more than 99% of these assets were current as of both March 31, 2020 and December 31, 2019.

(2)	Excluded from the table above are commercial mortgage and other loans held outside the general account in other entities and operations. For additional information regarding commercial mortgage and other loans held outside the general account, see “—Invested Assets of Other Entities and Operations” below.

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(1)	Regions as defined by the United States Census Bureau.

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(1)	Amounts presented exclude investments in private equity and hedge funds and other investments which are reported in “Other invested assets.”

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(1)	As of March 31, 2020 and December 31, 2019, real estate held through direct ownership had mortgage debt of $548 million and $537 million, respectively.

(2)	Primarily includes leveraged leases and member and activity stock held in the Federal Home Loan Banks of New York and Boston. For additional information regarding our holdings in the Federal Home Loan Banks of New York and Boston, see Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(1)	As of March 31, 2020 and December 31, 2019, balances include investments in CLOs with fair value of $375 million and $438 million, respectively.

(2)	Book value is generally based on unpaid principal balance, net of any allowance for credit losses, or at fair value, when the fair value option has been elected.

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•

We issued $1.5 billion of senior notes, with maturities ranging from 2026 to 2040. Of these senior notes, $500 million were issued in the form of “green bonds,” where proceeds are allocated to existing or future investments in assets, businesses or projects that provide environmental benefits, and $1 billion were issued for general corporate purposes, including pre-funding in part our senior notes maturing through 2021;

•	We temporarily suspended Common Stock repurchases under our existing repurchase authorization beginning April 1, 2020, after repurchasing $500 million of shares of Prudential Financial’s Common Stock in the first quarter of 2020. We will continue to evaluate the resumption of share repurchases under our existing Board authorization for 2020;

•

Prudential Legacy Insurance Company of New Jersey issued $800 million of surplus notes under its $4 billion reserve financing facility to enhance the statutory surplus of the Closed Block. This facility, established in 2015, is intended to alleviate any temporary impact to the Closed Block’s surplus due to the timing difference between the mark to market on assets and the decision on the level of the policyholder dividend;

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•	We executed additional capital hedges that protect a portion of the capital position of our U.S. insurance subsidiaries against additional declines in the equity markets; and

•	We accelerated our product diversification strategy and repriced certain products, which are expected to support the capital position of our insurance subsidiaries over time.

(1)	Amounts attributable to Prudential Financial, excluding AOCI.

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(1)	The 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.

(2)	Includes Prudential Retirement Insurance and Annuity Company (“PRIAC”), 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”).

(3)	Includes PICA and its subsidiaries, as noted above, and PALAC. Composite RBC is not reported to regulators and is based on the summation of total adjusted capital and risk charges for the included companies as determined under statutory accounting and RBC guidance to calculate a composite numerator and denominator, respectively, for purposes of calculating the composite ratio.

(1)	Includes Prudential Trust Co., Ltd., a subsidiary of Prudential of Japan.

(2)	Includes Prudential Gibraltar Financial Life Insurance Co., Ltd. (“PGFL”), a subsidiary of Gibraltar Life.

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(1)	Prior period amounts have been updated to conform to current period presentation.

(2)

2020 includes $241 million from international insurance subsidiaries, $207 million from PALAC, $63 million from PGIM subsidiaries, $43 million from Prudential Annuities Holding Company, and $4 million from other subsidiaries. 2019 includes $245 million from PALAC, $133 million from PGIM subsidiaries, $61 million from international insurance subsidiaries and $40 million from Prudential Annuities Holding Company.

(3)	2019 includes capital contributions of $200 million to PICA and $68 million to PGIM subsidiaries.

(4)	Excludes cash payments made on trades that settled in the subsequent period.

(5)	Includes cash payments made on dividends declared in prior periods.

(6)	“Total Debt Activity” excludes changes in PFI Commercial Paper. These changes are captured in “Other, net” in the “Total Other Activity” section.

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(1)	Excludes fixed maturities designated as held-to-maturity. Credit quality is based on NAIC or equivalent rating.

(1)	Includes PGFL.

(2)	Represents our international insurance operations, excluding Japan.

(3)	Excludes fixed maturities designated as held-to-maturity. Credit quality is based on NAIC or equivalent rating.

(4)	As of March 31, 2020, $123.6 billion, or 78%, were invested in government or government agency bonds.

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(1)	Includes non-yen related cash settlements of $23 million, primarily denominated in Korean won, Australian dollar and Brazilian real and $5.5 million, primarily denominated in Australian dollar, Chilean peso and Brazilian real, for the three months ended March 31, 2020 and 2019, respectively.

(2)	Represents internal transactions between international-based and U.S.-based entities. Amounts noted are from the U.S.-based entities’ perspectives.

(3)	Includes non-yen related cash settlements of $23 million and $1 million, denominated in Korean won for the three months ended March 31, 2020 and 2019, respectively.

(4)	Includes non-yen related assets of $158 million, primarily denominated in Brazilian real, Australian dollar and Korean won, and assets of $37 million, primarily denominated in Korean won, Australian dollar and Chilean peso, as of March 31, 2020 and December 31, 2019, respectively.

(5)	Includes non-yen related assets of $31 million, denominated in Korean won, and assets of $1 million, denominated in Korean won, as of March 31, 2020 and December 31, 2019, respectively.

(6)	As of March 31, 2020, approximately $218 million, $378 million, $185 million and $7 million of the net market values are scheduled to settle in 2020, 2021, 2022 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.

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(1)	The daily weighted average outstanding balance for the three months ended March 31, 2020 was $10,803 million for PFI excluding the Closed Block division, and $3,717 million for the Closed Block division.

(2)	Excludes securities that may be returned to the Company overnight. “N/A” reflects that all outstanding balances may be returned to the Company overnight.

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(1)	Amounts are net of assets under set-off arrangements of $10,614 million and $9,749 million as of March 31, 2020 and December 31, 2019, respectively.

(2)	Limited and non-recourse borrowing primarily represents mortgage debt of our subsidiaries that has recourse only to real estate investment property of $548 million and $537 million as of March 31, 2020 and December 31, 2019, respectively, and a draw on a credit facility with recourse only to collateral pledged by the Company of $300 million as of both March 31, 2020 and December 31, 2019.

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(1)	Prudential Financial has agreed to reimburse amounts paid under the credit-linked notes issued in this structure up to $0.5 billion. During the fourth quarter of 2019, this financing facility was restructured to allow for an extension through 2036.

(2)	The $2.3 billion of surplus notes represents an intercompany transaction that eliminates upon consolidation. Prudential Financial has agreed to reimburse amounts paid under credit-linked notes issued in this structure up to $1.0 billion.

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(1)	Includes shares of Common Stock withheld from participants for income tax withholding purposes whose shares of restricted stock units vested during the period. Such restricted stock units were originally issued to participants pursuant to the Prudential Financial Inc. Omnibus Incentive Plan.

(2)

In December 2019, Prudential Financial’s Board of Directors authorized the Company to repurchase, at management’s discretion, up to $2.0 billion of its outstanding Common Stock during the period from January 1, 2020 through December 31, 2020. The Company temporarily suspended Common Stock repurchases under its existing repurchase authorization beginning April 1, 2020; however, the Company will continue to evaluate the resumption of share repurchases under the existing Board authorization for 2020.

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