Other invested assets, allowance for credit losses

^[2]

65,425

^[1]

63,559

^[2]

18,125

^[1]

15,606

Short term investments, allowance for credit losses

7,800

Other liabilities, allowance for credit losses

20,323

20,802

Notes issued by consolidated VIEs

$ 872,512

$ 832,833

Preferred Stock, par value (in dollars per share)

$ 0.01

Preferred Stock, Shares Authorized

10,000,000

Preferred Stock, Shares Issued

0

Common Stock, par value (in dollars per share)

$ 0.01

Common Stock, Shares Authorized

1,500,000,000

Common Stock, Shares, Issued

666,305,189

Treasury Stock, Shares

269,867,738

267,472,781

ASU 2016-13

Other assets, allowance for credit losses

$ 11

Other liabilities, allowance for credit losses

20

Leveraged lease loans

Other invested assets, at fair value

6,407

$ 5,646

Other invested assets, allowance for credit losses

2

Fair value option

Notes issued by consolidated VIEs

1,092

228

$ 0

$ 800

[1]	December 31, 2020 amounts include the impacts of the January 1, 2020 adoption of ASU 2016-13. See Note 2 for details.
[2]	See Note 4 for details of balances associated with variable interest entities.

Consolidated Statements of Operations - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
REVENUES
Premiums	$ 31,140	$ 34,202	$ 35,779
Policy charges and fee income	6,029	5,978	6,002
Net investment income	17,410	17,585	16,176
Asset management and service fees	4,391	4,239	4,100
Other income (loss)	1,950	3,262	(1,042)
Realized investment gains (losses), net	(3,887)	(459)	1,977
Total revenues	57,033	64,807	62,992
BENEFITS AND EXPENSES
Policyholders’ benefits	35,059	36,820	39,404
Interest credited to policyholders’ account balances	4,538	4,880	3,196
Dividends to policyholders	1,625	2,274	1,336
Amortization of deferred policy acquisition costs	2,221	2,332	2,273
General and administrative expenses	13,913	13,416	11,949
Total benefits and expenses	57,356	59,722	58,158
Income (loss) before income taxes and equity in earnings of operating joint ventures	(323)	5,085	4,834
Total income tax expense (benefit)	(81)	947	822
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	(242)	4,138	4,012
Equity in earnings of operating joint ventures, net of taxes	96	100	76
NET INCOME (LOSS)	(146)	4,238	4,088
Less: Income (loss) attributable to noncontrolling interests	228	52	14
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.	$ (374)	$ 4,186	$ 4,074
Basic earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc. (in dollars per share)	$ (1.00)	$ 10.23	$ 9.64
Diluted earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc. (in dollars per share)	(1.00)	10.11	9.50
Dividends declared per share of Common Stock (in dollars per share)	$ 4.40	$ 4.00	$ 3.60

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Statement of Comprehensive Income [Abstract]
NET INCOME (LOSS)	$ (146)	$ 4,238	$ 4,088
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments for the period	523	67	(68)
Net unrealized investment gains (losses)	7,229	17,195	(8,393)
Defined benefit pension and postretirement unrecognized periodic benefit (cost)	210	(322)	(320)
Total	7,962	16,940	(8,781)
Less: Income tax expense (benefit) related to other comprehensive income (loss)	1,252	3,811	(1,812)
Other comprehensive income (loss), net of taxes	6,710	13,129	(6,969)
Comprehensive income (loss)	6,564	17,367	(2,881)
Less: Comprehensive income (loss) attributable to noncontrolling interests	239	55	19
Comprehensive income (loss) attributable to Prudential Financial, Inc.	$ 6,325	$ 17,312	$ (2,900)

Consolidated Statements of Equity - USD ($)
$ in Millions

Total

Cumulative Effect, Period of Adoption, Adjustment

ASU 2016-01

ASU 2018-02

Common Stock

Additional Paid-in Capital

Retained Earnings

Cumulative Effect, Period of Adoption, Adjustment

Retained Earnings

ASU 2016-01

Retained Earnings

ASU 2018-02

Common Stock Held in Treasury

Common Stock

Accumulated Other Comprehensive Income (Loss)

Cumulative Effect, Period of Adoption, Adjustment

^[1]

Accumulated Other Comprehensive Income (Loss)

ASU 2016-01

Accumulated Other Comprehensive Income (Loss)

ASU 2018-02

Total Prudential Financial, Inc. Equity

Cumulative Effect, Period of Adoption, Adjustment

Total Prudential Financial, Inc. Equity

ASU 2016-01

Total Prudential Financial, Inc. Equity

ASU 2018-02

Noncontrolling Interests

Balance at Dec. 31, 2017

$ 54,511

$ 57

$ 0

$ 6

$ 24,769

$ 28,671

$ 904

$ (1,653)

$ (16,284)

$ 17,074

$ (847)

$ 1,653

$ 54,236

$ 57

$ 0

$ 275

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Contributions from noncontrolling interests

(1,500)

147

Distributions to noncontrolling interests

(27)

Stock-based compensation programs

250

59

191

250

Dividends declared on Common Stock

(1,526)

Comprehensive income:

Other comprehensive income (loss), net of tax

4,088

4,074

14

(6,969)

(6,974)

5

Total comprehensive income (loss)

(2,881)

(2,900)

19

Balance at Dec. 31, 2018

49,031

$ (14)

^[1]

6

24,828

30,470

$ (21)

^[1]

(17,593)

10,906

$ 7

48,617

$ (14)

^[1]

414

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Exchangeable Surplus Notes conversion

(2,500)

502

Assurance IQ acquisition

454

79

375

454

Contributions from noncontrolling interests

208

Distributions to noncontrolling interests

(82)

Consolidations/(deconsolidations) of noncontrolling interests

9

Stock-based compensation programs

388

123

265

388

Dividends declared on Common Stock

(1,644)

Comprehensive income:

Other comprehensive income (loss), net of tax

4,238

4,186

52

13,129

13,126

3

Total comprehensive income (loss)

17,367

17,312

55

Balance at Dec. 31, 2019

63,719

$ (99)

^[2]

6

25,532

32,991

$ (99)

^[2]

(19,453)

24,039

63,115

$ (99)

^[2]

604

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Contributions from noncontrolling interests

(500)

100

Distributions to noncontrolling interests

(53)

Consolidations/(deconsolidations) of noncontrolling interests

(105)

Stock-based compensation programs

353

52

301

353

Dividends declared on Common Stock

(1,769)

Comprehensive income:

Other comprehensive income (loss), net of tax

(146)

(374)

228

6,710

6,699

11

Total comprehensive income (loss)

6,564

6,325

239

Balance at Dec. 31, 2020

$ 68,210

$ 6

$ 25,584

$ 30,749

$ (19,652)

$ 30,738

$ 67,425

$ 785

[1]	Includes the impact from the adoption of ASU 2017-08 and 2017-12.
[2]	Includes the impact from the adoption of ASU 2016-13. See Note 2.

Consolidated Statements of Cash Flows
$ in Millions

12 Months Ended

Dec. 31, 2020

USD ($)

Dec. 31, 2019

USD ($)

Dec. 31, 2018

USD ($)

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

$ (146)

$ 4,238

$ 4,088

Realized investment (gains) losses, net

3,887

459

(1,977)

Policy charges and fee income

(2,652)

(2,616)

(2,248)

Interest credited to policyholders’ account balances

4,538

4,880

3,196

Depreciation and amortization

457

460

161

(Gains) losses on assets supporting experience-rated contractholder liabilities, net

(743)

(971)

863

Change in:

Deferred policy acquisition costs

(542)

(634)

(597)

Future policy benefits and other insurance liabilities

10,817

10,992

16,481

Income taxes

(424)

(339)

49

Derivatives, net

(2,940)

1,485

968

Other, net

(3,884)

1,671

680

Cash flows from (used in) operating activities

8,368

19,625

21,664

Proceeds from the sale/maturity/prepayment of:

Fixed maturities, available-for-sale

44,106

52,306

59,675

Fixed maturities, held-to-maturity

88

100

94

Fixed maturities, trading

690

363

623

Assets supporting experience-rated contractholder liabilities

29,162

15,281

27,383

Equity securities

2,704

2,708

3,771

Payments for the purchase/origination of:

5,447

6,525

6,474

Policy loans

2,528

2,279

2,309

Other invested assets

1,815

1,783

1,549

Short-term investments

47,339

38,095

33,846

Fixed maturities, available-for-sale

(56,523)

(64,570)

(77,234)

Fixed maturities, held-to-maturity

0

(9)

Fixed maturities, trading

(1,413)

(876)

(1,080)

Assets supporting experience-rated contractholder liabilities

(30,822)

(14,613)

(27,315)

Equity securities

(3,168)

(2,813)

(3,254)

Acquisitions, net of cash acquired

(6,107)

(10,677)

(10,328)

Policy loans

(1,956)

(1,931)

(1,970)

Other invested assets

(2,760)

(2,557)

(2,664)

Short-term investments

(49,802)

(37,286)

(33,336)

0

(1,755)

0

Dispositions, net of cash disposed

1,454

0

Derivatives, net

1,286

1,047

26

Other, net

(278)

(437)

(188)

Cash flows from (used in) investing activities

(16,210)

(17,028)

(21,628)

CASH FLOWS FROM FINANCING ACTIVITIES

Policyholders’ account deposits

41,424

27,485

28,791

Policyholders’ account withdrawals

(34,701)

(26,662)

(27,287)

Net change in securities sold under agreements to repurchase and cash collateral for loaned securities

499

16

1,125

Cash dividends paid on Common Stock

(1,766)

(1,641)

(1,521)

Net change in financing arrangements (maturities 90 days or less)

(21)

(181)

199

Common Stock reissued for exercise of stock options

(500)

(2,500)

(1,500)

153

133

132

Proceeds from the issuance of debt (maturities longer than 90 days)

3,013

2,993

2,934

Repayments of debt (maturities longer than 90 days)

(2,743)

(1,429)

(1,810)

Proceeds from notes issued by consolidated VIEs

0

971

0

Repayments of notes issued by consolidated VIEs

(19)

(638)

0

Other, net

(456)

(181)

(282)

Cash flows from (used in) financing activities

4,883

(1,634)

781

Effect of foreign exchange rate changes on cash balances

340

16

142

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS

(2,619)

979

959

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR

16,474

15,495

14,536

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF YEAR

13,855

16,474

15,495

SUPPLEMENTAL CASH FLOW INFORMATION

Income taxes paid, net of refunds

287

1,348

760

Interest paid

1,531

1,521

1,443

NON-CASH TRANSACTIONS DURING THE YEAR

Treasury Stock shares issued for stock-based compensation programs

151

197

138

Conversion of surplus notes into Common Stock

0

502

0

Treasury Stock shares issued

454

RECONCILIATION TO STATEMENTS OF FINANCIAL POSITION

Cash and cash equivalents

13,701

^[1]

16,327

^[1]

15,353

Restricted cash and restricted cash equivalents (included in “Other assets”)

154

147

142

Total cash, cash equivalents, restricted cash and restricted cash equivalents

13,855

16,474

15,495

Pension Risk Transfer

NON-CASH TRANSACTIONS DURING THE YEAR

Assets received, excluding cash and cash equivalents

703

3,166

816

Net cash received

346

1,166

7,579

Liabilities assumed

1,049

4,332

8,395

Acquisitions

NON-CASH TRANSACTIONS DURING THE YEAR

Assets acquired, excluding cash and cash equivalents

0

2,425

0

Treasury Stock shares issued

0

454

0

Liabilities assumed

0

216

0

Net cash paid on acquisition

$ 0

$ 1,755

$ 0

[1]	See Note 4 for details of balances associated with variable interest entities.

Business and Basis of Presentation	12 Months Ended
Business and Basis of Presentation	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Business and Basis of Presentation	BUSINESS AND BASIS OF PRESENTATION Prudential Financial, Inc. (“Prudential Financial” or “PFI”) and its subsidiaries (collectively, “Prudential” or the “Company”) provide a wide range of insurance, investment management, and other financial products and services to both individual and institutional customers throughout the United States and in many other countries. Principal products and services provided include life insurance, annuities, retirement-related services, mutual funds and investment management. The Company’s principal operations are composed of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the U.S. Workplace Solutions, U.S. Individual Solutions, and Assurance IQ divisions), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The U.S. Workplace Solutions division consists of the Retirement and Group Insurance businesses, the U.S. Individual Solutions division consists of the Individual Annuities and Individual Life businesses, and the Assurance IQ division consists of the Assurance IQ business, which the Company acquired in October 2019. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other. The Company’s Corporate and Other operations include corporate items and initiatives that are not allocated to business segments and businesses that have been or will be divested or placed in run-off, excluding the Closed Block division. See Note 22 to the Consolidated Financial Statements for revenues, income and loss, and total assets by segment. Basis of Presentation The Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Consolidated Financial Statements include the accounts of Prudential Financial, entities over which the Company exercises control, including majority-owned subsidiaries and minority-owned entities such as limited partnerships in which the Company is the general partner and variable interest entities (“VIEs”) in which the Company is considered the primary beneficiary. See Note 4 for additional information on the Company’s consolidated variable interest entities. Intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs (“DAC”) and related amortization; policyholders’ account balances related to the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products; value of business acquired (“VOBA”) and its amortization; amortization of deferred sales inducements (“DSI”); measurement of goodwill and any related impairment; valuation of investments including derivatives, measurement of allowance for credit losses, and the recognition of other-than-temporary impairments (“OTTI”); future policy benefits including guarantees; pension and other postretirement benefits; provision for income taxes and valuation of deferred tax assets; and accruals for contingent liabilities, including estimates for losses in connection with unresolved legal and regulatory matters. COVID-19 Beginning in the first quarter of 2020, the outbreak of the novel coronavirus (“COVID-19”) has resulted in extreme stress and disruption in the global economy and financial markets, and has adversely impacted, and may continue to adversely impact, the Company’s results of operations, financial condition and cash flows. Due to the highly uncertain nature of these conditions, it is not possible to estimate the ultimate impacts at this time. The risks may have manifested, and may continue to manifest, in the Company’s financial statements in the areas of, among others, i) investments: increased risk of loss on our investments due to default or deterioration in credit quality or value; ii) insurance liabilities and related balances: potential changes to assumptions regarding investment returns, mortality, morbidity and policyholder behavior which are reflected in our insurance liabilities and certain related balances (e.g., DAC, VOBA, etc.); and iii) goodwill: the macroeconomic environment may also result in the need to recognize an impairment of goodwill which could negatively impact the Company’s results of operations and financial condition. The Company cannot predict what impact the COVID-19 pandemic will ultimately have on the global economy, markets or its businesses. Reclassifications Certain amounts in prior periods have been reclassified to conform to the current period presentation. Acquisitions In October 2019, the Company completed its acquisition of Assurance IQ, as noted above. Assurance IQ is a wholly-owned subsidiary of the Company and the results of the Assurance IQ business are reported as a separate segment within the Company’s U.S. Businesses. The total purchase consideration included $2,212 million paid at closing, and $100 million of contingent consideration (see “Assurance IQ Contingent Consideration Liability” below). The amount paid at closing comprised $1,758 million in cash and $454 million in shares of restricted Prudential Financial Common Stock and other equity awards. In addition to the purchase consideration, the Company also granted approximately $160 million of cash and equity awards to Assurance IQ employees which are recognized as compensation expense over their requisite service periods. See Note 21 for further details on the equity awards issued as part of the transaction. The contingent consideration as well as additional compensation awards are payable in 2023 in a mix of approximately 25% cash and 75% Prudential Financial Common Stock, contingent upon Assurance IQ’s achievement of certain targets for gross revenues net of associated selling expenses (“Variable Profits”) over the period from January 1, 2020 through December 31, 2022 as follows: •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. Payment of the additional amount may be accelerated if the Company violates certain provisions of the merger agreement requiring it to take or refrain from taking certain actions, including with respect to the management and operation of Assurance IQ. Pursuant to the merger agreement, the number of shares of Prudential Financial Common Stock issued at closing was determined based on a price per share of $83.71, which is equal to the weighted average price of Prudential Financial Common Stock for the 15 trading days before, and 15 trading days beginning on, September 4, 2019, the date of the merger agreement. The foregoing $454 million in shares of restricted Prudential Financial Common Stock and equity awards paid at closing was based on the $87.67 closing price per share of Prudential Financial Common Stock on the closing date. Assurance IQ Net Assets Acquired The assets acquired and liabilities assumed have been included in the Consolidated Financial Statements as of the acquisition date. Total assets acquired included identified intangible assets of $191 million. At the time of acquisition, the Company recognized an asset for goodwill, determined as the excess of the purchase price over the net fair value of the assets acquired and liabilities assumed, that amounted to $2,128 million, which is fully deductible for tax purposes. The value of the components within goodwill include expected revenue and cost synergies, the business model, technology capabilities, new customers, and the assembled workforce and key personnel. The valuation of the assets acquired and liabilities assumed was preliminary at the time of acquisition. In April 2020, the Company revised its purchase price allocation and adjusted the goodwill asset to $2,140 million. See Note 2 and Note 10 for additional information regarding goodwill. Assurance IQ Contingent Consideration Liability The contingent consideration liability referred to above is reported at fair value. Fair value is determined based on the present value of expected payments under the arrangement, using an internally-developed option pricing model based on a number of assumptions, including certain unobservable assumptions for future Variable Profits and the future price of Prudential Financial Common Stock. The fair value of the liability is updated each reporting period, with changes in fair value reported within “Other income.” The fair value of the contingent consideration liability was zero and $105 million as of December 31, 2020 and 2019, respectively (see Note 6 for additional information). The stock-based component of contingent consideration impacts the share count for purposes of calculating the Company’s diluted earnings per share when Assurance IQ’s actual Variable Profits achieved as of the end of the reporting period is in excess of $900 million, as if the contingent consideration performance period ended on the applicable reporting date. The number of shares issued as part of the contingent consideration payable in 2023 will be based on a $83.71 price per share. Dispositions The Prudential Life Insurance Company of Korea, Ltd. In August 2020, Prudential International Insurance Holdings, Ltd. (“PIIH”), a subsidiary of Prudential Financial, successfully completed the sale of The Prudential Life Insurance Company of Korea, Ltd. (“POK”) to KB Financial Group Inc., for cash consideration of approximately ₩2.3 trillion, equal to approximately $1.9 billion. The Company recognized an approximate $800 million after-tax loss on the transaction in 2020. Prudential Life Insurance Company of Taiwan Inc. In August 2020, PIIH entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Taishin Financial Holding Co, Ltd. (the “Buyer”), pursuant to which PIIH has agreed to sell to the Buyer all of the issued and outstanding capital stock of Prudential Life Insurance Company of Taiwan Inc. (“POT”), the Company’s insurance business in Taiwan. This transaction consists of cash consideration of approximately NT$5.5 billion, equal to approximately $195 million at current exchange rates, to be paid at closing, and contingent consideration with a fair value of approximately $15 million as of December 31, 2020. The fair value of the contingent consideration is tied to the level of yields for the 10-year Taiwanese Government bond two years after the signing of the transaction and can result in a maximum payout of $100 million if yields increase by 40 basis points. The Share Purchase Agreement contains customary warranties and covenants of PIIH and the Buyer. The Company expects the transaction to close in 2021, subject to regulatory approval and the satisfaction of customary closing conditions. As of December 31, 2020, the Company is reporting its investment in POT as “held for sale” and recognized an estimated $350 million after-tax charge to earnings to adjust the carrying value of POT to the fair market value reflected in the purchase price. The ultimate after-tax loss will be based on balances at the closing date and could vary materially from the charge recorded in 2020. The Company intends to use the proceeds of the transaction for general corporate purposes.

Significant Accounting Policies and Pronouncements

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Significant Accounting Policies and Pronouncements

SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS

ASSETS

Fixed maturities, available-for-sale, at fair value (“AFS debt securities”) includes bonds, notes and redeemable preferred stock that are carried at fair value. See Note 6 for additional information regarding the determination of fair value. The purchased cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity or, if applicable, call date.

AFS debt securities, where fair value is below amortized cost, are reviewed quarterly to determine whether the amortized cost basis of the security is recoverable. For mortgage-backed and asset-backed AFS debt securities, a credit impairment will be recognized to the extent the amortized cost exceeds the net present value of projected future cash flows (the “net present value”) for the security. For all other AFS debt securities, qualitative factors are first considered including, but not limited to, the extent of the decline and the reasons for the decline in value (e.g., credit events, currency or interest-rate related, including general credit spread widening), and the financial condition of the issuer. If analysis of these qualitative factors results in the security needing to be impaired, the credit impairment will be measured as the extent to which the amortized cost exceeds the net present value. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the AFS debt security at the date of acquisition.

Credit impairment is recognized as an allowance for credit losses and reported in “Realized investment gains (losses), net.” Once the Company has deemed all or a portion of the amortized cost uncollectible, the allowance is removed from the balance sheet by writing down the amortized cost basis of the AFS debt security.

The Company adopted Accounting Standards Update (“ASU”) 2016-13, and related ASUs, effective January 1, 2020. See “Recent Accounting Pronouncements” in this Note for additional information about the adoption. Prior to the adoption of ASU 2016-13, credit impairments were recognized as a direct write down to the cost basis of the security.

Interest income, including amortization of premium and accretion of discount, are included in “Net investment income” under the effective yield method. Prepayment premiums are also included in “Net investment income.”

For high credit quality mortgage-backed and asset-backed AFS debt securities (those rated AA or above), the amortized cost and effective yield of the securities are adjusted as necessary to reflect historical prepayment experience and changes in estimated future prepayments. The adjustments to amortized cost are recorded as a charge or credit to “Net investment income” in accordance with the retrospective method.

For mortgage-backed and asset-backed AFS debt securities rated below AA, the effective yield is adjusted prospectively for any changes in the estimated timing and amount of cash flows unless the investment is purchased with credit deterioration or an allowance is currently recorded for the respective security. If an investment is impaired, any changes in the estimated timing and amount of cash flows will be recorded as the credit impairment, as opposed to a yield adjustment. If the asset is purchased with credit deterioration (or previously impaired), the effective yield will be adjusted if there are favorable changes in cash flows subsequent to the allowance being reduced to zero. Prior to the adoption of ASU 2016-13, the effective yield was adjusted prospectively unless an impairment was recorded in the current period.

For mortgage-backed and asset-backed AFS debt securities, cash flow estimates consider the payment terms of the underlying assets backing a particular security, including interest rate and prepayment assumptions based on data from widely accepted third-party data sources or internal estimates. In addition to interest rate and prepayment assumptions, cash flow estimates also include other assumptions regarding the underlying collateral including default rates and recoveries, which vary based on the asset type and geographic location, as well as the vintage year of the security. These assumptions can significantly impact income recognition and the amount of impairment recognized in earnings and other comprehensive income (loss) (“OCI”). The payment priority of the respective security is also considered. For all other AFS debt securities, cash flow estimates are driven by assumptions regarding probability of default and estimates regarding timing and amount of recoveries associated with a default. The Company has developed these estimates using information based on its historical experience as well as using market observable data, such as industry analyst reports and forecasts, sector credit ratings and other data relevant to the collectability of a security, such as the general payment terms of the security and the security’s position within the capital structure of the issuer.

The Company may use the estimated fair value of collateral, if any, as a proxy for the net present value if it believes that the security is dependent on the liquidation of collateral for recovery of its investment. If the net present value is less than the amortized cost of the investment, an allowance for losses is recognized in earnings for the difference between amortized cost and the net present value and is limited to the difference between amortized cost and fair value of the AFS debt security. Any difference between the fair value and the net present value of the debt security at the impairment measurement date remains in OCI. Changes in the allowance for losses are reported in “Realized investment gains (losses), net.”

When an AFS debt security’s fair value is below amortized cost and (1) the Company has the intent to sell the AFS debt security, or (2) it is more likely than not the Company will be required to sell the AFS debt security before its anticipated recovery, the amortized cost basis of the AFS debt security is written down to fair value and any previously recognized allowance is reversed. The impairment is reported in “Realized investment gains (losses), net.”

The associated unrealized gains and losses, net of tax, and the effect on DAC, VOBA, DSI, future policy benefits, policyholders’ account balances and policyholders’ dividends that would result from the realization of unrealized gains and losses, are included in “Accumulated other comprehensive income (loss)” (“AOCI”). Each of these balances is discussed in greater detail below.

Fixed maturities, held-to-maturity, at amortized cost includes bonds that the Company has both the positive intent and ability to hold to maturity, and are carried at amortized cost, net of the current expected credit loss (“CECL”) allowance (“HTM debt securities”). Interest income for HTM debt securities is computed in the same manner as interest income for AFS debt securities, both prior to and after the adoption of ASU 2016-13.

Credit impairment for HTM debt securities is recorded through a CECL allowance. The CECL allowance is generally determined based on probability of default and loss given default assumptions according to sector, credit quality and remaining

time to maturity. Changes in the allowance are reported in “Realized investment gains (losses), net.” Once the Company has deemed all or a portion of the amortized cost uncollectible, the uncollectible portion of the allowance is removed from the balance sheet by writing down the amortized cost basis of the security. Prior to the adoption of ASU 2016-13, credit impairments were recognized as a direct write down to the cost basis of the security and the credit impairment recognized was measured based upon the net present value of expected cash flows.

The CECL allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts. The allowance is calculated separately for each HTM debt security.

Key inputs to the CECL model include unpaid principal balances, credit ratings, annual expected loss factors, average life adjusted for prepayment considerations, current and historical interest rate assumptions, and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate.

Fixed maturities, trading, at fair value consists of fixed maturities with embedded features that are considered derivatives and assets contained within consolidated variable interest entities. Realized and unrealized gains and losses on these investments are reported in “Other income (loss),” and interest and dividend income from these investments is reported in “Net investment income.”

Assets supporting experience-rated contractholder liabilities, at fair value includes invested assets that consist of fixed maturities, equity securities, short-term investments and cash equivalents, that support certain products included in the Retirement and International Businesses segments which are experience-rated, meaning that the investment results associated with these products are expected to ultimately accrue to contractholders. Realized and unrealized gains and losses for these investments are reported in “Other income (loss).” Interest and dividend income from these investments is reported in “Net investment income.”

Equity securities, at fair value is comprised of common stock, mutual fund shares and non-redeemable preferred stock that are carried at fair value. Realized and unrealized gains and losses on these investments are reported in “Other income (loss),” and dividend income is reported in “Net investment income” on the ex-dividend date.

Effective January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities using a modified retrospective method. Adoption of this ASU impacted the Company’s accounting and presentation related to equity investments. The most significant impact is that the changes in fair value of equity securities previously classified as “available-for-sale” are reported in net income within “Other income (loss)” in the Consolidated Statements of Operations. The impact of this standard resulted in an increase to retained earnings of $904 million, a reduction to AOCI of $847 million, and an increase to equity of $57 million upon adoption on January 1, 2018.

Commercial mortgage and other loans consists of commercial mortgage loans, agricultural property loans, loans backed by residential properties, as well as certain other collateralized and uncollateralized loans. Loans backed by residential properties primarily include recourse loans held by the Company’s international insurance operations. Uncollateralized loans primarily represent reverse dual currency loans and corporate loans held by the Company’s international insurance operations.

Commercial mortgage and other loans originated and held for investment are generally carried at unpaid principal balance, net of unamortized deferred loan origination fees and expenses, and net of the CECL allowance. Certain off-balance sheet credit exposures (e.g., indemnification of serviced mortgage loans, and certain unfunded mortgage loan commitments where the Company cannot unconditionally cancel the commitment) are also subject to a CECL allowance. See Note 23 for additional information.

The Company carries certain commercial mortgage loans originated within the Company’s commercial mortgage operations at fair value where the fair value option has been elected. Loans held for sale where the Company has not elected the fair value option are carried at the lower of cost or fair value. Commercial mortgage and other loans acquired, including those related to the acquisition of a business, are recorded at fair value when purchased, reflecting any premiums or discounts to unpaid principal balances. Interest income, and the amortization of the related premiums or discounts, are included in “Net investment income” under the effective yield method. Prepayment fees are also included in “Net investment income.”

The CECL allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets or off-balance sheet credit exposures. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts. Prior to the adoption of ASU 2016-13, the allowance was based upon credit losses that were probable of occurring for recognized loans, not an estimate of credit losses that may occur over the remaining life of the asset.

The allowance is calculated separately for commercial mortgage loans, agricultural mortgage loans, and other collateralized and uncollateralized loans. For commercial mortgage and agricultural mortgage loans, the allowance is calculated using an internally developed CECL model.

Key inputs to the CECL model include unpaid principal balances, internal credit ratings, annual expected loss factors, average lives of the loans adjusted for prepayment considerations, current and historical interest rate assumptions, and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate. Information about certain key inputs is detailed below.

Key factors in determining the internal credit ratings for commercial mortgage and agricultural mortgage loans include loan-to-value and debt-service-coverage ratios. Other factors include amortization, loan term, and estimated market value growth rate and volatility for the property type and region. The loan-to-value ratio compares the carrying amount of the loan to the fair value of the underlying property or properties collateralizing the loan, and is commonly expressed as a percentage. Loan-to-value ratios greater than 100% indicate that the carrying amount of the loan exceeds the collateral value. A loan-to-value ratio less than 100% indicates an excess of collateral value over the carrying amount of the loan. The debt service coverage ratio is a property’s net operating income as a percentage of its debt service payments. Debt service coverage ratios less than 1.0 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt service coverage ratio greater than 1.0 times indicates an excess of net operating income over the debt service payments. The values utilized in calculating these ratios are developed as part of the Company’s periodic review of the commercial mortgage loan and agricultural property loan portfolios, which includes an internal appraisal of the underlying collateral value. The Company’s periodic review also includes a quality re-rating process, whereby the internal quality rating originally assigned at underwriting is updated based on current loan, property and market information using a proprietary quality rating system. See Note 3 for additional information related to the loan-to-value ratios and debt service coverage ratios related to the Company’s commercial mortgage and agricultural loan portfolios.

Annual expected loss rates are based on historical default and loss experience factors. Using average lives, the annual expected loss rates are converted into life-of-loan loss expectations.

When individual loans no longer have the credit risk characteristics of the commercial or agricultural mortgage loan pools, they are removed from the pools and are evaluated individually for an allowance. The allowance is determined based on the outstanding loan balance less the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

The CECL allowance on commercial mortgage and other loans can increase or decrease from period to period based on the factors noted above. The change in allowance is reported in “Realized investment gains (losses), net.” As it relates to unfunded commitments that are in scope of this guidance, the CECL allowance is reported in “Other liabilities,” and the change in the allowance is reported in “Realized investment gains (losses), net.”

The CECL allowance for other collateralized and uncollateralized loans (e.g., corporate loans) carried at amortized cost is determined based on probability of default and loss given default assumptions by sector, credit quality and average lives of the loans. Additions to, or releases of, the allowance are reported in “Realized investment gains (losses), net.”

Once the Company has deemed a portion of the amortized costs to be uncollectible, the uncollectible portion of allowance is removed from the balance sheet by writing down the amortized cost basis of the loan. The carrying amount of the loan is not adjusted for subsequent recoveries in value.

Interest received on loans that are past due is either applied against the principal or reported as net investment income based on the Company’s assessment as to the collectability of the principal. The Company defines “past due” as principal or

interest not collected at least 30 days past the scheduled contractual due date. See Note 3 for additional information about the Company’s past due loans.

The Company discontinues accruing interest on loans after the loans become 90 days delinquent as to principal or interest payments, or earlier when the Company has doubts about collectability. When the Company discontinues accruing interest on a loan, any accrued but uncollectible interest on the loan and other loans backed by the same collateral, if any, is charged against interest income in the same period. Generally, a loan is restored to accrual status only after all delinquent interest and principal are brought current and, in the case of loans where the payment of interest has been interrupted for a substantial period, or the loan has been modified, a regular payment performance has been established.

Commercial mortgage and other loans are occasionally restructured in a troubled debt restructuring (“TDR”). These restructurings generally include one or more of the following: full or partial payoffs outside of the original contract terms; changes to interest rates; extensions of maturity; or additions or modifications to covenants. Additionally, the Company may accept assets in full or partial satisfaction of the debt as part of a TDR. When restructurings occur, they are evaluated individually to determine whether the restructuring or modification constitutes a TDR as defined by authoritative accounting guidance. If the borrower is experiencing financial difficulty and the Company has granted a concession, the restructuring, including those that involve a partial payoff or the receipt of assets in full satisfaction of the debt is deemed to be a TDR. When there is a reasonable expectation that the Company will execute a TDR, all effects of the potential restructuring are considered for the estimation of the CECL allowance.

When a loan is modified in a TDR, the CECL allowance of the loan is remeasured using the modified terms and the loan’s original effective yield, and the allowance is adjusted accordingly. The loan will be evaluated to determine whether the loan no longer has similar credit risk characteristics of the commercial or agricultural mortgage loan pools and need to be evaluated for an allowance on an individual basis. Subsequent to the modification, income is recognized prospectively based on the modified terms of the loan.

In a TDR where the Company receives assets in full satisfaction of the debt, any CECL allowance is reversed and a direct write-down of the loan is recorded for the amount of the allowance, and any additional loss, net of recoveries, or any gain is recorded for the difference between the fair value of the assets received and the recorded investment in the loan. When assets are received in partial settlement, the same process is followed, and the remaining loan is evaluated prospectively for credit impairment based on the CECL allowance process noted above.

The Company’s PGIM business provides commercial mortgage origination, underwriting and servicing for certain government sponsored entities (“GSEs”). The Company has agreed to indemnify the GSEs for a portion of the credit risk associated with certain of the mortgages it services. Management has established a CECL allowance that factors in historical loss information, current conditions and reasonable and supportable forecasts. The allowance also considers the remaining lives of the loans subject to the indemnification. The CECL allowance is included in “Other liabilities” and changes in the CECL allowance are reported in “Realized investment gains (losses), net.” See Note 23 for additional information. Prior to the adoption of ASU 2016-13, a credit loss allowance was not required.

Policy loans represent funds loaned to policyholders up to the cash surrender value of the associated insurance policies and are carried at the unpaid principal balances due to the Company from the policyholders. Interest income on policy loans is recognized in “Net investment income” at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies.

Other invested assets consists of the Company’s non-coupon investments in limited partnerships and limited liability companies (“LPs/LLCs”), other than operating joint ventures, as well as wholly-owned investment real estate, derivative assets and other investments. LPs/LLCs interests are accounted for using either the equity method of accounting, or at fair value with changes in fair value reported in “Other income (loss).” The Company’s income from investments in LPs/LLCs accounted for using the equity method, other than the Company’s investments in operating joint ventures, is included in “Net investment income.” The carrying value of these investments is written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. In applying the equity method (including assessment for OTTI), the Company uses financial information provided by the investee, generally on a one to three-month lag. The Company consolidates LPs/LLCs in certain other instances where it is deemed to exercise control, or is considered the primary beneficiary of a variable interest entity. See Note 4 for additional information about VIEs.

The Company’s wholly-owned investment real estate consists of real estate which the Company has the intent to hold for the production of income as well as real estate held for sale. Real estate which the Company has the intent to hold for the

production of income is carried at depreciated cost less any write-downs to fair value for impairment losses and is reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Real estate held for sale is carried at the lower of depreciated cost or fair value less estimated selling costs and is not further depreciated once classified as such. An impairment loss is recognized when the carrying value of the investment real estate exceeds the estimated undiscounted future cash flows (excluding interest charges) from the investment. At that time, the carrying value of the investment real estate is written down to fair value. Decreases in the carrying value of investment real estate held for the production of income due to OTTI are recorded in “Realized investment gains (losses), net.” Depreciation on real estate held for the production of income is computed using the straight-line method over the estimated useful lives of the properties and is included in “Net investment income.”

Short-term investments primarily consist of highly liquid debt instruments with a maturity of twelve months or less and greater than three months when purchased, other than those debt instruments meeting this definition that are included in “Assets supporting experience-rated contractholder liabilities, at fair value.” These investments are generally carried at fair value or amortized cost that approximates fair value and include certain money market investments, funds managed similar to regulated money market funds, short-term debt securities issued by government-sponsored entities and other highly liquid debt instruments.

Realized investment gains (losses) are computed using the specific identification method with the exception of some of the Company’s International Businesses portfolios, where the average cost method is used. Realized investment gains and losses are generated from numerous sources, including the sales of fixed maturity securities, investments in joint ventures and limited partnerships and other types of investments, as well as changes to the allowance for credit losses recognized in earnings. Realized investment gains and losses also reflect fair value changes on commercial mortgage loans carried at fair value, and fair value changes on embedded derivatives and free-standing derivatives that do not qualify for hedge accounting treatment. See “Derivative Financial Instruments” below for additional information regarding the accounting for derivatives.

Cash and cash equivalents include cash on hand, amounts due from banks, certain money market investments, funds managed similar to regulated money market funds, other debt instruments with maturities of three months or less when purchased, other than cash equivalents that are included in “Assets supporting experience-rated contractholder liabilities, at fair value,” and receivables related to securities purchased under agreements to resell (see also “Securities sold under agreements to repurchase” below). These assets are generally carried at fair value or amortized cost which approximates fair value.

Accrued investment income primarily includes accruals of interest and dividend income from investments that have been earned but not yet received.

Deferred policy acquisition costs are costs directly related to the successful acquisition of new and renewal insurance and annuity business that have been deferred to the extent such costs are deemed recoverable from future profits. Such DAC primarily includes commissions, costs of policy issuance and underwriting, and certain other expenses that are directly related to successfully acquired contracts. In each reporting period, capitalized DAC is amortized to “Amortization of DAC,” net of the accrual of imputed interest on DAC balances. DAC is subject to periodic recoverability testing. DAC, for applicable products, is adjusted for the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in AOCI.

For traditional participating life insurance which are included in the Closed Block, DAC is amortized over the expected life of the contracts in proportion to gross margins based on historical and anticipated future experience., Any changes in estimated gross margins on unamortized DAC are reflected in the period such that estimated gross margins are revised on a retrospective basis. DAC related to non-participating traditional individual life insurance and longevity reinsurance contracts is amortized in proportion to gross premiums.

DAC related to universal and variable life products and fixed and variable deferred annuity products are generally deferred and amortized over the expected life of the contracts in proportion to gross profits arising principally from investment margins, mortality and expense margins, and surrender charges, based on historical and anticipated future experience, which is updated periodically. The Company uses a reversion to the mean approach for equities to derive future equity return assumptions; however, if the projected equity return calculated using this approach is greater than the maximum equity return assumption, the maximum equity return is utilized. Gross profits also include impacts from the embedded derivatives associated with certain of the optional living benefit features of variable annuity contracts, and index-linked crediting features of certain universal life and annuity contracts and related hedging activities. Total gross profits include both actual gross profits and estimates of gross profits for future periods. The Company regularly evaluates and adjusts DAC balances with a corresponding charge or credit to current period earnings, representing a cumulative adjustment to all prior periods’ amortization, for the

impact of actual gross profits and changes in the Company’s projections of estimated future gross profits. Adjustments to DAC balances include: (i) annual review of assumptions that reflect the comprehensive review of the assumptions used in estimating gross profits for future periods; (ii) quarterly adjustments for current period experience (also referred to as “experience true-up” adjustments) that reflect the impact of differences between actual gross profits for a given period and the previously estimated expected gross profits for that period; and (iii) quarterly adjustments for market performance (also referred to as “experience unlocking”) that reflect the impact of changes to the Company’s estimate of total gross profits to reflect actual fund performance and market conditions.

For group annuity contracts (other than single premium group annuities), acquisition costs are generally deferred and amortized over the expected life of the contracts in proportion to gross profits. For group corporate-, bank- and trust-owned life insurance contracts, acquisition costs are generally deferred and amortized in proportion to lives insured. For single premium immediate annuities with life contingencies, single premium group annuities, including non-participating group annuity contracts, and single premium structured settlements with life contingencies, all acquisition costs are charged to expense immediately because generally all premiums are recognized as revenue at the inception of the contract. For funding agreement notes contracts, single premium structured settlement contracts without life contingencies, and single premium immediate annuities without life contingencies, acquisition expenses are deferred and amortized over the expected life of the contracts using the interest method. For other group life and disability insurance contracts and guaranteed investment contracts (“GICs”), acquisition costs are expensed as incurred.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. If policyholders surrender traditional life insurance policies in exchange for life insurance policies that do not have fixed and guaranteed terms, the Company immediately charges to expense the remaining unamortized DAC on the surrendered policies. For other internal replacement transactions, except those that involve the addition of a nonintegrated contract feature that does not change the existing base contract, the unamortized DAC is immediately charged to expense if the terms of the new policies are not substantially similar to those of the former policies. If the new terms are substantially similar to those of the earlier policies, the DAC is retained with respect to the new policies and amortized over the expected life of the new policies. See Note 7 for additional information regarding DAC.

Value of business acquired represents identifiable intangible assets to which a portion of the purchase price in a business acquisition is attributed under the application of purchase accounting. VOBA represents an adjustment to the stated value of in-force insurance contract liabilities to present them at fair value, determined as of the acquisition date. VOBA balances are subject to recoverability testing, in the manner in which they were acquired. The Company has established a VOBA asset primarily for its acquired life insurance products, accident and health products with fixed benefits, deferred annuity contracts, and defined contribution and defined benefit businesses. As of December 31, 2020, the majority of the VOBA balance relates to the 2011 acquisition of AIG Star Life Insurance Co., Ltd, AIG Edison Life Insurance Company, and AIG Financial Assurance Japan K.K. and AIG Edison Service Co., Ltd. (collectively, the “Star and Edison Businesses”.) The Company amortizes VOBA over the anticipated life of the acquired contracts using the same methodology and assumptions used to amortize DAC. The Company records amortization of VOBA in “General and administrative expenses.” VOBA, for applicable products, is adjusted for the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in AOCI. See Note 8 for additional information regarding VOBA.

Other assets consist primarily of prepaid pension benefit costs (see Note 18), certain restricted assets (e.g., cash and cash equivalents), trade receivables, goodwill and other intangible assets, “right-of-use” lease assets (see “Other liabilities” below), DSI, the Company’s investments in operating joint ventures, property and equipment, reinsurance recoverables (see “Reinsurance” below), receivables resulting from sales of securities that had not yet settled at the balance sheet date, and trade receivables related to Assurance IQ.

Trade receivables related to Assurance IQ are reported net of the CECL allowance. The CECL allowance considers the credit quality of the counterparties and is generally determined based on probability of default and loss given default assumptions. Additions to or releases of the allowance are reported in “General and administrative expenses.” Prior to the adoption of ASU 2016-13, the allowance was based upon credit losses that were probable of occurring, not an estimate of credit losses that may occur over the remaining life of the trade receivables.

Property and equipment are carried at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of the related assets, which generally range from 3 to 40 years.

As a result of certain acquisitions, the Company recognizes an asset for goodwill representing the excess of cost over the net fair value of the assets acquired and liabilities assumed. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. A reporting unit is an operating segment or a unit one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.

The Company tests goodwill for impairment annually as of December 31 and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Accounting guidance provides for an optional qualitative assessment for testing goodwill impairment that may allow companies to skip the quantitative test. The Company estimated the fair value of the reporting units by applying the quantitative test, which involves comparing each reporting unit’s fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, the applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, an impairment charge to income is recorded for the excess. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted. Management is required to make significant estimates in determining the fair value of a reporting unit including, but not limited to: projected revenues and operating margins, applicable discount and growth rates, and comparative market multiples. See Note 10 for additional information on goodwill by reporting unit.

The Company offered various types of sales inducements to policyholders related to fixed and variable deferred annuity contracts. The Company defers sales inducements and amortizes them over the expected life of the policy using the same methodology and assumptions used to amortize DAC. Sales inducement balances are subject to periodic recoverability testing. The Company records amortization of DSI in “Interest credited to policyholders’ account balances.” DSI, for applicable products, is adjusted for the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in AOCI. See Note 13 for additional information regarding sales inducements.

Identifiable intangible assets primarily include customer relationships and mortgage servicing rights and are recorded net of accumulated amortization. The Company tests identifiable intangible assets for impairment on an annual basis as of December 31 of each year or whenever events or circumstances suggest that the carrying value of an identifiable intangible asset may exceed the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If this condition exists and the carrying value of an identifiable intangible asset exceeds its fair value, the excess is recognized as an impairment and is recorded as a charge against net income. Measuring intangible assets requires the use of estimates. Significant estimates include the projected net cash flow attributable to the intangible asset and the risk rate at which future net cash flows are discounted for purposes of estimating fair value, as applicable. See Note 10 for additional information regarding identifiable intangible assets.

Investments in operating joint ventures are generally accounted for under the equity method. The carrying value of these investments is written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. See Note 9 for additional information on investments in operating joint ventures.

Leases are recorded on the balance sheet as “right-of-use” assets and lease liabilities within “Other assets” and “Other liabilities” respectively. Leases are classified as either operating or finance leases and lease expense is recognized within “General and administrative expenses.” As a lessee, for operating leases, total lease expense is recognized using a straight-line method. Finance leases are treated as the purchase of an asset on a financing basis. Additionally, as a lessor, for sales-type and direct financing leases, the Company derecognizes the carrying value of the leased asset that is considered to have been transferred to a lessee and records a lease receivable and residual asset (“receivable and residual” approach). See Note 11 for additional information regarding leases.

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), using a modified retrospective approach. The impact of this standard resulted in an increase of "right-of-use" assets and lease liabilities related to existing operating leases of approximately $600 million as of January 1, 2019 on the Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

Separate account assets represent segregated funds that are invested for certain policyholders, pension funds and other customers. The assets consist primarily of equity securities, fixed maturities, real estate-related investments, real estate mortgage loans, short-term investments and derivative instruments and are reported at fair value. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. 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. The investment income and realized investment gains or losses from separate account assets generally accrue to the policyholders and are not included in the Company’s results of operations. Mortality, policy administration and surrender charges assessed against the accounts are included in “Policy charges and fee income.” Asset management fees charged to the accounts are included in “Asset management and service fees.” Seed money that the Company invests in separate accounts is reported in the appropriate general account asset line. Investment income and realized investment gains or losses from seed money invested in separate accounts accrue to the Company and are included in the Company’s results of operations. See Note 13 for additional information regarding separate account arrangements with contractual guarantees. See also “Separate account liabilities” below.

LIABILITIES

Future policy benefits represent liabilities that primarily consist of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality or morbidity, less the present value of future net premiums. For individual traditional participating life insurance products, the mortality and interest rate assumptions applied are those used to calculate the policies’ guaranteed cash surrender values. For life insurance, other than individual traditional participating life insurance, and annuity and disability products, expected mortality and morbidity are generally based on Company experience, industry data and/or other factors. Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although mortality, morbidity and interest rate assumptions are “locked-in” upon the issuance of new insurance or annuity business with fixed and guaranteed terms, significant changes in experience or assumptions may require the Company to provide for expected future losses on a product by recognizing a premium deficiency. A premium deficiency exists when the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for expected future policy benefits and expenses. If a premium deficiency is recognized, the assumptions without a provision for the risk of adverse deviation as of the premium deficiency test date are locked-in and used in subsequent valuations. The net reserves continue to be subject to premium deficiency testing. In determining if a premium deficiency related to short-duration contracts exists, the Company considers, among other factors, anticipated investment income. Any adjustments to future policy benefit reserves related to net unrealized gains on securities classified as available-for-sale are included in AOCI. In certain instances, the policyholder liability for a particular line of business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional liability (Profits Followed by Losses or “PFL” liability) be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years. Historically, PFL liabilities have been predominantly associated with certain universal life contracts that measure GAAP reserves using a dynamic approach, and accordingly, are updated each quarter, using current in-force and market data, and as part of the annual assumption update, such that the liability as of each measurement date represents the Company’s current estimate of the present value of the amount necessary to offset anticipated future losses. See Note 12 for additional information regarding future policy benefits.

The Company’s liability for future policy benefits also includes a liability for unpaid claims and claim adjustment expenses. The Company does not establish claim liabilities until a loss has been incurred. However, unpaid claims and claim adjustment expenses include estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date. The Company’s liability for future policy benefits also includes net liabilities for guarantee benefits related to certain long-duration life and annuity contracts, which are discussed more fully in Note 13, and deferred profits.

Policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is primarily associated with the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance, as applicable. These policyholders’ account balances also include provision for benefits under non-life contingent payout annuities and certain unearned revenues. See Note 12 for additional information regarding policyholders’ account balances. Policyholders’ account balances also includes amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. For additional information regarding the valuation of these embedded derivatives, see Note 6.

Policyholders’ dividends includes dividends payable to policyholders and the policyholder dividend obligation associated with the participating policies included in the Closed Block. The dividends payable for participating policies included in the Closed Block are determined at the end of each year for the following year by the Board of Directors of The Prudential Insurance Company of America (“PICA”) based on its statutory results, capital position, ratings, and the emerging experience of the Closed Block. The policyholder dividend obligation represents amounts expected to be paid to Closed Block policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance. Any adjustments to the policyholder dividend obligation related to net unrealized gains (losses) on securities classified as available-

for-sale are included in AOCI. For additional information on the policyholder dividend obligation, see Note 15. The dividends payable for policies other than the participating policies included in the Closed Block include dividends payable in accordance with certain group and individual insurance policies.

Securities sold under agreements to repurchase represent liabilities associated with securities repurchase agreements that are used primarily to earn spread income. As part of securities repurchase agreements, the Company transfers U.S. government and government agency securities to a third-party and receives cash as collateral. For securities repurchase agreements, the cash received is typically invested in cash equivalents, short-term investments or fixed maturities. Receivables associated with securities purchased under agreements to resell are generally reflected as cash equivalents. As part of securities resale agreements, the Company invests cash and receives as collateral U.S. government securities or other debt securities.

Securities repurchase and resale agreements that satisfy certain criteria are treated as secured borrowing or secured lending arrangements. These agreements are carried at the amounts at which the securities will be subsequently resold or reacquired, as specified in the respective transactions. For securities purchased under agreements to resell, the Company’s policy is to take possession or control of the securities either directly or through a third-party custodian. These securities are valued daily and additional securities or cash collateral is received, or returned, when appropriate to protect against credit exposure. Securities to be resold are the same, or substantially the same, as the securities received. The majority of these transactions are with large brokerage firms and large banks. For securities sold under agreements to repurchase, the market value of the securities to be repurchased is monitored, and additional collateral is obtained where appropriate, to protect against credit exposure. The Company obtains collateral in an amount at least equal to 95% of the fair value of the securities sold. Securities to be repurchased are the same, or substantially the same, as those sold. The majority of these transactions are with highly rated money market funds. Income and expenses related to these transactions executed within the insurance companies used to earn spread income are reported as “Net investment income.”

Cash collateral for loaned securities represent liabilities to return cash proceeds from security lending transactions. Securities lending transactions are used primarily to earn spread income. As part of securities lending transactions, the Company transfers U.S. and foreign debt and equity securities, as well as U.S. government and government agency securities, and receives cash as collateral. Cash proceeds from securities lending transactions are primarily used to earn spread income, and are typically invested in cash equivalents, short-term investments or fixed maturities. Securities lending transactions are treated as financing arrangements and are recorded at the amount of cash received. The Company obtains collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of the Company’s securities lending transactions are with large brokerage firms and large banks. Income and expenses associated with securities lending transactions used to earn spread income are reported as “Net investment income.”

The Company also enters into securities lending transactions where non-cash collateral, typically U.S. government or Japanese government bonds, are received. The collateral received is not reported on the Company’s Consolidated Statements of Financial Position. In these transactions, the Company receives a fee and obtains collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of these transactions are with large brokerage firms and large banks. Income is reported as “Net investment income.”

Income taxes primarily represents the net deferred tax liability and the Company’s estimated taxes payable for the current year and open audit years.

The Company and its includible domestic subsidiaries file a consolidated federal income tax return that includes both life insurance companies and non-life insurance companies. Certain other domestic subsidiaries file separate tax returns. Subsidiaries operating outside the U.S. are taxed, and income tax expense is recorded, based on applicable foreign statutes. See Note 16 for a discussion of certain non-U.S. jurisdictions for which the Company assumes repatriation of earnings.

Items required by tax regulations to be included in the tax return may differ from the items reflected in the financial statements. As a result, the effective tax rate reflected in the financial statements may be different than the actual rate applied on the tax return. Some of these differences are permanent such as expenses that are not deductible in the Company’s tax return, and some differences are temporary, reversing over time, such as valuation of insurance reserves. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years for which the Company has already recorded the tax benefit in the Company’s Consolidated Statements of Operations. Deferred tax liabilities generally represent tax expense recognized in the Company’s financial statements for which payment has been deferred, or expenditures for which the Company has already taken a deduction in the Company’s tax return but have not yet been recognized in the Company’s financial statements. Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes.

The application of U.S. GAAP requires the Company to evaluate the recoverability of the Company’s deferred tax assets and establish a valuation allowance if necessary to reduce the Company’s deferred tax assets to an amount that is more likely than not expected to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. See Note 16 for a discussion of factors considered when evaluating the need for a valuation allowance.

The U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act of 2017”) included two new tax provisions that could impact the Company’s effective tax rate and cash tax payments. The Base Erosion and Anti-Abuse Tax (“BEAT”) taxes modified taxable income, starting at a rate of 10% in 2019 and increasing to 12.5% in 2026, and is due if the calculated BEAT amount that is determined without the benefit of foreign and certain tax credits is greater than the regular corporate tax in any given year. In general, modified taxable income is calculated by adding back to a taxpayer’s regular taxable income the amount of certain “base erosion tax benefits” with respect to payments to foreign affiliates, as well as the “base erosion percentage” of any net operating loss deductions. Final Regulations confirmed that benefit and claim payments made by our U.S. insurance business to our foreign affiliates on reinsurance assumed by the U.S. affiliates are not base erosion payments. The Global Intangible Low-Taxed Income (“GILTI”) provision applies a minimum U.S. tax to earnings of consolidated foreign subsidiaries in excess of a 10% deemed return on tangible assets of foreign subsidiaries by imposing the U.S. tax rate to 50% of earnings of such foreign affiliates and provides for a partial foreign tax credit for foreign income taxes. The amount of tax in any period on GILTI can depend on annual differences between U.S. taxable income recognition rules and taxable income recognition rules in the country of operations and the overall taxable income of U.S. operations, as well as U.S. expense allocation rules which limit the amount of foreign tax credits that can be applied to reduce the U.S. tax on the GILTI provision. Under certain circumstances, the taxable income of U.S. operations may cause more than 50% of earnings of foreign affiliates to be subject to the GILTI provision. In years that the PFI consolidated federal income tax return reports a net operating loss or has a loss attributable to U.S. sources of operations, the GILTI provision would cause a loss of U.S. tax benefits for some or all of those losses, effectively increasing the tax on foreign earnings. The Company accounts for the effects of the BEAT and GILTI provisions as a period cost if and when incurred.

In December of 2017, Securities and Exchange Commission (“SEC”) staff issued “SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), which allowed registrants to record provisional amounts during a “measurement period” not to extend beyond one year. Under the relief provided by SAB 118, a company could recognize provisional amounts when it did not have the necessary information available, prepared or analyzed in reasonable detail to complete its accounting for the change in tax law. See Note 16 for a discussion of refinements to the provisional amount related to the Tax Act of 2017 included in “Total income tax expense (benefit) before equity in earnings of operating joint ventures” in 2018.

U.S. GAAP prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on tax returns. The application of this guidance is a two-step process. First, the Company determines whether it is more likely than not, based on the technical merits, that the tax position will be sustained upon examination. If a tax position does not meet the more likely than not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step is measurement. The Company measures the tax position as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate resolution with a taxing authority that has full knowledge of all relevant information. This measurement considers the amounts and probabilities of the outcomes that could be realized upon ultimate settlement using the facts, circumstances, and information available at the reporting date.

The Company’s liability for income taxes includes a liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by the Internal Revenue Service (“IRS”) or other taxing jurisdictions. Audit periods remain open for review until the statute of limitations has passed. Generally, for tax years which produce net operating losses, capital losses or tax credit carryforwards (“tax attributes”), the statute of limitations does not close, to the extent of these tax attributes, until the expiration of the statute of limitations for the tax year in which they are fully utilized. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The Company classifies all interest and penalties related to tax uncertainties as income tax expense. See Note 16 for additional information regarding income taxes.

Effective January 1, 2018, the Company adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Loss), which allowed a reclassification from AOCI to retained earnings for stranded effects resulting from the Tax Act of 2017. The Company elected to apply the ASU subsequent to recording the adoption impacts of ASU 2016-01 as described above. As a result, the Company reclassified stranded effects resulting from the Tax Act of 2017 by increasing AOCI and decreasing retained earnings, each by $1,653 million upon adoption on January 1, 2018. Stranded effects unrelated to the Tax Act of 2017 are generally released from AOCI when an entire portfolio of the type of item related to the stranded effect is liquidated, sold or extinguished (i.e., portfolio approach).

Short-term and long-term debt liabilities are primarily carried at an amount equal to unpaid principal balance, net of unamortized discount or premium and debt issue costs. Original-issue discount or premium and debt-issue costs are recognized as a component of interest expense over the period the debt is expected to be outstanding, using the interest method of amortization. Interest expense is generally presented within “General and administrative expenses” in the Company’s Consolidated Statements of Operations. Interest expense may also be reported within “Net investment income” for certain activity, as prescribed by specialized industry guidance. Short-term debt is debt coming due in the next twelve months, including that portion of debt otherwise classified as long-term. The short-term debt caption may exclude short-term debt items for which the Company has the intent and ability to refinance on a long-term basis in the near-term. See Note 17 for additional information regarding short-term and long-term debt.

Other liabilities consist primarily of trade payables, lease liabilities (see “Other assets” above), pension and other employee benefit liabilities (see Note 18), derivative liabilities (see “Derivative Financial Instruments” below), reinsurance payables (see “Reinsurance” below), and payables resulting from purchases of securities that had not yet settled at the balance sheet date.

Notes issued by consolidated variable interest entities represent notes issued by certain asset-backed investment vehicles, primarily collateralized loan obligations (“CLOs”), which the Company is required to consolidate. The creditors of these VIEs do not have recourse to the Company in excess of the assets contained within the VIEs. The Company has elected the fair value option for the majority of these notes, and has based the fair value on the corresponding bank loan collateral. Changes in fair value are reported in “Other income (loss).”

Separate account liabilities primarily represent the contractholder’s account balance in separate account assets and to a lesser extent borrowings of the separate account, and will be equal and offsetting to total separate account assets. See also “Separate account assets” above.

Commitments and contingent liabilities are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, they are included in the accrual. These accruals are generally reported in “Other liabilities.”

REVENUES AND BENEFITS AND EXPENSES

Insurance Revenue and Expense Recognition

Premiums from individual life products, other than universal and variable life contracts, and health insurance and long-term care products are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium (i.e., the portion of the gross premium required to provide for all expected future benefits and expenses) is generally deferred and recognized into revenue in a constant relationship to insurance in force. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized using the net level premium valuation methodology.

Premiums from non-participating group annuities with life contingencies, single premium structured settlements with life contingencies and single premium immediate annuities with life contingencies are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium is generally deferred and recognized into revenue based on expected future benefit payments. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized using the net level premium valuation methodology.

Certain individual annuity contracts provide the contractholder a guarantee that the benefit received upon death or annuitization will be no less than a minimum prescribed amount. These benefits are accounted for as insurance contracts. The Company also provides contracts with certain living benefits which are considered embedded derivatives. See Note 13 for additional information regarding these contracts and Note 6 for information regarding the valuation of these embedded derivatives.

Amounts received as payment for universal or variable group and individual life contracts, deferred fixed or variable annuities, structured settlements and other contracts without life contingencies, and participating group annuities are reported as deposits to “Policyholders’ account balances” and/or “Separate account liabilities.” Revenues from these contracts are reflected in “Policy charges and fee income” consisting primarily of fees assessed during the period against the policyholders’ account balances for mortality and other benefit charges, policy administration charges and surrender charges. In addition to fees, the Company earns investment income from the investment of deposits in the Company’s general account portfolio. Fees assessed that represent compensation to the Company for services to be provided in future periods and certain other fees are generally deferred and amortized into revenue over the life of the related contracts in proportion to estimated gross profits. Benefits and expenses for these products include claims in excess of related account balances, expenses of contract administration, interest credited to policyholders’ account balances and amortization of DAC, DSI and VOBA.

Policyholders’ account balances also includes amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. For additional information regarding the valuation of these embedded derivatives, see Note 6.

For group life, other than universal and variable group life contracts, and disability insurance, premiums are generally recognized over the period to which the premiums relate in proportion to the amount of insurance protection provided. Claim and claim adjustment expenses are recognized when incurred.

Asset management and service fees principally includes asset-based asset management fees, which are recognized in the period in which the services are performed. In certain asset management fee arrangements, the Company is entitled to receive performance-based incentive fees when the return on assets under management exceeds certain benchmark returns or other performance targets. The Company may be required to return all, or part, of such performance-based incentive fees depending on future performance of these assets relative to performance benchmarks. The Company records performance-based incentive fee revenue when the contractual terms of the asset management fee arrangement have been satisfied and it is probable that a significant reversal in the amount of the fee will not occur. Under this principle the Company records a deferred performance-based incentive fee liability to the extent it receives cash related to the performance-based incentive fee prior to meeting the revenue recognition criteria delineated above.

Other income (loss) includes realized and unrealized gains or losses from investments classified “Fixed maturities, trading, at fair value,” “Assets supporting experience-rated contractholder liabilities, at fair value,” “Equity securities, at fair value,” and “Other invested assets” that are measured at fair value and consolidated entities that follow specialized investment company fair value accounting. “Other income (loss)” also includes gains and losses primarily related to the remeasurement of foreign currency denominated assets and liabilities, as discussed in more detail under “Foreign Currency” below.

Additionally, for digital insurance brokerage placement services provided by Assurance IQ, the Company earns both initial and renewal commissions as compensation for the placement of insurance policies with insurance carriers. At the effective date of the policy, the Company records within “Other income (loss)” the expected lifetime revenue for the initial and renewal commissions considering estimates of the timing of future policy cancelations. These estimates are reassessed each reporting period and any changes in estimates are reflected in the current period.

OTHER ACCOUNTING POLICIES

Share-Based Payments

The Company applies the fair value-based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. Excess tax benefits (deficits) are recorded in earnings and represent the cumulative difference between the actual tax benefit realized and the amount of deferred tax assets recorded attributable to shared-based payment transactions.

The Company accounts for non-employee stock options using the fair value method in accordance with authoritative guidance and related interpretations on accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services.

Earnings Per Share

Earnings per share of Common Stock for 2020, 2019 and 2018 reflects the consolidated earnings of Prudential Financial. Basic earnings per share is computed by dividing available income attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share includes the effect of all dilutive potential common shares that were outstanding during the period. See Note 20 for additional information.

Foreign Currency

The currency in which the Company prepares its financial statements (the “reporting currency”) is the U.S. dollar. Assets, liabilities and results of foreign operations are recorded based on the functional currency of each foreign operation. The determination of the functional currency is based on economic facts and circumstances pertaining to each foreign operation. The local currencies of the Company’s foreign operations are typically their functional currencies with the most significant exception being the Company’s Japanese operations where multiple functional currencies exist.

There are two distinct processes for expressing these foreign transactions and balances in the Company’s financial statements: foreign currency measurement and foreign currency translation. Foreign currency measurement is the process by which transactions in foreign currencies are expressed in the functional currency. Gains and losses resulting from foreign currency measurement are reported in current earnings in “Other income (loss).” Foreign currency translation is the process of expressing a foreign entity’s functional currency financial statements in the reporting currency. Assets and liabilities of foreign operations and subsidiaries reported in currencies other than U.S. dollars are translated at the exchange rate in effect at the end of the period. Revenues, benefits and other expenses are translated at the average rate prevailing during the period. The effects of translating the statements of operations and financial position of non-U.S. entities with functional currencies other than the U.S. dollar are included, net of related qualifying hedge gains and losses and income taxes, in “Foreign currency translation adjustment,” a component of AOCI.

Derivative Financial Instruments

Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, values of securities or commodities, credit spreads, market volatility, expected returns, and liquidity. Values can also be affected by changes in estimates and assumptions, including those related to counterparty behavior and non-performance risk (“NPR”) used in valuation models. Derivative financial instruments generally used by the Company include swaps, futures, forwards and options and may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (OTC-cleared), while others are bilateral contracts between two counterparties (OTC-bilateral). Derivative positions are carried at fair value, generally by obtaining quoted market prices or through the use of valuation models.

Derivatives are used to manage the interest rate and currency characteristics of assets or liabilities and to mitigate volatility of expected non-functional currency earnings and net investments in foreign operations resulting from changes in currency exchange rates. Additionally, derivatives may be used to seek to reduce exposure to interest rate, credit, foreign currency and equity risks associated with assets held or expected to be purchased or sold, and liabilities incurred or expected to be incurred. As discussed in detail below, and in Note 5, all realized and unrealized changes in fair value of derivatives are recorded in current earnings, with the exception of cash flow hedges and hedges of net investments in foreign operations. The Company may also enter into intercompany derivatives, the results of which ultimately eliminate in consolidation over the term of the instrument; however, where applicable, derivative results are included in business gross profits which may impact the

pattern by which DAC and other assets are amortized. Cash flows from derivatives are reported in the operating, investing, or financing activities sections in the Consolidated Statements of Cash Flows based on the nature and purpose of the derivative.

Derivatives are recorded either as assets, within “Other invested assets,” or as liabilities, within “Other liabilities,” except for embedded derivatives which are recorded with the associated host contract. The Company nets the fair value of all derivative financial instruments with counterparties for which a master netting arrangement has been executed.

The Company designates derivatives as either (1) a hedge of the fair value of a recognized asset or liability or unrecognized firm commitment (“fair value” hedge); (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge); (3) a foreign currency fair value or cash flow hedge (“foreign currency” hedge); (4) a hedge of a net investment in a foreign operation; or (5) a derivative that does not qualify for hedge accounting.

To qualify for hedge accounting treatment, a derivative must be highly effective in mitigating the designated risk of the hedged item. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship.

The Company formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Hedges of a net investment in a foreign operation are linked to the specific foreign operation.

When a derivative is designated as a fair value hedge and is determined to be highly effective, changes in its fair value, along with changes in the fair value of the hedged asset or liability (including losses or gains on firm commitments), are reported on a net basis in the Consolidated Statements of Operations, generally in “Realized investment gains (losses), net.” When swaps are used in hedge accounting relationships, periodic settlements are recorded in the same Consolidated Statements of Operations line as the related settlements of the hedged items.

When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in its fair value are recorded in AOCI until earnings are affected by the variability of cash flows being hedged (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). At that time, the related portion of deferred gains or losses on the derivative instrument is reclassified and reported in the Consolidated Statements of Operations line item associated with the hedged item.

When a derivative is designated as a foreign currency hedge and is determined to be highly effective, changes in its fair value are recorded either in current period earnings if the hedge transaction is a fair value hedge (e.g., a hedge of a recognized foreign currency asset or liability) or in AOCI if the hedge transaction is a cash flow hedge (e.g., a foreign currency denominated forecasted transaction). When a derivative is used as a hedge of a net investment in a foreign operation, its change in fair value is accounted for in the same manner as a translation adjustment (i.e., reported in the cumulative translation adjustment account within AOCI).

If it is determined that a derivative no longer qualifies as an effective fair value or cash flow hedge or management removes the hedge designation, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net.” In this scenario, the hedged asset or liability under a fair value hedge will no longer be adjusted for changes in fair value and the existing basis adjustment is amortized to the Consolidated Statements of Operations line associated with the asset or liability. The component of AOCI related to discontinued cash flow hedges is reclassified to the Consolidated Statements of Operations line associated with the hedged cash flows consistent with the earnings impact of the original hedged cash flows.

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, or because it is probable that the forecasted transaction will not occur by the end of the specified time period, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net.” Any asset or liability that was recorded pursuant to recognition of the firm commitment is removed from the balance sheet and recognized currently in “Realized investment gains (losses), net.” Gains and losses that were in AOCI pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in “Realized investment gains (losses), net.”

If a derivative does not qualify for hedge accounting, all changes in its fair value, including net receipts and payments, are included in “Realized investment gains (losses), net” without considering changes in the fair value of the economically associated assets or liabilities.

The Company is a party to financial instruments that contain derivative instruments that are “embedded” in the financial instruments. At inception, the Company assesses whether the economic characteristics of the embedded instrument are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded instrument possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded instrument qualifies as an embedded derivative that is separated from the host contract, carried at fair value, and changes in its fair value are included in “Realized investment gains (losses), net.” For certain financial instruments that contain an embedded derivative that otherwise would need to be bifurcated and reported at fair value, the Company may elect to carry the entire instrument at fair value and report it within “Other invested assets” or “Other liabilities.”

Reinsurance

For each of its reinsurance contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims.

The Company participates in reinsurance arrangements in various capacities as either the ceding entity or as the reinsurer (i.e., assuming entity). See Note 14 for additional information about the Company’s reinsurance arrangements. Reinsurance assumed business is generally accounted for consistent with direct business. Amounts currently recoverable under reinsurance agreements are included in “Other assets” and amounts payable are included in “Other liabilities.” Revenues and benefits and expenses include amounts assumed under reinsurance agreements and are reflected net of reinsurance ceded.

Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. Reinsurance recoverables are reported net of the CECL allowance. The CECL allowance considers the credit quality of the reinsurance counterparty and is generally determined based on the probability of default and loss given default assumptions, after considering any applicable collateral arrangements. Additions to or releases of the allowance are reported in “Policyholders’ benefits”. Prior to the adoption of ASU 2016-13, an allowance for credit losses for reinsurance recoverables was established only when it was deemed probable that a reinsurer may fail to make payments to us in a timely manner. Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured long-duration contracts under coinsurance arrangements are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. Coinsurance arrangements contrast with the Company’s yearly renewable term arrangements, where only mortality risk is transferred to the reinsurer and premiums are paid to the reinsurer to reinsure that risk. The mortality risk that is reinsured under yearly renewable term arrangements represents the difference between the stated death benefits in the underlying reinsured contracts and the corresponding reserves or account value carried by the Company on those same contracts. The premiums paid to the reinsurer are based upon negotiated amounts, not on the actual premiums paid by the underlying contract holders to the Company. As yearly renewable term arrangements are usually entered into by the Company with the expectation that the contracts will be in force for the lives of the underlying policies, they are considered to be long-duration reinsurance contracts. The cost of reinsurance for universal life products is generally recognized based on the gross assessments of the underlying direct policies. The cost of reinsurance for term insurance products is generally recognized in proportion to yearly renewable term premiums over the life of the underlying policies. The cost of reinsurance related to short-duration reinsurance contracts is accounted for over the reinsurance contract period.

If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Deposits received are included in “Other liabilities” and deposits made are included in “Other assets”. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as “Other income (loss)” or “General and administrative expenses,” as appropriate.

RECENT ACCOUNTING PRONOUNCEMENTS

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. ASUs listed below include those that have been adopted during the current fiscal year and/or those that have been issued but not yet adopted as of December 31, 2020, and as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material.

Adoption of ASU 2016-13

The Company adopted ASU 2016-13, and related ASUs, effective January 1, 2020 using the modified retrospective method for certain financial assets carried at amortized cost and certain off-balance sheet exposures. The modified retrospective method results in a cumulative effect adjustment to opening retained earnings. The Company adopted the guidance related to fixed maturities, available-for-sale on a prospective basis.

This ASU requires the use of a new current expected credit loss (“CECL”) model to account for expected credit losses on certain financial assets reported at amortized cost (e.g., loans held for investment, fixed maturities held-to-maturity, reinsurance receivables, etc.) and certain off-balance sheet credit exposures (e.g., indemnification of serviced mortgage loans and certain loan commitments). The guidance requires an entity to estimate lifetime credit losses related to such financial assets and credit exposures based on relevant information about past events, current conditions, and reasonable and supportable forecasts that may affect the collectability of the reported amounts. The standard also modifies the OTTI guidance for fixed maturities, available-for-sale requiring the use of an allowance rather than a direct write-down of the investment.

The impacts of this ASU on the Company’s Consolidated Financial Statements primarily include (1) A Cumulative Effect Adjustment Upon Adoption; (2) Changes to the Presentation of the Consolidated Statements of Financial Position and Consolidated Statements of Operations; and (3) Changes to Accounting Policies. Each of these impacts is described below.

(1) Cumulative Effect Adjustment Upon Adoption


Summary of Transition Impact on the Consolidated Statements of Financial Position
Upon Adoption on January 1, 2020
	Increase/(Decrease)
	(in millions)
Fixed maturities, held-to-maturity	$	(9)
Commercial mortgage and other loans	(115)
Other invested assets	(1)
Deferred policy acquisition costs	9
Other assets	(6)
Total assets	$	(122)

Policyholders' dividends	$	(14)
Other liabilities	21
Income taxes	(30)
Total liabilities	(23)

Retained earnings	(99)
Total equity	(99)
Total liabilities and equity	$	(122)

The prospective adoption of the portions of the standard related to fixed maturities, available-for-sale resulted in no impact to opening retained earnings.

(2) Changes to the Presentation of the Consolidated Statements of Financial Position and Consolidated Statements of Operations

The allowance for credit losses is presented parenthetically on relevant line items in the Consolidated Statements of Financial Position. In the Consolidated Statements of Operations, realized investment gains (losses), net are presented on one line item and no longer reflect the breakout of OTTI on fixed maturity securities; OTTI on fixed maturity securities transferred to OCI; and other realized investment gains (losses), net. The presentation of this detail in prior periods is immaterial.

(3) Changes to Accounting Policies

The narrative description of our significant accounting policies at the beginning of this Note reflects our policies as of December 31, 2020, including the policies associated with the adoption of ASU 2016-13.

Other ASUs adopted during the year ended December 31, 2020

Standard

Description

Effective date and method of adoption

Effect on the financial statements or other significant matters

ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

This ASU simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test, which measures a goodwill impairment by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of the goodwill. Under the ASU, a goodwill impairment should be recorded for the amount by which the carrying amount of a reporting unit exceeds its fair value (capped by the total amount of goodwill allocated to the reporting unit).

January 1, 2020 using the prospective method.

The adoption of the ASU did not have a significant impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

This ASU provides optional relief for certain contracts impacted by reference rate reform. The standard permits an entity to consider contract modification due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The ASU also temporarily (until December 31, 2022) allows hedge relationships to continue without de-designation upon changes due to reference rate reform.

March 12, 2020 to December 31, 2022 using the prospective method.

This ASU did not have a significant impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

The Company made the election under ASU 2020-04 for all applicable contracts as they converted from the current reference rate to the new reference rate.

ASU issued but not yet adopted as of December 31, 2020— ASU 2018-12

ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, was issued by the FASB on August 15, 2018 and is expected to have a significant impact on the Consolidated Financial Statements and Notes to the Consolidated Financial Statements. In October 2019, the FASB issued ASU 2019-09, Financial Services - Insurance (Topic 944): Effective Date to affirm its decision to defer the effective date of ASU 2018-12 to January 1, 2022 (with early adoption permitted), representing a one year extension from the original effective date of January 1, 2021. As a result of the COVID-19 pandemic, in November 2020 the FASB issued ASU 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application to defer for an additional one year the effective date of ASU 2018-12 from January 1, 2022 to January 1, 2023, and to provide transition relief to facilitate the early adoption of the ASU. The transition relief would allow large calendar-year public companies that early adopt ASU 2018-12 to apply the guidance either as of January 1, 2020 or January 1, 2021 (and record transition adjustments as of January 1, 2020 or January 1, 2021, respectively) in the 2022 financial statements. Companies that do not early adopt ASU 2018-12 would apply the guidance as of January 1, 2021 (and record transition adjustments as of January 1, 2021) in the 2023 financial statements. The Company currently intends to adopt ASU 2018-12 effective January 1, 2023. ASU 2018-12 will impact, at least to some extent, the accounting and disclosure requirements for all long-duration insurance and investment contracts issued by the Company. Outlined below are four key areas of change, although there are other less significant changes not noted below. In addition to the impacts to the balance sheet upon adoption, the Company also expects an impact to how earnings emerge thereafter.

ASU 2018-12 Amended Topic

Description

Method of adoption

Effect on the financial statements or other significant matters

Cash flow assumptions used to measure the liability for future policy benefits for non-participating traditional and limited-pay insurance products

Requires an entity to review, and if necessary, update the cash flow assumptions used to measure the liability for future policy benefits, for both changes in future assumptions and actual experience, at least annually using a retrospective update method with a cumulative catch-up adjustment recorded in a separate line item in the Consolidated Statements of Operations.

An entity may choose one of two adoption methods for the liability for future policy benefits: (1) a modified retrospective transition method whereby the entity may choose to apply the amendments to contracts in force as of the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in Accumulated other comprehensive income (loss) (“AOCI”) or (2) a full retrospective transition method.

The options for method of adoption and the impacts of such methods are under assessment.

Discount rate assumption used to measure the liability for future policy benefits for non-participating traditional and limited-pay insurance products

Requires discount rate assumptions to be based on an upper-medium grade fixed income instrument yield, which will be updated each quarter with the impact recorded through OCI. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the discount rate assumptions.

As noted above, an entity may choose either a modified retrospective transition method or full retrospective transition method for the liability for future policy benefits. Under either method, for balance sheet remeasurement purposes, the liability for future policy benefits will be remeasured using current discount rates as of either the beginning of the prior year (if early adoption is elected) or the beginning of the earliest period presented with the impact recorded as a cumulative effect adjustment to AOCI.

Upon adoption, under either transition method, there will be an adjustment to AOCI as a result of remeasuring in-force contract liabilities using current upper-medium grade fixed income instrument yields. The adjustment upon adoption will largely reflect the difference between discount rates locked-in at contract inception versus current discount rates at transition. The magnitude of such adjustment is currently being assessed.

Amortization of deferred acquisition costs (DAC) and other balances

Requires DAC and other balances, such as unearned revenue reserves and DSI, to be amortized on a constant level basis over the expected term of the related contract, independent of expected profitability.

An entity may apply one of two adoption methods: (1) a modified retrospective transition method whereby the entity may choose to apply the amendments to contracts in force as of the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI or (2) if an entity chooses a full retrospective transition method for its liability for future policy benefits, as described above, it is required to also use a full retrospective transition method for DAC and other balances.

The options for method of adoption and the impacts of such methods are under assessment. Under the modified retrospective transition method, the Company would not expect a significant impact to the balance sheet, other than the impact of the removal of any related amounts in AOCI.

Market Risk Benefits (“MRB”)

Requires an entity to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value, and record MRB assets and liabilities separately on the Consolidated Statements of Financial Position. Changes in fair value of market risk benefits are recorded in net income, except for the portion of the change in MRB liabilities attributable to changes in an entity’s NPR, which is recognized in OCI.

An entity shall adopt the guidance for market risk benefits using the retrospective transition method, which includes a cumulative effect adjustment on the balance sheet as of either the beginning of prior year (if early adoption is elected) or the beginning of the earliest period presented. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the balance of the market risk benefits upon adoption.

Upon adoption, the Company expects an impact to retained earnings for the difference between the fair value and carrying value of benefits not currently measured at fair value (e.g., guaranteed minimum death benefits on variable annuities) and an impact from reclassifying the cumulative effect of changes in NPR from retained earnings to AOCI. The magnitude of such adjustments is currently being assessed.

Investments

12 Months Ended

Dec. 31, 2020

Investments [Abstract]

Investments

INVESTMENTS

Fixed Maturity Securities

The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	30,766	$	9,699	$	17	$	0	$	40,448
Obligations of U.S. states and their political subdivisions	10,668		2,144		1		0		12,811
Foreign government bonds	94,110		16,373		239		0		110,244
U.S. public corporate securities	95,299		18,516		213		47		113,555
U.S. private corporate securities(1)	36,894		4,196		134		19		40,937
Foreign public corporate securities	25,857		3,768		64		24		29,537
Foreign private corporate securities	28,668		3,183		226		33		31,592
Asset-backed securities(2)	14,489		176		74		0		14,591
Commercial mortgage-backed securities	15,036		1,288		11		10		16,303
Residential mortgage-backed securities(3)	2,683		205		1		0		2,887
Total fixed maturities, available-for-sale(1)	$	354,470	$	59,548	$	980	$	133	$	412,905


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Amortized Cost, Net of Allowance
	(in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds	$	935	$	270	$	0	$	1,205	$	0	$	935
Foreign public corporate securities	651		68		0		719		9		642

Foreign private corporate securities	87		1		0		88		0		87

Residential mortgage-backed securities(3)	266		20		0		286		0		266
Total fixed maturities, held-to-maturity(4)	$	1,939	$	359	$	0	$	2,298	$	9	$	1,930

__________

(1)Excludes notes with amortized cost of $5,966 million (fair value, $6,100 million), which have been offset with the associated debt under a netting agreement.

(2)Includes credit-tranched securities 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)Excludes notes with amortized cost of $4,998 million (fair value, $5,821 million), which have been offset with the associated debt under a netting agreement.


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI(4)
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	30,625	$	5,195	$	161	$	35,659	$	0
Obligations of U.S. states and their political subdivisions	10,068		1,437		8		11,497		0
Foreign government bonds	98,356		20,761		63		119,054		(34)
U.S. public corporate securities	87,566		11,030		257		98,339		(6)
U.S. private corporate securities(1)	34,410		2,243		120		36,533		0
Foreign public corporate securities	26,841		3,054		70		29,825		(1)
Foreign private corporate securities	27,619		1,201		580		28,240		0
Asset-backed securities(2)	13,067		147		40		13,174		(77)
Commercial mortgage-backed securities	14,978		610		14		15,574		0
Residential mortgage-backed securities(3)	3,044		159		2		3,201		(1)
Total fixed maturities, available-for-sale(1)	$	346,574	$	45,837	$	1,315	$	391,096	$	(119)


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds	$	891	$	282	$	0	$	1,173
Foreign public corporate securities	649		64		0		713
Foreign private corporate securities	83		2		0		85

Residential mortgage-backed securities(3)	310		21		0		331
Total fixed maturities, held-to-maturity(5)	$	1,933	$	369	$	0	$	2,302

__________

(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 credit-tranched securities collateralized by 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.

The following table sets forth the fair value and gross unrealized losses on available-for-sale fixed maturity securities without an allowance for credit losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the date indicated:


	December 31, 2020
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	750	$	17	$	0	$	0	$	750	$	17
Obligations of U.S. states and their political subdivisions	73		1		0		0		73		1
Foreign government bonds	6,536		231		39		8		6,575		239
U.S. public corporate securities	3,905		87		1,197		106		5,102		193
U.S. private corporate securities	1,712		52		843		82		2,555		134
Foreign public corporate securities	1,412		30		376		23		1,788		53
Foreign private corporate securities	798		34		2,371		192		3,169		226
Asset-backed securities	4,132		25		4,685		49		8,817		74
Commercial mortgage-backed securities	284		8		93		3		377		11
Residential mortgage-backed securities	116		1		1		0		117		1
Total fixed maturities, available-for-sale	$	19,718	$	486	$	9,605	$	463	$	29,323	$	949

The following table sets forth the fair value and gross unrealized losses on fixed maturity securities aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the date indicated:


	December 31, 2019
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in millions)
Fixed maturities(1):
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	4,950	$	161	$	267	$	0	$	5,217	$	161
Obligations of U.S. states and their political subdivisions	273		8		0		0		273		8
Foreign government bonds	2,332		60		126		3		2,458		63
U.S. public corporate securities	3,944		85		2,203		172		6,147		257
U.S. private corporate securities	2,283		44		1,563		76		3,846		120
Foreign public corporate securities	1,271		23		496		47		1,767		70
Foreign private corporate securities	1,466		33		5,666		547		7,132		580
Asset-backed securities	3,979		12		4,433		28		8,412		40
Commercial mortgage-backed securities	1,193		10		164		4		1,357		14
Residential mortgage-backed securities	207		1		88		1		295		2
Total	$	21,898	$	437	$	15,006	$	878	$	36,904	$	1,315

__________

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

As of December 31, 2020, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of $636 million related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $313 million related to other than high or highest quality securities based on NAIC or equivalent rating. As of December 31, 2020, the $463 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the energy, utility and finance sectors.

As of December 31, 2019, the gross unrealized losses on fixed maturity securities were composed of $973 million related to “1” highest quality or “2” high quality securities based on NAIC or equivalent rating and $342 million related to other than high or highest quality securities based on NAIC or equivalent rating. As of December 31, 2019, the $878 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the energy, consumer non-cyclical and finance sectors.

In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at December 31, 2020. These conclusions were based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to general credit spread widening, increases in interest rates, foreign currency exchange rate movements and the financial condition or near-term prospects of the issuer. As of December 31, 2020, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost basis.

The following table sets forth the amortized cost or amortized cost, net of allowance and fair value of fixed maturities by contractual maturities, as of the date indicated:


	December 31, 2020
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost, Net of Allowance		Fair Value
	(in millions)
Fixed maturities:
Due in one year or less	$	11,534	$	12,100	$	120	$	120
Due after one year through five years	51,323		55,272		526		602
Due after five years through ten years	68,938		78,293		87		89
Due after ten years(1)	190,467		233,459		931		1,201
Asset-backed securities	14,489		14,591		0		0
Commercial mortgage-backed securities	15,036		16,303		0		0
Residential mortgage-backed securities	2,683		2,887		266		286
Total	$	354,470	$	412,905	$	1,930	$	2,298

__________

(1)Excludes available-for-sale notes with amortized cost of $5,966 million (fair value, $6,100 million) and held-to-maturity notes with amortized cost of $4,998 million (fair value, $5,821 million), which have been offset with the associated debt under a netting agreement.

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.

The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on write-downs, impairments and the allowance for credit losses of fixed maturities, for the periods indicated:


	Years Ended December 31,
	2020		2019		2018
	(in millions)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	21,013	$	32,283	$	38,230
Proceeds from maturities/prepayments	23,563		20,036		21,207
Gross investment gains from sales and maturities	1,690		1,715		1,412
Gross investment losses from sales and maturities	(524)		(434)		(905)
OTTI recognized in earnings(2)	N/A		(315)		(279)
Write-downs recognized in earnings(3)	(304)		N/A		N/A
(Addition to) release of allowance for credit losses(4)	(133)		N/A		N/A
Fixed maturities, held-to-maturity:
Proceeds from maturities/prepayments(5)	$	88	$	99	$	94
(Addition to) release of allowance for credit losses(4)	0		N/A		N/A

__________

(1)Includes $470 million, $13 million and $(238) million of non-cash related proceeds due to the timing of trade settlements for the years ended December 31, 2020, 2019 and 2018, respectively.

(2)For the years ended December 31, 2019 and 2018, amounts exclude the portion of OTTI amounts remaining in 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 year ended December 31, 2020, amounts represent write-downs of credit adverse securities, 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 less than $1 million, less than $(1) million and less than $(1) million of non-cash related proceeds due to the timing of trade settlements for the years ended December 31, 2020, 2019 and 2018, respectively.

The following tables set forth the activity in the allowance for credit losses for fixed maturity securities, as of the date indicated:


	Year Ended December 31, 2020
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Additions to allowance for credit losses not previously recorded	0		39		255		0		1		0		295

Reductions for securities sold during the period	0		(39)		(126)		0		0		0		(165)


Additions (reductions) on securities with previous allowance	0		0		5		0		9		0		14
Write-downs charged against the allowance	0		0		(11)		0		0		0		(11)

Balance, end of period	$	0	$	0	$	123	$	0	$	10	$	0	$	133


	Year Ended December 31, 2020
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Cumulative effect of adoption of ASU 2016-13	0		0		9		0		0		0		9






Balance, end of period	$	0	$	0	$	9	$	0	$	0	$	0	$	9

See Note 2 for additional information about the Company’s methodology for developing our allowance and expected losses.

For the year ended December 31, 2020, the increase in the allowance for credit losses on available-for-sale securities was primarily related to adverse projected cash flows on public and private corporate securities.

The Company did not have any fixed maturity securities purchased with credit deterioration, as of December 31, 2020.

Assets Supporting Experience-Rated Contractholder Liabilities

The following table sets forth the composition of “Assets supporting experience-rated contractholder liabilities,” as of the dates indicated:


	December 31, 2020				December 31, 2019
	Amortized Cost or Cost		Fair Value		Amortized Cost or Cost		Fair Value
	(in millions)
Short-term investments and cash equivalents	$	658	$	658	$	277	$	277
Fixed maturities:
Corporate securities	14,442		15,472		13,143		13,603
Commercial mortgage-backed securities	1,743		1,839		1,845		1,896
Residential mortgage-backed securities(1)	964		1,018		1,134		1,158
Asset-backed securities(2)	1,665		1,697		1,639		1,662
Foreign government bonds	934		945		802		814
U.S. government authorities and agencies and obligations of U.S. states	371		443		341		397
Total fixed maturities(3)	20,119		21,414		18,904		19,530
Equity securities	1,661		2,043		1,465		1,790
Total assets supporting experience-rated contractholder liabilities(4)	$	22,438	$	24,115	$	20,646	$	21,597

__________

(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 $1,102 million and $1,060 million as of December 31, 2020 and 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 December 31, 2020 and 2019.

(4)As a percentage of amortized cost, 79% and 77% of the portfolio consisted of public securities as of December 31, 2020 and 2019, respectively.

The net change in unrealized gains (losses) from assets supporting experience-rated contractholder liabilities still held at period end, recorded within “Other income (loss),” was $726 million, $996 million and $(778) million during the years ended December 31, 2020, 2019 and 2018, respectively.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $205 million, $943 million and $(1,157) million during the years ended December 31, 2020, 2019 and 2018, respectively.

Concentrations of Financial Instruments

The Company monitors its concentrations of financial instruments and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any single issuer.

As of the dates indicated, the Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s equity included securities of the U.S. government and certain U.S. government agencies and securities guaranteed by the U.S. government, as well as the securities disclosed below:


	December 31, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in millions)
Investments in Japanese government and government agency securities:
Fixed maturities, available-for-sale	$	80,273	$	92,764	$	74,118	$	89,546
Fixed maturities, held-to-maturity	912		1,173		869		1,143
Fixed maturities, trading	25		25		23		23
Assets supporting experience-rated contractholder liabilities	849		855		653		664


Total	$	82,059	$	94,817	$	75,663	$	91,376

	December 31, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in millions)
Investments in South Korean government and government agency securities:
Fixed maturities, available-for-sale	$	26	$	33	$	10,823	$	13,322


Assets supporting experience-rated contractholder liabilities	15		16		15		16


Total	$	41	$	49	$	10,838	$	13,338

The decrease in South Korean government and government agency securities from December 31, 2019 to December 31, 2020 was due to the sale of POK, which was completed in August 2020.

Commercial Mortgage and Other Loans

The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:


	December 31, 2020				December 31, 2019
	Amount (in millions)		% of Total		Amount (in millions)		% of Total
Commercial mortgage and agricultural property loans by property type:
Office	$	12,750	19.7	%	$	13,462	21.4	%
Retail	7,326		11.3		8,379		13.3
Apartments/Multi-Family	18,330		28.3		17,348		27.6
Industrial	14,954		23.1		13,226		21.1
Hospitality	2,395		3.7		2,415		3.9
Other	4,981		7.7		4,533		7.2
Total commercial mortgage loans	60,736		93.8		59,363		94.5
Agricultural property loans	4,048		6.2		3,472		5.5
Total commercial mortgage and agricultural property loans	64,784		100.0	%	62,835		100.0	%
Allowance for credit losses	(227)				(117)
Total net commercial mortgage and agricultural property loans	64,557				62,718
Other loans:
Uncollateralized loans	655				656
Residential property loans	101				124
Other collateralized loans	120				65
Total other loans	876				845
Allowance for credit losses	(8)				(4)
Total net other loans	868				841
Total net commercial mortgage and other loans(1)	$	65,425			$	63,559

__________

(1)Includes loans held for sale which are carried at fair value and are collateralized primarily by apartment complexes. As of December 31, 2020 and 2019, the net carrying value of these loans was $1,092 million and $228 million, respectively.

As of December 31, 2020, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in California (28%), Texas (8%) and New York (7%)) and included loans secured by properties in Europe (8%), Australia (2%) and Asia (2%).

The following table sets forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:



	Commercial Mortgage Loans		Agricultural Property Loans		Residential Property Loans		Other Collateralized Loans		Uncollateralized Loans		Total
	(in millions)
Balance at December 31, 2017	$	97	$	3	$	1	$	0	$	5	$	106
Addition to (release of) allowance for credit losses	23		0		(1)		0		0		22
Charge-offs, net of recoveries	0		0		0		0		0		0

Balance at December 31, 2018	120		3		0		0		5		128
Addition to (release of) allowance for credit losses	(5)		0		0		0		(1)		(6)
Charge-offs, net of recoveries	(1)		0		0		0		0		(1)

Balance at December 31, 2019	114		3		0		0		4		121
Cumulative effect of adoption of ASU 2016-13	110		5		0		0		0		115
Addition to (release of) allowance for expected losses	1		1		0		0		1		3

Write-downs charged against allowance	(7)		0		0		0		0		(7)
Other	0		0		0		3		0		3
Balance at December 31, 2020	$	218	$	9	$	0	$	3	$	5	$	235

See Note 2 for additional information about the Company’s methodology for developing our allowance and expected losses.

For the year ended December 31, 2020, the increase in the allowance for credit losses on commercial mortgage and other loans was primarily related to the cumulative effect of adoption of ASU 2016-13.

The following tables set forth key credit quality indicators based upon the recorded investment gross of allowance for credit losses, as of the date indicated:


	December 31, 2020
	Amortized Cost by Origination Year
	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
Commercial Mortgage Loans
Loan-to-Value Ratio:
0%-59.99%	$	828	$	2,693	$	3,217	$	3,854	$	3,223	$	15,360	$	29,175
60%-69.99%	2,678		4,981		4,291		2,239		2,667		4,058		20,914
70%-79.99%	2,492		2,587		1,500		1,057		918		1,409		9,963
80% or greater	23		3		61		69		23		505		684
Total	$	6,021	$	10,264	$	9,069	$	7,219	$	6,831	$	21,332	$	60,736
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	5,901	$	9,429	$	8,587	$	6,954	$	6,382	$	18,904	$	56,157
1.0 - 1.2x	118		711		383		263		384		1,719		3,578
Less than 1.0x	2		124		99		2		65		709		1,001
Total	$	6,021	$	10,264	$	9,069	$	7,219	$	6,831	$	21,332	$	60,736
Agricultural Property Loans
Loan-to-Value Ratio:
0%-59.99%	$	956	$	494	$	349	$	527	$	367	$	1,254	$	3,947
60%-69.99%	8		51		39		3		0		0		101
70%-79.99%	0		0		0		0		0		0		0
80% or greater	0		0		0		0		0		0		0
Total	$	964	$	545	$	388	$	530	$	367	$	1,254	$	4,048
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	941	$	544	$	381	$	468	$	308	$	1,202	$	3,844
1.0 - 1.2x	23		0		1		59		1		40		124
Less than 1.0x	0		1		6		3		58		12		80
Total	$	964	$	545	$	388	$	530	$	367	$	1,254	$	4,048


Commercial mortgage loans
	December 31, 2019
	Debt Service Coverage Ratio
	>1.2X		1.0X to <1.2X		< 1.0X		Total
	(in millions)
Loan-to-Value Ratio:
0%-59.99%	$	31,027	$	701	$	217	$	31,945
60%-69.99%	17,090		1,145		42		18,277
70%-79.99%	8,020		719		28		8,767
80% or greater	209		143		22		374
Total commercial mortgage loans	$	56,346	$	2,708	$	309	$	59,363


Agricultural property loans
	December 31, 2019
	Debt Service Coverage Ratio
	>1.2X		1.0X to <1.2X		< 1.0X		Total
	(in millions)
Loan-to-Value Ratio:
0%-59.99%	$	3,289	$	57	$	14	$	3,360
60%-69.99%	112		0		0		112
70%-79.99%	0		0		0		0
80% or greater	0		0		0		0
Total agricultural property loans	$	3,401	$	57	$	14	$	3,472

See Note 2 for additional information about the Company’s commercial mortgage and other loans credit quality monitoring process.

The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:


	December 31, 2020
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Past Due		Total Loans		Non-Accrual Status(2)
	(in millions)
Commercial mortgage loans	$	60,614	$	3	$	119	$	0	$	122	$	60,736	$	5
Agricultural property loans	3,996		37		0		15		52		4,048		15
Residential property loans	99		1		0		1		2		101		1
Other collateralized loans	120		0		0		0		0		120		0
Uncollateralized loans	655		0		0		0		0		655		0
Total	$	65,484	$	41	$	119	$	16	$	176	$	65,660	$	21

__________

(1)As of December 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.


	December 31, 2019
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Past Due		Total Loans		Non-Accrual Status(2)
	(in millions)
Commercial mortgage loans	$	59,363	$	0	$	0	$	0	$	0	$	59,363	$	44
Agricultural property loans	3,458		1		0		13		14		3,472		13
Residential property loans	121		1		0		2		3		124		2
Other collateralized loans	65		0		0		0		0		65		0
Uncollateralized loans	656		0		0		0		0		656		0
Total	$	63,663	$	2	$	0	$	15	$	17	$	63,680	$	59

__________

(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.

Loans on non-accrual status recognized interest income of $2 million for the year ended December 31, 2020, and $15 million of these loans did not have a related allowance for credit losses as of December 31, 2020.

The Company did not have any losses on commercial mortgage and other loans purchased with credit deterioration, as of December 31, 2020.

Other Invested Assets

The following table sets forth the composition of “Other invested assets,” as of the dates indicated:


	December 31,
	2020		2019
	(in millions)
LPs/LLCs:
Equity method:
Private equity	$	4,605	$	3,625
Hedge funds	2,451		1,947
Real estate-related	1,691		1,372
Subtotal equity method	8,747		6,944
Fair value:
Private equity	1,786		1,705
Hedge funds	2,036		2,172
Real estate-related	314		336
Subtotal fair value	4,136		4,213
Total LPs/LLCs	12,883		11,157
Real estate held through direct ownership(1)	2,027		2,388
Derivative instruments	1,915		877
Other(2)	1,300		1,184
Total other invested assets	$	18,125	$	15,606

__________

(1)As of December 31, 2020 and 2019, real estate held through direct ownership had mortgage debt of $409 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.

In certain investment structures, the Company’s investment management business invests with other co-investors in an investment fund referred to as a feeder fund. In these structures, the invested capital of several feeder funds is pooled together and used to purchase ownership interests in another fund, referred to as a master fund. The master fund utilizes this invested capital and, in certain cases, other debt financing, to purchase various classes of assets on behalf of its investors. Specialized industry accounting for investment companies calls for the feeder fund to reflect its investment in the master fund as a single net asset equal to its proportionate share of the net assets of the master fund, regardless of its level of interest in the master fund. In cases where the Company consolidates the feeder fund, it retains the feeder fund’s net asset presentation and reports the consolidated feeder fund’s proportionate share of the net assets of the master fund in “Other invested assets,” with any unaffiliated investors’ non-controlling interest in the feeder fund reported in “Other liabilities” or “Noncontrolling interests.” The consolidated feeder funds’ investments in these master funds, reflected on this net asset basis, totaled $459 million and $428 million as of December 31, 2020 and 2019, respectively. There was $201 million and $230 million of unaffiliated interest in the consolidated feeder funds as of December 31, 2020 and 2019, respectively, and the master funds had gross assets of $54,123 million and $89,313 million, respectively, and gross liabilities of $50,706 million and $86,471 million, respectively, which are not included on the Company’s balance sheet.

Equity Method Investments

The following tables set forth summarized combined financial information for significant LP/LLC interests accounted for under the equity method, including the Company’s investments in operating joint ventures that are described in more detail in Note 9. Changes between periods in the tables below reflect changes in the activities within the operating joint ventures and LPs/LLCs, as well as changes in the Company’s level of investment in such entities:


	December 31,
	2020		2019
	(in millions)
STATEMENTS OF FINANCIAL POSITION
Total assets(1)	$	424,712	$	313,828
Total liabilities(2)	$	35,705	$	19,274
Partners’ capital	389,007		294,554
Total liabilities and partners’ capital	$	424,712	$	313,828
Total liabilities and partners’ capital included above	$	9,475	$	7,438
Equity in LP/LLC interests not included above	666		814
Carrying value	$	10,141	$	8,252

__________

(1)Amount represents gross assets of each fund where the Company has a significant investment. These assets consist primarily of investments in real estate, investments in securities and other miscellaneous assets.

(2)Amount represents gross liabilities of each fund where the Company has a significant investment. These liabilities consist primarily of third-party-borrowed funds, securities repurchase agreements and other miscellaneous liabilities.


	Years Ended December 31,
	2020		2019		2018
	(in millions)
STATEMENTS OF OPERATIONS
Total revenue(1)	$	42,964	$	11,430	$	6,264
Total expenses(2)	(8,887)		(5,800)		(3,222)
Net earnings (losses)	$	34,077	$	5,630	$	3,042
Equity in net earnings (losses) included above	$	744	$	525	$	233
Equity in net earnings (losses) of LP/LLC interests not included above	28		11		14
Total equity in net earnings (losses)	$	772	$	536	$	247

__________

(1)Amount represents gross revenue of each fund where the Company has a significant investment. This revenue consists of income from investments in real estate, investments in securities and other income.

(2)Amount represents gross expenses of each fund where the Company has a significant investment. These expenses consist primarily of interest expense, investment management fees, salary expenses and other expenses.

Accrued Investment Income

The following table sets forth the composition of “Accrued investment income,” as of the date indicated:


	December 31, 2020
	(in millions)
Fixed maturities	$	2,676



Equity securities	7
Commercial mortgage and other loans	205
Policy loans	274
Other invested assets	27
Short-term investments and cash equivalents	4
Total accrued investment income	$	3,193

There was less than $1 million of write-downs on accrued investment income for the year ended December 31, 2020.

Net Investment Income

The following table sets forth “Net investment income” by investment type, for the periods indicated:


	Years Ended December 31,
	2020		2019		2018
	(in millions)
Fixed maturities, available-for-sale(1)	$	12,339	$	12,644	$	11,989
Fixed maturities, held-to-maturity(1)	235		232		226
Fixed maturities, trading	126		149		143
Assets supporting experience-rated contractholder liabilities	700		731		722
Equity securities	162		160		164
Commercial mortgage and other loans	2,485		2,584		2,352
Policy loans	584		619		622
Other invested assets	1,318		1,005		519
Short-term investments and cash equivalents	197		453		345
Gross investment income	18,146		18,577		17,082
Less: investment expenses	(736)		(992)		(906)
Net investment income	$	17,410	$	17,585	$	16,176

__________

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

The carrying value of non-income producing assets included $389 million in available-for-sale fixed maturities, $29 million in assets supporting experience-rated contractholder liabilities and less than $1 million in trading fixed maturities as of December 31, 2020. Non-income producing assets represent investments that had not produced income for the twelve months preceding December 31, 2020.

Realized Investment Gains (Losses), Net

The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:


	Years Ended December 31,
	2020		2019		2018
	(in millions)
Fixed maturities(1)	$	729	$	966	$	228
Commercial mortgage and other loans	103		44		49
Investment real estate	(16)		78		84
LPs/LLCs	2		(38)		17
Derivatives	(4,715)		(1,513)		1,597
Other	10		4		2
Realized investment gains (losses), net	$	(3,887)	$	(459)	$	1,977

__________

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

Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:


	December 31,
	2020		2019		2018
	(in millions)
Fixed maturity securities, available-for-sale—with OTTI(1)	$ N/A		$	243	$	190
Fixed maturity securities, available-for-sale—all other(1)	N/A		44,279		21,721
Fixed maturity securities, available-for-sale with an allowance	(25)		N/A		N/A
Fixed maturity securities, available-for-sale without an allowance	58,593		N/A		N/A
Derivatives designated as cash flow hedges(2)	(168)		832		811
Derivatives designated as fair value hedges(2)	10		0		0
Other investments(3)	7		(15)		(2)
Net unrealized gains (losses) on investments	$	58,417	$	45,339	$	22,720

__________

(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 and fair value hedges, see Note 5.

(3)As of December 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.”

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. The following table sets forth the composition of “Securities sold under agreements to repurchase,” as of the dates indicated:


	December 31, 2020						December 31, 2019
	Remaining Contractual Maturities of the Agreements						Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		Total		Overnight & Continuous		Up to 30 Days		Total
	(in millions)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	9,548	$	546	$	10,094	$	9,431	$	0	$	9,431


Commercial mortgage-backed securities	463		0		463		0		0		0
Residential mortgage-backed securities	337		0		337		250		0		250
Total securities sold under agreements to repurchase(1)	$	10,348	$	546	$	10,894	$	9,681	$	0	$	9,681

__________

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

The following table sets forth the composition of “Cash collateral for loaned securities” which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:


	December 31, 2020						December 31, 2019
	Remaining Contractual Maturities of the Agreements						Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		Total		Overnight & Continuous		Up to 30 Days		Total
	(in millions)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	0	$	0	$	9	$	0	$	9
Obligations of U.S. states and their political subdivisions	108		0		108		33		0		33
Foreign government bonds	426		0		426		244		0		244
U.S. public corporate securities	2,360		0		2,360		2,996		0		2,996
Foreign public corporate securities	567		0		567		762		0		762
Commercial mortgage-backed securities	0		0		0		2		0		2

Equity securities	38		0		38		167		0		167
Total cash collateral for loaned securities(1)	$	3,499	$	0	$	3,499	$	4,213	$	0	$	4,213

__________

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

Securities Pledged

The Company pledges as collateral investment securities it owns to unaffiliated parties through certain transactions, including securities lending, securities sold under agreements to repurchase, collateralized borrowings and postings of collateral with derivative counterparties. The following table sets forth the carrying value of investments pledged to third parties, as of the dates indicated:


	December 31,
	2020		2019
	(in millions)
Fixed maturities(1)	$	19,608	$	15,109
Fixed maturities, trading	67		58
Assets supporting experience-rated contractholder liabilities	29		22
Separate account assets	3,191		2,547
Equity securities	416		543
Other	450		445
Total securities pledged	$	23,761	$	18,724

__________

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

The following table sets forth the carrying amount of the associated liabilities supported by the pledged collateral, as of the dates indicated:


	December 31,
	2020		2019
	(in millions)
Securities sold under agreements to repurchase	$	10,894	$	9,681
Cash collateral for loaned securities	3,499		4,213
Separate account liabilities	3,249		2,624

Total liabilities supported by the pledged collateral	$	17,642	$	16,518

In the normal course of its business activities, the Company accepts collateral that can be sold or repledged. The primary sources of this collateral are securities in customer accounts, securities purchased under agreements to resell and postings of collateral from OTC derivative counterparties. The fair value of this collateral was approximately $8,872 million as of December 31, 2020 (the largest components of which included $252 million of securities and $8,620 million of cash from OTC derivative counterparties) and $7,729 million as of December 31, 2019 (the largest components of which included $1,012 million of securities and $6,717 million of cash from OTC derivative counterparties). A portion of the aforementioned securities, for both periods, had either been sold or repledged.

Assets on Deposit, Held in Trust, and Restricted as to Sale

The following table provides assets on deposit, assets held in trust, and securities restricted as to sale, as of the dates indicated:


	December 31,
	2020		2019
	(in millions)
Assets on deposit with governmental authorities or trustees	$	31	$	30
Assets held in voluntary trusts(1)	539		58
Assets held in trust related to reinsurance and other agreements(2)	16,614		14,897
Securities restricted as to sale(3)	153		36
Total assets on deposit, assets held in trust and securities restricted as to sale	$	17,337	$	15,021

__________

(1)Represents assets held in voluntary trusts established primarily to fund guaranteed dividends to certain policyholders and to fund certain employee benefits.

(2)Represents assets held in trust related to reinsurance agreements excluding reinsurance agreements between wholly-owned subsidiaries. Assets valued at $34.0 billion and $21.7 billion were held in trust related to reinsurance agreements between wholly-owned subsidiaries as of December 31, 2020 and 2019, respectively.

(3)Includes member and activity stock associated with memberships in the Federal Home Loan Banks of New York and Boston.

Variable Interest Entities

12 Months Ended

Dec. 31, 2020

Variable Interest Entity, Measure of Activity [Abstract]

Variable Interest Entities

VARIABLE INTEREST ENTITIES

In the normal course of its activities, the Company enters into relationships with various special-purpose entities and other entities that are deemed to be VIEs. A VIE is an entity that either (1) has equity investors that lack certain essential characteristics of a controlling financial interest (including the ability to control activities of the entity, the obligation to absorb the entity’s expected losses and the right to receive the entity’s expected residual returns) or (2) lacks sufficient equity to finance its own activities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the VIE.

The Company is the primary beneficiary if the Company has (1) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (2) the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. If the Company determines that it is the VIE’s primary beneficiary, it consolidates the VIE.

Consolidated Variable Interest Entities

The Company is the investment manager of certain asset-backed investment vehicles, commonly referred to as CLOs, and certain other vehicles for which the Company earns fee income for investment management services. The Company may sell or syndicate investments through these vehicles, principally as part of the strategic investing activity of the Company’s investment management businesses. Additionally, the Company may invest in securities issued by these vehicles. The Company is also the investment manager of certain investment structures whose beneficial interests are wholly-owned by consolidated subsidiaries.

The Company has analyzed these relationships and determined that for certain CLOs and other investment structures it is the primary beneficiary and consolidates these entities. This analysis includes a review of (1) the Company’s rights and responsibilities as investment manager and (2) variable interests (if any) held by the Company. The assets of these VIEs are restricted and must be used first to settle liabilities of the VIE. The Company is not required to provide, and has not provided, material financial or other support to any of these VIEs.

Additionally, the Company is the primary beneficiary of certain VIEs in which the Company has invested, as part of its investment activities, but for which it is not the investment manager. These include structured investments issued by a VIE that manages yen-denominated investments coupled with cross-currency coupon swap agreements thereby creating synthetic dual currency investments. The Company’s involvement in the structuring of these investments combined with its economic interest indicates that the Company is the primary beneficiary. The Company has not provided material financial support or other support that was not contractually required to these VIEs.

The table below reflects the carrying amount and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported. The liabilities primarily comprise obligations under debt instruments issued by the VIEs. The creditors of these VIEs do not have recourse to the Company in excess of the assets contained within the VIEs.


	Consolidated VIEs for which the Company is the Investment Manager(1)				Other Consolidated VIEs(1)
	December 31,				December 31,
	2020		2019		2020		2019

	(in millions)
Fixed maturities, available-for-sale	$	110	$	104	$	296	$	285
Fixed maturities, held-to-maturity	87		83		882		839
Fixed maturities, trading	160		1,112		0		0
Assets supporting experience-rated contractholder liabilities	0		0		0		4
Equity securities	42		47		0		0
Commercial mortgage and other loans	975		883		0		0
Other invested assets	2,221		2,199		127		89
Cash and cash equivalents	101		166		0		0
Accrued investment income	2		4		4		4
Other assets	594		450		768		689
Total assets of consolidated VIEs	$	4,292	$	5,048	$	2,077	$	1,910
Other liabilities	$	256	$	304	$	2	$	13
Notes issued by consolidated VIEs(2)	305		1,274		0		0
Total liabilities of consolidated VIEs	$	561	$	1,578	$	2	$	13

__________

(1)Total assets of consolidated VIEs reflect $2,538 million and $2,668 million as of December 31, 2020 and 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 December 31, 2020, the maturity of this obligation was within 4 years.

Unconsolidated Variable Interest Entities

The Company has determined that it is not the primary beneficiary of certain VIEs for which it is the investment manager. These VIEs consist primarily of CLOs and investment funds for which the Company has determined that it is not the primary beneficiary as it does not have both (1) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (2) the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. The Company’s maximum exposure to loss resulting from its relationship with unconsolidated VIEs for which it is the investment manager is limited to its investment in the VIEs, which was $935 million and $1,021 million at December 31, 2020 and 2019, respectively. These investments are reflected in “Fixed maturities, available-for-sale,” “Fixed maturities, trading,” “Equity securities” and “Other invested assets.” There are no liabilities associated with these unconsolidated VIEs on the Company’s Consolidated Statements of Financial Position.

In the normal course of its activities, the Company will invest in LPs/LLCs which include hedge funds, private equity funds and real estate-related funds and may or may not be VIEs. The Company’s maximum exposure to loss on these investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company has determined that it is not required to consolidate these entities because either (1) it does not control them or (2) it does not have the obligation to absorb losses of these entities that could be potentially significant to the entities or the right to receive benefits from the entities that could be potentially significant. The Company classifies these investments as “Other invested assets” and its maximum exposure to loss associated with these entities was $12,883 million and $11,157 million as of December 31, 2020 and 2019, respectively.

In addition, in the normal course of its activities, the Company will invest in structured investments including VIEs for which it is not the investment manager. These structured investments typically invest in fixed income investments and are managed by third parties and include asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Company’s maximum exposure to loss on these structured investments, both VIEs and non-VIEs, is limited to the amount of its investment. See Note 3 for details regarding the carrying amounts and classification of these assets. The Company has not provided material financial or other support that was not contractually required to these structures. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not control these entities.

Derivative Instruments

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVES AND HEDGING

Types of Derivative and Hedging Instruments

Interest Rate Contracts

Interest rate swaps, options and futures are used by the Company to reduce risks from changes in interest rates, manage interest rate exposures arising from mismatches between assets and liabilities and to hedge against changes in their values it owns or anticipates acquiring or selling.

Swaps may be attributed to specific assets or liabilities or to a portfolio of assets or liabilities. Under interest rate swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed upon notional principal amount.

The Company also uses interest rate swaptions, caps, and floors to manage interest rate risk. A swaption is an option to enter into a swap with a forward starting effective date. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. In an interest rate cap, the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. Similarly, in an interest rate floor, the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price. Swaptions, caps and floors are included in interest rate options.

In standardized exchange-traded interest rate futures transactions, the Company purchases or sells a specified number of contracts, the values of which are determined by the daily market values of underlying referenced investments. The Company enters into exchange-traded futures with regulated futures commission’s merchants who are members of a trading exchange.

Equity Contracts

Equity options, total return swaps, and futures are used by the Company to manage its exposure to the equity markets which impacts the value of assets and liabilities it owns or anticipates acquiring or selling.

Equity index options are contracts which will settle in cash based on differentials in the underlying indices at the time of exercise and the strike price. The Company uses combinations of purchases and sales of equity index options to hedge the effects of adverse changes in equity indices within a predetermined range.

Total return swaps are contracts whereby the Company agrees with counterparties to exchange, at specified intervals, the difference between the return on an asset (or market index) and London Inter-Bank Offered Rate (“LIBOR”) plus an associated funding spread based on a notional amount. The Company generally uses total return swaps to hedge the effect of adverse changes in equity indices.

In standardized exchange-traded equity futures transactions, the Company purchases or sells a specified number of contracts, the values of which are determined by the daily market values of underlying referenced equity indices. The Company enters into exchange-traded futures with regulated futures commission’s merchants who are members of a trading exchange.

Foreign Exchange Contracts

Currency derivatives, including currency futures, options, forwards and swaps, and foreign currency denominated debts are used by the Company to reduce risks from changes in currency exchange rates with respect to investments denominated in foreign currencies that the Company either holds or intends to acquire or sell, and to hedge the currency risk associated with net investments in foreign operations and anticipated earnings of its foreign operations.

Under currency forwards, the Company agrees with counterparties to deliver a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. As noted above, the Company uses currency forwards to mitigate the impact of changes in currency exchange rates on U.S. dollar-equivalent earnings generated by certain of its non-U.S. businesses, primarily its international insurance and investment operations. The Company executes forward sales of the hedged currency in exchange for U.S. dollars at a specified exchange rate. The maturities of these forwards correspond with the future periods in which the non-U.S. dollar-denominated earnings are expected to be generated.

Under currency swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between one currency and another at an exchange rate and calculated by reference to an agreed principal amount. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party.

Under foreign currency denominated debts, the company uses portion of its foreign currency denominated debt (same functional currency of its foreign subsidiaries) to hedge the risk of change in the net investment in a foreign subsidiary due to changes in exchange rates. These debt obligations reduce the company’s foreign currency exposure from equity investment and act as hedge of the investment. The Company assesses hedge effectiveness of its derivatives based upon the change in forward rates and assesses its foreign currency denominated debts based upon the change in spot rates.

Credit Contracts

The Company writes credit default swaps to gain exposure similar to investment in public fixed maturity cash instruments. With these derivatives the Company sells credit protection on a single name reference, or certain index reference, and in return receives a quarterly premium. This premium or credit spread generally corresponds to the difference between the yield on the referenced name (or an index’s referenced names) public fixed maturity cash instruments and swap rates, at the time the agreement is executed. If there is an event of default by the referenced name or one of the referenced names in the index, as defined by the agreement, then the Company is obligated to pay the referenced amount of the contract to the counterparty and receive in return the referenced defaulted security or similar security (in the case of a credit default index) or pay the referenced amount less the auction recovery rate. See credit derivatives section for further discussion of guarantees. In addition to selling credit protection, the Company purchases credit protection using credit derivatives to hedge specific credit exposures in the Company’s investment portfolio.

Other Contracts

“To Be Announced” (“TBA”) Forward Contracts. The Company uses TBA forward contracts to gain exposure to the investment risk and return of mortgage-backed securities. TBA transactions can help the Company enhance the return on its investment portfolio, and can provide a more liquid and cost-effective method of achieving these goals than purchasing or selling individual mortgage-backed pools. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. Additionally, pursuant to the Company’s mortgage dollar roll program, TBAs or mortgage-backed securities are transferred to counterparties with a corresponding agreement to repurchase them at a future date. These transactions do not qualify as secured borrowings and are accounted for as derivatives.

Loan Commitments. In its mortgage operations, the Company enters into commitments to fund commercial mortgage loans at specified interest rates and other applicable terms within specified periods of time. These commitments are legally binding agreements to extend credit to a counterparty. Loan commitments for loans that will be held for sale are recognized as derivatives and recorded at fair value. The determination of the fair value of loan commitments accounted for as derivatives considers various factors including, among others, terms of the related loan, the intended exit strategy for the loans based upon either securitization valuation models or investor purchase commitments, prevailing interest rates, origination income or expense, and the value of service rights. Loan commitments that relate to the origination of mortgage loans that will be held for investment are not accounted for as derivatives and accordingly are not recognized in the Company’s financial statements. See Note 23 for additional information.

Embedded Derivatives. The Company offers certain products (for example, variable annuities) which may include guaranteed benefit features that are accounted for as embedded derivatives. These embedded derivatives are carried at fair value through “Realized investment gains (losses), net” based on the change in value of the underlying contractual guarantees, which are determined using valuation models. The Company maintains a portfolio of derivative instruments that is intended to offset certain risks related to the above products’ features. The derivatives may include, but are not limited to equity options, equity futures, total return swaps, interest rate swaptions, caps, floors and other instruments.

Synthetic Guarantees. The Company sells synthetic GICs, through both full service and investment-only sales channels, to investment vehicles primarily used by qualified defined contribution pension plans. The synthetic GICs are issued in respect of assets that are owned by the trustees of such plans, who invest the assets according to the contract terms agreed to with the Company. The contracts establish participant balances and credit interest thereon. The participant balances are supported by the underlying assets. In connection with certain participant-initiated withdrawals, the contract guarantees that after all underlying assets are liquidated, any remaining participant balances will be paid by the Company. These contracts are accounted for as derivatives and recorded at fair value.

Primary Risks Managed by Derivatives

The table below provides a summary of the gross notional amount and fair value of derivatives contracts by the primary underlying risks, excluding embedded derivatives and associated reinsurance recoverables. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account the netting effects of master netting agreements and cash collateral. This netting impact results in total derivative assets of $1,906 million and $867 million as of December 31, 2020 and 2019, respectively, and total derivative liabilities of $792 million and $831 million as of December 31, 2020 and 2019, respectively, reflected in the Consolidated Statements of Financial Position.


	December 31, 2020						December 31, 2019
Primary Underlying Risk/ Instrument Type	Gross		Fair Value				Gross		Fair Value
	Notional		Assets		Liabilities		Notional		Assets		Liabilities
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps	$	3,065	$	978	$	(90)	$	3,257	$	628	$	(73)
Interest Rate Forwards	249		0		(8)		205		4		(1)
Foreign Currency
Foreign Currency Forwards	2,577		68		(116)		1,461		22		(57)
Currency/Interest Rate
Foreign Currency Swaps	22,642		878		(1,037)		22,746		1,467		(302)
Total Derivatives Designated as Hedge Accounting Instruments	$	28,533	$	1,924	$	(1,251)	$	27,669	$	2,121	$	(433)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps	$	178,803	$	17,174	$	(13,172)	$	141,162	$	10,249	$	(4,861)
Interest Rate Futures	15,778		99		(5)		17,095		4		(38)
Interest Rate Options	14,593		914		(233)		16,496		339		(238)
Interest Rate Forwards	2,910		25		0		2,218		18		(3)
Foreign Currency
Foreign Currency Forwards	35,478		764		(647)		26,604		208		(214)
Foreign Currency Options	0		0		0		0		0		0
Currency/Interest Rate
Foreign Currency Swaps	13,661		537		(601)		13,874		740		(345)
Credit
Credit Default Swaps	3,360		63		(28)		798		21		0
Equity
Equity Futures	5,668		10		(25)		1,802		0		(3)
Equity Options	36,250		1,731		(1,028)		32,657		679		(765)
Total Return Swaps	22,489		32		(1,277)		18,218		6		(636)
Other
Other(1)	1,262		0		0		1,258		0		0
Synthetic GICs	86,264		0		0		80,009		1		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	$	416,516	$	21,349	$	(17,016)	$	352,191	$	12,265	$	(7,103)
Total Derivatives(2)(3)	$	445,049	$	23,273	$	(18,267)	$	379,860	$	14,386	$	(7,536)

__________

(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 $20,119 million and $14,035 million as of December 31, 2020, and 2019, respectively, primarily included in “Future policy benefits.”

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

As of December 31, 2020, the following amounts were recorded on the Consolidated Statements of Financial Position related to the carrying amount of the hedged assets (liabilities) and cumulative basis adjustments included in the carrying amount for fair value hedges:


	December 31, 2020				December 31, 2019
Balance Sheet Line Item in which Hedged Item is Recorded	Carrying Amount of the Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1)		Carrying Amount of the Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1)

	(in millions)
Fixed maturities, available-for-sale, at fair value	$	402	$	79	$	389	$	64
Commercial mortgage and other loans	$	20	$	2	$	23	$	2
Policyholders’ account balances	$	(1,627)	$	(303)	$	(1,376)	$	(107)
Future policy benefits	$	(1,585)	$	(372)	$	(676)	$	(172)

________

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

Most of the Company’s derivatives do not qualify for hedge accounting for various reasons. For example: (i) derivatives that economically hedge embedded derivatives do not qualify for hedge accounting because changes in the fair value of the embedded derivatives are already recorded in net income; (ii) derivatives that are utilized as macro hedges of the Company’s exposure to various risks typically do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedge accounting rules; and (iii) synthetic GIC, which are product standalone derivatives, do not qualify as hedging instruments under hedge accounting rules.

Offsetting Assets and Liabilities

The following table presents recognized derivative instruments (excluding embedded derivatives and associated reinsurance recoverables), and repurchase and reverse repurchase agreements that are offset in the Consolidated Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Consolidated Statements of Financial Position:


	December 31, 2020
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position		Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives(1)	$	23,144	$	(21,367)	$	1,777	$	(806)	$	971
Securities purchased under agreement to resell	252		0		252		(252)		0
Total Assets	$	23,396	$	(21,367)	$	2,029	$	(1,058)	$	971
Offsetting of Financial Liabilities:
Derivatives(1)	$	18,265	$	(17,475)	$	790	$	(790)	$	0
Securities sold under agreement to repurchase	10,894		0		10,894		(10,432)		462
Total Liabilities	$	29,159	$	(17,475)	$	11,684	$	(11,222)	$	462


	December 31, 2019
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position		Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives(1)	$	14,303	$	(13,519)	$	784	$	(607)	$	177
Securities purchased under agreement to resell	1,012		0		1,012		(1,012)		0
Total Assets	$	15,315	$	(13,519)	$	1,796	$	(1,619)	$	177
Offsetting of Financial Liabilities:
Derivatives(1)	$	7,528	$	(6,705)	$	823	$	(244)	$	579
Securities sold under agreement to repurchase	9,681		0		9,681		(9,681)		0
Total Liabilities	$	17,209	$	(6,705)	$	10,504	$	(9,925)	$	579

__________

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

For information regarding the rights of offset associated with the derivative assets and liabilities in the table above, see “—Counterparty Credit Risk” below. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information on the Company’s accounting policy for securities repurchase and resale agreements, see Note 2.

Cash Flow, Fair Value and Net Investment Hedges

The primary derivative instruments used by the Company in its fair value, cash flow and net investment hedge accounting relationships are interest rate swaps, currency swaps, currency forwards, and foreign currency denominated debts. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit, and equity derivatives in any of its fair value, cash flow or net investment hedge accounting relationships.

The following table provides the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, including the offset of the hedged item in fair value hedge relationships.


	Year Ended December 31, 2020
	Realized Investment Gains (Losses)		Net Investment Income		Other Income (Loss)		Interest Expense		Interest Credited To Policyholders’ Account Balances		Policyholders’ Benefits		AOCI(1)




	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	(17)	$	(8)	$	0	$	0	$	236	$	186	$	0
Currency	0		0		0		0		0		46		0
Total gains (losses) on derivatives designated as hedge instruments	(17)		(8)		0		0		236		232		0
Gains (losses) on the hedged item:
Interest Rate	16		18		0		0		(196)		(155)		0
Currency	0		1		0		0		0		(46)		0
Total gains (losses) on hedged item	16		19		0		0		(196)		(201)		0
Amortization for Gain (Loss) Excluded from Assessment of the Effectiveness

Currency	0		0		0		0		0		(1)		10
Total Amortization for Gain (Loss) Excluded from Assessment of the Effectiveness	0		0		0		0		0		(1)		10
Total gains (losses) on fair value hedges net of hedged item	(1)		11		0		0		40		30		10
Cash flow hedges
Interest Rate	40		1		0		(1)		0		0		7
Currency	5		0		0		0		0		0		(69)
Currency/Interest Rate	99		314		(303)		0		0		0		(938)
Total gains (losses) on cash flow hedges	144		315		(303)		(1)		0		0		(1,000)
Net investment hedges
Currency	(7)		0		126		0		0		0		(128)
Currency/Interest Rate	0		0		0		0		0		0		0
Total gains (losses) on net investment hedges	(7)		0		126		0		0		0		(128)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	5,800		0		0		0		0		0		0
Currency	100		0		(1)		0		0		0		0
Currency/Interest Rate	(188)		0		(4)		0		0		0		0
Credit	(56)		0		0		0		0		0		0
Equity	(5,623)		0		0		0		0		0		0
Other	2		0		0		0		0		0		0
Embedded Derivatives	(4,882)		0		0		0		0		0		0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	(4,847)		0		(5)		0		0		0		0
Total	$	(4,711)	$	326	$	(182)	$	(1)	$	40	$	30	$	(1,118)


	Year Ended December 31, 2019
	Realized Investment Gains (Losses)		Net Investment Income		Other Income (Loss)		Interest Expense		Interest Credited To Policyholders’ Account Balances		Policyholders’ Benefits		AOCI(1)




	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	(14)	$	(7)	$	0	$	0	$	194	$	155	$	0
Currency	0		0		0		0		0		0		0
Total gains (losses) on derivatives designated as hedge instruments	(14)		(7)		0		0		194		155		0
Gains (losses) on the hedged item:
Interest Rate	11		20		0		0		(186)		(140)		0
Currency	1		3		0		0		0		0		0
Total gains (losses) on hedged item	12		23		0		0		(186)		(140)		0
Total gains (losses) on fair value hedges net of hedged item	(2)		16		0		0		8		15		0
Cash flow hedges
Interest Rate	58		0		0		0		0		0		(25)
Currency	6		0		0		0		0		0		(62)
Currency/Interest Rate	130		282		(97)		0		0		0		99
Total gains (losses) on cash flow hedges	194		282		(97)		0		0		0		12
Net investment hedges
Currency	0		0		0		0		0		0		4
Currency/Interest Rate	0		0		0		0		0		0		0
Total gains (losses) on net investment hedges	0		0		0		0		0		0		4
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	4,533		0		0		0		0		0		0
Currency	14		0		5		0		0		0		0
Currency/Interest Rate	394		0		0		0		0		0		0
Credit	123		0		0		0		0		0		0
Equity	(4,057)		0		0		0		0		0		0
Other	0		0		0		0		0		0		0
Embedded Derivatives	(2,705)		0		0		0		0		0		0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	(1,698)		0		5		0		0		0		0
Total	$	(1,506)	$	298	$	(92)	$	0	$	8	$	15	$	16


	Year Ended December 31, 2018
	Realized Investment Gains (Losses)		Net Investment Income		Other Income (Loss)		Interest Expense		Interest Credited To Policyholders’ Account Balances		Policyholders’ Benefits		AOCI(1)




	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	20	$	(9)	$	0	$	0	$	(65)	$	35	$	0
Currency	6		0		0		0		0		0		0
Total gains (losses) on derivatives designated as hedge instruments	26		(9)		0		0		(65)		35		0
Gains (losses) on the hedged item:
Interest Rate	(27)		31		0		0		79		(31)		0
Currency	(5)		3		0		0		0		0		0
Total gains (losses) on hedged item	(32)		34		0		0		79		(31)		0
Total gains (losses) on fair value hedges net of hedged item	(6)		25		0		0		14		4		0
Cash flow hedges
Interest Rate	2		0		0		(1)		0		0		32
Currency	7		0		0		0		0		0		20
Currency/Interest Rate	69		217		257		0		0		0		798
Total gains (losses) on cash flow hedges	78		217		257		(1)		0		0		850
Net investment hedges
Currency	0		0		0		0		0		0		6
Currency/Interest Rate	0		0		0		0		0		0		0
Total gains (losses) on net investment hedges	0		0		0		0		0		0		6
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(1,226)		0		0		0		0		0		0
Currency	342		0		(1)		0		0		0		0
Currency/Interest Rate	364		0		3		0		0		0		0
Credit	(55)		0		0		0		0		0		0
Equity	1,121		0		0		0		0		0		0
Other	0		0		0		0		0		0		0
Embedded Derivatives	966		0		0		0		0		0		0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	1,512		0		2		0		0		0		0
Total	$	1,584	$	242	$	259	$	(1)	$	14	$	4	$	856

__________

(1)Net change in AOCI, excluding changes related to net investment hedges using non-derivative instruments of $(21) million for year ended December 31, 2020 and $0 million for both year ended December 31, 2019 and 2018.

Presented below is a rollforward of current period cash flow hedges in AOCI before taxes:


	(in millions)
Balance, December 31, 2017	$	(39)
Amount recorded in AOCI
Interest Rate	33
Currency	27
Currency/Interest Rate	1,341
Total amount recorded in AOCI	1,401
Amount reclassified from AOCI to income
Interest Rate	(1)
Currency	(7)
Currency/Interest Rate	(543)
Total amount reclassified from AOCI to income	(551)
Balance, December 31, 2018	$	811
Cumulative effect adjustment from the adoption of ASU 2017-12(1)	9
Amount recorded in AOCI
Interest Rate	33
Currency	(56)
Currency/Interest Rate	414
Total amount recorded in AOCI	391
Amount reclassified from AOCI to income
Interest Rate	(58)
Currency	(6)
Currency/Interest Rate	(315)
Total amount reclassified from AOCI to income	(379)
Balance, December 31, 2019	$	832
Amount recorded in AOCI
Interest Rate	47
Currency	(64)
Currency/Interest Rate	(828)
Total amount recorded in AOCI	(845)
Amount reclassified from AOCI to income
Interest Rate	(40)
Currency	(5)
Currency/Interest Rate	(110)
Total amount reclassified from AOCI to income	(155)
Balance, December 31, 2020	$	(168)

_________

(1)See Note 2 for details.

The changes in fair value of cash flow hedges are deferred in AOCI and are included in “Net unrealized investment gains (losses)” in the Consolidated Statements of Comprehensive Income; these amounts are then reclassified to earnings when the hedged item affects earnings. Using December 31, 2020 values, it is estimated that a pre-tax gain of approximately $230 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending December 31, 2021.

The exposures the Company is hedging with these qualifying cash flow hedges include the variability of future cash flows from forecasted transactions denominated in foreign currencies, the purchases of invested assets, and the receipt or payment of variable interest on existing financial instruments. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is 10 years.

There were no material amounts reclassified from AOCI into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging. In addition, there were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.

For net investment hedges, in addition to derivatives, the Company uses foreign currency denominated debt to hedge the risk of change in the net investment in a foreign subsidiary due to changes in exchange rates. For effective net investment hedges, the amounts, before applicable taxes, recorded in the cumulative translation adjustment within AOCI were $(149) million for the year ended December 31, 2020, $4 million for the year ended December 31, 2019, and $6 million for the year ended December 31 2018.

Credit Derivatives

The following table provides a summary of the notional and fair value of written credit protection. The Company’s maximum amount at risk under these credit derivatives, assuming the value of the underlying referenced securities become worthless, is equal to the notional amounts. These credit derivatives have maturities of less than 27 years for index references.


	December 31, 2020
	NAIC Rating Designation of Underlying Credit Obligation(1)
	NAIC 1				NAIC 2				NAIC 3				NAIC 4				NAIC 5				NAIC 6				Total
	Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value
	(in millions)
Single name reference(2)	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Index reference(2)	50		0		0		0		3,003		63		0		0		0		0		0		0		3,053		63
Total	$	50	$	0	$	0	$	0	$	3,003	$	63	$	0	$	0	$	0	$	0	$	0	$	0	$	3,053	$	63


	December 31, 2019
	NAIC Rating Designation of Underlying Credit Obligation(1)
	NAIC 1				NAIC 2				NAIC 3				NAIC 4				NAIC 5				NAIC 6				Total
	Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value
	(in millions)
Single name reference(2)	$	36	$	0	$	60	$	1	$	4	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	100	$	1
Index reference(2)	50		0		0		0		570		13		0		0		0		0		72		7		692		20
Total	$	86	$	0	$	60	$	1	$	574	$	13	$	0	$	0	$	0	$	0	$	72	$	7	$	792	$	21

_________

(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 credit default swaps 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.

In addition to writing credit protection, the Company has purchased credit protection using credit derivatives in order to hedge specific credit exposures in the Company’s investment portfolio. As of December 31, 2020 and 2019, the Company had $307 million and $6 million of outstanding notional amounts, reported at fair value as a liability of $28 million and $0 million, respectively.

Counterparty Credit Risk

The Company is exposed to losses in the event of non-performance by counterparties to financial derivative transactions with a positive fair value. The Company manages credit risk by: (i) entering into derivative transactions with highly rated major international financial institutions and other creditworthy counterparties governed by master netting agreements, as applicable; (ii) trading through central clearing and OTC parties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.

Substantially all of the Company’s derivative agreements have zero thresholds which require daily full collateralization by the party in a liability position. In addition, certain of the Company’s derivative agreements contain credit-risk related contingent features; if the credit rating of one of the parties to the derivative agreement is to fall below a certain level, the party with positive fair value could request termination at the then fair value or demand immediate full collateralization from the party whose credit rating fell and is in a net liability position.

As of December 31, 2020, there were no net liability derivative positions with counterparties with credit risk-related contingent features. All derivatives have been appropriately collateralized by the Company or the counterparty in accordance with the terms of the derivative agreements.

Fair Value of Assets and Liabilities

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value of Assets and Liabilities

FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Measurement—Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1—Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. The Company’s Level 1 assets and liabilities primarily include certain cash equivalents and short-term investments, equity securities and derivative contracts that trade on an active exchange market.

Level 2—Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs. The Company’s Level 2 assets and liabilities include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed securities, etc.), certain equity securities (mutual funds, which do not trade in active markets because they are not publicly available), certain commercial mortgage loans, short-term investments and certain cash equivalents (primarily commercial paper), and certain OTC derivatives.

Level 3—Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value. The Company’s Level 3 assets and liabilities primarily include: certain private fixed maturities and equity securities, certain manually priced public equity securities and fixed maturities, certain highly structured OTC derivative contracts, certain consolidated real estate funds for which the Company is the general partner and embedded derivatives resulting from certain products with guaranteed benefits.

Assets and Liabilities by Hierarchy Level—The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated:


	As of December 31, 2020
	Level 1		Level 2		Level 3		Netting(1)		Total
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	40,298	$	150	$		$	40,448
Obligations of U.S. states and their political subdivisions	0		12,807		4				12,811
Foreign government bonds	0		110,233		11				110,244
U.S. corporate public securities	0		113,486		69				113,555
U.S. corporate private securities(2)	0		38,689		2,248				40,937
Foreign corporate public securities	0		29,384		153				29,537
Foreign corporate private securities	0		28,727		2,865				31,592
Asset-backed securities(3)	0		14,068		523				14,591
Commercial mortgage-backed securities	0		16,294		9				16,303
Residential mortgage-backed securities	0		2,876		11				2,887
Subtotal	0		406,862		6,043				412,905
Assets supporting experience-rated contractholder liabilities:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	0		212		0				212
Obligations of U.S. states and their political subdivisions	0		231		0				231
Foreign government bonds	0		926		19				945
Corporate securities	0		14,990		482				15,472
Asset-backed securities(3)	0		1,583		114				1,697
Commercial mortgage-backed securities	0		1,839		0				1,839
Residential mortgage-backed securities	0		1,018		0				1,018
Equity securities	1,784		259		0				2,043
All other(4)	50		549		20				619
Subtotal	1,834		21,607		635				24,076
Fixed maturities, trading	0		3,671		243				3,914
Equity securities	6,207		1,131		660				7,998
Commercial mortgage and other loans	0		1,092		0				1,092
Other invested assets(5)	227		23,045		366		(21,367)		2,271
Short-term investments	405		5,728		177				6,310
Cash equivalents	1,476		4,005		1				5,482
Other assets	0		0		268				268
Separate account assets(6)(7)	51,826		250,623		1,821				304,270
Total assets	$	61,975	$	717,764	$	10,214	$	(21,367)	$	768,586
Future policy benefits(8)	$	0	$	0	$	18,879	$		$	18,879
Policyholders’ account balances	0		0		1,914				1,914
Other liabilities	32		17,828		0		(17,475)		385
Notes issued by consolidated VIEs	0		0		0				0
Total liabilities	$	32	$	17,828	$	20,793	$	(17,475)	$	21,178


	As of December 31, 2019
	Level 1		Level 2		Level 3		Netting(1)		Total
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	35,554	$	105	$		$	35,659
Obligations of U.S. states and their political subdivisions	0		11,493		4				11,497
Foreign government bonds	0		119,032		22				119,054
U.S. corporate public securities	0		97,959		380				98,339
U.S. corporate private securities(2)	0		34,749		1,784				36,533
Foreign corporate public securities	0		29,756		69				29,825
Foreign corporate private securities	0		27,237		1,003				28,240
Asset-backed securities(3)	0		12,238		936				13,174
Commercial mortgage-backed securities	0		15,574		0				15,574
Residential mortgage-backed securities	0		3,189		12				3,201
Subtotal	0		386,781		4,315				391,096
Assets supporting experience-rated contractholder liabilities:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	0		185		0				185
Obligations of U.S. states and their political subdivisions	0		212		0				212
Foreign government bonds	0		790		24				814
Corporate securities	0		12,966		637				13,603
Asset-backed securities(3)	0		1,593		69				1,662
Commercial mortgage-backed securities	0		1,896		0				1,896
Residential mortgage-backed securities	0		1,158		0				1,158
Equity securities	1,505		285		0				1,790
All other(4)	0		261		0				261
Subtotal	1,505		19,346		730				21,581
Fixed maturities, trading	0		3,597		287				3,884
Equity securities	5,813		939		633				7,385
Commercial mortgage and other loans	0		228		0				228
Other invested assets(5)	6		14,379		567		(13,519)		1,433
Short-term investments	1,806		1,975		155				3,936
Cash equivalents	2,079		6,796		131				9,006
Other assets	0		0		113				113
Separate account assets(6)(7)	46,574		240,433		1,717				288,724
Total assets	$	57,783	$	674,474	$	8,648	$	(13,519)	$	727,386
Future policy benefits(8)	$	0	$	0	$	12,831			$	12,831
Policyholders’ account balances	0		0		1,316				1,316
Other liabilities	41		7,495		105		(6,705)		936
Notes issued by consolidated VIEs	0		0		800				800
Total liabilities	$	41	$	7,495	$	15,052	$	(6,705)	$	15,883

__________

(1)“Netting” amounts represent cash collateral of $3,892 million and $6,814 million as of December 31, 2020 and 2019, respectively.

(2)Excludes notes with fair value of $6,100 million (carrying amount of $5,966 million) and $4,757 million (carrying amount of $4,751 million) as of December 31, 2020 and 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. At December 31, 2020 and 2019, the fair values of such investments were $4,136 million and $4,213 million respectively.

(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. At December 31, 2020 and 2019, the fair value of such investments were $23,007 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 Consolidated Statements of Financial Position.

(8)As of December 31, 2020, the net embedded derivative liability position of $18.9 billion includes $0.5 billion of embedded derivatives in an asset position and $19.4 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.

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below.

Fixed Maturity Securities—The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Prices for each security are generally sourced from multiple pricing vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company ultimately uses the price from the pricing service highest in the vendor hierarchy based on the respective asset type. The pricing hierarchy is updated for new financial products and recent pricing experience with various vendors. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. Typical inputs used by these pricing services include but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, and/or estimated cash flow, prepayment speeds and default rates. If the pricing information received from third-party pricing services is deemed not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service or classify the securities as Level 3. If the pricing service updates the price to be more consistent with the presented market observations, the security remains within Level 2.

Internally-developed valuations or indicative broker quotes are also used to determine fair value in circumstances where vendor pricing is not available, or where the Company ultimately concludes that pricing information received from the independent pricing services is not reflective of market activity. If the Company concludes the values from both pricing services and brokers are not reflective of market activity, it may override the information with an internally-developed valuation. As of December 31, 2020 and 2019, overrides on a net basis were not material. Pricing service overrides, internally-developed valuations and indicative broker quotes are generally included in Level 3 in the fair value hierarchy.

The Company conducts several specific price monitoring activities. Daily analyses identify price changes over predetermined thresholds defined at the financial instrument level. Various pricing integrity reports are reviewed on a daily and monthly basis to determine if pricing is reflective of market activity or if it would warrant any adjustments. Other procedures performed include, but are not limited to, reviews of third-party pricing services methodologies, reviews of pricing trends and back testing.

The fair values of private fixed maturities, which are originated by internal private asset managers, are primarily determined using discounted cash flow models. These models primarily use observable inputs that include Treasury or similar base rates plus estimated credit spreads to value each security. The credit spreads are obtained through a survey of private market intermediaries who are active in both primary and secondary transactions, and consider, among other factors, the credit quality and the reduced liquidity associated with private placements. Internal adjustments are made to reflect variation in observed sector spreads. Since most private placements are valued using standard market observable inputs and inputs derived from, or corroborated by, market observable data including, but not limited to observed prices and spreads for similar publicly-traded issues, they have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model may incorporate significant unobservable inputs, which reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the price of a security, a Level 3 classification is made.

Assets Supporting Experience-Rated Contractholder Liabilities—Assets supporting experience-rated contractholder liabilities consist primarily of fixed maturity securities, equity securities and derivatives whose fair values are determined consistent with similar instruments described above under “Fixed Maturity Securities” and below under “Equity Securities” and “Derivative Instruments.”

Equity Securities—Equity securities consist principally of investments in common and preferred stock of publicly-traded companies, perpetual preferred stock, privately-traded securities, as well as mutual fund shares. The fair values of most publicly-traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for most privately traded equity securities are determined using discounted cash flow, earnings multiple and other valuation models that require a substantial level of judgment around inputs and therefore are classified within Level 3. The fair values of mutual fund shares that transact regularly (but do not trade in active markets because they are not publicly available) are based on transaction prices of identical fund shares and are classified within Level 2 in the fair value hierarchy. The fair values of perpetual preferred stock are based on inputs obtained from independent pricing services that are primarily based on indicative broker quotes. As a result, the fair values of perpetual preferred stock are classified as Level 3.

Commercial Mortgage and Other Loans—The fair value of loans held and accounted for using the fair value option is determined utilizing pricing indicators from the whole loan market, where investors are committed to purchase these loans at a predetermined price, which is considered the principal exit market for these loans. The Company evaluates the valuation inputs used for these assets, including the existence of predetermined exit prices, the terms of the loans, prevailing interest rates and credit risk, and deems the primary pricing inputs are Level 2 inputs in the fair value hierarchy.

Other Invested Assets—Other invested assets primarily include investments in LPs/LLCs, derivatives and certain limited partnerships which are consolidated because the Company is either deemed to exercise control or considered the primary beneficiary of a variable interest entity. These entities are primarily investment companies and follow specialized industry accounting whereby their assets are carried at fair value. The investments held by these entities include various feeder fund investments in underlying master funds (whose underlying holdings generally include public fixed maturities, equity securities and mutual funds), as well as wholly-owned real estate held within other investment funds. For the unconsolidated fund investments, the fair value is primarily determined by the fund managers and is measured at NAV as a practical expedient.

Other Assets—Other assets reflected in Level 3 primarily include reinsurance recoverables which are carried at fair value and relate to the reinsurance of the Company’s living benefit guarantees on certain variable annuity contracts. The methods and assumptions used to estimate the fair value are consistent with those described below under “Future Policy Benefits.”

Derivative Instruments—Derivatives are recorded at fair value either as assets, within “Assets supporting experience-rated contractholder liabilities,” or “Other invested assets, at fair value,” or as liabilities, within “Other liabilities,” except for embedded derivatives which are recorded with the associated host contract. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, commodity prices, credit spreads, market volatility, expected returns, NPR, liquidity and other factors. For derivative positions included within Level 3 of the fair value hierarchy, liquidity valuation adjustments are made to reflect the cost of exiting significant risk positions, and consider the bid-ask spread, maturity, complexity and other specific attributes of the underlying derivative position.

The Company’s exchange-traded futures and options include Treasury futures, Eurodollar futures, commodity futures, Eurodollar options and commodity options. Exchange-traded futures and options are valued using quoted prices in active markets and are classified within Level 1 in the fair value hierarchy.

The majority of the Company’s derivative positions are traded in the OTC derivative market and are classified within Level 2 in the fair value hierarchy. OTC derivatives classified within Level 2 are valued using models that utilize actively quoted or observable market input values from external market data providers, third-party pricing vendors and/or recent trading activity. The Company’s policy is to use mid-market pricing in determining its best estimate of fair value. The fair values of most OTC derivatives, including interest rate and cross-currency swaps, currency forward contracts, commodity swaps, commodity forward contracts, single name credit default swaps, loan commitments held for sale and TBA forward contracts on highly rated mortgage-backed securities issued by U.S. government sponsored entities are determined using discounted cash flow models. The fair values of European style option contracts are determined using Black-Scholes option pricing models. These models’ key inputs include the contractual terms of the respective contract, along with significant observable inputs, including interest rates, currency rates, credit spreads, equity prices, index dividend yields, NPR, volatility and other factors.

The Company’s cleared interest rate swaps and credit derivatives linked to an index are valued using models that utilize actively quoted or observable market inputs, including the secured overnight financing rate (“SOFR”), obtained from external market data providers, third-party pricing vendors and/or recent trading activity. These derivatives are classified as Level 2 in the fair value hierarchy.

The majority of the Company’s derivative agreements are with highly rated major international financial institutions. To reflect the market’s perception of its own and the counterparty’s NPR, the Company incorporates additional spreads over LIBOR into the discount rate used in determining the fair value of OTC derivative assets and liabilities that are not otherwise collateralized.

Derivatives classified as Level 3 include look-back equity options and other structured products. These derivatives are valued based upon models, such as Monte Carlo simulation models and other techniques that utilize significant unobservable inputs. Level 3 methodologies are validated through periodic comparison of the Company’s fair values to external broker-dealer values.

Cash Equivalents and Short-Term Investments—Cash equivalents and short-term investments include money market instruments, commercial paper and other highly liquid debt instruments. Certain money market instruments are valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The remaining instruments in this category are generally fair valued based on market observable inputs and these investments have primarily been classified within Level 2.

Separate Account Assets—Separate account assets include mutual funds, fixed maturity securities, treasuries, equity securities, real estate and commercial mortgage loans for which values are determined consistent with similar instruments described above under “Fixed Maturity Securities,” “Equity Securities” and “Commercial Mortgage and Other Loans.”

Future Policy Benefits—The liability for future policy benefits is related to guarantees primarily associated with the living benefit features of certain variable annuity contracts offered by the Company’s Individual Annuities segment, including guaranteed minimum accumulation benefits (“GMAB”), guaranteed withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”), accounted for as embedded derivatives. The fair values of these liabilities are calculated as the present value of future expected benefit payments to customers less the present value of future expected rider fees attributable to the embedded derivative feature. This methodology could result in either a liability or asset balance, given changing capital market conditions and various actuarial assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally-developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The determination of these risk premiums requires the use of management’s judgment.

The significant inputs to the valuation models for these embedded derivatives include capital market assumptions, such as interest rate levels and volatility assumptions, the Company’s market-perceived NPR, as well as actuarially determined assumptions, including contractholder behavior, such as lapse rates, benefit utilization rates, withdrawal rates, and mortality rates. Since many of these assumptions are unobservable and are considered to be significant inputs to the liability valuation, the liability included in future policy benefits has been reflected within Level 3 in the fair value hierarchy.

Capital market inputs and actual policyholders’ account values are updated each quarter based on capital market conditions as of the end of the quarter, including interest rates, equity markets and volatility. In the risk neutral valuation, the initial swap curve drives the total return used to grow the policyholders’ account values. The Company’s discount rate assumption is based on the LIBOR swap curve adjusted for an additional spread relative to LIBOR to reflect NPR.

Actuarial assumptions, including contractholder behavior and mortality, are reviewed at least annually, and updated based upon emerging experience, future expectations and other data, including any observable market data. These assumptions are generally updated annually unless a material change that the Company feels is indicative of a long-term trend is observed in an interim period.

Policyholders’ Account Balances—The liability for policyholders’ account balances is related to certain embedded derivative instruments associated with certain universal life and annuity products that provide the policyholders with the index-linked interest credited over contract specified term periods. The fair values of these liabilities are determined using discounted cash flow models which include capital market assumptions such as interest rates and equity index volatility assumptions, the Company’s market-perceived NPR and actuarially determined assumptions for mortality, lapses and projected hedge costs.

As there is no observable active market for these liabilities, the fair value is determined as the present value of account balances paid to policyholders in excess of contractually guaranteed minimums using option pricing techniques for index term periods that contain deposits as of the valuation date, and the expected option cost for future index term periods, where the terms of index crediting rates have not yet been declared by the Company. Premiums for risks inherent in valuation techniques,

inputs, and the general uncertainty around the timing and amount of future cash flows are also incorporated in the fair value of these liabilities. Since the valuation of these liabilities require the use of management’s judgement to determine these risk premiums and the use of unobservable inputs, these liabilities are reflected within Level 3 in the fair value hierarchy.

Capital market inputs, including interest rates and equity markets volatility, and actual policyholders’ account values are updated each quarter. Actuarial assumptions are reviewed at least annually and updated based upon emerging experience, future expectations and other data, including any observable market data. Aside from these annual updates, assumptions are generally updated only if a material change is observed in an interim period that the Company believes is indicative of a long-term trend.

Other Liabilities—Other liabilities include certain derivative instruments and the contingent consideration liability associated with the acquisition of Assurance IQ. The fair values of derivative instruments are primarily determined consistent with those described above under “Derivative Instruments.” For the contingent consideration liability, see Note 1 for additional information.

Notes issued by Consolidated VIEs—These notes are based on the fair values of corresponding bank loan collateral. Since the notes are valued based on reference collateral, they are classified as Level 3. See Note 4 and “Fair Value Option” below for additional information.

Quantitative Information Regarding Internally-Priced Level 3 Assets and Liabilities—The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities:

As of December 31, 2020

Fair Value

Valuation
Techniques

Unobservable Inputs

Minimum

Maximum

Weighted
Average

Impact of
Increase in
Input on
Fair
Value(1)

(in millions)

Assets:

Corporate securities(2)(3)

$

3,697

Discounted cash flow(5)

Discount rate

0.40%

25%

4.28%

Decrease

Market comparables

EBITDA multiples(4)

7.0X

15.0X

9.0X

Increase

Liquidation

Liquidation value

12.13%

15.00%

13.02%

Increase

Equity securities

$

195

Discounted cash flow(5)

Discount rate

0.5%

20%

Decrease

Market comparables

EBITDA multiples(4)

1X

8.8X

3.3X

Increase

Net Asset Value

Share price

$1

$1,414

$495

Increase

Separate account assets-commercial mortgage loans(6)

$

775

Discounted cash flow

Spread

1.60%

2.98%

1.80%

Decrease

Liabilities:

Future policy benefits(7)

$

18,879

Discounted cash flow

Lapse rate(9)

1%

20%

Decrease

Spread over LIBOR(10)

0.06%

1.17%

Decrease

Utilization rate(11)

39%

96%

Increase

Withdrawal rate

See table footnote (12) below.

Mortality rate(13)

0%

15%

Decrease

Equity volatility curve

18%

26%

Increase

Policyholders’ account balances(8)

$

1,914

Discounted
cash flow

Lapse rate(9)

1%

42%

Decrease

Spread over LIBOR(10)

0.06%

1.17%

Decrease

Mortality rate(13)

0%

24%

Decrease

Equity volatility curve

6%

42%

Increase

As of December 31, 2019

Fair Value

Valuation
Techniques

Unobservable Inputs

Minimum

Maximum

Weighted
Average

Impact of
Increase in
Input on
Fair
Value(1)

(in millions)

Assets:

Corporate securities(2)(3)

$

1,424

Discounted cash flow(5)

Discount rate

0.49%

20%

7.41%

Decrease

Market comparables

EBITDA multiples(4)

5.7X

9.2X

7.3X

Increase

Liquidation

Liquidation value

14.25%

83.61%

59.47%

Increase

Equity securities

$

210

Discounted cash flow(5)

Discount rate

10%

30%

Decrease

Market comparables

EBITDA multiples(4)

1X

10.1X

5.4X

Increase

Net Asset Value

Share price

$5

$1,353

$451

Increase

Separate account assets-commercial mortgage loans(6)

$

796

Discounted cash flow

Spread

1.11%

1.85%

1.26%

Decrease

Liabilities:

Future policy benefits(7)

$

12,831

Discounted cash flow

Lapse rate(9)

1%

18%

Decrease

Spread over LIBOR(10)

0.10%

1.23%

Decrease

Utilization rate(11)

43%

97%

Increase

Withdrawal rate

See table footnote (12) below.

Mortality rate(13)

0%

15%

Decrease

Equity volatility curve

13%

23%

Increase

Policyholders’ account balances(8)

$

1,316

Discounted
cash flow

Lapse rate(9)

1%

42%

Decrease

Spread over LIBOR(10)

0.10%

1.23%

Decrease

Mortality rate(13)

0%

24%

Decrease

Equity volatility curve

6%

25%

Increase

__________

(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)Excludes notes which have been offset with the associated payables under a netting agreement.

(4)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.

(5)Includes certain investments where enterprise value is less than the amount needed to support senior and subordinated claims. 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.

(6)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 Consolidated Statements of Financial Position. As a result, changes in value associated with these investments are not reflected in the Company’s Consolidated Statements of Operations.

(7)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 a weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(8)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 a weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(9)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.

(10)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.

(11)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.

(12)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 December 31, 2020 and 2019, the minimum withdrawal rate assumption is 76% and 78% respectively. As of both December 31, 2020 and 2019, 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%.

(13)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.

Interrelationships Between Unobservable Inputs—In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another or multiple inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows:

Corporate Securities—The rate used to discount future cash flows reflects current risk-free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term, and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors.

Future Policy Benefits—The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is generally highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other contractholder behavior assumptions. To the extent more efficient contractholder behavior results in greater in-the-moneyness at the contract level, lapse rates may decline for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, lapse rates may decline as contracts become more in-the-money.

Changes in Level 3 Assets and Liabilities––The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods. When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate.


	Year Ended December 31, 2020
	Fair Value, beginning of period		Total realized and unrealized gains (losses)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:
U.S. government	$	105	$	0	$	45	$	0	$	0	$	0	$	0	$	0	$	0	$	150	$	0
U.S. states	4		0		0		0		0		0		0		0		0		4		0
Foreign government	22		0		0		0		0		0		0		1		(12)		11		0
Corporate securities(3)	3,236		274		1,144		(127)		0		(1,021)		(16)		2,178		(333)		5,335		203
Structured securities(4)	948		(8)		685		(18)		0		(547)		156		178		(851)		543		(11)
Assets supporting experience-rated contractholder liabilities:
Foreign government	24		0		0		0		0		(5)		0		0		0		19		0
Corporate securities(3)	637		(17)		6		(9)		0		(182)		(19)		99		(33)		482		(25)
Structured securities(4)	69		(1)		191		0		0		(33)		0		1		(113)		114		3
Equity securities	0		0		0		0		0		0		0		0		0		0		0
All other activity	0		0		134		0		0		(5)		(2)		0		(107)		20		0
Other assets:
Fixed maturities, trading	287		(24)		33		(33)		0		0		9		19		(48)		243		(24)
Equity securities	633		14		59		(50)		0		(6)		11		0		(1)		660		11
Other invested assets	567		7		209		0		4		(5)		(415)		8		(9)		366		7
Short-term investments	155		1		327		0		0		(115)		(48)		0		(143)		177		(1)
Cash equivalents	131		0		0		0		0		0		(130)		0		0		1		0
Other assets	113		87		69		0		0		(1)		0		0		0		268		88
Separate account assets(5)	1,717		143		242		(71)		0		(84)		0		43		(169)		1,821		157
Liabilities:
Future policy benefits	(12,831)		(4,837)		0		0		(1,304)		0		93		0		0		(18,879)		(5,263)
Policyholders’ account balances(6)	(1,316)		(228)		0		0		(370)		0		0		0		0		(1,914)		(155)
Other liabilities	(105)		105		0		0		0		0		0		0		0		0		105
Notes issued by consolidated VIEs	(800)		25		0		0		0		0		775		0		0		0		25


	Year Ended December 31, 2020
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)		Net investment income		Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)(7)
	(in millions)
Fixed maturities, available-for-sale	$	(111)	$	0	$	0	$	368	$	9	$	(139)	$	0	$	0	$	331
Assets supporting experience-rated contractholder liabilities	0		(22)		0		0		4		0		(22)		0		0
Other assets:
Fixed maturities, trading	0		(25)		0		0		1		0		(24)		0		0
Equity securities	0		14		0		0		0		0		11		0		0
Other invested assets	0		7		0		0		0		0		7		0		0
Short-term investments	1		0		0		0		0		(1)		0		0		0
Cash equivalents	0		0		0		0		0		0		0		0		0
Other assets	87		0		0		0		0		88		0		0		0
Separate account assets(5)	0		0		143		0		0		0		0		157		0
Liabilities:
Future policy benefits	(4,837)		0		0		0		0		(5,263)		0		0		0
Policyholders’ account balances	(228)		0		0		0		0		(155)		0		0		0
Other liabilities	0		105		0		0		0		0		105		0		0
Notes issued by consolidated VIEs	0		25		0		0		0		0		25		0		0


	Year Ended December 31, 2019
	Fair Value, beginning of period		Total realized and unrealized gains (losses)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:
U.S. government	$	81	$	0	$	24	$	0	$	0	$	0	$	0	$	0	$	0	$	105	$	0
U.S. states	5		0		0		0		0		(1)		0		0		0		4		0
Foreign government	125		0		0		0		0		0		(1)		10		(112)		22		(2)
Corporate securities(3)	2,685		(3)		1,462		(47)		0		(1,137)		10		353		(87)		3,236		(96)
Structured securities(4)	1,339		40		952		(67)		0		(507)		(4)		755		(1,560)		948		0
Assets supporting experience-rated contractholder liabilities:
Foreign government	225		0		0		0		0		(5)		(196)		0		0		24		0
Corporate securities(3)	444		4		146		0		0		(189)		196		46		(10)		637		(6)
Structured securities(4)	149		0		29		0		0		(35)		0		0		(74)		69		0
Equity securities	1		1		0		(2)		0		0		0		0		0		0		1
All other activity	0		0		8		0		0		(8)		0		0		0		0		0
Other assets:
Fixed maturities, trading	206		(26)		105		(31)		0		0		(7)		41		(1)		287		(27)
Equity securities	671		42		79		(52)		0		(85)		1		1		(24)		633		34
Other invested assets	263		11		341		0		0		(42)		(6)		0		0		567		(1)
Short-term investments	89		0		597		0		0		(526)		(5)		0		0		155		0
Cash equivalents	77		0		131		0		0		(77)		0		0		0		131		0
Other assets	25		44		44		0		0		0		0		0		0		113		44
Separate account assets(5)	1,534		184		346		(111)		0		(144)		0		55		(147)		1,717		170
Liabilities:
Future policy benefits	(8,926)		(2,685)		0		0		(1,221)		0		1		0		0		(12,831)		(2,999)
Policyholders’ account balances(6)	(56)		(933)		0		0		(324)		0		(3)		0		0		(1,316)		(917)
Other liabilities	0		(5)		0		0		(100)		0		0		0		0		(105)		(5)
Notes issued by consolidated VIEs	(595)		15		0		0		(858)		638		0		0		0		(800)		15


	Year Ended December 31, 2019
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)		Net investment income		Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances
	(in millions)
Fixed maturities, available-for-sale	$	(67)	$	0	$	0	$	86	$	18	$	(98)	$	0	$	0
Assets supporting experience-rated contractholder liabilities	0		(4)		0		0		9		0		(5)		0
Other assets:
Fixed maturities, trading	0		(27)		0		0		1		0		(27)		0
Equity securities	0		42		0		0		0		0		34		0
Other invested assets	(1)		12		0		0		0		(1)		0		0
Short-term investments	0		0		0		0		0		0		0		0
Cash equivalents	0		0		0		0		0		0		0		0
Other assets	44		0		0		0		0		44		0		0
Separate account assets(5)	0		0		180		0		4		0		0		170
Liabilities:
Future policy benefits	(2,685)		0		0		0		0		(2,999)		0		0
Policyholders’ account balances	(933)		0		0		0		0		(917)		0		0
Other liabilities	0		(5)		0		0		0		0		(5)		0
Notes issued by consolidated VIEs	15		0		0		0		0		15		0		0

The following tables summarize the portion of changes in fair values of Level 3 assets and liabilities included in earnings and OCI for the year ended December 31, 2018, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held as of December 31, 2018:


	Year Ended December 31, 2018
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)		Net investment income		Realized investment gains (losses), net		Other income (loss)		Interest credited to policyholders’ account balances
	(in millions)
Fixed maturities, available-for-sale	$	(29)	$	0	$	0	$	(141)	$	17	$	(60)	$	0	$	0
Assets supporting experience-rated contractholder liabilities	0		(39)		0		0		8		0		(38)		0
Other assets:
Fixed maturities, trading	0		5		0		0		1		0		8		0
Equity securities	0		(6)		0		0		0		0		(19)		0
Other invested assets	4		0		0		0		0		2		1		0
Short-term investments	0		0		0		0		0		(1)		0		0
Cash equivalents	(1)		0		0		0		0		0		0		0
Other assets	(34)		0		0		0		0		(34)		0		0
Separate account assets(5)	0		0		(66)		0		2		0		0		(52)
Liabilities:
Future policy benefits	947		0		0		0		0		611		0		0
Policyholders’ account balances	30		0		0		0		0		30		0		0
Other liabilities	2		0		0		0		0		3		0		0
Notes issued by consolidated VIEs	14		0		0		0		0		14		0		0

__________

(1)“Other,” for the periods ended December 31, 2020 and 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 Consolidated Statements of Financial Position.

(6)Issuances and settlements for Policyholders’ account balances are presented net in the rollforward. Prior period amounts 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.

Derivative Fair Value Information

The following tables present the balances of certain derivative assets and liabilities measured at fair value on a recurring basis, as of the date indicated, by primary underlying risks. These tables exclude embedded derivatives and associated reinsurance recoverables. The derivative assets and liabilities shown below are included in “Other invested assets” or “Other liabilities” in the tables contained within the sections “—Assets and Liabilities by Hierarchy Level” and “—Changes in Level 3 Assets and Liabilities,” above.


	As of December 31, 2020
	Level 1		Level 2		Level 3		Netting(1)		Total

	(in millions)
Derivative assets:
Interest Rate	$	99	$	19,091	$	0	$		$	19,190
Currency	0		832		0				832
Credit	0		63		0				63
Currency/Interest Rate	0		1,415		0				1,415
Equity	128		1,645		0				1,773
Commodity	0		0		0				0
Netting(1)							(21,367)		(21,367)
Total derivative assets	$	227	$	23,046	$	0	$	(21,367)	$	1,906
Derivative liabilities:
Interest Rate	$	5	$	13,503	$	0	$		$	13,508
Currency	0		763		0				763
Credit	0		28		0				28
Currency/Interest Rate	0		1,638		0				1,638
Equity	25		2,305		0				2,330
Commodity	0		0		0				0
Netting(1)							(17,475)		(17,475)
Total derivative liabilities	$	30	$	18,237	$	0	$	(17,475)	$	792


	As of December 31, 2019
	Level 1		Level 2		Level 3		Netting(1)		Total

	(in millions)
Derivative assets:
Interest Rate	$	4	$	11,238	$	1	$		$	11,243
Currency	0		230		0				230
Credit	0		21		0				21
Currency/Interest Rate	0		2,207		0				2,207
Equity	2		683		0				685
Commodity	0		0		0				0
Netting(1)							(13,519)		(13,519)
Total derivative assets	$	6	$	14,379	$	1	$	(13,519)	$	867
Derivative liabilities:
Interest Rate	$	38	$	5,176	$	0	$		$	5,214
Currency	0		271		0				271
Credit	0		0		0				0
Currency/Interest Rate	0		647		0				647
Equity	3		1,401		0				1,404
Commodity	0		0		0				0
Netting(1)							(6,705)		(6,705)
Total derivative liabilities	$	41	$	7,495	$	0	$	(6,705)	$	831

__________

(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.

Changes in Level 3 derivative assets and liabilities—The following tables provide a summary of the changes in fair value of Level 3 derivative assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods:


	Year Ended December 31, 2020
	Fair Value, beginning of period		Total realized and unrealized gains (losses) (4)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3 (2)		Transfers out of Level 3 (2)		Fair Value, end of period		Unrealized gains (losses) for assets still held (4)
	(in millions)
Net Derivative - Equity	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	1		(1)		0		0		0		0		0		0		0		0		0


	Year Ended December 31, 2019
	Fair Value, beginning of period		Total realized and unrealized gains (losses) (4)		Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3 (2)		Transfers out of Level 3 (2)		Fair Value, end of period		Unrealized gains (losses) for assets still held (4)
	(in millions)
Net Derivative - Equity	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	2		(1)		0		0		0		0		0		0		0		1		(2)


	Year Ended December 31, 2018
	Fair Value, beginning of period		Total realized and unrealized gains (losses) (4)		Purchases		Sales		Issuances		Settlements		Other(3)		Transfers into Level 3 (2)		Transfers out of Level 3 (2)		Fair Value, end of period		Unrealized gains (losses) for assets still held (4)
	(in millions)
Net Derivative - Equity	$	10	$	1	$	0	$	0	$	0	$	0	$	(11)	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	(3)		5		0		0		0		0		0		0		0		2		5

__________

(1)Represents conversion of warrants to equity shares.

(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.

(3)Related to warrants received in restructuring a certain asset that resulted in reclassification of reporting category.

(4)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.”

Nonrecurring Fair Value Measurements—The following tables represent information for assets measured at fair value on a nonrecurring basis. The fair value measurement is nonrecurring as these assets are measured at fair value only when there is a triggering event (e.g., an evidence of impairment). Assets included in the table are those that were impaired during the respective reporting periods and that are still held as of the reporting date. The estimated fair values for these amounts were determined using significant unobservable inputs (Level 3).


	Year Ended December 31,
	2020		2019		2018
	(in millions)
Realized investment gains (losses) net:
Commercial mortgage loans(1)	$	0	$	2	$	(12)
Mortgage servicing rights(2)	$	(25)	$	11	$	10
Investment real estate	$	(24)	$	0	$	0


	Year Ended December 31,
	2020		2019
	(in millions)
Carrying value after measurement as of period end
Commercial mortgage loans(1):	$	0	$	15
Mortgage servicing rights(2):	$	307	$	87
Investment real estate	$	31	$	0

__________

(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 plus a liquidity and risk premium. This estimate includes available relevant data from any active market sales of mortgage servicing rights.

Fair Value Option

The fair value option allows the Company to elect fair value as an alternative measurement for selected financial assets and financial liabilities not otherwise reported at fair value. Such elections have been made by the Company to help mitigate volatility in earnings that result from different measurement attributes. Electing the fair value option also allows the Company to achieve consistent accounting for certain assets and liabilities. Changes in fair value are reflected in “Realized investment gains (losses), net” for commercial mortgage and other loans and “Other income (loss)” for other assets and notes issued by consolidated VIEs. Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Interest income on commercial mortgage and other loans is included in “Net investment income.” Interest income on these loans is recorded based on the effective interest rate as determined at the closing of the loan.

The following tables present information regarding assets and liabilities where the fair value option has been elected:


	Year Ended December 31,
	2020		2019		2018
	(in millions)
Liabilities:
Notes issued by consolidated VIEs:
Changes in fair value	$	(25)	$	(15)	$	(14)


	Year Ended December 31,
	2020		2019		2018
	(in millions)
Commercial mortgage and other loans:
Interest income	$	17	$	20	$	18
Notes issued by consolidated VIEs:
Interest expense	$	32	$	45	$	36


	Year Ended December 31,
	2020		2019
	(in millions)
Commercial mortgage and other loans(1):
Fair value as of period end	$	1,092	$	228
Aggregate contractual principal as of period end	$	1,073	$	224
Other assets:
Fair value as of period end	$	10	$	10
Notes issued by consolidated VIEs:
Fair value as of period end	$	0	$	800
Aggregate contractual principal as of period end	$	0	$	857

__________

(1)As of December 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.

Fair Value of Financial Instruments

The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Consolidated Statements of Financial Position. In some cases, as described below, the carrying amount equals or approximates fair value.


	December 31, 2020
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in millions)
Assets:
Fixed maturities, held-to-maturity(2)	$	0	$	2,209	$	89	$	2,298	$	1,930
Assets supporting experience-rated contractholder liabilities	39		0		0		39		39
Commercial mortgage and other loans	0		107		67,477		67,584		64,333
Policy loans	0		0		11,271		11,271		11,271
Other invested assets	0		153		0		153		153
Short-term investments	1,464		26		0		1,490		1,490
Cash and cash equivalents	7,951		268		0		8,219		8,219
Accrued investment income	0		3,193		0		3,193		3,193
Other assets	154		2,917		449		3,520		3,517
Total assets	$	9,608	$	8,873	$	79,286	$	97,767	$	94,145
Liabilities:
Policyholders’ account balances—investment contracts	$	0	$	36,820	$	73,653	$	110,473	$	107,526
Securities sold under agreements to repurchase	0		10,894		0		10,894		10,894
Cash collateral for loaned securities	0		3,499		0		3,499		3,499
Short-term debt	0		794		146		940		925
Long-term debt(3)	644		21,685		1,139		23,468		19,718
Notes issued by consolidated VIEs	0		0		305		305		305
Other liabilities	0		7,626		48		7,674		7,674
Separate account liabilities—investment contracts	0		86,046		23,631		109,677		109,677
Total liabilities	$	644	$	167,364	$	98,922	$	266,930	$	260,218


	December 31, 2019
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in millions)
Assets:
Fixed maturities, held-to-maturity(2)	$	0	$	2,217	$	85	$	2,302	$	1,933
Assets supporting experience-rated contractholder liabilities	16		0		0		16		16
Commercial mortgage and other loans	0		107		65,558		65,665		63,331
Policy loans	0		0		12,096		12,096		12,096
Other invested assets	0		36		0		36		36
Short-term investments	1,492		39		0		1,531		1,531
Cash and cash equivalents	6,278		1,043		0		7,321		7,321
Accrued investment income	0		3,330		0		3,330		3,330
Other assets	147		2,526		643		3,316		3,315
Total assets	$	7,933	$	9,298	$	78,382	$	95,613	$	92,909
Liabilities:
Policyholders’ account balances—investment contracts	$	0	$	32,940	$	69,216	$	102,156	$	101,241
Securities sold under agreements to repurchase	0		9,681		0		9,681		9,681
Cash collateral for loaned securities	0		4,213		0		4,213		4,213
Short-term debt	0		1,748		205		1,953		1,933
Long-term debt(3)	1,950		18,188		1,186		21,324		18,646
Notes issued by consolidated VIEs	0		0		474		474		474
Other liabilities	0		6,403		579		6,982		6,982
Separate account liabilities—investment contracts	0		77,134		24,407		101,541		101,541
Total liabilities	$	1,950	$	150,307	$	96,067	$	248,324	$	244,711

__________

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

(2)Excludes notes with fair value of $5,821 million (carrying amount of $4,998 million) and $5,401 million (carrying amount of $4,998 million) as of December 31, 2020 and 2019, respectively, which have been offset with the associated payables under a netting agreement.

(3)Includes notes with fair value of $11,921 million (carrying amount of $10,964 million) and $10,158 million (carrying amount of $9,749 million) as of December 31, 2020 and 2019, respectively, which have been offset with the associated receivables under a netting agreement.

The fair values presented above have been determined by using available market information and by applying market valuation methodologies, as described in more detail below.

Fixed Maturities, Held-to-Maturity

The fair values of public fixed maturity securities are generally based on prices from third-party pricing services, which are reviewed for reasonableness; however, for certain public fixed maturity securities and investments in private placement fixed maturity securities, this information is either not available or not reliable. For these public fixed maturity securities, the fair value is based on indicative broker quotes, if available, or determined using a discounted cash flow model or other internally-developed models. For private fixed maturities, fair value is determined using a discounted cash flow model. In determining the fair value of certain fixed maturity securities, the discounted cash flow model may also use unobservable inputs, which reflect the Company’s own assumptions about the inputs market participants would use in pricing the security.

Commercial Mortgage and Other Loans

The fair value of most commercial mortgage loans is based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate or foreign government bond rate (for non-U.S. dollar-denominated loans) plus an appropriate credit spread for loans of similar quality, average life and currency. The quality ratings for these loans, a primary determinant of the credit spreads and a significant component of the pricing process, are based on an internally-developed methodology. Certain commercial mortgage loans are valued incorporating other factors, including the terms of the loans, the principal exit strategies for the loans, prevailing interest rates and credit risk.

Policy Loans

The Company’s valuation technique for policy loans is to discount cash flows at the current policy loan coupon rate. Policy loans are fully collateralized by the cash surrender value of underlying insurance policies. As a result, the carrying value of the policy loans approximates the fair value.

Short-Term Investments, Cash and Cash Equivalents, Accrued Investment Income and Other Assets

The Company believes that due to the short-term nature of certain assets, the carrying value approximates fair value. These assets include: certain short-term investments, which are not securities, recorded at amortized cost and include quality loans; cash and cash equivalent instruments; accrued investment income; and other assets that meet the definition of financial instruments, including receivables, such as reinsurance recoverables, unsettled trades, accounts receivable and restricted cash.

Policyholders’ Account Balances—Investment Contracts

Only the portion of policyholders’ account balances related to products that are investment contracts (those without significant mortality or morbidity risk) are reflected in the table above. For fixed deferred annuities, single premium endowments, payout annuities and other similar contracts without life contingencies, fair values are generally derived using discounted projected cash flows based on interest rates that are representative of the Company’s financial strength ratings, and hence reflect the Company’s NPR. For GICs, funding agreements, structured settlements without life contingencies and other similar products, fair values are generally derived using discounted projected cash flows based on interest rates being offered for similar contracts with maturities consistent with those of the contracts being valued. For those balances that can be withdrawn by the customer at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the customer as of the reporting date, which is generally the carrying value. For defined contribution and defined benefit contracts and certain other products, the fair value is the market value of the assets supporting the liabilities.

Securities Sold Under Agreements to Repurchase

The Company receives collateral for selling securities under agreements to repurchase, or pledges collateral under agreements to resell. Repurchase and resale agreements are also generally short-term in nature and, therefore, the carrying amounts of these instruments approximate fair value.

Cash Collateral for Loaned Securities

Cash collateral for loaned securities represents the collateral received or paid in connection with loaning or borrowing securities, similar to the securities sold under agreement to repurchase above. Due to the short-term nature of these transactions, the carrying value approximates fair value.

Debt

The fair value of short-term and long-term debt, as well as notes issued by consolidated VIEs, is generally determined by either prices obtained from independent pricing services, which are validated by the Company, or discounted cash flow models. With the exception of the notes issued by consolidated VIEs for which recourse is limited to the assets of the respective VIE and does not extend to the general credit of the Company, the fair values of these instruments consider the Company’s NPR. Discounted cash flow models predominately use market observable inputs such as the borrowing rates currently available to the Company for debt and financial instruments with similar terms and remaining maturities. For commercial paper issuances and other debt with a maturity of less than 90 days, the carrying value approximates fair value.

Other Liabilities

Other liabilities are primarily payables, such as reinsurance payables, unsettled trades, drafts and accrued expense payables. Due to the short-term until settlement of most of these liabilities, the Company believes that carrying value approximates fair value.

Separate Account Liabilities—Investment Contracts

Only the portion of separate account liabilities related to products that are investment contracts are reflected in the table above. Separate account liabilities are recorded at the amount credited to the contractholder, which reflects the change in fair value of the corresponding separate account assets including contractholder deposits less withdrawals and fees; therefore, carrying value approximates fair value.

Deferred Policy Acquisition Costs Disclosures [Abstract]

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2020

Deferred Policy Acquisition Costs

DEFERRED POLICY ACQUISITION COSTS

The balances of and changes in DAC as of and for the years ended December 31, are as follows:


	2020		2019		2018
	(in millions)
Balance, beginning of period	$	19,912	$	20,058	$	18,992
Capitalization of commissions, sales and issue expenses	2,763		2,966		2,870
Amortization—Impact of assumption and experience unlocking and true-ups	(36)		(164)		(217)
Amortization—All other	(2,185)		(2,168)		(2,056)
Change due to unrealized investment gains and losses	(379)		(713)		519
Foreign currency translation	142		(8)		(32)
Other(1)	(1,190)		(59)		(18)
Balance, end of period	$	19,027	$	19,912	$	20,058

__________

(1)“Other” for 2020 primarily represents the impact related to the sale of The Prudential Life Insurance Company of Korea, Ltd. of $(1,193) million. “Other” for 2019 primarily represents the impact related to the sale of the Company’s Pramerica of Italy subsidiary of $(46) million and DAC ceded to a third-party reinsurer of $(14) million. “Other” for 2018 represents the impact related to the sale of the Company’s Pramerica of Poland subsidiary of $(38) million and the impact of the elimination of Gibraltar Life’s one-month reporting lag of $20 million.

Value of Business Acquired

12 Months Ended

Dec. 31, 2020

Present Value of Future Insurance Profits [Abstract]

Value of Business Acquired

VALUE OF BUSINESS ACQUIRED

The balances of and changes in VOBA as of and for the years ended December 31, are as follows:


	2020		2019		2018
	(in millions)
Balance, beginning of period	$	1,110	$	1,850	$	1,591

Amortization—Impact of assumption and experience unlocking and true-ups	(317)		(139)		0
Amortization—All other	(212)		(235)		(276)
Change due to unrealized investment gains and losses	418		(478)		455
Interest	56		64		69
Foreign currency translation	48		10		23
Other	0		38		(12)
Balance, end of period	$	1,103	$	1,110	$	1,850

The following table provides VOBA balances for the year ended December 31, 2020:


	VOBA Balance
	(in millions)
CIGNA	$	219
Prudential Annuities Holding Co.	$	29
Gibraltar Life	$	852
Gibraltar BSN Life Berhad	$	3

The following table provides estimated future amortization, net of interest, for the periods indicated:


	2021		2022		2023		2024		2025
	(in millions)
Estimated future VOBA amortization	$	99	$	93	$	85	$	79	$	72

Investments In Operating Joint Ventures

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments In Operating Joint Ventures

INVESTMENTS IN OPERATING JOINT VENTURES

The Company has made investments in certain joint ventures that are strategic in nature and made other than for the sole purpose of generating investment income. These investments are accounted for under the equity method of accounting and are included in “Other assets” in the Company’s Consolidated Statements of Financial Position. The earnings from these investments are included on an after-tax basis in “Equity in earnings of operating joint ventures, net of taxes” in the Company’s Consolidated Statements of Operations. The Company has made these investments through its PGIM and International Businesses segments, and its Corporate and Other operations. The summarized financial information for the Company’s operating joint ventures has been included in the summarized combined financial information for all significant equity method investments shown in Note 3.

The following table sets forth information related to the Company’s investments in operating joint ventures as of and for the years ended December 31:


	2020		2019		2018
	(in millions)
Investment in operating joint ventures	$	1,394	$	1,309	$	1,329
Dividends received from operating joint ventures	$	60	$	70	$	93
After-tax equity in earnings of operating joint ventures	$	96	$	100	$	76

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $30 million, $29 million and $32 million, respectively, of asset management fee income for services the Company provided to these operating joint ventures.

Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles

GOODWILL AND OTHER INTANGIBLES

The changes in the carrying value of goodwill by reportable segment are as follows:


	PGIM		Retirement		Assurance IQ		International Businesses		Other		Total
	(in millions)
Goodwill balance, December 31, 2017:	$	235	$	444	$	0	$	164	$	0	$	843
Acquisitions	0		11		0		0		11		22
Foreign currency translation	(2)		0		0		0		0		(2)
Goodwill balance, December 31, 2018:	233		455		0		164		11		863
Acquisitions	22		0		2,128		0		0		2,150
Foreign currency translation	(1)		0		0		1		0		0
Goodwill balance, December 31, 2019:	254		455		2,128		165		11		3,013
Foreign currency translation and other(1)	4		0		12		(21)		27		22
Goodwill balance, December 31, 2020:	$	258	$	455	$	2,140	$	144	$	38	$	3,035

__________

(1)The goodwill associated with Assurance IQ includes a measurement period adjustment made during 2020. The goodwill reclass between International Businesses and Other relates to an operation that became classified as divested business and transferred to Corporate and Other during 2020.

The Company tests goodwill for impairment annually, as of December 31, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, as discussed in further detail in Note 2. The Company performed the annual goodwill test using the quantitative approach for all reporting units at December 31, 2020. As of December 31, 2019, the Company performed a qualitative goodwill impairment assessment for Assurance IQ and applied the quantitative goodwill impairment approach for all other reporting units.

As of December 31, 2020, the estimated fair value of Assurance IQ, based on a weighted average of the valuation approaches described above, exceeded the carrying value by 10%, while the estimated fair values of the other reporting units with allocated goodwill exceeded their carrying value by a weighted average of 229%.

Estimating the fair value of reporting units is a subjective process that involves the use of significant estimates by management. For all reporting units tested, unanticipated changes in business performance or regulatory environment, market declines or other events impacting the fair value of these businesses, including changes in market multiples, discount rates, interest rates and growth rates assumptions or increases in the level of equity required to support these businesses, could cause an impairment of goodwill, resulting in a charge to income.

Other Intangibles

Other intangible balances at December 31, are as follows:


	2020						2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)
Subject to amortization:
Mortgage servicing rights	$	819	$	(512)	$	307	$	745	$	(468)	$	277
Customer relationships	247		(175)		72		244		(153)		91
Software and other	192		(60)		132		201		(38)		163
Not subject to amortization	69		N/A		69		69		N/A		69
Total					$	580					$	600

The fair values of net mortgage servicing rights were $309 million and $287 million at December 31, 2020 and 2019, respectively. Amortization expense for other intangibles was $102 million, $65 million and $61 million for the years ending December 31, 2020, 2019 and 2018, respectively. The amortization expense amounts for 2020, 2019 and 2018 do not include impairments recorded for mortgage servicing rights or other intangibles. See the nonrecurring fair value measurements section of Note 6 for more information regarding these impairments.

The following table provides estimated future amortization for the periods indicated:


	2021		2022		2023		2024		2025
	(in millions)
Estimated future amortization expense of other intangibles	$	101	$	93	$	76	$	46	$	38

Leases

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Operating Leases, Lessee

LEASES

The Company occupies leased office space and other facilities in many locations under various long-term leases and has entered into numerous leases covering the long-term use of computers and other equipment. The leases, depending on their specific terms, are classified as either operating or finance with the vast majority of leases falling under the operating classification. The leases in the Company’s portfolio have remaining lease terms from less than one year to 28 years, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases within 8 years. An analysis of all economic and non-economic factors associated with leases containing certain options, including factors such as the existence of cancellation penalties, leasehold improvements made to the underlying assets and location of the underlying assets, is conducted to determine whether those leases are reasonably certain to renew, and hence, should be included in the lease term that is used to establish the right-of-use assets and lease liabilities for those arrangements.

The Company does not have residual guarantees associated with its lessee arrangements, nor are there any restrictions or covenants associated with its lease arrangements.

Lessee

Supplemental balance sheet information related to leases where the Company is the lessee is included below. Right-of-use assets and lease liabilities are included within “Other assets” and “Other liabilities” respectively.


	December 31,
	2020			2019
	($ in millions)
Operating Leases:

Right-of-use assets	$	466		$	554
Lease liabilities	$	511		$	594

Weighted average remaining lease term	6 years			6 years
Weighted average discount rate	2.22		%	2.46		%

Maturities of operating lease liabilities are as follows:


	December 31, 2020
	(in millions)
2021	$	156
2022	121
2023	81
2024	72
2025	46
Thereafter	80
Total lease payments	556
Less imputed interest	(45)
Total	$	511

Lease expense is included in “General and administrative expenses,” which was comprised of operating lease and short-term costs. Operating lease costs were $156 million and $138 million for the years ended December 31, 2020 and 2019, respectively. Short-term lease costs were $104 million and $101 million for the years ended December 31, 2020 and 2019, respectively. Short-term lease costs relate to those leases with terms of twelve months or less that do not include an option to purchase the underlying asset that is reasonably certain of exercise.

LessorThe Company directly owns real estate properties within its investment portfolio. Such real estate is leased to third-parties, with the Company serving as the lessor. The terms of the leases vary depending on property type (e.g., commercial or residential). In most cases, the lessee has an option to renew the lease contract based on market rates but does not have an option to purchase the property. The terms of the leases may also include provisions for the use of common areas. Such non-lease components are not separately accounted for by the Company, as a result of applying the practical expedient discussed in Note 2. Lease income included in “Net investment income” were $161 million and $182 million for the years ended December 31, 2020 and 2019, respectively.

Operating Leases, Lessor

LEASES

The Company occupies leased office space and other facilities in many locations under various long-term leases and has entered into numerous leases covering the long-term use of computers and other equipment. The leases, depending on their specific terms, are classified as either operating or finance with the vast majority of leases falling under the operating classification. The leases in the Company’s portfolio have remaining lease terms from less than one year to 28 years, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases within 8 years. An analysis of all economic and non-economic factors associated with leases containing certain options, including factors such as the existence of cancellation penalties, leasehold improvements made to the underlying assets and location of the underlying assets, is conducted to determine whether those leases are reasonably certain to renew, and hence, should be included in the lease term that is used to establish the right-of-use assets and lease liabilities for those arrangements.

The Company does not have residual guarantees associated with its lessee arrangements, nor are there any restrictions or covenants associated with its lease arrangements.

Lessee

Supplemental balance sheet information related to leases where the Company is the lessee is included below. Right-of-use assets and lease liabilities are included within “Other assets” and “Other liabilities” respectively.


	December 31,
	2020			2019
	($ in millions)
Operating Leases:

Right-of-use assets	$	466		$	554
Lease liabilities	$	511		$	594

Weighted average remaining lease term	6 years			6 years
Weighted average discount rate	2.22		%	2.46		%

Maturities of operating lease liabilities are as follows:


	December 31, 2020
	(in millions)
2021	$	156
2022	121
2023	81
2024	72
2025	46
Thereafter	80
Total lease payments	556
Less imputed interest	(45)
Total	$	511

Lease expense is included in “General and administrative expenses,” which was comprised of operating lease and short-term costs. Operating lease costs were $156 million and $138 million for the years ended December 31, 2020 and 2019, respectively. Short-term lease costs were $104 million and $101 million for the years ended December 31, 2020 and 2019, respectively. Short-term lease costs relate to those leases with terms of twelve months or less that do not include an option to purchase the underlying asset that is reasonably certain of exercise.

LessorThe Company directly owns real estate properties within its investment portfolio. Such real estate is leased to third-parties, with the Company serving as the lessor. The terms of the leases vary depending on property type (e.g., commercial or residential). In most cases, the lessee has an option to renew the lease contract based on market rates but does not have an option to purchase the property. The terms of the leases may also include provisions for the use of common areas. Such non-lease components are not separately accounted for by the Company, as a result of applying the practical expedient discussed in Note 2. Lease income included in “Net investment income” were $161 million and $182 million for the years ended December 31, 2020 and 2019, respectively.

Policyholders' Liabilities

12 Months Ended

Dec. 31, 2020

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Policyholders' Liabilities

POLICYHOLDERS’ LIABILITIES

Future Policy Benefits

Future policy benefits at December 31 for the years indicated are as follows:


	2020		2019
	(in millions)
Life insurance	$	195,245	$	191,654
Individual and group annuities and supplementary contracts	77,254		75,940
Other contract liabilities	30,873		23,052
Subtotal future policy benefits excluding unpaid claims and claim settlement expenses	303,372		290,646
Unpaid claims and claim settlement expenses	2,971		2,881
Total future policy benefits	$	306,343	$	293,527

Life insurance liabilities include reserves for death and endowment policy benefits, terminal dividends and certain health benefits. Individual and group annuities and supplementary contracts liabilities include reserves for life contingent immediate annuities and life contingent group annuities. Other contract liabilities include unearned premiums and certain other reserves for group, annuities and individual life and health products.

Future policy benefits for individual participating traditional life insurance are based on the net level premium method, calculated using the guaranteed mortality and nonforfeiture interest rates which range from 2.5% to 7.5%. Participating insurance represented 3% and 2% of direct individual life insurance in force as of December 31, 2020 and 2019, respectively, and 10%, 11% and 12% of direct individual life insurance premiums for 2020, 2019 and 2018, respectively.

Future policy benefits for individual non-participating traditional life insurance policies, group and individual long-term care policies and individual health insurance policies are generally equal to the present value of future benefit payments and related expenses, less the present value of future net premiums. Assumptions as to mortality, morbidity and persistency are based on the Company’s experience, industry data, and/or other factors, when the basis of the reserve is established. Interest rates used in the determination of the present values range from (0.1)% to 7.8%.

Future policy benefits for individual and group annuities and supplementary contracts with life contingencies are generally equal to the present value of expected future payments. Assumptions as to mortality are based on the Company’s experience, industry data, and/or other factors, when the basis of the reserve is established. The interest rates used in the determination of the present values range from (0.2)% to 12.1%; less than 1% of the reserves are based on an interest rate in excess of 8%.

Future policy benefits for other contract liabilities are generally equal to the present value of expected future payments based on the Company’s experience, except for example, certain group insurance coverages for which future policy benefits are equal to gross unearned premium reserves. The interest rates used in the determination of the present values range from 0.2% to 6.5%.

The Company’s liability for future policy benefits is also inclusive of liabilities for guaranteed benefits related to certain long-duration life and annuity contracts. Liabilities for guaranteed benefits with embedded derivative features are primarily in “other contract liabilities” in the table above. The remaining liabilities for guaranteed benefits are primarily reflected with the underlying contract in the table above. See Note 13 for additional information regarding liabilities for guaranteed benefits related to certain long-duration life and annuity contracts.

Reserves for recognizing a premium deficiency included in “Future policy benefits” are established, if necessary, when the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for expected future policy benefits and expenses. Additionally, in certain instances the policyholder liability for a particular line of business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional PFL liability be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years. Premium deficiencies have been recognized in the past for the group single premium annuity business, which consists of limited-payment, long-duration traditional, non-participating annuities; structured settlements; single premium immediate annuities with life contingencies; long-term care; certain individual health policies; and certain interest-sensitive life products.

Unpaid claims and claim settlement expenses primarily reflect the Company’s estimate of future disability claim payments and expenses as well as estimates of claims incurred but not yet reported as of the balance sheet date related to group disability products. Unpaid claim liabilities that are discounted use interest rates ranging from 1.8% to 6.4%.

Policyholders’ Account Balances

Policyholders’ account balances at December 31 for the years indicated are as follows:


	2020		2019
	(in millions)
Individual annuities	$	47,663	$	44,391
Group annuities	30,700		27,843
Guaranteed investment contracts and guaranteed interest accounts	14,071		13,759
Funding agreements	6,938		4,119
Interest-sensitive life contracts	41,711		40,364
Dividend accumulation and other deposit type funds	20,599		21,634
Total policyholders’ account balances	$	161,682	$	152,110

Policyholders’ account balances primarily represent an accumulation of account deposits plus credited interest less withdrawals, expense charges and mortality charges, if applicable. These policyholders’ account balances also include provisions for benefits under non-life contingent payout annuities and certain unearned revenues. Policyholders’ account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. See Note 6 for additional information on the fair value of these embedded derivative instruments. Included in “Funding agreements” at December 31, 2020 and 2019 are $4,402 million and $4,104 million, respectively, related to the Company’s Funding Agreement Notes Issuance Program (“FANIP”). Under this program, which has a maximum authorized amount of $15 billion of medium-term notes and $3 billion of commercial paper, Delaware statutory trusts issue short-term commercial paper and/or medium-term notes to investors that are secured by funding agreements issued to the trusts by PICA. The outstanding commercial paper and notes have fixed or floating interest rates that range from 0.0% to 3.5% and original maturities ranging from two months to five years. Included in the amounts at December 31, 2020 and 2019 is the medium-term note liability, which is carried at amortized cost, of $2,414 million and $2,414 million, respectively and short-term note liability of $1,991 million and $1,697 million, respectively.

Also included in “Funding agreements” are collateralized funding agreements issued to the Federal Home Loan Bank of New York (“FHLBNY”) at December 31, 2020 and 2019 totaled $2,522 million and $0 million, respectively. These obligations, which are carried at amortized cost, have fixed or floating interest rates that range from 0.6% to 1.9% and original maturities ranging from nine months to seven years. For additional details on the FHLBNY program, see Note 17.

Interest crediting rates range from 0% to 6.3% for interest-sensitive life contracts and from 0% to 13.3% for contracts other than interest-sensitive life. Less than 1% of policyholders’ account balances have interest crediting rates in excess of 8%.

Certain Long-Duration Contracts with Guarantees

12 Months Ended

Dec. 31, 2020

Long-Duration Contracts, Assumptions Supporting Guarantee Obligations [Abstract]

Certain Long-Duration Contracts With Guarantees

CERTAIN LONG-DURATION CONTRACTS WITH GUARANTEES

The Company issues variable annuity contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company also issues variable annuity contracts with general and separate account options where the Company contractually guarantees to the contractholder a return of no less than total deposits made to the contract adjusted for any partial withdrawals (“return of net deposits”). In certain of these variable annuity contracts, the Company also contractually guarantees to the contractholder a return of no less than (1) total deposits made to the contract adjusted for any partial withdrawals plus a minimum return (“minimum return”), and/or (2) the highest contract value on a specified date adjusted for any withdrawals (“contract value”). These guarantees include benefits that are payable in the event of death, annuitization or at specified dates during the accumulation period and withdrawal and income benefits payable during specified periods. The Company also issues annuity contracts and single premium life contracts with market value adjusted investment options (“MVAs”). Annuity contracts and single premium life contracts with MVAs provide for a return of principal plus a fixed rate of return if held-to-maturity, or, alternatively, a “market adjusted value” if surrendered prior to maturity or if funds are reallocated to other investment options. The market value adjustment may result in a gain or loss to the Company, depending on crediting rates or an indexed rate at surrender, as applicable. The Company also issues fixed deferred and immediate annuity contracts, some without MVA, that have a guaranteed credited rate and annuity benefit. The Company also issues indexed variable annuity contracts for which the return is tied to the return of specific indices where the Company contractually guarantees to the contractholder a return of no less than total deposits made to the contract adjusted for any partial withdrawals upon death.

In addition, the Company issues certain variable life, variable universal life and universal life contracts where the Company contractually guarantees to the contractholder a death benefit even when there is insufficient value to cover monthly mortality and expense charges, whereas otherwise the contract would typically lapse (“no-lapse guarantee”). Variable life and variable universal life contracts are offered with general and separate account options.

The assets supporting the variable portion of all variable annuities are carried at fair value and reported as “Separate account assets” with an equivalent amount reported as “Separate account liabilities.” Amounts assessed against the contractholders for mortality, administration, and other services are included within revenue in “Policy charges and fee income” and changes in liabilities for minimum guarantees are generally included in “Policyholders’ benefits” or “Realized investment gains (losses), net.”

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, timing of annuitization, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, interest rates, market volatility and contractholder behavior.

The Company’s contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed may not be mutually exclusive. The liabilities related to the net amount at risk are reflected within “Future policy benefits.” As of December 31, 2020 and 2019, the Company had the following guarantees associated with these contracts, by product and guarantee type:


	December 31, 2020				December 31, 2019
	In the Event of Death		At Annuitization / Accumulation(1)		In the Event of Death		At Annuitization / Accumulation(1)
	($ in millions)
Annuity Contracts
Return of net deposits
Account value	$	133,726	$	17	$	130,893	$	16
Net amount at risk	$	214	$	0	$	244	$	0
Average attained age of contractholders	68 years		75 years		67 years		75 years
Minimum return or contract value
Account value	$	31,157	$	148,841	$	32,609	$	147,511
Net amount at risk	$	2,327	$	4,203	$	2,626	$	4,578
Average attained age of contractholders	70 years		68 years		69 years		68 years
Average period remaining until earliest expected annuitization	N/A		0.20 years		N/A		0.17 years

__________

(1)Includes income and withdrawal benefits.


	December 31,
	2020		2019
	In the Event of Death
	($ in millions)
Variable Life, Variable Universal Life and Universal Life Contracts
Separate account value	$	8,939	$	9,983
General account value	$	19,279	$	18,225
Net amount at risk	$	222,703	$	245,929
Average attained age of contractholders	55 years		55 years

Account balances of variable annuity contracts with guarantees were invested in separate account investment options as follows:


	December 31,
	2020		2019
	(in millions)
Equity funds	$	94,270	$	93,010
Bond funds	62,549		60,074
Balanced funds	0		1,592
Money market funds	3,156		3,530
Total	$	159,975	$	158,206

In addition to the amounts invested in separate account investment options above, $7,729 million at December 31, 2020, and $7,781 million at December 31, 2019, of account balances of variable annuity contracts with guarantees, inclusive of contracts with MVA features, were invested in general account investment options. For the years ended December 31, 2020, 2019 and 2018, there were no transfers of assets, other than cash, from the general account to any separate account, and accordingly no gains or losses recorded.

Liabilities for Guarantee Benefits

The table below summarizes the changes in general account liabilities for guarantees. The liabilities for GMDB and GMIB are included in “Future policy benefits” and the related changes in the liabilities are included in “Policyholders’ benefits.” GMAB, GMWB and GMIWB are accounted for as embedded derivatives and are recorded at fair value within “Future policy benefits.” Changes in the fair value of these derivatives, including changes in the Company’s own risk of non-performance, along with any fees attributed or payments made relating to the derivative, are recorded in “Realized investment gains (losses), net.” See Note 6 for additional information regarding the methodology used in determining the fair value of these embedded derivatives. The Company maintains a portfolio of derivative investments that serve as a partial hedge of the risks associated with these products, for which the changes in fair value are also recorded in “Realized investment gains (losses),

net.” This portfolio of derivative investments does not qualify for hedge accounting treatment under U.S. GAAP. Additionally, the Company externally reinsures the guaranteed benefit features associated with certain contracts. See Note 14 for further information regarding the external reinsurance arrangement.


	GMDB				GMIB		GMAB/GMWB/GMIWB
	Variable Life, Variable Universal Life and Universal Life		Annuity		Annuity		Annuity
	(in millions)
Balance at December 31, 2017	$	5,110	$	697	$	419	$	8,721
Incurred guarantee benefits(1)	791		125		(14)		206
Paid guarantee benefits	(77)		(88)		(5)		0
Change in unrealized investment gains and losses	(406)		(20)		(20)		0
Other(2)	0		(1)		(2)		0
Balance at December 31, 2018	5,418		713		378		8,927
Incurred guarantee benefits(1)	1,492		82		(8)		3,905
Paid guarantee benefits	(111)		(69)		(4)		0
Change in unrealized investment gains and losses	805		27		(15)		0
Other(2)	(2)		0		4		(1)
Balance at December 31, 2019	7,602		753		355		12,831
Incurred guarantee benefits(1)	1,389		162		12		6,103
Paid guarantee benefits	(126)		(89)		(4)		0
Change in unrealized investment gains and losses	721		38		(8)		0
Other(2)(3)	(77)		(1)		13		(53)
Balance at December 31, 2020	$	9,509	$	863	$	368	$	18,881

__________

(1)Incurred guarantee benefits include the portion of assessments established as additions to reserves as well as changes in estimates affecting the reserves. Also includes changes in the fair value of features considered to be derivatives.

(2)Other primarily represents foreign currency translation.

(3)Includes the impact from the sale of POK.

The GMDB, which includes the liability for no-lapse guarantees, and GMIB liability are established when associated assessments (which include all policy charges including charges for administration, mortality, expense, surrender, and other, regardless of how characterized) are recognized. This liability is established using current best estimate assumptions and is based on the ratio of the present value of total expected excess payments (e.g., payments in excess of account value) over the life of the contract divided by the present value of total expected assessments (i.e., benefit ratio). The liability equals the current benefit ratio multiplied by cumulative assessments recognized to date, plus interest, less cumulative excess payments to date. Similar to as described above for DAC, the reserves are subject to adjustments based on annual reviews of assumptions and quarterly adjustments for experience, including market performance. These adjustments reflect the impact on the benefit ratio of using actual historical experience from the issuance date to the balance sheet date plus updated estimates of future experience. The updated benefit ratio is then applied to all prior periods’ assessments to derive an adjustment to the reserve recognized through a benefit or charge to current period earnings.

The GMAB features provide the contractholder with a guaranteed return of initial account value or an enhanced value if applicable. The most significant of the Company’s GMAB features are the guaranteed return option features, which includes an automatic rebalancing element that reduces the Company’s exposure to these guarantees. The GMAB liability is calculated as the present value of future expected payments in excess of the account balance less the present value of future expected rider fees attributable to the embedded derivative feature.

The GMWB features provide the contractholder with access to a guaranteed remaining balance if the account value is reduced to zero through a combination of market declines and withdrawals. The guaranteed remaining balance is generally equal to the protected value under the contract, which is initially established as the greater of the account value or cumulative deposits when withdrawals commence, less cumulative withdrawals. The contractholder also has the option, after a specified time period, to reset the guaranteed remaining balance to the then current account value, if greater. The contractholder accesses the guaranteed remaining balance through payments over time, subject to maximum annual limits. The GMWB liability is calculated as the present value of future expected payments to customers less the present value of future expected rider fees attributable to the embedded derivative feature.

The GMIWB features, taken collectively, provide a contractholder two optional methods to receive guaranteed minimum payments over time, a “withdrawal” option or an “income” option. The withdrawal option (which was available under only one of the GMIWBs and is no longer offered) guarantees that a contractholder can withdraw an amount each year until the cumulative withdrawals reach a total guaranteed balance. The income option (which varies among the Company’s GMIWBs) in general guarantees the contractholder the ability to withdraw an amount each year for life (or for joint lives, in the case of any spousal version of the benefit) where such amount is equal to a percentage of a protected value under the benefit. The contractholder also has the potential to increase this annual amount, based on certain subsequent increases in account value that may occur. The GMIWB can be elected by the contractholder upon issuance of an appropriate deferred variable annuity contract or at any time following contract issue prior to annuitization. Certain GMIWB features include an automatic rebalancing element that reduces the Company’s exposure to these guarantees. The GMIWB liability is calculated as the present value of future expected payments to customers less the present value of future expected rider fees attributable to the embedded derivative feature.

Sales Inducements

The Company defers sales inducements and amortizes them over the anticipated life of the policy using the same methodology and assumptions used to amortize DAC. DSI is included in “Other assets.” The Company has offered various types of sales inducements including: (1) a bonus whereby the policyholder’s initial account balance is increased by an amount equal to a specified percentage of the customer’s initial deposit; (2) additional credits after a certain number of years a contract is held; and (3) enhanced interest crediting rates that are higher than the normal general account interest rate credited in certain product lines. Changes in DSI, reported as “Interest credited to policyholders’ account balances,” are as follows:


	Sales Inducements
	(in millions)
Balance at December 31, 2017	$	1,168
Capitalization	3
Amortization—Impact of assumption and experience unlocking and true-ups	(6)
Amortization—All other	(166)
Change in unrealized investment gains and losses	25
Balance at December 31, 2018	1,024
Capitalization	1
Amortization—Impact of assumption and experience unlocking and true-ups	108
Amortization—All other	(163)
Change in unrealized investment gains and losses	(35)
Balance at December 31, 2019	935
Capitalization	1
Amortization—Impact of assumption and experience unlocking and true-ups	104
Amortization—All other	(166)
Change in unrealized investment gains and losses	(54)
Balance at December 31, 2020	$	820

Reinsurance

12 Months Ended

Dec. 31, 2020

Reinsurance Disclosures [Abstract]

Reinsurance

REINSURANCE

The Company participates in reinsurance with third parties primarily to provide additional capacity for future growth, limit the maximum net loss potential arising from large risks and acquire or dispose of businesses.

Effective April 1, 2015, the Company entered into an agreement with Union Hamilton Reinsurance, Ltd. (“Union Hamilton”) an external counterparty, to reinsure approximately 50% of the Prudential Premier® Retirement Variable Annuity with Highest Daily Lifetime Income (“HDI”) v.3.0 business, a guaranteed benefit feature. This reinsurance agreement covered most new HDI v.3.0 variable annuity business issued between April 1, 2015 and December 31, 2016 on a quota share basis, with Union Hamilton’s cumulative quota share amounting to $2.9 billion of new rider premiums as of December 31, 2016. Reinsurance on business subject to this agreement remains in force for the duration of the underlying annuity contracts. New sales subsequent to December 31, 2016 are not covered by this external reinsurance agreement. This reinsurance agreement is accounted for as an embedded derivative.

In January 2013, the Company acquired the Hartford Life Business through reinsurance transactions with three subsidiaries of Hartford Financial Services Group, Inc. (“Hartford Financial”). Under the related agreements, the Company provided reinsurance for approximately 700,000 life insurance policies with net retained face amount in force of approximately $141 billion. The Company acquired the general account business through a coinsurance arrangement and, for certain types of general account policies, a modified coinsurance arrangement. The Company acquired the separate account business through a modified coinsurance arrangement. In May 2018, Hartford Financial sold a group of operating subsidiaries, which included two of the Company’s counterparties to these reinsurance arrangements. There was no impact to the terms, rights or obligations of the Company, or operation of these reinsurance arrangements, as a result of this change in control of such counterparties. In January 2021, there was a definitive agreement announced to subsequently sell the two counterparties mentioned above. We anticipate there will be no impact to the terms, rights or obligations of the Company, or operation of these reinsurance arrangements, as a result of this change in control of such counterparties.

Since 2011, the Company has entered into several reinsurance agreements to assume pension liabilities in the United Kingdom. Under these arrangements, the Company assumes the longevity risk, and in some arrangements, also the investment risk associated with the pension benefits of certain specified beneficiaries.

In 2006, the Company acquired the variable annuity business of The Allstate Corporation (“Allstate”) through a reinsurance transaction. The reinsurance arrangements with Allstate include a coinsurance arrangement associated with the general account liabilities assumed and a modified coinsurance arrangement associated with the separate account liabilities assumed. The reinsurance payable, which represents the Company’s obligation under the modified coinsurance arrangement, is netted with the reinsurance receivable in the Consolidated Statements of Financial Position. In January 2021, Allstate announced a definitive agreement to sell the Company’s counterparty to these reinsurance arrangements. We anticipate there will be no impact to the terms, rights or obligations of the Company, or operation of these reinsurance arrangements, as a result of this change in control of such counterparty.

In 2004, the Company acquired the retirement business of CIGNA and subsequently entered into various reinsurance arrangements. The Company still has indemnity coinsurance and modified coinsurance without assumption arrangements in effect related to this acquisition.

For the domestic business, life and disability reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term, per person excess, excess of loss, and coinsurance. On policies sold since 2000, the Company has reinsured a significant portion of the individual life mortality risk. Placement of reinsurance is accomplished primarily on an automatic basis with some specific risks reinsured on a facultative basis. The Company is authorized and has historically retained up to $30 million per life, but reduced its operating retention limit to $20 million per life in 2013. Retention in excess of the operating limit is on an exception basis.

The international business primarily uses reinsurance to obtain experience with respect to certain new product offerings and to a lesser extent, to mitigate mortality risk for certain protection products and for capital management purposes.

Reinsurance amounts included in the Consolidated Statements of Operations for premiums, policy charges and fee income, and policyholders’ benefits for the years ended December 31, are as follows:


	2020		2019		2018
	(in millions)
Direct premiums	$	29,091	$	33,260	$	35,048
Reinsurance assumed	4,336		3,022		2,574
Reinsurance ceded	(2,287)		(2,080)		(1,843)
Premiums	$	31,140	$	34,202	$	35,779

Direct policy charges and fee income	$	5,341	$	5,252	$	5,245
Reinsurance assumed	1,192		1,181		1,189
Reinsurance ceded	(504)		(455)		(432)
Policy charges and fee income	$	6,029	$	5,978	$	6,002

Direct policyholders’ benefits	$	32,514	$	35,601	$	38,079
Reinsurance assumed	5,659		4,304		3,659
Reinsurance ceded	(3,114)		(3,085)		(2,334)
Policyholders’ benefits	$	35,059	$	36,820	$	39,404

Reinsurance recoverables at December 31, are as follows:


	2020		2019
	(in millions)
Individual and group annuities(1)	$	273	$	688
Life insurance(2)	6,649		5,535
Other reinsurance	432		403
Total reinsurance recoverables(3)	$	7,354	$	6,626

__________

(1)Primarily represents reinsurance recoverables established under the reinsurance arrangements associated with the acquisition of the retirement business of CIGNA. The Company has recorded reinsurance recoverables related to the acquisition of the retirement business of CIGNA of $27 million and $553 million at December 31, 2020 and 2019, respectively. Also included is $204 million and $95 million of reinsurance recoverables at December 31, 2020 and 2019, respectively, established under the reinsurance agreement with Union Hamilton related to the ceding of certain embedded derivative liabilities associated with the Company’s guaranteed benefits.

(2)Includes $2,245 million and $2,105 million of reinsurance recoverables established at December 31, 2020 and 2019, respectively, under the reinsurance arrangements associated with the acquisition of the Hartford Life Business. The Company has also recorded reinsurance payables related to the Hartford Life Business acquisition of $1,362 million and $1,290 million at December 31, 2020 and 2019, respectively.

(3)Net of $(5) million of loss allowance at December 31, 2020.

Excluding the reinsurance recoverable associated with the acquisition of the Hartford Life Business and the retirement business of CIGNA, four major reinsurance companies account for approximately 59% of the reinsurance recoverable at December 31, 2020. The Company periodically reviews the financial condition of its reinsurers, amounts recoverable therefrom, and unearned reinsurance premium, in order to reduce its exposure to loss from reinsurer insolvencies. Any expected credit losses are reflected in the CECL allowance, after considering any collateral the Company obtained in the form of a trust, letter of credit, or funds withheld arrangement. See Note 2 for additional details regarding CECL. Under the Company’s longevity reinsurance transactions, the Company obtains collateral from its counterparties to mitigate counterparty default risk.

Closed Block

12 Months Ended

Dec. 31, 2020

Closed Block Disclosure [Abstract]

Closed Block

CLOSED BLOCK

On December 18, 2001, the date of demutualization, PICA established a closed block for certain in-force participating insurance policies and annuity products, along with corresponding assets used for the payment of benefits and policyholders’ dividends on these products, (collectively the “Closed Block”), and ceased offering these participating products. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block division. See Note 22 for financial information on the Closed Block. The insurance policies and annuity contracts comprising the Closed Block are managed in accordance with the Plan of Reorganization approved by the New Jersey Department of Banking and Insurance (“NJDOBI”) on December 18, 2001, and PICA is directly obligated for the insurance policies and annuity contracts in the Closed Block.

The policies included in the Closed Block are specified individual life insurance policies and individual annuity contracts that were in force on the date of demutualization and for which PICA is currently paying or expects to pay experience-based policy dividends. Assets have been allocated to the Closed Block in an amount that has been determined to produce cash flows which, together with revenues from policies included in the Closed Block, are expected to be sufficient to support obligations and liabilities relating to these policies, including provision for payment of benefits, certain expenses and taxes and to provide for continuation of the policyholder dividend scales in effect in 2000, assuming experience underlying such scales continues. To the extent that, over time, cash flows from the assets allocated to the Closed Block and claims and other experience related to the Closed Block are, in the aggregate, more or less favorable than what was assumed when the Closed Block was established, total dividends paid to Closed Block policyholders may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect in 2000 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to Closed Block policyholders and will not be available to shareholders. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from PICA’s assets outside of the Closed Block. The Closed Block will continue in effect as long as any policy in the Closed Block remains in force unless, with the consent of the New Jersey insurance regulator, it is terminated earlier.

The excess of Closed Block liabilities over Closed Block assets at the date of the demutualization (adjusted to eliminate the impact of related amounts in AOCI) represented the estimated maximum future earnings at that date from the Closed Block expected to result from operations attributed to the Closed Block after income taxes. In establishing the Closed Block, the Company developed an actuarial calculation of the timing of such maximum future earnings. If actual cumulative earnings of the Closed Block from inception through the end of any given period are greater than the expected cumulative earnings, only the expected earnings will be recognized in income. Any excess of actual cumulative earnings over expected cumulative earnings will represent undistributed accumulated earnings attributable to policyholders, which are recorded as a policyholder dividend obligation. The policyholder dividend obligation represents amounts to be paid to Closed Block policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance that is less favorable than originally expected. If the actual cumulative earnings of the Closed Block from its inception through the end of any given period are less than the expected cumulative earnings of the Closed Block, the Company will recognize only the actual earnings in income.

As of December 31, 2020 and 2019, the Company recognized a policyholder dividend obligation of $2,920 million and $2,816 million, respectively, to Closed Block policyholders for the excess of actual cumulative earnings over the expected cumulative earnings. Additionally, accumulated net unrealized investment gains that have arisen subsequent to the establishment of the Closed Block have been reflected as a policyholder dividend obligation of $5,867 million and $3,332 million at December 31, 2020 and 2019, respectively, to be paid to Closed Block policyholders unless offset by future experience, with a corresponding amount reported in AOCI.

On December 7, 2018, PICA’s Board of Directors approved a continuation of the dividends payable on Closed Block policies for 2019. On December 6, 2019, PICA’s Board of Directors acted to decrease the dividends payable on Closed Block policies for 2020. On December 4, 2020, PICA’s Board of Directors acted to decrease the dividends payable on Closed Block policies for 2021. These actions resulted in decreases of approximately $86 million, $79 million and $147 million for the years ended December 31, 2018, 2019 and 2020, respectively, in the liability for policyholders’ dividends recognized.

Closed Block liabilities and assets designated to the Closed Block at December 31, as well as maximum future earnings to be recognized from these liabilities and assets, are as follows:


	2020		2019
	(in millions)
Closed Block liabilities
Future policy benefits	$	46,762	$	47,613
Policyholders’ dividends payable	635		717
Policyholders’ dividend obligation	8,787		6,149
Policyholders’ account balances	4,874		4,973
Other Closed Block liabilities	3,141		4,049
Total Closed Block liabilities	64,199		63,501
Closed Block assets
Fixed maturities, available-for-sale, at fair value	41,959		41,146
Fixed maturities, trading, at fair value	277		256
Equity securities, at fair value	2,345		2,245
Commercial mortgage and other loans	8,421		8,629
Policy loans	4,064		4,264
Other invested assets	3,610		3,333
Short-term investments	124		227
Total investments	60,800		60,100
Cash and cash equivalents	269		191
Accrued investment income	431		456
Other Closed Block assets	92		93
Total Closed Block assets	61,592		60,840
Excess of reported Closed Block liabilities over Closed Block assets	2,607		2,661
Portion of above representing accumulated other comprehensive income (loss):
Net unrealized investment gains (losses)	5,810		3,280
Allocated to policyholder dividend obligation	(5,867)		(3,332)
Future earnings to be recognized from Closed Block assets and Closed Block liabilities	$	2,550	$	2,609

Information regarding the policyholder dividend obligation is as follows:


	2020		2019
	(in millions)
Balance, January 1	$	6,149	$	3,150
Cumulative effect adjustment from the adoption of ASU 2016-13(1)	(13)		0
Impact from earnings allocable to policyholder dividend obligation	117		564
Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation	2,534		2,435
Balance, December 31	$	8,787	$	6,149

__________

(1)See Note 2 for more information.

Closed Block revenues and benefits and expenses for the years ended December 31, are as follows:


	2020		2019		2018
	(in millions)
Revenues
Premiums	$	1,981	$	2,207	$	2,301
Net investment income	2,255		2,332		2,298
Realized investment gains (losses), net	182		521		130
Other income (loss)	362		589		(39)
Total Closed Block revenues	4,780		5,649		4,690
Benefits and Expenses
Policyholders’ benefits	2,758		2,906		2,972
Interest credited to policyholders’ account balances	127		130		132
Dividends to policyholders	1,549		2,187		1,236
General and administrative expenses	327		351		364
Total Closed Block benefits and expenses	4,761		5,574		4,704
Closed Block revenues, net of Closed Block benefits and expenses, before income taxes	19		75		(14)
Income tax expense (benefit)	(43)		10		(78)
Closed Block revenues, net of Closed Block benefits and expenses and income taxes	$	62	$	65	$	64

Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The following schedule discloses significant components of income tax expense (benefit) for each year presented:


	Year Ended December 31,
	2020		2019		2018

	(in millions)
Current tax expense (benefit):
U.S.	$	(571)	$	86	$	(346)
State and local	11		2		7
Foreign	848		879		681
Total current tax expense (benefit)	288		967		342
Deferred tax expense (benefit):
U.S.	(362)		57		80
State and local	1		(1)		1
Foreign	(8)		(76)		399
Total deferred tax expense (benefit)	(369)		(20)		480
Total income tax expense (benefit) on income (loss) before equity in earnings of operating joint ventures	(81)		947		822
Income tax expense (benefit) on equity in earnings of operating joint ventures	47		43		31
Income tax expense (benefit) on discontinued operations	0		0		0
Income tax expense (benefit) reported in equity related to:
Other comprehensive income (loss)	1,252		3,811		(1,812)
Stock-based compensation programs	0		0		0
Total income taxes	$	1,218	$	4,801	$	(959)

Reconciliation of Expected Tax at Statutory Rates to Reported Income Tax Expense (Benefit)

The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% applicable for 2020, 2019 and 2018, and the reported income tax expense (benefit) are summarized as follows:


	Year Ended December 31,
	2020			2019(1)			2018(1)

	(in millions)
Expected federal income tax expense (benefit)	$	(68)		$	1,068		$	1,015
Non-taxable investment income	(228)			(270)			(250)
Foreign taxes at other than U.S. rate	252			234			347
Low-income housing and other tax credits	(112)			(118)			(112)


Changes in tax law	(194)			(2)			(321)
Sale of subsidiary	277			4			10
Non-controlling interest	(48)			(11)			0
Non-deductible expenses	14			23			33
Change in valuation allowance	17			(1)			(6)
State taxes	10			1			6
Other	(1)			19			100
Reported income tax expense (benefit)	$	(81)		$	947		$	822
Effective tax rate	25.1		%	18.6		%	17.0		%

__________

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

The effective tax rate is the ratio of “Total income tax expense (benefit)” divided by “Income before income taxes and equity in earnings of operating joint ventures.” The Company’s effective tax rate for fiscal years 2020, 2019 and 2018 was 25.1%, 18.6% and 17.0%, respectively. The following is a description of items that had the most significant impact on the difference between the Company’s statutory U.S. federal income tax rate of 21% applicable for 2020, 2019 and 2018, and the Company’s effective tax rate during the periods presented:

Non-Taxable Investment Income. The U.S. Dividends Received Deduction (“DRD”) reduces the amount of dividend income subject to U.S. tax and accounts for most of the non-taxable investment income shown in the table above. More specifically, the U.S. DRD constitutes $109 million of the total $228 million of 2020 non-taxable investment income, $122 million of the total $270 million of 2019 non-taxable investment income, and $127 million of the total $250 million of 2018 non-taxable investment income. The DRD for the current period was estimated using information from 2019, current year investment results, and current year’s equity market performance. The actual current year DRD can vary based on factors such as, but not limited to, changes in the amount of dividends received that are eligible for the DRD, changes in the amount of distributions received from fund investments, changes in the account balances of variable life and annuity contracts, and the Company’s taxable income before the DRD.

Foreign Taxes at Other Than U.S. Rates. The statutory income tax rate in the Company’s largest non-U.S. tax jurisdiction is approximately 28% in Japan as compared to the U.S. federal income tax rate of 21% applicable for 2020, 2019 and 2018.

The 952 Election. The Company made a tax election, effective for the 2017 and later tax years, to subject earnings from its insurance operations in Brazil to tax in the U.S. in the tax year earned, net of related foreign tax credits. This election has the effect of reducing the rate at which the Company will incur taxes on these earnings from the approximately 40% tax rate in Brazil to the 21% tax rate in the U.S., which in turn will reduce the amount of associated income tax expense in 2018 and thereafter. In conjunction with this election, the Company remeasured its related deferred tax assets from the previous 45% rate in Brazil to the new rate of 21% in the U.S., which resulted in additional income tax expense at the time of election. The net effect of the lower tax rate and the remeasurement of the deferred tax assets was a net increase (decrease) in income tax expense of $34 million in 2018, $(3) million in 2019 and $24 million in 2020. In October 2019, the IRS issued a legal memorandum, applicable to all taxpayers, in which the IRS argues that the election became inoperable in 1998. The Company disagrees with

the IRS’s position and intends to defend its position. If the Company is ultimately not successful, it will not be able to claim a U.S. tax credit for the Brazil taxes in excess of the U.S. tax rate, and thus will have a higher tax expense over time.

Low-Income Housing and Other Tax Credits. These amounts include incentives within the U.S. tax code for the development of affordable housing aiming at low-income Americans. The Company routinely makes such investments that generate a tax credit which reduces the Company’s effective tax rate.

Changes in Tax Law. The following is a list of notable changes in tax law that impacted the Company’s effective tax rate for the periods presented:

Tax Act of 2017. On December 22, 2017, the Tax Act of 2017 was enacted into U.S. law. During 2018, the Company completed the collection, preparation and analysis of data relevant to the Tax Act of 2017, and interpreted any additional guidance issued by the IRS, U.S. Department of the Treasury, or other standard-setting organizations, and recognized a $153 million reduction in income tax expense primarily related to refinements of our provisional estimates of earnings of affiliated foreign companies subject to the one-time toll charge.

2018 Industry Issue Resolution (IIR). In August 2018, the IRS released a Directive to provide guidance on the tax reserving for guaranteed benefits within variable annuity contracts and principle-based reserves on certain life insurance contracts. Adopting the methodology specified in the Directive resulted in an accelerated deduction for the Company’s 2017 tax return that would have otherwise been deductible in future years. Prior to the adoption of this Directive, the Company accounted for these future deductions as deferred tax assets measured using the current 21% corporate income tax rate. Upon adoption of the Directive, the tax benefits were revalued using the 35% tax rate applicable for the 2017 tax year and resulted in a reduction in income tax expense of $198 million in 2018.

The CARES Act. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law. One provision of the CARES Act amends the Tax Act of 2017 and allows companies with net operating losses (“NOLs”) originating in 2020, 2019 or 2018 to carry back those losses for up to five years. For 2020, the Company has recorded an income tax benefit of $149 million and $51 million from carrying the estimated 2020 NOL and 2018 NOL back to tax years that have a 35% tax rate.

Sale of Subsidiary. This line item is primarily related to a lower tax basis than our GAAP basis for subsidiaries sold. See Note 1 for additional information on the sale of subsidiary-related items.

Other. This line item represents insignificant reconciling items that are individually less than 5% of the computed expected federal income tax expense (benefit) and have therefore been aggregated for purposes of this reconciliation in accordance with relevant disclosure guidance.

GILTI High Tax Exclusion. On July 20, 2020, the U.S. Treasury and the Internal Revenue Service issued Final Regulations which will allow an annual election to exclude from the U.S. tax return certain GILTI amounts when the taxes paid by a foreign affiliate exceed 18.9% (90% of U.S. statutory rate of 21%) of the GILTI amount for that foreign affiliate (the “high-tax exception”). These regulations are effective for the 2021 taxable year with an election to apply to any taxable year beginning after 2017. In many of the countries in which we operate, including Japan, there are differences between local tax rules used to determine the tax base and the U.S. tax principles used to determine GILTI. Also, our Japan affiliates have a different tax year than the U.S. calendar tax year used to determine GILTI. Therefore, while many of the countries, including Japan, have a statutory tax rate above the 18.9% threshold, separate affiliates may not meet the 18.9% threshold each year and, as such, may not qualify for this exclusion. The Company plans to make the high-tax exception election for the 2020 tax year and recorded lower 2020 GILTI cost included in “Total income tax expense” for 2020. Additionally, the Company plans to make an election for 2018 by filing an amended tax return and recorded an estimated tax benefit of $4 million in “Total income tax expense” for 2020.

The Treasury Department and the IRS also issued Proposed Regulations on July 20, 2020 which would require that, if a high-tax exception election is made with respect to GILTI in any year, an election having the same effect must also be made with regard to income taxed under Subpart F of the Tax Code. Such an election under Subpart F of the Tax Code would apply to the Full Inclusion election made by the Company for its insurance operations in Brazil, thereby increasing the tax rate applied to our Brazil insurance operations. The Proposed Regulations will be effective for taxable years beginning after they are issued in final form.

Schedule of Deferred Tax Assets and Deferred Tax Liabilities


	As of December 31,
	2020		2019
	(in millions)
Deferred tax assets:
Insurance reserves	$	1,926	$	730
Policyholders’ dividends	1,901		1,365
Net operating and capital loss carryforwards	205		189

Employee benefits	929		973

Other	206		113
Deferred tax assets before valuation allowance	5,167		3,370
Valuation allowance	(143)		(136)
Deferred tax assets after valuation allowance	5,024		3,234
Deferred tax liabilities:

Net unrealized investment gains	13,841		11,109
Deferred policy acquisition costs	3,518		3,799
Investments	19		138

Value of business acquired	270		262

Deferred tax liabilities	17,648		15,308
Net deferred tax liability	$	(12,624)	$	(12,074)

The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, the Company considers many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) in which tax jurisdictions they were generated and the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable earnings exclusive of reversing temporary differences and carryforwards; (5) the length of time that carryovers can be utilized in the various taxing jurisdictions; (6) any unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused. Although realization is not assured, management believes it is more likely than not that the deferred tax assets, net of valuation allowances, will be realized.

A valuation allowance has been recorded against deferred tax assets related to federal, state and local taxes and foreign operations. Adjustments to the valuation allowance are made to reflect changes in management’s assessment of the amount of the deferred tax asset that is realizable and the amount of deferred tax asset actually realized during the year. The valuation allowance includes amounts recorded in connection with deferred tax assets as follows:


	Federal		State		Foreign Operations		Total
	(in millions)
Balance at January 1, 2018	$	0	$	196	$	18	$	214
Charged to costs and expenses	0		24		(6)		18
Other adjustments	0		(114)		(1)		(115)
Balance at December 31, 2018	0		106		11		117
Charged to costs and expenses	3		34		(5)		32
Other adjustments	0		(13)		0		(13)
Balance at December 31, 2019	3		127		6		136
Charged to costs and expenses	12		5		5		22
Other adjustments	0		(16)		1		(15)
Balance at December 31, 2020	$	15	$	116	$	12	$	143

The following table sets forth the amount and expiration dates of federal, state and foreign operating, capital loss and tax credit carryforwards for tax purposes, as of the periods indicated:


	As of December 31,
	2020		2019
	(in millions)
Federal net operating and capital loss carryforwards(1)	$	231	$	33
State net operating and capital loss carryforwards(2)	$	1,880	$	2,005
Foreign net operating and capital loss carryforwards(3)	$	136	$	203
Federal foreign tax credit carryforwards(4)	$	9	$	4
General business credits(5)	$	82	$	0

__________

(1)Expires in 2025.

(2)Expires between 2021 and 2040.

(3)$2 million expires between 2021 and 2035 and $54 million has an unlimited carryforward.

(4)Expires in 2030. These relate to foreign non-general basket tax credits.

(5)Expires in 2040.

Consistent with the Tax Act of 2017, the Company provides applicable U.S. income tax for all unremitted earnings of the Company’s foreign affiliates. For certain foreign affiliates organized in withholding tax jurisdictions, the Company considers the unremitted foreign earnings of those affiliates to be indefinitely reinvested, and therefore does not provide for the withholding tax when calculating its current and deferred tax obligations. For certain other foreign affiliates organized in withholding tax jurisdictions, the Company does not consider unremitted earnings indefinitely reinvested, and therefore provides for foreign withholding tax when calculating its current and deferred tax obligations. The following table summarizes the Company’s indefinite reinvestment assertions for jurisdictions in which the Company operates that impose a withholding tax on dividends or may be subject to other foreign country tax upon a remittance:


Unremitted earnings are indefinitely reinvested			Unremitted earnings are not indefinitely reinvested
Insurance operations in Chile and China and non-insurance operations in Korea and certain operations in Luxembourg			Insurance operations in Argentina, India, Indonesia, Ghana and Taiwan, and non-insurance operations in China, India, Italy and Taiwan

During the first and second quarters of 2018, respectively, the Company determined that the earnings of its Polish and Italian insurance operations would be repatriated to the United States; accordingly, these earnings were not considered indefinitely reinvested, and the Company recognized an income tax expense of $10 million in “Income (loss) before equity in earnings of operating joint ventures” during 2018. During the first and fourth quarters of 2018, the Company determined that a portion of the earnings of its Korean insurance operation would be repatriated to the United States; accordingly, a portion of these earnings were not considered indefinitely reinvested, and the Company recognized an income tax expense of $14 million in “Income (loss) before equity in earnings of operating joint ventures” during 2018. The Company made no changes with respect to its repatriation assumptions in 2019. During the second and third quarters of 2020, respectively, the Company determined that the earnings of its Korean and Taiwan insurance operations would be repatriated to the United States; accordingly, these earnings were not considered indefinitely reinvested, and the Company recognized an income tax expense of $132 million in “Income (loss) before equity in earnings of operating joint ventures” during 2020. During the second quarter of 2020, the Company changed the permanent investment assertion for Europrisa Management Company S.A (Luxembourg) due to a plan to liquidate the company, which gave rise to an immaterial amount of income tax expense during 2020.

The following table sets forth the undistributed earnings of foreign subsidiaries, where the Company assumes indefinite reinvestment of such earnings and for which, in 2020, 2019, and 2018, U.S. deferred taxes have not been provided, and for which foreign deferred withholding taxes have not been provided. The net tax liability that may arise if the 2020 earnings were remitted which includes any foreign exchange impacts, is immaterial.


	At December 31,
	2020		2019		2018
	(in millions)
Undistributed earnings of foreign subsidiaries (assuming indefinite reinvestment for U.S. tax purposes)(1)	N/A		N/A		N/A
Undistributed earnings of foreign subsidiaries (assuming indefinite reinvestment only for Withholding or other non-U.S. Taxes)	$	176	$	2,764	$	2,475

__________

(1)Consistent with the Tax Act of 2017, the Company provides U.S. income tax for all unremitted earnings of the Company’s foreign affiliates as of December 31, 2017.

The Company’s “Income (loss) before income taxes and equity in earnings of operating joint ventures” includes income (loss) from domestic operations of $(3,226) million, $1,985 million and $1,447 million, and income (loss) from foreign operations of $2,903 million, $3,101 million and $3,387 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Tax Audit and Unrecognized Tax Benefits

The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest that relate to tax years still subject to review by the IRS or other taxing authorities. The completion of review or the expiration of the Federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes.

The following table reconciles the total amount of unrecognized tax benefits at the beginning and end of the periods indicated:


	2020		2019		2018
	(in millions)
Balance at January 1,	$	18	$	20	$	45
Increases in unrecognized tax benefits—prior years	0		0		20
(Decreases) in unrecognized tax benefits—prior years	(1)		(2)		0
Increases in unrecognized tax benefits—current year	0		0		0
(Decreases) in unrecognized tax benefits—current year	0		0		0
Settlements with taxing authorities	0		0		(45)
Balance at December 31,	$	17	$	18	$	20
Unrecognized tax benefits that, if recognized, would favorably impact the effective rate	$	0	$	0	$	0

The Company does not anticipate any significant changes within the next twelve months to its total unrecognized tax benefits related to tax years for which the statute of limitations has not expired.

The Company classifies all interest and penalties related to tax uncertainties as income tax expense (benefit). The amounts recognized in the consolidated financial statements for tax-related interest and penalties for the years ended December 31 are as follows:


	2020		2019		2018
	(in millions)
Interest and penalties recognized in the Consolidated Statements of Operations	$	1	$	1	$	1


	2020		2019
	(in millions)
Interest and penalties recognized in liabilities in the Consolidated Statements of Financial Position	$	3	$	2

Listed below are the tax years that remain subject to examination, by major tax jurisdiction, as of December 31, 2020:


Major Tax Jurisdiction						Open Tax Years
United States						2014-2020
Japan						Fiscal years ended March 31, 2016-2020
Korea						2015-2020

The Company participates in the IRS’s Compliance Assurance Program. Under this program, the IRS assigns an examination team to review completed transactions as they occur in order to reach agreement with the Company on how they should be reported in the relevant tax returns. If disagreements arise, accelerated resolutions programs are available to resolve the disagreements in a timely manner.

Some of the Company’s affiliates in Japan file a consolidated tax return, while others file separate tax returns. The Company’s affiliates in Japan are subject to audits by the local taxing authority. The general statute of limitations is five years from when the return is filed. The Japanese National Tax Service conducted tax audits of some non-insurance companies during the reporting period, which had no material impact on the Company’s 2020, 2019 or 2018 results.

The Company’s affiliates in South Korea file separate tax returns and are subject to audits by the local taxing authority. The general statute of limitations is five years from when the return is filed. During 2020, the Korean tax authority substantially completed a routine tax audit of Prudential of Korea for 2017, 2016, and 2015 tax years. These activities are expected to have no material impact on the Company’s 2020, 2019 or 2018 results.

Short-Term and Long-Term Debt

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Short-Term and Long-Term Debt

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

SHORT-TERM AND LONG-TERM DEBT

Short-term Debt

The table below presents the Company’s short-term debt at December 31, for the years indicated as follows:


	2020			2019
	($ in millions)
Commercial paper:
Prudential Financial	$	25		$	25
Prudential Funding, LLC	355			524
Subtotal commercial paper	380			549

Current portion of long-term debt:
Senior Notes	399			1,179
Mortgage Debt	128			192
Surplus Notes subject to set-off arrangements (1)	500			0

Subtotal Current portion of long-term debt	1,027			1,371
Other(2)	18			13
Subtotal	1,425			1,933
Less: Assets under set-off arrangements (1)	500			0
Total short-term debt(3)	$	925		$	1,933
Supplemental short-term debt information:
Portion of commercial paper borrowings due overnight	$	75		$	224
Daily average commercial paper outstanding for the quarter ended	$	1,602		$	1,702
Weighted average maturity of outstanding commercial paper, in days	18			6
Weighted average interest rate on outstanding commercial paper	0.11		%	1.61		%

__________

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

(2)Includes $18 million drawn on a revolving line of credit held by a subsidiary at December 31, 2020.

(3)Includes Prudential Financial debt of $424 million and $1,204 million at December 31, 2020 and 2019, respectively.

At December 31, 2020 and 2019, the Company was in compliance with all covenants related to the above debt.

Commercial Paper

Prudential Financial has a commercial paper program with an authorized capacity of $3.0 billion. Prudential Financial’s commercial paper borrowings have generally been used to fund the working capital needs of Prudential Financial’s subsidiaries and provide short-term liquidity at Prudential Financial.

Prudential Funding, LLC (“Prudential Funding”), a wholly-owned subsidiary of PICA, has a commercial paper program, with an authorized capacity of $7.0 billion. Prudential Funding commercial paper borrowings generally have served as an additional source of financing to meet the working capital needs of PICA and its subsidiaries. Prudential Funding also lends to other subsidiaries of Prudential Financial up to limits agreed with the NJDOBI. Prudential Funding maintains a support agreement with PICA whereby PICA has agreed to maintain Prudential Funding’s tangible net worth at a positive level. Additionally, Prudential Financial has issued a subordinated guarantee covering Prudential Funding’s $7.0 billion commercial paper program.

Federal Home Loan Bank of New York

PICA is a member of the FHLBNY. Membership allows PICA access to the FHLBNY’s financial services, including the ability to obtain collateralized loans and to issue collateralized funding agreements. Under applicable law, the funding agreements issued to the FHLBNY have priority claim status above debt holders of PICA. FHLBNY borrowings and funding agreements are collateralized by qualifying mortgage-related assets or U.S. Treasury securities, the fair value of which must be maintained at certain specified levels relative to outstanding borrowings. FHLBNY membership requires PICA to own member stock and borrowings require the purchase of activity-based stock in an amount equal to 4.5% of outstanding borrowings. Under FHLBNY guidelines, if any of PICA’s financial strength ratings decline below A-/A3/A- Negative by S&P/Moody’s/Fitch, respectively, and the FHLBNY does not receive written assurances from the NJDOBI regarding PICA’s solvency, new borrowings from the FHLBNY would be limited to a term of 90 days or less. Currently there are no restrictions on the term of borrowings from the FHLBNY. All FHLBNY stock purchased by PICA is classified as restricted general account investments within “Other invested assets,” and the carrying value of these investments was $147.4 million and $30.2 million as of December 31, 2020 and 2019, respectively.

NJDOBI permits PICA to pledge collateral to the FHLBNY in an amount of up to 5% of its prior year-end statutory net admitted assets, excluding separate account assets. Based on PICA’s statutory net admitted assets as of December 31, 2019, the 5% limitation equates to a maximum amount of eligible assets of $7.3 billion and an estimated maximum borrowing capacity (after taking into account required collateralization levels) of approximately $6.6 billion. Nevertheless, FHLBNY borrowings are subject to the FHLBNY’s discretion and to the availability of qualifying assets at PICA.

In the first quarter of 2020, PICA issued $3.6 billion in funding agreements under the FHLBNY facility. As of December 31, 2020, $2.5 billion of funding agreements remain outstanding under this facility with maturities ranging from January 2021 to February 2027 and rates from 0.620% to 1.925%. These funding agreements are reflected as “Policyholders’ account balances” on the Consolidated Statements of Financial Position and as such are not included in the foregoing table.

Federal Home Loan Bank of Boston

Prudential Retirement Insurance and Annuity Company (“PRIAC”) is a member of the Federal Home Loan Bank of Boston (“FHLBB”). Membership allows PRIAC access to collateralized advances which will be classified in “Short-term debt” or “Long-term debt,” depending on the maturity date of the obligation. PRIAC’s membership in FHLBB requires the ownership of member stock and borrowings from FHLBB require the purchase of activity-based stock in an amount between 3.0% and 4.5% of outstanding borrowings, depending on the maturity date of the obligation. All FHLBB stock purchased by PRIAC is classified as restricted general account investments within “Other invested assets,” and the carrying value of these investments was $6 million and $6 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020, PRIAC had no advances outstanding under the FHLBB facility.

Under Connecticut state insurance law, without the prior consent of the Connecticut Insurance Department, the amount of assets insurers may pledge to secure debt obligations is limited to the lesser of 5% of prior-year statutory admitted assets or 25% of prior-year statutory surplus, resulting in a maximum borrowing capacity for PRIAC under the FHLBB facility of approximately $265 million as of December 31, 2020.

Credit Facilities

As of December 31, 2020, the Company maintained syndicated, unsecured committed credit facilities as described below.


Borrower	Original Term	Expiration Date	Capacity		Amount Outstanding
			(in millions)
Prudential Financial and Prudential Funding	5 years	Jul 2022	$	4,000	$	0
Prudential Holdings of Japan, Inc.	5 years	Sep 2024	¥	100,000	¥	0

The $4.0 billion five-year credit facility contains customary representations and warranties, covenants and events of default and borrowings are not contingent on the borrowers’ credit ratings nor subject to material adverse change clauses. Borrowings under this facility are conditioned on the continued satisfaction of customary conditions, including Prudential Financial’s maintenance of consolidated net worth of at least $20.958 billion, which is calculated as U.S. GAAP equity, excluding AOCI, equity of noncontrolling interests and equity attributable to the Closed Block. The Company expects that it may borrow under the facility from time to time to fund its working capital needs. In addition, amounts under this credit facility may be drawn in the form of standby letters of credit that can be used to meet the Company’s operating needs.

The ¥100 billion five-year facility was entered into by Prudential Holdings of Japan, Inc. (“PHJ”) in September 2019. This facility also contains customary representations and warranties, covenants, and events of default and borrowings are not contingent on the borrower’s credit ratings nor subject to material adverse change clauses.

Borrowings under each of these credit facilities may be used for general corporate purposes. As of December 31, 2020, the Company was in compliance with the covenants under each of these credit facilities.

In addition to the above credit facilities, the Company had access to $219 million of certain other lines of credit at December 31, 2020, of which $175 million was for the sole use of certain real estate separate accounts. The separate account facilities include loan-to-value ratio requirements and other financial covenants, and recourse on obligations under these facilities is limited to the assets of the applicable separate account. At December 31, 2020, $31 million of these credit facilities were used. The Company also has access to uncommitted lines of credit from financial institutions.

Agreements for Senior Notes Issuance

In November 2013, Prudential Financial entered into a ten-year put option agreement with a Delaware trust upon the completion of the sale of $1.5 billion of trust securities by that Delaware trust in a Rule 144A private placement. The trust invested the proceeds from the sale of the trust securities in a portfolio of principal and interest strips of U.S. Treasury securities. The put option agreement provides Prudential Financial the right to sell to the trust at any time up to $1.5 billion of 4.419% senior notes due November 2023 and receive in exchange a corresponding amount of U.S. Treasury securities held by the trust. In return, the Company agreed to pay a semi-annual put premium to the trust at a rate of 1.777% per annum applied to the unexercised portion of the put option. The put option agreement with the trust provides Prudential Financial with a source of liquid assets.

The put option described above will be exercised automatically in full upon the Company’s failure to make certain payments to the trust, such as paying the put option premium or reimbursing the trust for its expenses, if the Company’s failure to pay is not cured within 30 days, and upon an event involving its bankruptcy. The Company is also required to exercise the put option if its consolidated stockholders’ equity, calculated in accordance with U.S. GAAP but excluding AOCI, falls below $7.0 billion, subject to adjustment in certain cases. The Company has a one-time right to unwind a prior voluntary exercise of the put option by repurchasing all of the senior notes then held by the trust in exchange for a corresponding amount of U.S. Treasury securities. Finally, Prudential Financial may redeem all but not less than all outstanding senior notes prior to their maturity at a redemption price equal to the greater of par or a make-whole price, following a voluntary exercise in full of the put option.

In May 2020, Prudential Financial entered into a ten-year facility agreement with a Delaware trust upon the completion of the sale of $1.5 billion of trust securities by that Delaware trust in a Rule 144A private placement. The trust invested the proceeds from the sale of the trust securities in a portfolio of principal and/or interest strips of U.S. Treasury securities. The facility agreement provides Prudential Financial the right to issue and sell to the trust from time to time up to $1.5 billion of 2.850% senior notes due May 15, 2030 and receive in exchange a corresponding amount of the U.S. Treasury securities held by the trust. In return, the Company agreed to pay a semi-annual facility fee to the trust at a rate of 2.175% per annum applied to the maximum amount of senior notes that the Company could issue and sell to the trust. Similar to the Company’s put option agreement, the facility agreement with the trust provides Prudential Financial with a source of liquid assets.

The right to issue senior notes described above will be exercised automatically in full upon the Company’s failure to make certain payments to the trust, such as paying the facility fee or reimbursing the trust for its expenses, if the Company’s failure to pay is not cured within 30 days, and upon an event involving its bankruptcy. The Company is also required to exercise this issuance right if its consolidated stockholders’ equity, calculated in accordance with U.S. GAAP but excluding AOCI, falls below $9.0 billion, subject to adjustment in certain cases. Prior to any involuntary exercise of the issuance right, the Company has the right to repurchase any of its senior notes then held by the trust in exchange for a corresponding amount of U.S. Treasury securities. Finally, Prudential Financial may redeem any outstanding senior notes, in whole or in part, prior to February 15, 2030, at a redemption price equal to the greater of par or a make-whole price, or thereafter, at par.

Long-term Debt

The table below presents the Company’s long-term debt at December 31, for the years indicated as follows:


	Maturity Dates	Rate(1)	December 31,
			2020		2019
			($ in millions)
Fixed-rate notes:
Surplus notes	2025	8.3%	$	343	$	342
Surplus notes subject to set-off arrangements	2022-2038	2.23%-5.26%	8,134		7,484
Senior notes	2023-2051	1.5%-6.75%	11,179		10,084
Mortgage debt(2)	2027	3.85%	24		104
Floating-rate notes:
Line of Credit	2023	1.41%-3.10%	300		300
Surplus notes subject to set-off arrangements	2024-2037	1.61%-3.5%	2,330		2,265

Mortgage debt(3)	2022-2024	1.43%-3.88%	257		241
Junior subordinated notes(4)	2042-2060	1.55%-5.88%	7,615		7,575
Subtotal			30,182		28,395
Less: assets under set-off arrangements(5)			10,464		9,749
Total long-term debt(6)			$	19,718	$	18,646

__________

(1)Ranges of interest rates are for the year ended December 31, 2020.

(2)Includes $0 and $43 million of debt denominated in foreign currency at December 31, 2020 and 2019, respectively.

(3)Includes $29 million and $53 million of debt denominated in foreign currency at December 31, 2020 and 2019, respectively.

(4)Includes Prudential Financial debt of $7,554 million and subsidiary debt of $60 million denominated in foreign currency at December 31, 2020.

(5)Assets under set-off arrangements represent a reduction in the amount of surplus notes included in long-term debt, resulting from an arrangement where valid rights of set-off exist and it is the intent of both parties to settle on a net basis under legally enforceable arrangements. These assets include available-for-sale securities that are reported at fair value.

(6)Includes Prudential Financial debt of $18,561 million and $17,430 million at December 31, 2020 and 2019, respectively.

At December 31, 2020 and 2019, the Company was in compliance with all debt covenants related to the borrowings in the table above.

The following table presents the contractual maturities of the Company’s long-term debt as of December 31, 2020:


	Calendar Year
	2022		2023		2024		2025		2026 and thereafter		Total
	(in millions)
Long-term debt	$	136	$	572	$	724	$	348	$	17,938	$	19,718

Senior Notes

Under its shelf registration statement the Company maintains a Medium-Term Notes Program and an InterNotes® Retail Notes Program which have authorized issuance capacities of $20.0 billion and $5.0 billion, respectively.

The table below presents the Company’s senior notes and mortgage debt balances as of December 31, 2020 for the years indicated as follows:


Facility Name	Maturity Date Range	2020 Amount Outstanding		2019 Amount Outstanding
		($ in millions)
Medium-Term Notes(1)	2021-2051	$	9,847	$	9,508
Senior Notes	2047-2049	1,462		1,455
InterNotes® Retail Notes	2029-2045	270		302
Mortgage Debt(2)	2021-2027	409		537
Total		$	11,988	$	11,802

__________

(1)Includes $400 million of notes from current portion of long-term debt.

(2)Includes $128 million of notes from current portion of long-term debt.

Medium-Term Notes Program. The outstanding balance of this program increased by $0.3 billion from December 31, 2019. The increase was due to the issuance of $0.5 billion of medium-term notes with an interest rate of 1.5% maturing in March 2026, $0.5 billion of notes with an interest rate of 2.1% maturing in 2030, and $0.5 billion of notes with an interest rate of 3.0% maturing in 2040, offset by $1.2 billion of maturities in June and November 2020. As of December 31, 2020, $0.4 billion of the outstanding balance of this program is included in current portion of long-term debt.

The weighted average interest rate on outstanding senior notes issued under the Medium-Term Notes and InterNotes® Retail Notes Programs, including the effect of interest rate hedging activity, was 4.45% and 4.85% for the years ended December 31, 2020 and 2019, respectively, excluding the effect of debt issued to consolidated subsidiaries.

Mortgage Debt. Mortgage debt decreased by $128 million from December 31, 2019, primarily due to $200 million of prepayment activity, offset by new borrowings in 2020 of $71 million and foreign exchange fluctuations of $2 million. As of December 31, 2020, the Company’s subsidiaries had long-term mortgage debt of $409 million that has recourse only to real estate property held for investment by those subsidiaries, of which $128 million is included in current portion of long-term debt.

Funding Agreement Notes Issuance Program (“FANIP”). The Company maintains a FANIP in which statutory trusts issue medium-term notes and commercial paper secured by funding agreements issued to the trusts by PICA. These obligations are included in “Policyholders’ account balances” and not included in the foregoing table. See Note 12 for further discussion of these obligations.

Surplus Notes

As of December 31, 2020, PICA had $343 million of fixed-rate surplus notes outstanding. These notes are subordinated to other PICA borrowings and policyholder obligations, and the payment of interest and principal may only be made with the prior approval of the NJDOBI. The NJDOBI could prohibit the payment of the interest and principal on the surplus notes if certain statutory capital requirements are not met. At December 31, 2020 and 2019, the Company met these statutory capital requirements.

Surplus Notes with Set-Off Arrangements


Agreement Start Date	Maturity Years	Maximum Borrowing Capacity		2020 Amount Outstanding		2019 Amount Outstanding
		($ in millions)
Regulation XXX
2011-2014(1)(2)	2021-2024	$	1,750	$	1,750	$	1,750
2014-2017	2024-2037	2,400		2,330		2,265
2018	2038	1,600		1,070		920
Guideline AXXX
2013(3)	2033	3,500		3,248		3,248
2017	2037	2,000		1,466		1,466
2020	2032	1,200		700		0
Other Notes
2015-2019	2029	4,000		400		100
Total		$	16,450	$	10,964	$	9,749

__________

(1)Prudential has agreed to reimburse one of the external counterparties for any payment under the credit linked notes funded by it in an amount of up to $0.5 billion.

(2)Includes $0.5 billion of notes from current portion of long-term debt.

(3)The current financing capacity available under the facility is $3.5 billion but can be increased to a maximum potential size of $4.5 billion.

Surplus Notes Supporting Regulation XXX and Guideline AXXX Reserves

As shown in the table above, the Company’s captive reinsurance subsidiaries maintain facilities with external counterparties providing for the issuance of surplus notes by the captive to finance reserves required under Regulation XXX and Guideline AXXX. Under these facilities, the captives receive in exchange for the surplus notes one or more credit-linked notes issued by special-purpose affiliates in aggregate principal amounts equal to the surplus notes issued. The captives hold the credit-linked notes as assets supporting the non-economic portion of the statutory reserves required to be held by the Company’s domestic insurance subsidiaries under Regulation XXX and Guideline AXXX in connection with the reinsurance of term life or universal life insurance policies through the captive. The non-economic portion of the statutory reserve equals the difference between the statutory reserve required under Regulation XXX and Guideline AXXX and the amount the Company considers necessary to maintain solvency for moderately adverse experience. The credit-linked notes are redeemable for cash upon the occurrence of a liquidity stress event affecting the captives and external counterparties have agreed to fund these payments in return for a fee. Under certain of these different transactions, Prudential Financial has agreed to reimburse the captive for investment losses in excess of specified amounts.

For each of the above transactions, because valid rights of set-off exist, interest and principal payments on the surplus notes and on the related credit-linked notes are settled on a net basis, and the surplus notes are reflected in the Company’s total consolidated borrowings on a net basis. The surplus notes for the captive reinsurance subsidiaries described above are subordinated to policyholder obligations, and for certain applicable surplus notes, the repayment of principal may only be made with prior approval of the Arizona Department of Insurance and Financial Institutions, the domiciliary insurance regulator of the captives. The payment of interest on the surplus notes has been approved by the Arizona Department of Insurance and Financial Institutions, subject to its ability to withdraw that approval.

Other Surplus Notes

The surplus note facility listed under “Other Notes” in the table above reflects a financing facility that Prudential Legacy Insurance Company of New Jersey (“PLIC”) has entered into with certain external counterparties and a special-purpose affiliate, pursuant to which PLIC may, at its option, issue and sell to the affiliate up to $4.0 billion in aggregate principal amount of surplus notes, in return for an equal principal amount of credit-linked notes. The credit-linked notes are redeemable for cash upon the occurrence of a liquidity stress event affecting PLIC, and external counterparties have agreed to fund these payments in return for a fee. Upon issuance, PLIC would hold any credit-linked notes as assets to support future statutory surplus needs within PLIC.

Junior Subordinated Notes

Prudential Financial’s junior subordinated notes outstanding are considered hybrid securities that receive enhanced equity treatment from the rating agencies. These notes outstanding, along with their key terms, are as follows:


Issue Date	Principal Amount		Initial Interest Rate		Investor Type	Optional Redemption Date	Interest Rate Subsequent to Optional Redemption Date	Maturity Date
	($ in millions)
Aug-12	$	1,000	5.88	%	Institutional	9/15/2022	LIBOR + 4.18%	9/15/2042
Nov-12	$	1,500	5.63	%	Institutional	6/15/2023	LIBOR + 3.92%	6/15/2043
Mar-13	$	500	5.20	%	Institutional	3/15/2024	LIBOR + 3.04%	3/15/2044
May-15	$	1,000	5.38	%	Institutional	5/15/2025	LIBOR + 3.03%	3/15/2045
Sep-17	$	750	4.50	%	Institutional	9/15/2027	LIBOR + 2.38%	9/15/2047
Aug-18	$	565	5.63	%	Retail	8/15/2023	5.63%	8/13/2058
Sep-18	$	1,000	5.70	%	Institutional	9/15/2028	LIBOR + 2.67%	9/15/2048
Aug-20	$	500	4.13	%	Retail	9/1/2025	4.13%	9/1/2060
Aug-20	$	800	3.70	%	Institutional	10/1/2030	US Treasury + 3.04%	10/1/2050

The Company has the right to defer interest payments on these notes for specified periods, typically 5 to 10 years without resulting in a default, during which time interest will be compounded. On or after the optional redemption dates, Prudential Financial may redeem the notes at par plus accrued and unpaid interest. Prior to those optional redemption dates, redemptions generally are subject to a make-whole price; however, the Company may redeem the notes prior to these dates at par upon the occurrence of certain events, such as a future change in the regulatory capital treatment of the notes with respect to the Company.

Limited Recourse Notes

In 2014, the Company entered into financing transactions pursuant to which it issued $500 million of limited recourse notes and, in return, obtained $500 million of asset-backed notes issued by a designated series of a Delaware master trust. The asset-backed notes mature from 2021 through 2027; however, the maturity date of a portion of the notes may be extended by the Company through 2028, subject to conditions.

The master trust’s payment obligations under each of the asset-backed notes are secured by corresponding payment obligations of a third-party financial institution and a portfolio of specified assets that have an aggregate value at least equal to the principal amount of the applicable asset-backed note. The principal amount of each asset-backed note is payable to PRIAC in cash at any time upon demand by PRIAC or, if not repaid earlier, at maturity. Each of the limited recourse notes obligates Prudential Financial to reimburse the applicable third-party financial institution for any principal payments received on the corresponding asset-backed note, but there is no obligation to reimburse any portion of a principal payment that is needed by PRIAC to pay then current claims to its policyholders. Each limited recourse note bears interest at a rate equal to the rate on the corresponding asset-backed note, plus an amount representing fees payable to the applicable third-party financial institution. As of December 31, 2020, no principal payments have been received or are currently due on the asset-backed notes and, as a result, there was no payment obligation under the limited recourse notes. Accordingly, the notes are not reflected in the Consolidated Financial Statements as of December 31, 2020.

Interest Expense

In order to modify exposure to interest rate and currency exchange rate movements, the Company utilizes derivative instruments, primarily interest rate swaps, in conjunction with some of its debt issues. The impact of these derivative instruments is not reflected in the rates presented in the tables above. For those derivative instruments that qualify for hedge accounting treatment, interest expense was $2 million, less than $1 million, and $1 million for the years ended December 31, 2020, 2019 and 2018, respectively. See Note 5 for additional information on the Company’s use of derivative instruments.

Interest expense for short-term and long-term debt was $1,575 million, $1,563 million and $1,423 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Employee Benefit Plans

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

Pension and Other Postretirement Plans

The Company has funded and non-funded non-contributory defined benefit pension plans (“Pension Benefits”), which cover substantially all of its employees. For some employees, benefits are based on final average earnings and length of service (the “traditional formula”), while benefits for other employees are based on an account balance that takes into consideration age, length of service and earnings during their career (the “cash balance formula”). At December 31, 2020, approximately 77% of the Company’s Pension Benefits relate to its domestic qualified pension plan, which initially determined benefits based on the traditional formula. Effective January 1, 2001, active domestic employees covered under this plan were given the option to convert from the traditional formula to the cash balance formula, and all new domestic employees began accruing benefits under the cash balance formula. As of December 31, 2020, approximately 68% and 32% of the benefit obligation under this plan relates to participants under the traditional formula and cash balance formula, respectively. At December 31, 2020, the vast majority of active employees under this plan are accruing benefits under the cash balance formula.

The Company provides certain health care and life insurance benefits for its retired employees, their beneficiaries and covered dependents (“Other Postretirement Benefits”). The health care plan is contributory; the life insurance plan is non-contributory. Substantially all of the Company’s U.S. employees may become eligible to receive other postretirement benefits if they retire after age 55 with at least 10 years of service or under certain circumstances after age 50 with at least 20 years of continuous service.

Prepaid benefits costs and accrued benefit liabilities are included in “Other assets” and “Other liabilities,” respectively, in the Company’s Consolidated Statements of Financial Position. The status of these plans as of December 31, 2020 and 2019 is summarized below:


	Pension Benefits				Other Postretirement Benefits
	2020		2019		2020		2019
	(in millions)
Change in benefit obligation
Benefit obligation at the beginning of period	$	(14,637)	$	(13,185)	$	(1,993)	$	(1,876)

Service cost	(321)		(291)		(24)		(22)
Interest cost	(429)		(489)		(64)		(78)
Plan participants’ contributions	0		0		(22)		(21)
Medicare Part D subsidy receipts	0		0		(7)		(7)
Amendments	0		0		0		(27)
Curtailments	16		0		0		0
Actuarial gains (losses), net(1)	(978)		(1,499)		(101)		(124)
Settlements	43		45		0		0
Special termination benefits	(7)		(26)		0		(1)
Benefits paid	878		831		171		165
Acquisition/Divestiture	46		0		0		0
Foreign currency changes and other	(94)		(23)		0		(2)
Benefit obligation at end of period	$	(15,483)	$	(14,637)	$	(2,040)	$	(1,993)
Change in plan assets
Plan assets at beginning of period	$	13,906	$	12,807	$	1,557	$	1,432
Actual return on plan assets	1,740		1,681		171		264

Employer contributions	200		280		10		5
Plan participants’ contributions	0		0		22		21
Disbursement for settlements	(43)		(45)		0		0
Benefits paid	(878)		(831)		(171)		(165)
Acquisition/Divestiture	(51)		0		0		0
Foreign currency changes and other	23		14		0		0

Plan assets at end of period	$	14,897	$	13,906	$	1,589	$	1,557
Funded status at end of period	$	(586)	$	(731)	$	(451)	$	(436)
Amounts recognized in the Statements of Financial Position
Prepaid benefit cost	$	2,426	$	2,204	$	0	$	0
Accrued benefit liability	(3,012)		(2,935)		(451)		(436)
Net amount recognized	$	(586)	$	(731)	$	(451)	$	(436)
Items recorded in “Accumulated other comprehensive income (loss)” not yet recognized as a component of net periodic (benefit) cost:
Prior service cost	$	(10)	$	(12)	$	59	$	65
Net actuarial loss	3,972		4,191		354		341
Net amount not recognized	$	3,962	$	4,179	$	413	$	406
Accumulated benefit obligation	$	(14,690)	$	(13,934)	$	(2,040)	$	(1,993)

__________

(1)For 2020 and 2019, actuarial losses for pension and other postretirement benefits were primarily driven by a decrease in the discount rate.

In addition to the plan assets above, the Company in 2007 established an irrevocable trust, commonly referred to as a “rabbi trust,” for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain non-qualified retirement plans ($1,360 million and $1,301 million benefit obligation at December 31, 2020 and 2019, respectively). Assets held in the rabbi trust are available to the general creditors of the Company in the event of insolvency or bankruptcy. The Company may from time to time in its discretion make contributions to the trust to fund accrued benefits payable to participants in one or more of the plans, and, in the case of a change in control of the Company, as defined in the trust agreement, the Company will be required to make contributions to the trust to fund the accrued benefits, vested and unvested, payable on a pre-tax basis to participants in the plans. The Company did not make any discretionary payments to the trust in 2020 and 2019. As of December 31, 2020 and 2019, the assets in the trust had a carrying value of $1,044 million and $986 million, respectively.

The Company also maintains a separate rabbi trust for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain other non-qualified retirement plans ($77 million and $76 million benefit obligation at December 31, 2020 and 2019, respectively), as well as certain cash-based deferred compensation arrangements. As of December 31, 2020 and 2019, the assets in the trust had a carrying value of $111 million and $106 million, respectively.

Pension benefits for foreign plans comprised 13% and 14% of the ending benefit obligation for both 2020 and 2019, respectively. Foreign pension plans comprised 4% and 5% of the ending fair value of plan assets for both 2020 and 2019, respectively. There are no material foreign postretirement plans.

Information for pension plans with a projected benefit obligation in excess of plan assets


	2020		2019

	(in millions)
Projected benefit obligation	$	3,012	$	2,997
Fair value of plan assets	$	0	$	62

Information for pension plans with an accumulated benefit obligation in excess of plan assets


	2020		2019

	(in millions)
Accumulated benefit obligation	$	2,834	$	2,760
Fair value of plan assets	$	0	$	7

Components of Net Periodic Benefit Cost

The Company uses market related value to determine components of net periodic (benefit) cost. Market related value recognizes certain changes in fair value of plan assets over a period of five years. Changes in the fair value of U.S. equities, international equities, real estate and other assets are recognized over a five year period. However, changes in the fair value for fixed maturity assets (including short-term investments) are recognized immediately for the purposes of market related value.

Net periodic (benefit) cost included in “General and administrative expenses” in the Company’s Consolidated Statements of Operations for the years ended December 31, includes the following components:


	Pension Benefits						Other Postretirement Benefits
	2020		2019		2018		2020		2019		2018
	(in millions)
Service cost	$	321	$	291	$	314	$	24	$	22	$	23
Interest cost	429		489		448		64		78		70
Expected return on plan assets	(804)		(816)		(817)		(100)		(95)		(108)
Amortization of prior service cost	(4)		(4)		(4)		6		4		1
Amortization of actuarial (gain) loss, net	262		217		213		16		24		17
Settlements	9		59		8		0		0		0

Special termination benefits(1)(2)(3)	7		26		1		0		1		0
Net periodic (benefit) cost	$	220	$	262	$	163	$	10	$	34	$	3

__________

(1)For 2020, 2019 and 2018, 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.

(2)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 participation in the Voluntary Separation Program that was offered to eligible U.S.-based employees in 2019.

(3)For 2019, certain employees were provided special termination benefits in the qualified and non-qualified plans in the form of retirement eligibility bridging as a result of their participation in the Voluntary Separation Program that was offered to eligible U.S.-based employees.

Changes in Accumulated Other Comprehensive Income (Loss)

The benefit obligation is based upon actuarial assumptions such as discount, termination, retirement, mortality and salary growth rates. Changes at year-end in these actuarial assumptions, along with experience changes based on updated participant census data are deferred in AOCI. Plan assets generate actuarial gains and losses when actual returns on plan assets differ from expected returns on plan assets, and these differences are also deferred in AOCI. The cumulative deferred gain (loss) within AOCI is amortized into earnings if it exceeds 10% of the greater of the benefit obligation or plan assets at the beginning of the year, and the amortization period is based upon the actuarially calculated expected future years of service for a given plan.

The amounts recorded in AOCI as of the end of the period, which have not yet been recognized as a component of net periodic (benefit) cost, and the related changes in these items during the period that are recognized in “Other comprehensive income (loss)” are as follows:


	Pension Benefits				Other Postretirement Benefits
	Prior Service Cost		Net Actuarial (Gain) Loss		Prior Service Cost		Net Actuarial (Gain) Loss
	(in millions)
Balance, December 31, 2017	$	(22)	$	3,611	$	10	$	344
Amortization for the period	4		(213)		(1)		(17)
Deferrals for the period(1)	3		430		32		82
Impact of foreign currency changes and other	0		1		0		(1)
Balance, December 31, 2018	(15)		3,829		41		408
Amortization for the period	4		(217)		(4)		(24)
Deferrals for the period(2)	0		634		27		(45)
Impact of foreign currency changes and other	(1)		(55)		1		2
Balance, December 31, 2019	(12)		4,191		65		341
Amortization for the period	4		(262)		(6)		(16)
Deferrals for the period(3)	0		42		0		30
Impact of foreign currency changes and other	(2)		1		0		(1)
Balance, December 31, 2020	$	(10)	$	3,972	$	59	$	354

__________

(1)For 2018, deferred losses for pension and other postretirement benefits were driven by unfavorable asset performance partially offset by an increase in discount rate.

(2)For 2019, deferred losses for pension were driven by a decrease in discount rate partially offset by favorable asset performance. Deferred gains for other postretirement benefits were driven by favorable asset performance partially offset by a decrease in discount rate.

(3)For 2020, deferred losses for pension and other postretirement benefits were driven by a decrease in discount rate partially offset by favorable asset performance.

The Company’s assumptions related to the calculation of the domestic benefit obligation (end of period) and the determination of net periodic (benefit) cost (beginning of period) are presented in the table below:


	Pension Benefits						Other Postretirement Benefits
	2020		2019		2018		2020		2019		2018
Weighted average assumptions
Discount rate (beginning of period)	3.30	%	4.30	%	3.65	%	3.25	%	4.30	%	3.60	%
Discount rate (end of period)	2.55	%	3.30	%	4.30	%	2.40	%	3.25	%	4.30	%
Rate of increase in compensation levels (beginning of period)	4.50	%	4.50	%	4.50	%	N/A		N/A		N/A
Rate of increase in compensation levels (end of period)	4.50	%	4.50	%	4.50	%	N/A		N/A		N/A
Expected return on plan assets (beginning of period)	6.00	%	6.50	%	6.25	%	6.75	%	7.00	%	7.00	%
Interest crediting rate (beginning of period)	4.30	%	4.30	%	4.30	%	N/A		N/A		N/A
Interest crediting rate (end of period)	4.25	%	4.30	%	4.30	%	N/A		N/A		N/A
Health care cost trend rates (beginning of period)	N/A		N/A		N/A		6.25	%	6.00	%	6.20	%
Health care cost trend rates (end of period)	N/A		N/A		N/A		6.25	%	6.25	%	6.00	%
For 2020, 2019 and 2018, the ultimate health care cost trend rate after gradual decrease until: 2028, 2024, 2024, (beginning of period)	N/A		N/A		N/A		5.00	%	5.00	%	5.00	%
For 2020, 2019 and 2018, the ultimate health care cost trend rate after gradual decrease until: 2028, 2028, 2024 (end of period)	N/A		N/A		N/A		4.50	%	5.00	%	5.00	%

The domestic discount rate used to value the pension and postretirement obligations at December 31, 2020 and December 31, 2019 is based upon the value of a portfolio of Aa-rated investments whose cash flows would be available to pay the benefit obligation’s cash flows when due. The December 31, 2020 portfolio is selected from a compilation of approximately 440 Aa-rated bonds across the full range of maturities. Since yields can vary widely at each maturity point, the Company generally avoids using the highest and lowest yielding bonds at the maturity points, so as to avoid relying on bonds that might be mispriced or misrated. This refinement process generally results in having a distribution from the 10th to 90th percentile. The Aa-rated portfolio is then selected and, accordingly, its value is a measure of the benefit obligation. A single equivalent discount rate is calculated to equate the value of the Aa-rated portfolio to the cash flows for the benefit obligation. The result is rounded to the nearest 5 basis points and the benefit obligation is recalculated using the rounded discount rate.

The pension and postretirement expected long-term rates of return on plan assets for 2020 were determined based upon an approach that considered the allocation of plan assets as of December 31, 2019. Expected returns are estimated by asset class as noted in the discussion of investment policies and strategies below. Expected returns on asset classes are developed using a building-block approach that is forward looking and are not strictly based upon historical returns. The building blocks for equity returns include inflation, real return, a term premium, an equity risk premium, capital appreciation, expenses, the effect of active management and the effect of rebalancing. The building blocks for fixed maturity returns include inflation, real return, a term premium, credit spread, capital appreciation, effect of active management, expenses and the effect of rebalancing.

The Company applied the same approach to the determination of the expected rate of return on plan assets in 2021. The expected rate of return for 2021 is 5.75% and 6.75% for pension and postretirement, respectively.

The assumptions for foreign pension plans are based on local markets. There are no material foreign postretirement plans.

Plan Assets

The investment goal of the domestic pension plan assets is to generate an above benchmark return on a diversified portfolio of stocks, bonds and other investments. The cash requirements of the pension obligation, which include a traditional formula principally representing payments to annuitants and a cash balance formula that allows lump sum payments and annuity payments, are designed to be met by the bonds and short-term investments in the portfolio.

The investment goal of the domestic postretirement plan assets is to generate an above benchmark return on a diversified portfolio of stocks, bonds, and other investments, while meeting the cash requirements for the postretirement obligation that includes a medical benefit including prescription drugs, a dental benefit and a life benefit.

The pension and postretirement plans risk management practices include guidelines for asset concentration, credit rating, liquidity and tax efficiency. The pension and postretirement plans do not invest in leveraged derivatives. Derivatives such as futures contracts are used to reduce transaction costs and change asset concentration, while interest rate swaps and futures are used to adjust duration.

The plan fiduciaries for the Company’s pension and postretirement plans have developed guidelines for asset allocations reflecting a percentage of total assets by asset class, which are reviewed on an annual basis. Asset allocation targets as of December 31, 2020 are as follows:


	Pension				Postretirement
	Minimum		Maximum		Minimum		Maximum
Asset Category
U.S. Equities	2	%	8	%	31	%	70	%
International Equities	2	%	9	%	2	%	22	%
Fixed Maturities	54	%	67	%	10	%	45	%
Short-term Investments	0	%	12	%	0	%	31	%
Real Estate	2	%	16	%	0	%	0	%
Other	4	%	27	%	0	%	0	%

To implement the investment strategy, plan assets are invested in funds that primarily invest in securities that correspond to one of the asset categories under the investment guidelines. However, at any point in time, some of the assets in a fund may be of a different nature than the specified asset category.

Assets held with PICA are in either pooled separate accounts or single client separate accounts. Assets held with a bank are either in common/collective trusts or single client trusts. Pooled separate accounts and common/collective trusts hold assets for multiple investors. Each investor owns a “unit of account.” The asset allocation targets above include the underlying asset mix in the Pooled Separate Accounts and Common/Collective Trusts. Single client separate accounts or trusts hold assets for only one investor, the domestic qualified pension plan, and each security in the fund is treated as individually owned.

There were no investments in Prudential Financial Common Stock as of December 31, 2020 and December 31, 2019 for either the pension or postretirement plans.

The authoritative guidance around fair value established a framework for measuring fair value. Fair value is disclosed using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as described in Note 6.

The following describes the valuation methodologies used for pension and postretirement plans assets measured at fair value.

Insurance Company Pooled Separate Accounts, Common or Collective Trusts, and United Kingdom Insurance Pooled Funds—Insurance company pooled separate accounts are invested via group annuity contracts issued by PICA. Assets are represented by a “unit of account.” The redemption value of those units is based on a per unit value whose value is the result of the accumulated values of underlying investments. The unit of account value is used as a practical expedient to estimate fair value.

Equities—See Note 6 for a discussion of the valuation methodologies for equity securities.

U.S. Government Securities (both Federal and State & Other), Non–U.S. Government Securities, and Corporate Debt—See Note 6 for a discussion of the valuation methodologies for fixed maturity securities.

Interest Rate Swaps—See Note 6 for a discussion of the valuation methodologies for derivative instruments.

Registered Investment Companies (Mutual Funds)—Securities are priced at the NAV, which is the closing price published by the registered investment company on the reporting date.

Unrealized Gain (Loss) on Investment of Securities Lending Collateral—This value is the contractual position relative to the investment of securities lending collateral.

Short-term Investments—Securities are valued initially at cost and thereafter adjusted for amortization of any discount or premium (i.e., amortized cost). Amortized cost approximates fair value.

Partnerships—The value of interests owned in partnerships is based on valuations of the underlying investments that include private placements, structured debt, real estate, equities, fixed maturities, commodities and other investments.

Hedge Funds—The value of interests in hedge funds is based on the underlying investments that include equities, debt and other investments.

Variable Life Insurance Policies—These assets are held in group and individual variable life insurance policies issued by PICA. Group policies are invested in Insurance Company Pooled Separate Accounts. Individual policies are invested in Registered Investment Companies (Mutual Funds). The value of interest in these policies is the cash surrender value (contract value) of the policies based on the underlying investments. The variable life insurance policies are valued at contract value which approximates fair value.

Pension plan asset allocations in accordance with the investment guidelines are as follows:


	As of December 31, 2020								As of December 31, 2019 (5)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Fixed Maturities:
U.S. government securities (federal):
Mortgage-backed	$	0	$	1	$	0	$	1	$	0	$	1	$	0	$	1
Other U.S. government securities	0		985		0		985		0		783		0		783
U.S. government securities (state & other)	0		588		0		588		0		562		0		562
Non-U.S. government securities	0		103		0		103		0		93		0		93
Corporate Debt:
Corporate bonds	0		4,290		0		4,290		0		4,281		0		4,281
Asset-backed	0		25		0		25		0		22		0		22
Collateralized Mortgage Obligations	0		614		0		614		0		485		0		485
Collateralized Loan Obligations	0		441		0		441		0		397		0		397
Interest rate swaps (1)	0		0		0		0		0		2		0		2
Registered investment companies	96		0		0		96		7		0		0		7
Other (2)	33		2		35		70		37		(2)		44		79
Unrealized gain (loss) on investment of
securities lending collateral (3)	0		0		0		0		0		0		0		0
Subtotal fixed maturities	129		7,049		35		7,213		44		6,624		44		6,712
Real Estate:
Partnerships	0		0		838		838		0		0		688		688
Other:
Partnerships	0		0		1,234		1,234		0		0		973		973
Hedge funds	0		0		1,327		1,327		0		0		1,312		1,312
Subtotal other	0		0		2,561		2,561		0		0		2,285		2,285
Net assets in the fair value hierarchy	$	129	$	7,049	$	3,434	$	10,612	$	44	$	6,624	$	3,017	$	9,685

Investments Measured at Net Asset Value,
as a practical expedient (4)
Pooled separate accounts							$	2,659							$	2,869
Common/collective trusts							1,440								1,185
United Kingdom insurance pooled funds							186								167
Net assets at fair value							$	14,897							$	13,906

_______________

(1)Interest rate swaps notional amount is $13 million and $2,462 million for the years ended December 31, 2020 and 2019, respectively.

(2)This category primarily consists of cash and cash equivalents, short-term investments, payables and receivables, and open future contract positions (including fixed income collateral).

(3)The contractual net value of the investment of securities lending collateral invested primarily in short-term bond funds is $586 million and $135 million and the liability for securities lending collateral is $586 million and $135 million for the years ended December 31, 2020 and 2019, respectively.

(4)The pension plan excludes from the fair value hierarchy investments that are measured at NAV per share (or its equivalent) as a practical expedient to estimate fair value.

(5)Prior period amounts have been updated to conform to the current year presentation.

Changes in Fair Value of Level 3 Pension Assets


		Fixed Maturities				Real Estate(1)		Other(1)
		Corporate Bonds		Other		Partnerships		Partnerships		Hedge Fund
	(in millions)
Fair Value, January 1, 2019		$	2	$	62	$	482	$	830	$	1,463
Actual Return on Assets:
Relating to assets still held at the reporting date		0		0		41		68		15
Relating to assets sold during the period		0		0		0		0		0
Purchases, sales and settlements		0		(18)		165		75		(166)
Transfers in and/or out of Level 3 (2)		(2)		0		0		0		0
Fair Value, December 31, 2019		$	0	$	44	$	688	$	973	$	1,312
Actual Return on Assets:
Relating to assets still held at the reporting date		0		0		11		161		116
Relating to assets sold during the period		0		0		0		0		0
Purchases, sales and settlements		0		(9)		139		100		(101)
Transfers in and/or out of Level 3		0		0		0		0		0
Fair Value, December 31, 2020		$	0	$	35	$	838	$	1,234	$	1,327

__________

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

(2)The transfers from level 3 to level 2 are due to the availability of external pricing sources.

Postretirement plan asset allocations in accordance with the investment guidelines are as follows:


	As of December 31, 2020								As of December 31, 2019 (3)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Equities:
U.S. Equities	$	0	$	14	$	0	$	14	$	0	$	14	$	0	$	14
International Equities	0		9		0		9		0		8		0		8
Subtotal equities	0		23		0		23		0		22		0		22
Fixed Maturities:
U.S. government securities (federal):
Other U.S. government securities	0		9		0		9		0		20		0		20
Non-U.S. government securities	0		1		0		1		0		2		0		2
Corporate Debt:
Corporate bonds	0		7		0		7		0		53		0		53
Asset-backed	0		2		0		2		0		16		0		16
Collateralized Mortgage Obligations	0		3		0		3		0		10		0		10
Collateralized Loan Obligations	0		4		0		4		0		15		0		15
Registered investment companies	19		0		0		19		4		0		0		4
Equities	0		22		0		22		0		20		0		20
Other (1)	0		0		0		0		0		0		1		1
Subtotal fixed maturities	19		48		0		67		4		136		1		141
Short-term Investments:
Registered investment companies	165		0		0		165		163		0		0		163
Net assets in the fair value hierarchy	$	184	$	71	$	0	$	255	$	167	$	158	$	1	$	326

Investments Measured at Net Asset Value,
as a practical expedient (2)
Common trusts							$	279							$	273
Net assets at fair value							534								599
Variable Life Insurance Policies at contract value							1,055								958
Total net assets							$	1,589							$	1,557

__________

(1)This category primarily consists of cash and cash equivalents, short-term investments, payables and receivables and open future contract positions (including fixed income collateral).

(2)The postretirement plan excludes from the fair value hierarchy investments that are measured at NAV per share (or its equivalent) as a practical expedient to estimate fair value.

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

Changes in Fair Value of Level 3 Postretirement Assets


		Fixed Maturities
		Asset-backed		Collateralized Mortgage Obligations		Other
	(in millions)
Fair Value, January 1, 2019		$	1	$	1	$	3
Actual Return on Assets:
Relating to assets still held at the reporting date		0		0		0
Relating to assets sold during the period		0		0		0
Purchases, sales and settlements		0		(1)		(2)
Transfers in and/or out of Level 3 (1)		(1)		0		0
Fair Value, December 31, 2019		$	0	$	0	$	1
Actual Return on Assets:
Relating to assets still held at the reporting date		0		0		0
Relating to assets sold during the period		0		0		0
Purchases, sales and settlements		0		0		(1)
Transfers in and/or out of Level 3		0		0		0
Fair Value, December 31, 2020		$	0	$	0	$	0

__________

(1)The transfers from level 3 to level 2 are due to the availability of external pricing sources.

The expected benefit payments for the Company’s pension and postretirement plans, as well as the expected Medicare Part D subsidy receipts related to the Company’s postretirement plan, for the years indicated are as follows:


	Pension Benefit Payments		Other Postretirement Benefit Payments		Other Postretirement Benefits– Medicare Part D Subsidy Receipts
	(in millions)
2021	$	802	$	148	$	7
2022	824		149		7
2023	862		148		6
2024	866		148		6
2025	897		145		6
2026-2030	4,646		669		28
Total	$	8,897	$	1,407	$	60

The Company anticipates that it will make cash contributions in 2021 of approximately $185 million to the pension plans and approximately $10 million to the postretirement plans.

Postemployment Benefits

The Company accrues postemployment benefits for income continuance and health and life benefits provided to former or inactive employees who are not retirees. The net accumulated liability for these benefits at December 31, 2020 and 2019 was $15 million and $1 million, respectively, and is included in “Other liabilities.”

Other Employee Benefits

The Company sponsors voluntary savings plans for employees (401(k) plans). The plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The matching contributions by the Company included in “General and administrative expenses” were $82 million, $84 million and $89 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Stockholders' Equity Note [Abstract]

The entire disclosure for retirement benefits.

+ References

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+ Details

Equity

12 Months Ended

Dec. 31, 2020

Equity

EQUITY

Preferred Stock

As of December 31, 2020, 2019 and 2018, the Company had 10,000,000 shares of preferred stock authorized but none issued or outstanding.

Common Stock

On the date of demutualization in December 2001, Prudential Financial completed an initial public offering of its Common Stock. The shares of Common Stock issued were in addition to shares of Common Stock the Company distributed to policyholders as part of the demutualization. The Common Stock is traded on the New York Stock Exchange under the symbol “PRU”. In the event of a liquidation, dissolution or winding-up of the Company, holders of Common Stock would be entitled to receive a proportionate share of the net assets of the Company that remain after paying all liabilities and the liquidation preferences of any preferred stock.

The changes in the number of shares of Common Stock issued, held in treasury and outstanding, are as follows for the periods indicated:


	Common Stock
	Issued	Held In Treasury	Outstanding

	(in millions)
Balance, December 31, 2017	660.1	237.5	422.6
Common Stock issued	0.0	0.0	0.0
Common Stock acquired	0.0	14.9	(14.9)
Stock-based compensation programs(1)	0.0	(3.0)	3.0
Balance, December 31, 2018	660.1	249.4	410.7
Common Stock issued(2)(3)	6.2	(5.5)	11.7
Common Stock acquired	0.0	27.2	(27.2)
Stock-based compensation programs(1)	0.0	(3.6)	3.6
Balance, December 31, 2019	666.3	267.5	398.8
Common Stock issued	0.0	0.0	0.0
Common Stock acquired	0.0	6.7	(6.7)
Stock-based compensation programs(1)	0.0	(4.3)	4.3
Balance, December 31, 2020	666.3	269.9	396.4

__________

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

(2)In August 2019, as a result of the note holders’ exercise of the exchange option on $500 million of surplus notes, the Company issued approximately 6.2 million shares of Common Stock at an exchange rate equal to 12.3877 shares of Common Stock per each $1,000 principal amount of surplus notes. The Company’s obligations under the surplus notes are now satisfied. For additional information, see Note 20.

(3)In October 2019, the Company issued approximately 5.5 million shares of restricted Common Stock as part of consideration paid for the Assurance IQ acquisition. For additional information about the acquisition, see Note 1.

Additional paid-in capital

Additional paid-in capital is primarily comprised of the cumulative excess between: (a) the total cash received by the Company in conjunction with past issuances of Common Stock shares or Common Stock shares reissued from treasury in conjunction with the Company’s stock-based compensation program and (b) the total par value associated with those shares ($.01 per share).

Common stock held in treasury

Common Stock held in treasury represents the Company’s previously issued shares of stock which have been repurchased by the Company but not retired. These shares are accounted for at the cost at which they were acquired. Common Stock held in

treasury is typically impacted by repurchases of shares under the Board of Directors approved share repurchase program and by reissuances of shares associated with our stock-based compensation programs, or for other purposes, which are accounted for at average cost upon reissuance. Gains resulting from the reissuance of Common Stock held in treasury are credited to Additional paid-in capital. Losses resulting from the reissuance of Common Stock held in treasury are charged first to Additional paid-in capital to the extent the Company has previously recorded gains on treasury share transactions, then to Retained earnings.

The Board of Directors may from time to time, at its discretion, authorize management to repurchase shares of Common Stock of the Company. The timing and amount of share repurchases are determined by management based upon market conditions and other considerations, and repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through prearranged trading plans complying with Rule 10b5-1(c) under the Securities Exchange Act of 1934 (the “Exchange Act”). Numerous factors could affect the timing and amount of any future repurchases under the share repurchase authorization, including increased capital needs of the Company due to changes in regulatory capital requirements, opportunities for growth and acquisitions, and the effect of adverse market conditions on the segments.

The following table summarizes share repurchases for each of the past three years as well as the share repurchase authorization for 2021, which was approved by the Board of Directors in February 2021:


	January 1, 2021 - December 31, 2021		January 1, 2020 - December 31, 2020(1)		January 1, 2019 - December 31, 2019		January 1, 2018 - December 31, 2018
Total Board authorized share repurchase amount ($ in billions)	$	1.5	$	2.0	$	2.5	$	1.5
Total number of shares repurchased under this authorization as of the period end (in millions)	N/A*		6.7		27.2		14.9

__________

* Share repurchase authorization for a future period.

(1)In April 2020, the Company suspended Common Stock repurchases under the 2020 share repurchase authorization and did not resume share repurchases for the remainder of the authorization period.

Accumulated Other Comprehensive Income (Loss)

AOCI represents the cumulative OCI items that are reported separate from net income and detailed on the Consolidated Statements of Comprehensive Income. Each of the components that comprise OCI are described in further detail in Note 2 (Foreign Currency Translation Adjustment and Net Unrealized Investment Gains (Losses)) and Note 18 (Pension and Postretirement Unrecognized Net Periodic Benefit (Cost)). The balance of and changes in each component of AOCI as of and for the years ended December 31, are as follows:


	Accumulated Other Comprehensive Income (Loss) Attributable to Prudential Financial, Inc.
	Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Pension and Postretirement Unrecognized Net Periodic Benefit (Cost)		Total Accumulated Other Comprehensive Income (Loss)
	(in millions)
Balance, December 31, 2017	$	(269)	$	19,968	$	(2,625)	$	17,074
Change in OCI before reclassifications	(74)		(7,614)		(547)		(8,235)
Amounts reclassified from AOCI	1		(779)		227		(551)
Income tax benefit (expense)	9		1,735		68		1,812
Cumulative effect of adoption of ASU 2016-01	0		(847)		0		(847)
Cumulative effect of adoption of ASU 2018-02	(231)		2,282		(398)		1,653
Balance, December 31, 2018	(564)		14,745		(3,275)		10,906
Change in OCI before reclassifications	37		18,540		(563)		18,014
Amounts reclassified from AOCI	27		(1,345)		241		(1,077)
Income tax benefit (expense)	(36)		(3,835)		60		(3,811)
Cumulative effect of adoption of ASU 2017-12	0		7		0		7
Balance, December 31, 2019	(536)		28,112		(3,537)		24,039
Change in OCI before reclassifications	455		8,112		(70)		8,497
Amounts reclassified from AOCI	57		(883)		280		(546)
Income tax benefit (expense)	76		(1,276)		(52)		(1,252)
Balance, December 31, 2020	$	52	$	34,065	$	(3,379)	$	30,738

__________

(1)Includes cash flow hedges of $(168) million, $832 million and $811 million as of December 31, 2020, 2019, and 2018, respectively, and fair value hedges of $10 million, $0 million, and $0 million as of December 31, 2020, 2019, and 2018, respectively.

Reclassifications out of Accumulated Other Comprehensive Income (Loss)


	Years Ended December 31,						Affected line item in Consolidated Statements of Operations
	2020		2019		2018
	(in millions)
Amounts reclassified from AOCI(1)(2):
Foreign currency translation adjustment:
Foreign currency translation adjustment	$	1	$	(27)	$	(1)	Realized investment gains (losses), net
Foreign currency translation adjustment	(58)		0		0		Other income (loss)
Total foreign currency translation adjustment	(57)		(27)		(1)
Net unrealized investment gains (losses):
Cash flow hedges—Interest Rate	40		58		1		(3)
Cash flow hedges—Currency	5		6		7		(3)
Cash flow hedges—Currency/Interest rate	110		315		543		(3)
Fair value hedges—Currency	(1)		0		0		(3)
Net unrealized investment gains (losses) on available-for-sale securities	729		966		228		Realized investment gains (losses), net
Total net unrealized investment gains (losses)	883		1,345		779		(4)
Amortization of defined benefit items:
Prior service cost	(2)		0		3		(5)
Actuarial gain (loss)	(278)		(241)		(230)		(5)
Total amortization of defined benefit items	(280)		(241)		(227)
Total reclassifications for the period	$	546	$	1,077	$	551

__________

(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 and fair value 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 18 for information on employee benefit plans.

Net Unrealized Investment Gains (Losses)

Net unrealized investment gains (losses) on available-for-sale fixed maturity securities and certain other invested assets and other assets are included in the Company’s Consolidated Statements of Financial Position as a component of AOCI. Changes in these amounts include reclassification adjustments to exclude from “Other comprehensive income (loss)” those items that are included as part of “Net income” for a period that had been part of “Other comprehensive income (loss)” in earlier periods. The amounts for the periods indicated below, split between amounts related to available-for-sale fixed maturity securities on which an OTTI loss had been previously recognized, an allowance for credit losses has been recognized, and all other net unrealized investment gains (losses), are as follows:

Net Unrealized Investment Gains (Losses) on Available-for-Sale Fixed Maturity Securities on which an OTTI loss had been previously recognized and an allowance for credit losses has been recognized


	Net Unrealized Gains (Losses) on Investments		DAC, DSI, VOBA and Reinsurance Recoverables		Future Policy Benefits, Policyholders’ Account Balances and Reinsurance Payables		Policyholders’ Dividends		Deferred Income Tax (Liability) Benefit		Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
	(in millions)
Balance, December 31, 2017	$	286	$	(2)	$	3	$	(46)	$	(94)	$	147
Net investment gains (losses) on investments arising during the period	(19)								8		(11)
Reclassification adjustment for (gains) losses included in net income	(76)								33		(43)
Reclassification adjustment for OTTI losses excluded from net income(1)	(2)								1		(1)
Impact of net unrealized investment (gains) losses on DAC, DSI, VOBA and reinsurance recoverables			1						0		1
Impact of net unrealized investment (gains) losses on future policy benefits, policyholders’ account balances and reinsurance payables					1				0		1
Impact of net unrealized investment (gains) losses on policyholders’ dividends							23		(9)		14
Balance, December 31, 2018	189		(1)		4		(23)		(61)		108
Net investment gains (losses) on investments arising during the period	129								(29)		100
Reclassification adjustment for (gains) losses included in net income	(96)								21		(75)
Reclassification adjustment for OTTI losses excluded from net income(1)	21								(5)		16
Impact of net unrealized investment (gains) losses on DAC, DSI, VOBA and reinsurance recoverables			0						0		0
Impact of net unrealized investment (gains) losses on future policy benefits, policyholders’ account balances and reinsurance payables					1				0		1
Impact of net unrealized investment (gains) losses on policyholders’ dividends							1		0		1
Balance, December 31, 2019	243		(1)		5		(22)		(74)		151
Reclassification to all other due to implementation of ASU 2016-13(2)	(243)		1		(5)		22		74		(151)
Net investment gains (losses) on investments arising during the period	47								(9)		38
Reclassification adjustment for (gains) losses included in net income	25								(5)		20
Increase (Decrease) due to non-credit related losses recognized in AOCI during the period	(97)								19		(78)
Impact of net unrealized investment (gains) losses on DAC, DSI, VOBA and reinsurance recoverables			1						0		1
Impact of net unrealized investment (gains) losses on future policy benefits, policyholders’ account balances and reinsurance payables					(1)				0		(1)
Impact of net unrealized investment (gains) losses on policyholders’ dividends							11		(2)		9
Balance, December 31, 2020	$	(25)	$	1	$	(1)	$	11	$	3	$	(11)

__________

(1)Represents “transfers in” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

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

All Other Net Unrealized Investment Gains (Losses) in AOCI


	Net Unrealized Gains (Losses) on Investments(1)		DAC, DSI, VOBA and Reinsurance Recoverables		Future Policy Benefits, Policyholders’ Account Balances and Reinsurance Payables		Policyholders’ Dividends		Deferred Income Tax (Liability) Benefit		Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
	(in millions)
Balance, December 31, 2017	$	36,112	$	(1,580)	$	(1,243)	$	(3,631)	$	(9,837)	$	19,821
Net investment gains (losses) on investments arising during the period	(10,838)								2,893		(7,945)
Reclassification adjustment for (gains) losses included in net income	(703)								303		(400)
Reclassification adjustment for OTTI losses excluded from net income(2)	2								(1)		1
Impact of net unrealized investment (gains) losses on DAC, DSI, VOBA and reinsurance recoverables			842						(263)		579
Impact of net unrealized investment (gains) losses on future policy benefits, policyholders’ account balances and reinsurance payables					452				(186)		266
Impact of net unrealized investment (gains) losses on policyholders’ dividends							1,924		(874)		1,050
Cumulative effect of adoption of ASU 2016-01	(2,042)						813		212		(1,017)
Cumulative effect of adoption of ASU 2018-02									2,282		2,282
Balance, December 31, 2018	22,531		(738)		(791)		(894)		(5,471)		14,637
Net investment gains (losses) on investments arising during the period	23,826								(5,282)		18,544
Reclassification adjustment for (gains) losses included in net income	(1,249)								277		(972)
Reclassification adjustment for OTTI losses excluded from net income(2)	(21)								5		(16)
Impact of net unrealized investment (gains) losses on DAC, DSI, VOBA and reinsurance recoverables			(846)						190		(656)
Impact of net unrealized investment (gains) losses on future policy benefits, policyholders’ account balances and reinsurance payables					(2,123)				475		(1,648)
Impact of net unrealized investment (gains) losses on policyholders’ dividends							(2,450)		515		(1,935)
Cumulative effect of adoption of ASU 2017-12	9								(2)		7
Balance, December 31, 2019	45,096		(1,584)		(2,914)		(3,344)		(9,293)		27,961
Reclassification due to implementation of ASU 2016-13(3)	243		(1)		5		(22)		(74)		151
Net investment gains (losses) on investments arising during the period	13,914								(2,656)		11,258
Reclassification adjustment for (gains) losses included in net income	(908)								173		(735)
Reclassification due to allowance for credit losses recorded during the period	97								(19)		78
Impact of net unrealized investment (gains) losses on DAC, DSI, VOBA and reinsurance recoverables			355						(70)		285
Impact of net unrealized investment (gains) losses on future policy benefits, policyholders’ account balances and reinsurance payables					(3,678)				760		(2,918)
Impact of net unrealized investment (gains) losses on policyholders’ dividends							(2,537)		533		(2,004)
Balance, December 31, 2020	$	58,442	$	(1,230)	$	(6,587)	$	(5,903)	$	(10,646)	$	34,076

__________

(1)Includes cash flow and fair value hedges. See Note 5 for additional information.

(2)Represents “transfers out” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

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

Retained earnings

Retained earnings primarily represents the cumulative net income earned by the Company that has been retained by the Company as of the reporting date. Other unique items, included but not limited to the adoption of new accounting standards updates, may also impact retained earnings. In any given period, retained earnings may increase due to net income and may decrease due to net losses or the declaration of dividends. The declaration and payment of dividends on the Common Stock is limited by New Jersey corporate law, pursuant to which Prudential Financial is prohibited from paying a Common Stock dividend if, after giving effect to that dividend, either (a) the Company would be unable to pay its debts as they become due in the usual course of its business or (b) the Company’s total assets would be less than its liabilities. In addition, the terms of the Company’s outstanding junior subordinated debt include a “dividend stopper” provision that restricts the payment of dividends on the Common Stock if interest payments are not made on the junior subordinated debt.

Other than the above limitations, the Company’s Retained earnings balance is free of restrictions for the payment of Common Stock dividends; however, Common Stock dividends will be dependent upon financial conditions, results of operations, cash needs, future prospects and other factors, including cash available to Prudential Financial, the parent holding company. The principal sources of funds available to Prudential Financial are dividends and returns of capital from its subsidiaries, loans from its subsidiaries, repayments of operating loans from its subsidiaries, and cash and other highly liquid assets. The primary uses of funds at Prudential Financial include servicing its debt, operating expenses, capital contributions and loans to subsidiaries, the payment of declared shareholder dividends and repurchases of outstanding shares of Common Stock if executed under Board authority. As of December 31, 2020, Prudential Financial had highly liquid assets (excluding amounts held in an intercompany liquidity account) of $5,560 million predominantly including cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds.

Future cash available at Prudential Financial to support the payment of future Common Stock dividends is dependent on the receipt of dividends or other funds from its subsidiaries, the majority of which are subject to comprehensive regulation, including limitations on their payment of dividends and other transfers of funds, which are discussed in this Note further below.

Non-controlling interests

For certain subsidiaries, the Company owns a controlling interest that is less than 100% ownership of the subsidiary but must consolidate 100% of the subsidiary’s financial statements in accordance with U.S. GAAP. Non-controlling interests represent the portion of equity ownership in a consolidated subsidiary that is not attributable to the Company.

Insurance Subsidiaries - Statutory Financial Information and Restrictions on Payments of Dividends

U.S. Insurance Subsidiaries - Statutory Financial Information

The Company’s domestic insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile. Statutory accounting practices primarily differ from U.S. GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.

The risk-based capital (“RBC”) ratio is a primary measure by which the Company and its insurance regulators evaluate the capital adequacy of PICA and the Company’s other domestic insurance subsidiaries. RBC is determined by NAIC-prescribed formulas that consider, among other things, risks related to the type and quality of the invested assets, insurance-related risks associated with an insurer’s products and liabilities, interest rate risks and general business risks. Insurers that have less statutory capital than required are considered to have inadequate capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy. The Company expects to report RBC ratios as of December 31, 2020 above the regulatory required minimums that would require corrective action and above our “AA” financial strength target levels for both PICA and Prudential Annuities Life Assurance Corporation (“PALAC”).

The following table summarizes certain statutory financial information for the Company’s two largest U.S. insurance subsidiaries for the periods indicated:


	PICA						PALAC
In millions and presented as of or for the year ended	December 31, 2020		December 31, 2019		December 31, 2018		December 31, 2020		December 31, 2019		December 31, 2018
Statutory net income (loss)	$	1,770	$	(169)	$	1,324	$	(637)	$	(2,052)	$	(852)
Statutory capital and surplus	$	11,597	$	11,483	$	10,695	$	6,262	$	4,748	$	6,396

U.S. Insurance Subsidiaries - Restrictions on Payment of Dividends to Prudential Financial, the Parent Holding Company

With respect to PICA, a New Jersey domiciled insurance subsidiary which is also the Company’s primary domestic insurance subsidiary, New Jersey insurance law provides that, except in the case of extraordinary dividends (as described below), all dividends or other distributions paid by PICA may be paid only from unassigned surplus, as determined pursuant to statutory accounting principles, less cumulative unrealized investment gains and losses and revaluation of assets as of the prior calendar year-end. As of December 31, 2020, PICA’s unassigned surplus less applicable adjustments for cumulative unrealized investment gains was $8,266 million. PICA must give prior notification to the NJDOBI of its intent to pay any such dividend or distribution. Also, if any dividend, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of statutory capital and surplus as of the preceding December 31 or (ii) its statutory net gain from operations excluding realized investment gains and losses for the twelve-month period ending on the preceding December 31, the dividend is considered to be an “extraordinary dividend” and requires the prior approval of the NJDOBI. Under New Jersey insurance law, PICA is permitted to pay an ordinary dividend of up to $1,476 million in 2021, without prior approval of the NJDOBI.

The laws regulating dividends of the states where the Company’s other domestic insurance subsidiaries are domiciled are similar, but not identical, to New Jersey. With respect to PALAC, an Arizona domiciled insurance subsidiary of the Company, Arizona insurance law provides that if any dividend, together with other dividends or distributions made within the preceding twelve months, exceeds the lesser of (i) 10% of statutory capital and surplus as of the preceding December 31 or (ii) its statutory net gain from operations excluding realized investment gains and losses for the twelve month period ending on the preceding December 31, the dividend is considered to be an “extraordinary dividend” and requires prior approval of the Arizona Department of Insurance. Under Arizona law, PALAC has no ordinary dividend capacity during 2021. All dividends will be considered extraordinary and will require prior approval from the Arizona Department of Insurance.

International Insurance Subsidiaries - Statutory Financial Information

The Company’s international insurance subsidiaries prepare financial statements in accordance with local regulatory requirements. These statutory accounting practices differ from U.S. GAAP primarily by charging policy acquisition costs to expense as incurred and establishing future policy benefit liabilities using different actuarial assumptions, as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.

The Japan Financial Services Agency (“FSA”) utilizes a solvency margin ratio to evaluate the capital adequacy of Japanese insurance companies. The solvency margin ratio considers the level of solvency margin capital to a solvency margin risk amount, which is calculated in a similar manner to RBC. As of December 31, 2020, the Company expects The Prudential Life Insurance Company Ltd. (“Prudential of Japan”) and Gibraltar Life both had solvency margin capital in excess of 3.5 times the regulatory required minimums that would require corrective action.

All of the Company’s domestic and international insurance subsidiaries have capital and surplus levels that exceed their respective regulatory minimum requirements, and none utilized prescribed or permitted practices that vary materially from the practices prescribed by the NAIC or equivalent regulatory bodies for results reported as of December 31, 2020 and 2019, respectively, or for the years ended December 31, 2020, 2019 and 2018, respectively.

International Insurance Subsidiaries - Restrictions on Payment of Dividends to Prudential Financial, the Parent Holding Company

The Company’s international insurance operations are subject to dividend restrictions from the regulatory authorities in the jurisdictions in which they operate. With respect to Prudential of Japan and Gibraltar Life, the Company’s most significant international insurance subsidiaries, both of which are domiciled in Japan, Japan insurance law provides that common stock dividends may be paid in an amount of up to 83% of prior fiscal year statutory after-tax earnings, after certain reserving thresholds are met, including providing for policyholder dividends. If statutory retained earnings exceed 100% of statutory paid-in capital, 100% of prior year statutory after-tax earnings may be paid, after reserving thresholds are met. Dividends in

excess of these amounts and other forms of capital distribution require the prior approval of the FSA. Additionally, Prudential of Japan and Gibraltar Life must give prior notification to the FSA of their intent to pay any dividend or distribution.

For the year ended December 31, 2020, Prudential Financial received $3,531 million from its international insurance subsidiaries, which includes $1,627 million of net proceeds from the sale of POK and $470 million of in-kind dividends in the form of extinguishment of debt held by international insurance subsidiaries. In addition to paying Common Stock dividends, the Company’s international insurance operations may return capital to Prudential Financial through, or facilitated by, other means, such as the repayment of Preferred Stock obligations held by Prudential Financial or other affiliates, affiliated lending, affiliated derivatives and reinsurance with U.S.- and Bermuda-based affiliates. In 2019, the Company’s Japan insurance operations entered into reinsurance agreements with Gibraltar Re, the Company’s Bermuda-based reinsurance affiliate, to reinsure the mortality and morbidity risk associated with a portion of the in-force contracts as well as newly-issued contracts for certain products. The Company expects these transactions will allow it to more efficiently manage its capital and risk profile. The current regulatory fiscal year end for both Prudential of Japan and Gibraltar Life is March 31, 2021, after which time the common stock dividend amount permitted to be paid without prior approval from the FSA can be determined.

In addition, although prior regulatory approval may not be required by law for the payment of dividends up to the limitations described above, in practice, the Company would typically discuss any dividend payments with the applicable regulatory authority prior to payment. Additionally, the payment of dividends by the Company’s subsidiaries is subject to declaration by their Board of Directors and may be affected by market conditions and other factors.

Earnings Per Share

12 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the basic and diluted per share computations of Common Stock based on the consolidated earnings of Prudential Financial for the years ended December 31, is as follows:


	2020					2019					2018
	Income		Weighted Average Shares	Per Share Amount		Income		Weighted Average Shares	Per Share Amount		Income		Weighted Average Shares	Per Share Amount
	(in millions, except per share amounts)
Basic earnings per share
Net income (loss)	$	(146)				$	4,238				$	4,088
Less: Income (loss) attributable to noncontrolling interests	228					52					14
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards	21					46					48
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	(395)	395.8	$	(1.00)	$	4,140	404.8	$	10.23	$	4,026	417.6	$	9.64
Effect of dilutive securities and compensation programs
Add: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Basic	$	21				$	46				$	48
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Diluted	21					45					47
Stock options			0.0					1.1					1.5
Deferred and long-term compensation programs			0.0					1.4					1.2
Exchangeable Surplus Notes	0		0.0			12		3.6			21		5.9
Diluted earnings per share(1)
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	(395)	395.8	$	(1.00)	$	4,153	410.9	$	10.11	$	4,048	426.2	$	9.50

Unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and included in the computation of earnings per share pursuant to the two-class method. Under this method, earnings attributable to Prudential Financial are allocated between Common Stock and the participating awards, as if the awards were a second class of stock. During periods of net income available to holders of Common Stock, the calculation of earnings per share excludes the income attributable to participating securities in the numerator and the dilutive impact of these securities from the denominator. In the event of a net loss available to holders of Common Stock, undistributed earnings are not allocated to participating securities and the denominator excludes the dilutive impact of these securities as they do not share in the losses of the Company. Undistributed earnings allocated to participating unvested share-based payment awards for the years ended December 31, 2020, 2019 and 2018, as applicable, were based on 4.9 million, 4.6 million and 4.9 million of such awards, respectively, weighted for the period they were outstanding.

Stock options and shares related to deferred and long-term compensation programs that are considered antidilutive are excluded from the computation of diluted earnings per share. Stock options are considered antidilutive based on application of the treasury stock method or in the event of a net loss available to holders of Common Stock. Shares related to deferred and long-term compensation programs are considered antidilutive in the event of a net loss available to holders of Common Stock. For the years ended December 31, the number of stock options and shares related to deferred and long-term compensation programs that were considered antidilutive and were excluded from the computation of diluted earnings per share, weighted for the portion of the period they were outstanding, are as follows:


	2020			2019			2018
	Shares	Exercise Price Per Share		Shares	Exercise Price Per Share		Shares	Exercise Price Per Share
	(in millions, except per share amounts, based on weighted average)
Antidilutive stock options based on application of the treasury stock method	3.3	$	82.06	1.2	$	102.84	0.7	$	108.34
Antidilutive stock options due to net loss available to holders of Common Stock	0.4			0.0			0.0
Antidilutive shares based on application of the treasury stock method	0.2			0.0			0.0
Antidilutive shares due to net loss available to holders of Common Stock	1.6			0.0			0.0
Total antidilutive stock options and shares	5.5			1.2			0.7

In September 2009, the Company issued $500 million of surplus notes with an interest rate of 5.36% per annum which were exchangeable at the option of the note holders for shares of Common Stock. In August 2019, as a result of the note holders’ exercise of the exchange option, the Company issued approximately 6.2 million shares of Common Stock at an exchange rate equal to 12.3877 shares of Common Stock per each $1,000 principal amount of surplus notes. The Company’s obligations under the surplus notes are now satisfied. In calculating diluted earnings per share under the if-converted method, for the years ended December 31, 2019 and 2018, the potential shares that would be issued assuming a hypothetical exchange, weighted for the period the notes were outstanding, are added to the denominator, and the related interest expense, net of tax, is excluded from the numerator, if the overall effect is dilutive.

Share-Based Payments

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Share-based Payment Arrangement

SHARE-BASED PAYMENTS

Omnibus Incentive Plan

Prudential Financial, Inc.’s Omnibus Incentive Plan provides stock-based awards including stock options, stock appreciation rights, restricted stock shares, restricted stock units, stock settled performance shares, and cash settled performance units. Dividend equivalents are generally provided on restricted stock shares and restricted stock units outstanding as of the record date. Dividend equivalents are generally accrued on target performance shares and units outstanding as of the record date. These dividend equivalents are paid only on the performance shares and units released up to a maximum of the target number of shares and units awarded. Generally, the requisite service period is the vesting period. There were 9,906,113 authorized shares available for grant under the Omnibus Incentive Plan as of December 31, 2020.

Assurance IQ Acquisition

The Company acquired Assurance IQ on October 10, 2019. The terms of the Acquisition included compensation awards that involved share-based payment arrangements that are linked to retention and therefore fall under the reporting requirements of ASC 718, Stock Compensation. These compensation awards include stock options, restricted stock units and performance shares.

Compensation Costs

Compensation cost for restricted stock units, performance shares and performance units granted to employees is measured by the share price of the underlying Common Stock at the date of grant.

Compensation cost for employee stock options is based on the fair values estimated on the grant date. Under the Omnibus Incentive Plan, the fair value of each stock option award is estimated using a binomial option pricing model on the date of grant for stock options issued to employees. For the Acquisition related awards, the fair value of each stock option award is based on its intrinsic value on the date of grant.

The weighted average grant date assumptions used in the binomial option valuation model are as follows:


	2020		2019		2018
Expected volatility	33.99	%	34.63	%	35.39	%
Expected dividend yield	4.59	%	4.26	%	2.88	%
Expected term	5.60 years		5.54 years		5.49 years
Risk-free interest rate	1.42	%	2.50	%	2.64	%

Expected volatilities are based on historical volatility of Prudential Financial’s Common Stock and implied volatilities from traded options on Prudential Financial’s Common Stock. The Company uses historical data and expectations of future exercise patterns to estimate option exercises and employee terminations within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods associated with the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The following table summarizes the compensation cost recognized and the related income tax benefit for stock options, restricted stock units, performance shares and performance units for the years ended December 31:


	2020				2019				2018
Omnibus Incentive Plan:	Total Compensation Cost Recognized (1)		Income Tax Benefit		Total Compensation Cost Recognized (1)		Income Tax Benefit		Total Compensation Cost Recognized (1)		Income Tax Benefit
	(in millions)
Employee stock options	$	11	$	3	$	11	$	3	$	13	$	3
Employee restricted stock units	162		38		149		35		139		32
Employee performance shares and performance units	53		12		71		17		3		1
Total	$	226	$	53	$	231	$	55	$	155	$	36

__________

(1) Compensation costs related to retirement eligible participants are recorded on the grant date (typically in the first quarter of every year).


	2020				2019
Assurance IQ Acquisition:	Total Compensation Cost Recognized		Income Tax Benefit		Total Compensation Cost Recognized		Income Tax Benefit
	(in millions)
Employee stock options	$	14	$	4	$	4	$	1
Employee restricted stock units	2		1		1		0
Employee performance shares	0		0		0		0
Total	$	16	$	5	$	5	$	1

Compensation costs related to stock-based compensation plans capitalized in deferred acquisition costs for the years ended December 31, 2020, 2019 and 2018 were de minimis.

Stock Options

Each stock option granted under the Omnibus Incentive Plan has an exercise price at the fair market value of Prudential Financial’s Common Stock on the date of grant and has a maximum term of 10 years. Generally, one third of the option grant vests in each of the first three years. Options granted related to the Acquisition have an exercise price based on the original strike price of the Assurance IQ options that they replaced and have a maximum term of 10 years from the date the Assurance IQ options were originally granted. Options granted related to the Acquisition generally vest quarterly over three years.

A summary of the status of the Company’s stock option grants is as follows:


	Employee Stock Options
	Omnibus Incentive Plan			Assurance IQ Acquisition
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding at December 31, 2019	4,610,997	$	76.26	547,192	$	1.38
Granted	610,027	95.87		0	0.00
Exercised	(647,313)	59.82		(142,638)	0.51
Forfeited	0	0.00		(10,288)	5.10
Expired	(9,859)	78.45		0	0.00
Outstanding at December 31, 2020	4,563,852	$	81.21	394,266	$	1.60
Exercisable at December 31, 2020	3,427,197	$	76.25	57,791	$	4.02

The weighted average grant date fair value of employee stock options granted under the Omnibus Incentive Plan during the years ended December 31, 2020, 2019 and 2018 was $18.00, $20.02 and $27.11, respectively. For the Acquisition related awards, the weighted average grant date fair value of employee stock options granted during the year ended December 31, 2019 was $86.31. No Acquisition related options were granted in 2020.

The total intrinsic value (i.e., market price of the stock less the option exercise price) of employee stock options exercised during the years ended December 31, 2020, 2019 and 2018 was $13 million, $21 million, and $28 million, respectively. For the Acquisition related awards, the total intrinsic value of employee stock options exercised during the years ended December 31, 2020 and 2019 were $10 million and $3 million, respectively.

The weighted average remaining contractual term and the aggregate intrinsic value of stock options outstanding and exercisable as of December 31, 2020 is as follows:


	Employee Stock Options
	Omnibus Incentive Plan			Assurance IQ Acquisition
	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in years)	(in millions)		(in years)	(in millions)
Outstanding	4.47	$	32	7.44	$	30
Exercisable	3.46	$	32	7.39	$	4

Restricted Stock Units, Performance Share Awards and Performance Unit Awards

A restricted stock unit is an unfunded, unsecured right to receive a share of Prudential Financial’s Common Stock at the end of a specified period of time, which is subject to forfeiture and transfer restrictions. Generally, the restrictions will lapse on the third anniversary of the date of grant. Performance shares and performance units are awards denominated in Prudential Financial’s Common Stock. The number of units is determined over the performance period and may be adjusted based on the satisfaction of certain performance goals for the Company. Performance share awards are payable in Prudential Financial’s Common Stock. Performance unit awards are payable in cash. Effective October 2019, the Company modified certain provisions of its long term compensation plan to settle the performance units component in Prudential Financial Common Stock. As a result, outstanding performance units were converted to performance shares except for certain employee directed deferrals in the deferred compensation plan which remain as performance units for the full life of the grant. Beginning in 2020, the Company no longer grants performance unit awards.

A summary of the Company’s restricted stock units, performance shares and performance unit awards under the Omnibus Incentive Plan is as follows:


	Restricted Stock Units	Weighted Average Grant Date Fair Value		Performance Share and Performance Unit Awards(1)	Weighted Average Grant Date Fair Value
Restricted at December 31, 2019(2)	4,471,189	$	102.25	1,822,886	$	90.03
Granted(2)	1,922,202	93.88		671,994	95.42
Forfeited	(197,399)	95.86		(16,118)	65.17
Performance adjustment(3)				49,485	95.43
Released	(1,437,753)	109.73		(622,607)	90.23
Restricted at December 31, 2020(2)	4,758,239	$	96.87	1,905,640	$	92.07

__________

(1)Performance share and performance unit awards reflect the target units awarded, reduced for forfeitures and releases to date. The actual number of units to be awarded at the end of each performance period will range between 0% and 125% of the target number of units granted, based upon a measure of the reported performance for the Company relative to stated goals. Performance awards granted to senior management in 2018 include a stated goal related to diversity & inclusion that can modify the performance result by +/- 10%.

(2)Effective October 1, 2019, the Company modified existing performance share and performance unit awards to remove features of the grants that prevent having a mutual understanding of the key terms and conditions of the award between the employee and employer until the grants vested. Consequently, the weighted average grant date fair value as of December 31, 2020 is the closing stock price of Prudential Financial’s common stock as of September 30, 2019. The weighted average grant date fair value as of December 31, 2018 is the closing stock price of Prudential Financial’s common stock as of December 31, 2019.

(3)Represents the difference between the target units granted and the actual units awarded based upon the attainment of performance goals for the Company.

A summary of the Company’s restricted stock units and performance share awards related to the Acquisition is as follows:


	Restricted Stock Units	Weighted Average Grant Date Fair Value		Performance Share Awards(1)	Weighted Average Grant Date Fair Value
Restricted at December 31, 2019	125,788	$	87.67	1,982,708	$	89.81
Granted	0	0.00		112,949	63.30
Forfeited	(20,222)	87.67		(29,662)	85.30
Performance adjustment(2)	0	0.00		0	0.00
Released	(32,869)	87.67		0	0.00
Restricted at December 31, 2020	72,697	$	87.67	2,065,995	$	88.43

__________

(1)Performance share awards related to the Assurance IQ acquisition reflect the maximum number of units that have been awarded under the terms of the acquisition. The actual number of units that will be awarded at the end of the performance period will range between 0% and 100% of the number of units granted, based upon a predetermined formula of achieving Variable Profits between $900 million and $1,300 million.

(2)Represents the difference between the target units granted and the actual units awarded based upon the attainment of performance goals for the Company.

The fair market value of restricted stock units, performance shares and performance units released under the Omnibus Incentive Plan for the years ended December 31, 2020, 2019 and 2018 was $191 million, $255 million and $238 million, respectively. The fair market value of restricted stock units for the Acquisition related awards under the Omnibus Incentive Plan for the year ended December 31, 2020 was $2 million. There were no vested restricted stock units or performance shares related to the Acquisition for the year ended December 31, 2019.

The weighted average grant date fair value for restricted stock units granted under the Omnibus Incentive Plan during the years ended December 31, 2020, 2019 and 2018 was $93.88, $93.35 and $106.32, respectively. The weighted average grant date fair value for performance shares and performance units granted under the Omnibus Incentive Plan during the years ended December 31, 2020, 2019 and 2018 was $95.42, $90.68 and $81.55, respectively. The weighted average grant date fair value for restricted stock units granted for the Acquisition during the year ended December 31, 2019 was $87.67. No restricted units were granted in 2020. The weighted average grant date fair value for performance shares granted for the Acquisition during the years ended December 31, 2020 and 2019 were $63.30 and $89.81 respectively .

Unrecognized Compensation Cost

Unrecognized compensation cost for stock options under the Omnibus Incentive Plan as of December 31, 2020 was $3 million with a weighted average recognition period of 1.57 years. Unrecognized compensation cost for restricted stock units, performance shares and performance units under the Omnibus Incentive Plan as of December 31, 2020 was $153 million with a weighted average recognition period of 1.68 years. Unrecognized compensation cost for stock options related to the Acquisition as of December 31, 2020 was $30 million with a weighted average recognition period of 2.16 years. Unrecognized

compensation cost for restricted stock units and performance shares related to the Acquisition as of December 31, 2020 was $7 million with a weighted average recognition period of 3.23 years.

Tax Benefits Realized

The Company’s tax benefit realized for exercises of stock options under the Omnibus Incentive Plan during the years ended December 31, 2020, 2019 and 2018 was $3 million, $5 million and $7 million, respectively. The tax benefit realized for exercises of stock options related to the Acquisition during the years ended December 31, 2020 and 2019 were $3 million and $2 million, respectively.

The Company’s tax benefit realized upon vesting of restricted stock units, performance shares and performance units under the Omnibus Incentive Plan for the years ended December 31, 2020, 2019 and 2018 was $44 million, $52 million and $49 million, respectively. The tax benefit realized upon vesting of restricted stock units and performance shares related to the Acquisition during the year ended December 31, 2020 was $1 million. There were no vested restricted stock units or performance shares related to the Acquisition for the year ended December 31, 2019.

Settlement of Awards

The Company’s policy is to issue shares from Common Stock held in treasury upon exercise of stock options, the release of restricted stock units and performance shares. The Company uses cash to settle performance units. The amount of cash used to settle performance units during the years ended December 31, 2020, 2019 and 2018 was $2 million, $32 million and $29 million, respectively.

Segment Information

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

Segments

The Company operates through eight segments: PGIM (our global investment management business); Retirement, Group Insurance, Individual Annuities, Individual Life, and Assurance IQ (collectively referred to as the U.S. Businesses); International Businesses; and Closed Block. In addition, the Company reports certain of its results of operations in its Corporate and Other operations.

The PGIM segment provides investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit and other alternatives, and multi-asset class strategies, to institutional and retail clients globally, as well as the Company’s general account.

The U.S. Businesses offer a broad range of products and solutions that cover protection, retirement, savings, income and investment needs. The U.S. Businesses are organized into three divisions:

U.S. Workplace Solutions division. The U.S. Workplace Solutions division consists of the Retirement and Group Insurance segments. The Retirement segment provides a broad range of retirement investment and income products and services to retirement plan sponsors in the public, private and not-for-profit sectors. The Group Insurance segment provides a full range of group life, long-term and short-term group disability, and group corporate-, bank- and trust-owned life insurance in the U.S., primarily to institutional clients for use in connection with employee plans and affinity groups.

U.S. Individual Solutions division. The U.S. Individual Solutions division consists of the Individual Annuities and Individual Life segments. The Individual Annuities segment develops and distributes individual variable and fixed annuity products, primarily to the U.S. mass affluent and affluent markets. The Individual Life segment develops and distributes individual variable life, term life and universal life insurance products primarily to the U.S. mass middle, mass affluent and affluent markets.

Assurance IQ division. The Assurance IQ division consists of the Assurance IQ segment, a leading consumer solutions platform that offers a range of solutions to help meet consumers’ financial needs. Assurance IQ leverages data science and technology to primarily distribute third-party products (such as Medicare, health, life, property and casualty, and personal finance products) and a proprietary term life product directly to retail shoppers, primarily through its digital and agent channels. Additionally, Assurance IQ may help customers fulfill financial wellness needs by matching them with other product providers or intermediaries.

The International Businesses develops and distributes individual life insurance, retirement and related products to the mass affluent and affluent markets in Japan and other foreign countries through its Life Planner operations. In addition, similar products are offered through its Gibraltar Life and Other operations to the broad middle income and mass affluent markets across Japan and the Company’s joint ventures in various foreign countries through multiple distribution channels (including banks, independent agencies and Life Consultants).

The Closed Block division includes certain in-force participating insurance and annuity products and corresponding assets that are used for the payment of benefits, expenses and policyholders’ dividends related to these products, as well as certain related assets and liabilities. In connection with demutualization, the Company ceased offering these participating products. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in the Company’s Corporate and Other operations. See Note 15 for additional information on the Closed Block.

Corporate and Other Operations consists primarily of: (1) capital that is not deployed in any business segment; (2) investments not allocated to business segments, including debt-financed investment portfolios, and tax credit and other tax-enhanced investments financed by business segments; (3) capital debt, including any related interest expense and financing costs, that is used or will be used to meet the capital requirements of the Company; (4) our qualified and non-qualified pension and other employee benefit plans, after allocations to business segments; (5) corporate-level activities, after allocations to business segments, including strategic expenditures, acquisition and disposition costs, corporate governance, corporate advertising, philanthropic activities, deferred compensation, costs related to certain contingencies and legal matters; (6) expenses associated with the multi-year plan of programs that span across our businesses and the functional areas that support those businesses; (7) certain retained obligations relating to pre-demutualization policyholders; (8) impacts of risk management activities pursuant to our Risk Appetite Framework; (9) the foreign currency income hedging program used to hedge certain non-U.S. dollar denominated earnings in our International Businesses segment; (10) intercompany arrangements with our International Businesses and PGIM segments to translate non-U.S. dollar-denominated earnings at fixed currency exchange rates; and (11) transactions with and between other segments, including the elimination of intercompany transactions for consolidation purposes.

Segment Accounting Policies. The accounting policies of the segments are the same as those described in Note 2. Results for each segment include earnings on attributed equity established at a level which management considers necessary to support each segment’s risks. Operating expenses specifically identifiable to a particular segment are allocated to that segment as incurred. Operating expenses not identifiable to a specific segment that are incurred in connection with the generation of segment revenues are generally allocated based upon the segment’s historical percentage of general and administrative expenses.

For information related to significant acquisitions, see Note 1. For information related to the adoption of new accounting pronouncements, see Note 2. The segments’ results in prior years have been revised for these items, as applicable, to conform to the current year presentation.

Adjusted Operating Income

The Company analyzes the operating performance of each segment using “adjusted operating income.” Adjusted operating income does not equate to “Income (loss) before income taxes and equity in earnings of operating joint ventures” or “Net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss used by the Company’s chief operating decision maker to evaluate segment performance and allocate resources and, consistent with authoritative guidance, is the measure of segment performance presented below. Adjusted operating income is calculated by adjusting each segment’s “Income (loss) before income taxes and equity in earnings of operating joint ventures” for the following items, which are described in greater detail below:

•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.

These items are important to an understanding of overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and the Company’s definition of adjusted operating income may differ from that used by other companies. However, the Company believes that the presentation of adjusted operating income as measured for management purposes enhances the understanding of results of operations by highlighting the results from ongoing operations and the underlying profitability factors of its businesses.

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

Realized investment gains (losses), net

Adjusted operating income excludes “Realized investment gains (losses), net,” except for certain items described below. Significant activity excluded from adjusted operating income includes impairments and credit-related gains (losses) from sales of securities, the timing of which depends largely on market credit cycles and can vary considerably across periods, and interest rate-related gains (losses) from sales of securities, which are largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile. Additionally, adjusted operating income excludes realized investment gains (losses) from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset/liability management program related to the risk of those products. While the Company has historically reflected the results of its variable annuities hedging programs in adjusted operating income over time, beginning with the second quarter of 2020 these impacts are excluded from adjusted operating income, which the Company believes enhances the understanding of underlying performance trends.

The following table sets forth the significant components of “Realized investment gains (losses), net” that are included in adjusted operating income and, as a result, are reflected as adjustments to “Realized investment gains (losses), net” for purposes of calculating adjusted operating income:


	Year Ended December 31,
	2020		2019		2018
	(in millions)
Net gains (losses) from(1)(2):
Terminated hedges of foreign currency earnings	$	68	$	60	$	(14)
Current period yield adjustments	$	364	$	326	$	369
Principal source of earnings	$	57	$	(37)	$	219

__________

(1)In addition to the items in the table above, “Realized investment gains (losses), net, and related charges and adjustments” also includes an adjustment to reflect “Realized investment gains (losses), net” related to Divested and Run-off Businesses. See “Divested and Run-off Businesses” discussed below.

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

Terminated Hedges of Foreign Currency Earnings. The amounts shown in the table above primarily reflect the impact of an intercompany arrangement between Corporate and Other operations and the International Businesses segment, pursuant to which the non-U.S. dollar-denominated earnings in all countries for a particular year, including its interim reporting periods, are translated at fixed currency exchange rates. The fixed rates are determined in connection with a currency hedging program designed to mitigate the risk that unfavorable rate changes will reduce the segment’s U.S. dollar-equivalent earnings. Pursuant to this program, the Company’s Corporate and Other operations may execute forward currency contracts with third-parties to sell the net exposure of projected earnings from the hedged currency in exchange for U.S. dollars at a specified exchange rate. The maturities of these contracts correspond with the future periods in which the identified non-U.S. dollar-denominated earnings are expected to be generated. These contracts do not qualify for hedge accounting under U.S. GAAP, so the resulting profits or losses are recorded in “Realized investment gains (losses), net.” When the contracts are terminated in the same period that the expected earnings emerge, the resulting positive or negative cash flow effect is included in adjusted operating income.

Current Period Yield Adjustments. The Company uses interest rate and currency swaps and other derivatives to manage interest and currency exchange rate exposures arising from mismatches between assets and liabilities, including duration mismatches. For derivative contracts that do not qualify for hedge accounting treatment, the periodic swap settlements, as well as certain other derivative related yield adjustments are recorded in “Realized investment gains (losses), net,” and are included in adjusted operating income to reflect the after-hedge yield of the underlying instruments. In certain instances, when these derivative contracts are terminated or offset before their final maturity, the resulting realized gains or losses are recognized in adjusted operating income over periods that generally approximate the expected terms of the derivatives or underlying instruments in order for adjusted operating income to reflect the after-hedge yield of the underlying instruments. Included in the amounts shown in the table above are gains (losses) on certain derivative contracts that were terminated or offset before their final maturity of $41 million, $41 million and $19 million for the years ended 2020, 2019 and 2018, respectively. As of December 31, 2020, there was a $195 million deferred net gain related to certain derivative contracts that were terminated or offset before their final maturity, primarily in the International Businesses. Also included in the amounts shown in the table above are fees related to synthetic GICs of $139 million, $147 million and $146 million for the years ended 2020, 2019 and 2018, respectively. Synthetic GICs are accounted for as derivatives under U.S. GAAP and, therefore, these fees are recorded in “Realized investment gains (losses), net.” See Note 5 for additional information on synthetic GICs.

Principal Source of Earnings. The Company conducts certain activities for which realized investment gains (losses) are a principal source of earnings for its businesses and are therefore included in adjusted operating income, particularly within the Company’s PGIM segment. For example, PGIM’s strategic investing business makes investments for sale or syndication to other investors or for placement or co-investment in the Company’s managed funds and structured products. The realized investment gains (losses) associated with the sale of these strategic investments, as well as the majority of derivative results, are a principal activity for this business and included in adjusted operating income. In addition, the realized investment gains (losses) associated with loans originated by the Company’s commercial mortgage operations, as well as related derivative results and retained mortgage servicing rights, are a principal activity for this business and are therefore included in adjusted operating income.

Adjustments related to Realized investment gains (losses), net

The following table sets forth certain other items excluded from adjusted operating income and reflected as an adjustment to “Realized investment gains (losses), net” for purposes of calculating adjusted operating income:


	Year Ended December 31,
	2020		2019		2018
	(in millions)
Net gains (losses) from(1):
Investments carried at fair value through net income	$	163	$	490	$	(343)
Foreign currency exchange movements	$	3	$	42	$	(270)
Gains (losses), net, on experience-rated contracts (excluding derivatives and commercial mortgage and other loans)(2)	$	50	$	22	$	(153)
Other activities	$	(35)	$	(32)	$	(34)

__________

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

(2)Adjusted operating income excludes net investment gains (losses) on assets supporting experience-rated contractholder liabilities, related derivatives, and commercial mortgage and other loans. The activity for derivatives and commercial mortgage and other loans that support these experience-rated products are reported in “Realized investment gains (losses), net” and excluded from adjusted operating income.

Investments carried at fair value through net income. The Company has certain investments in its general account portfolios that are carried at fair value with changes in fair value reported in “Other income (loss).” Examples include the Company’s investments in equity securities and fixed maturities designated as trading. Consistent with the exclusion of realized investment gains (losses) with respect to other investments managed on a consistent basis, the net gains or losses on these investments are excluded from adjusted operating income.

Foreign Currency Exchange Movements. The Company has certain assets and liabilities for which, under U.S. GAAP, the changes in value, including those associated with changes in foreign currency exchange rates during the period, are recorded in “Other income (loss).” To the extent the foreign currency exposure on these assets and liabilities is economically hedged or considered part of the Company’s capital funding strategies for its international subsidiaries, the change in value included in “Other income (loss)” is excluded from adjusted operating income. The insurance liabilities are supported by investments denominated in corresponding currencies, including a significant portion designated as available-for-sale. While these non-yen denominated assets and liabilities are economically hedged, unrealized gains (losses) on available-for-sale investments, including those arising from foreign currency exchange rate movements, are recorded in AOCI under U.S. GAAP, while the non-yen denominated liabilities are remeasured for foreign currency exchange rate movements, with the related change in value recorded in earnings within “Other income (loss).” Due to this non-economic volatility that has been reflected in U.S. GAAP earnings, the change in value recorded within “Other income (loss)” is excluded from adjusted operating income.

Investment gains (losses) on assets supporting experience-rated contractholder liabilities and changes in experience-rated contractholder liabilities due to asset value changes. Certain products included in the Retirement and International Businesses segments are experience-rated in that investment results associated with these products are expected to ultimately accrue to contractholders. The majority of investments supporting these experience-rated products are carried at fair value, with realized and unrealized gains (losses) reported in “Other income (loss)” and the related interest and dividend income reported in “Net investment income.” To a lesser extent, these experience-rated products are also supported by derivatives and commercial mortgage and other loans. The derivatives are carried at fair value, with realized and unrealized gains (losses) reported in “Realized investment gains (losses), net.” The commercial mortgage and other loans are carried at unpaid principal, net of unamortized discounts and an allowance for losses, with gains (losses) on sales and changes in the valuation allowance for commercial mortgage and other loans reported in “Realized investment gains (losses), net.”

Adjusted operating income excludes net investment gains (losses) on assets supporting experience-rated contractholder liabilities, related derivatives and commercial mortgage and other loans. This is consistent with the exclusion of realized investment gains (losses) with respect to other investments supporting insurance liabilities managed on a consistent basis. In addition, to be consistent with the historical treatment of charges related to realized investment gains (losses) on investments, adjusted operating income also excludes the change in contractholder liabilities due to asset value changes in the pool of investments (including changes in the fair value of commercial mortgage and other loans) supporting these experience-rated contracts, which are reflected in “Interest credited to policyholders’ account balances.” The result of this approach is that adjusted operating income for these products includes net fee revenue and interest spread we earn on these experience-rated contracts, and excludes changes in fair value of the pool of investments, both realized and unrealized, that we expect will ultimately accrue to the contractholders.

Other Activities. The Company excludes certain other items from adjusted operating income that are consistent with similar adjustments described above.

Charges related to realized investment gains (losses), net

Charges that relate to realized investment gains (losses) are also excluded from adjusted operating income, and include the following:

•The portion of the amortization of DAC, VOBA, unearned revenue reserves and DSI for certain products that is related to net realized investment gains (losses).

•Policyholder dividends and interest credited to policyholders’ account balances that relate to certain life policies that pass back certain realized investment gains (losses) to the policyholder, and reserves for future policy benefits for certain policies that are affected by net realized investment gains (losses).

•Market value adjustments paid or received upon a contractholder’s surrender of certain of the Company’s annuity products as these amounts mitigate the net realized investment gains or losses incurred upon the disposition of the underlying invested assets.

Market experience updates

The Company had historically recognized the immediate impacts from changes in current market conditions on estimates of profitability in current period adjusted operating income. Beginning with the second quarter of 2019 these impacts are excluded from adjusted operating income, which the Company believes enhances the understanding of underlying performance

trends. These amounts represent the impact of those changes on DAC and other costs and reserves, primarily related to variable annuity and variable and universal life products.

Divested and Run-off Businesses

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, are excluded from adjusted operating income as the results of Divested and Run-off Businesses are not considered relevant to understanding the Company’s ongoing operating results.

The Closed Block division is accounted for as a divested business because it consists primarily of certain participating insurance and annuity products that the Company ceased selling at demutualization in 2001. See Note 15 for further information on the Closed Block.

Other adjustments

Other adjustments represent all other adjustments that are excluded from adjusted operating income. These 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.

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

Equity in earnings of operating joint ventures, on a pre-tax basis, are included in adjusted operating income as these results are a principal source of earnings. These earnings are reflected on a U.S. GAAP basis on an after-tax basis as a separate line on the Company’s Consolidated Statements of Operations.

Earnings attributable to noncontrolling interests are excluded from adjusted operating income. Earnings attributable to noncontrolling interests represents the portion of earnings from consolidated entities that relates to the equity interests of minority investors, and are reflected on a U.S. GAAP basis as a separate line on the Company’s Consolidated Statements of Operations.

Reconciliation of adjusted operating income and net income (loss)

The table below reconciles adjusted operating income before income taxes to income before income taxes and equity in earnings of operating joint ventures:


	Year ended December 31,
	2020		2019		2018
	(in millions)
Adjusted operating income before income taxes by segment:
PGIM	$	1,262	$	998	$	959
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	1,436		1,301		1,049
Group Insurance	(16)		285		229
Total U.S. Workplace Solutions division	1,420		1,586		1,278
U.S. Individual Solutions division:
Individual Annuities(1)	1,470		1,843		1,925
Individual Life	(48)		87		223
Total U.S. Individual Solutions division	1,422		1,930		2,148
Assurance IQ division(2):
Assurance IQ	(88)		(9)		0
Total Assurance IQ division	(88)		(9)		0
Total U.S. Businesses	2,754		3,507		3,426
International Businesses(3)	2,952		3,112		3,019
Corporate and Other	(1,824)		(1,766)		(1,283)
Total segment adjusted operating income before income taxes	5,144		5,851		6,121
Reconciling Items(3):
Realized investment gains (losses), net, and related adjustments(4)	(4,156)		(835)		611
Charges related to realized investment gains (losses), net	(159)		(123)		(315)
Market experience updates(5)	(640)		(449)		0
Divested and Run-off Businesses:
Closed Block division	(24)		36		(62)
Other Divested and Run-off Businesses	(629)		755		(1,434)
Other adjustments(6)	51		(47)		0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests	90		(103)		(87)
Consolidated income (loss) before income taxes and equity in earnings of operating joint ventures	$	(323)	$	5,085	$	4,834

__________

(1)Individual Annuities segment results reflect DAC as if the Individual Annuities 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. See Note 1 for additional information.

(3)Effective second quarter of 2020, the results of POK and the impact of its sale are excluded from the International Businesses and are included in the Divested and Run-off Businesses in Corporate and Other. Effective third quarter of 2020, the results of POT and the impact of its anticipated sale are excluded from the International Businesses and are included in the Divested and Run-off Businesses in Corporate and Other. Prior period amounts have been updated to conform to current period presentation. See Note 1 for additional information.

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

(5)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.

(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.

Reconciliation of select financial information

The tables below present certain financial information for the Company’s segments and its Corporate and Other operations, including assets by segment and revenues, and benefits and expenses by segment on an adjusted operating income basis, and the reconciliation of the segment totals to amounts reported in the Consolidated Financial Statements.


	As of December 31,
	2020		2019
	(in millions)
Assets by segment:
PGIM	$	48,680	$	47,655
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	213,726		198,153
Group Insurance	45,601		43,712
Total U.S. Workplace Solutions division	259,327		241,865
U.S. Individual Solutions division:
Individual Annuities	200,718		189,040
Individual Life	110,953		96,072
Total U.S. Individual Solutions division	311,671		285,112
Assurance IQ division(1):
Assurance IQ	2,703		2,639
Total Assurance IQ division	2,703		2,639
Total U.S. Businesses	573,701		529,616
International Businesses(2)	231,128		213,335
Corporate and Other(2)	25,124		44,619
Closed Block division	62,089		61,327
Total assets per Consolidated Statements of Financial Position	$	940,722	$	896,552

__________

(1)Assurance IQ was acquired by the Company in October 2019. See Note 1 for additional information.

(2)Effective second quarter of 2020, the carrying amount of assets of POK are excluded from the International Businesses and are included in the Divested and Run-off Businesses in Corporate and Other. Effective third quarter of 2020, the carrying amount of assets of POT are excluded from the International Businesses and are included in the Divested and Run-off Businesses in Corporate and Other. Prior period amounts have been updated to conform to current period presentation. See Note 1 for additional information.

.


	Year Ended December 31, 2020
Revenues, and benefits and expenses on an adjusted operating income basis by segment	Total Revenues		Net Investment Income		Total Benefits and Expenses		Policyholders’ Benefits		Interest Credited to Policyholders’ Account Balances		Dividends to Policyholders		Interest Expense		Amortization of DAC
	(in millions)
PGIM	$	4,153	$	304	$	2,891	$	0	$	0	$	0	$	33	$	8
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	12,034		4,707		10,598		8,010		1,470		0		23		26
Group Insurance	5,786		526		5,802		4,664		206		0		3		8
Total U.S. Workplace Solutions division	17,820		5,233		16,400		12,674		1,676		0		26		34
U.S. Individual Solutions division:
Individual Annuities	4,440		898		2,970		337		337		0		59		524
Individual Life	6,398		2,314		6,446		3,170		848		36		769		367
Total U.S. Individual Solutions division	10,838		3,212		9,416		3,507		1,185		36		828		891
Assurance IQ division(1):
Assurance IQ	391		2		479		0		0		0		5		0
Total Assurance IQ division	391		2		479		0		0		0		5		0
Total U.S. Businesses	29,049		8,447		26,295		16,181		2,861		36		859		925
International Businesses(2)	21,576		4,982		18,624		13,714		851		40		8		1,204
Corporate and Other(2)	(629)		541		1,195		30		0		0		670		(49)
Total revenues, and benefits and expenses on an adjusted operating income basis	54,149		14,274		49,005		29,925		3,712		76		1,570		2,088
Reconciling items:
Realized investment gains (losses), net, and related adjustments	(3,463)		(35)		693		0		693		0		0		0
Charges related to realized investment gains (losses), net	(134)		0		25		0		(58)		0		0		(116)
Market experience updates(3)	(196)		0		444		261		21		0		0		132
Divested and Run-off Businesses:
Closed Block division	4,766		2,240		4,790		2,757		127		1,549		1		26
Other Divested and Run-off Businesses(2)	1,944		931		2,573		2,116		43		0		3		91
Other adjustments(4)	105		0		54		0		0		0		0		0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests	(138)		0		(228)		0		0		0		0		0
Total revenue, and benefits and expenses per Consolidated Statements of Operations	$	57,033	$	17,410	$	57,356	$	35,059	$	4,538	$	1,625	$	1,574	$	2,221


	Year Ended December 31, 2019
Revenues, and benefits and expenses on an adjusted operating income basis by segment	Total Revenues		Net Investment Income		Total Benefits and Expenses		Policyholders’ Benefits		Interest Credited to Policyholders’ Account Balances		Dividends to Policyholders		Interest Expense		Amortization of DAC
	(in millions)
PGIM	$	3,589	$	200	$	2,591	$	0	$	0	$	0	$	49	$	6
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	15,064		4,738		13,763		11,061		1,503		0		46		38
Group Insurance	5,750		624		5,465		4,257		286		0		2		7
Total U.S. Workplace Solutions division	20,814		5,362		19,228		15,318		1,789		0		48		45
U.S. Individual Solutions division:
Individual Annuities	4,995		856		3,152		435		334		0		122		513
Individual Life	6,115		2,247		6,028		2,778		830		38		774		577
Total U.S. Individual Solutions division	11,110		3,103		9,180		3,213		1,164		38		896		1,090
Assurance IQ division(1):
Assurance IQ	101		0		110		0		0		0		0		0
Total Assurance IQ division	101		0		110		0		0		0		0		0
Total U.S. Businesses	32,025		8,465		28,518		18,531		2,953		38		944		1,135
International Businesses(2)	20,936		4,944		17,824		12,925		876		46		25		1,116
Corporate and Other(2)	(677)		579		1,089		36		0		0		521		(46)
Total revenues, and benefits and expenses on an adjusted operating income basis	55,873		14,188		50,022		31,492		3,829		84		1,539		2,211
Reconciling items(2):
Realized investment gains (losses), net, and related adjustments	114		(36)		949		0		949		0		0		0
Charges related to realized investment gains (losses), net	(252)		0		(129)		(136)		(94)		0		0		(181)
Market experience updates(3)	(79)		0		370		191		4		0		0		139
Divested and Run-off Businesses:
Closed Block division	5,642		2,323		5,606		2,907		130		2,187		7		29
Other Divested and Run-off Businesses	3,660		1,110		2,905		2,366		62		3		4		134
Other adjustments(4)	(5)		0		42		0		0		0		0		0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests	(146)		0		(43)		0		0		0		0		0
Total revenue, and benefits and expenses per Consolidated Statements of Operations	$	64,807	$	17,585	$	59,722	$	36,820	$	4,880	$	2,274	$	1,550	$	2,332


	Year Ended December 31, 2018
Revenues, and benefits and expenses on an adjusted operating income basis by segment	Total Revenues		Net Investment Income		Total Benefits and Expenses		Policyholders’ Benefits		Interest Credited to Policyholders’ Account Balances		Dividends to Policyholders		Interest Expense		Amortization of DAC
	(in millions)
PGIM	$	3,294	$	73	$	2,335	$	0	$	0	$	0	$	40	$	8
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	16,825		4,377		15,776		13,215		1,430		0		35		33
Group Insurance	5,685		616		5,456		4,241		282		0		2		5
Total U.S. Workplace Solutions division	22,510		4,993		21,232		17,456		1,712		0		37		38
U.S. Individual Solutions division:
Individual Annuities	4,966		694		3,041		370		335		0		67		511
Individual Life	5,831		2,033		5,608		2,489		766		37		714		368
Total U.S. Individual Solutions division	10,797		2,727		8,649		2,859		1,101		37		781		879



Total U.S. Businesses	33,307		7,720		29,881		20,315		2,813		37		818		917
International Businesses(2)	20,058		4,642		17,039		12,453		867		59		21		1,121
Corporate and Other(2)	(705)		452		578		(12)		0		0		535		(44)
Total revenues, and benefits and expenses on an adjusted operating income basis	55,954		12,887		49,833		32,756		3,680		96		1,414		2,002
Reconciling items(2):
Realized investment gains (losses), net, and related adjustments(5)	(99)		(41)		(710)		0		(710)		0		0		0
Charges related to realized investment gains (losses), net	(273)		0		42		(75)		40		0		0		118
Divested and Run-off Businesses:
Closed Block division	4,678		2,288		4,740		2,972		132		1,236		2		35
Other Divested and Run-off Businesses	2,835		1,042		4,269		3,751		54		4		4		118
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests	(103)		0		(16)		0		0		0		0		0
Total revenue, and benefits and expenses per Consolidated Statements of Operations	$	62,992	$	16,176	$	58,158	$	39,404	$	3,196	$	1,336	$	1,420	$	2,273

__________

(1)Assurance IQ was acquired by the Company in October 2019. See Note 1 for additional information.

(2)Effective second quarter of 2020, the results of POK and the impact of its sale are excluded from the International Businesses and are included in the Divested and Run-off Businesses in Corporate and Other. Effective third quarter of 2020, the results of POT and the impact of its anticipated sale are excluded from the International Businesses and are included in the Divested and Run-off Businesses in Corporate and Other. Prior period amounts have been updated to conform to current period presentation. See Note 1 for additional information.

(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.

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

Revenues, calculated in accordance with U.S. GAAP, for the years ended December 31, include the following associated with the Company’s foreign and domestic operations:


	2020		2019		2018
	(in millions)
Domestic operations	$	34,921	$	40,868	$	40,603
Foreign operations, total	$	22,112	$	23,939	$	22,389
Foreign operations, Japan	$	19,864	$	19,626	$	19,125
Foreign operations, Korea(1)	$	364	$	1,638	$	1,495

__________

(1)Revenues related to POK until sold in August 2020.

Intersegment Revenues

Management has determined the intersegment revenues with reference to market rates. Intersegment revenues are eliminated in consolidation in Corporate and Other operations. The PGIM segment revenues include intersegment revenues, primarily consisting of asset-based management and administration fees, for the years ended December 31, as follows:


	2020		2019		2018

	(in millions)
PGIM segment intersegment revenues	$	866	$	777	$	731

Segments may also enter into internal derivative contracts with other segments. For adjusted operating income, each segment accounts for the internal derivative results consistent with the manner in which that segment accounts for other similar external derivatives.

Asset management and service fees

The table below presents asset management and service fees, predominantly related to an investment management activities, for the periods indicated:


	2020		2019		2018
	(in millions)
Asset-based management fees	$	3,615	$	3,489	$	3,438
Performance-based incentive fees	193		169		56
Other fees	583		581		606
Total asset management and service fees	$	4,391	$	4,239	$	4,100