Form: 10-Q

Quarterly report [Sections 13 or 15(d)]

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Transition Period from              to             
 
Commission File Number 001-16707
Prudential Financial, Inc.
(Exact Name of Registrant as Specified in its Charter) 
New Jersey22-3703799
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
751 Broad Street
Newark, NJ 07102
(973) 802-6000
(Address and Telephone Number of Registrant’s Principal Executive Offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Trading Symbols(s)Name of Each Exchange on Which Registered
Common Stock, Par Value $.01PRUNew York Stock Exchange
5.625% Junior Subordinated NotesPRSNew York Stock Exchange
4.125% Junior Subordinated NotesPFHNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerxAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No  x

As of October 31, 2021, 378 million shares of the registrant’s Common Stock (par value $0.01) were outstanding.


Table of Contents
TABLE OF CONTENTS
 
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.



Table of Contents
Forward-Looking Statements

Certain of the statements included in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Prudential Financial, Inc. and its subsidiaries. There can be no assurance that future developments affecting Prudential Financial, Inc. and its subsidiaries will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) the ongoing impact of the COVID-19 pandemic on the global economy, financial markets and our business; (2) losses on investments or financial contracts due to deterioration in credit quality or value, or counterparty default; (3) losses on insurance products due to mortality experience, morbidity experience or policyholder behavior experience that differs significantly from our expectations when we price our products; (4) changes in interest rates, equity prices and foreign currency exchange rates that may (a) adversely impact the profitability of our products, the value of separate accounts supporting these products or the value of assets we manage, (b) result in losses on derivatives we use to hedge risk or increase collateral posting requirements and (c) limit opportunities to invest at appropriate returns; (5) guarantees within certain of our products which are market sensitive and may decrease our earnings or increase the volatility of our results of operations or financial position; (6) liquidity needs resulting from (a) derivative collateral market exposure, (b) asset/liability mismatches, (c) the lack of available funding in the financial markets or (d) unexpected cash demands due to severe mortality calamity or lapse events; (7) financial or customer losses, or regulatory and legal actions, due to inadequate or failed processes or systems, external events, and human error or misconduct such as (a) disruption of our systems and data, (b) an information security breach, (c) a failure to protect the privacy of sensitive data, (d) reliance on third-parties or (e) labor and employment matters; (8) changes in the regulatory landscape, including related to (a) financial sector regulatory reform, (b) changes in tax laws, (c) fiduciary rules and other standards of care, (d) U.S. state insurance laws and developments regarding group-wide supervision, capital and reserves, (e) insurer capital standards outside the U.S. and (f) privacy and cybersecurity regulation; (9) technological changes which may adversely impact companies in our investment portfolio or cause insurance experience to deviate from our assumptions; (10) an inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (11) ratings downgrades; (12) market conditions that may adversely affect the sales or persistency of our products; (13) competition; (14) reputational damage; (15) the costs, effects, timing, or success of our plans to execute our strategy; and (16) the integration of Assurance IQ, LLC into our strategy. Prudential Financial, Inc. does not undertake to update any particular forward-looking statement included in this document. See “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2020 for discussion of certain risks relating to our businesses and investment in our securities.












































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Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Financial Position
September 30, 2021 and December 31, 2020 (in millions, except share amounts)
September 30,
2021
December 31,
2020
ASSETS
Fixed maturities, available-for-sale, at fair value (allowance for credit losses: 2021-$92; 2020-$133) (amortized cost: 2021-$332,957; 2020-$354,470)(1)
$373,252 $412,905 
Fixed maturities, held-to-maturity, at amortized cost, net of allowance for credit losses (allowance for credit losses: 2021-$6; 2020-$9) (fair value: 2021-$1,956; 2020-$2,298)(1)
1,644 1,930 
Fixed maturities, trading, at fair value (amortized cost: 2021-$9,583; 2020-$3,670)(1)
9,548 3,914 
Assets supporting experience-rated contractholder liabilities, at fair value3,424 24,115 
Equity securities, at fair value (cost: 2021-$5,100; 2020-$5,968)(1)
7,727 8,135 
Commercial mortgage and other loans (net of $117 and $235 allowance for credit losses; includes $1,106 and $1,092 of loans measured at fair value under the fair value option at September 30, 2021 and December 31, 2020, respectively)(1)
57,786 65,425 
Policy loans10,471 11,271 
Other invested assets (net of $2 and $2 allowance for credit losses; includes $6,965 and $6,407 of assets measured at fair value at September 30, 2021 and December 31, 2020, respectively)(1)
20,205 18,125 
Short-term investments (net of allowance for credit losses: 2021-$0; 2020-$1)
4,733 7,800 
Total investments488,790 553,620 
Cash and cash equivalents(1)15,605 13,701 
Accrued investment income(1)2,808 3,193 
Deferred policy acquisition costs18,067 19,027 
Value of business acquired815 1,103 
Assets held-for-sale(2)143,910 0 
Other assets (net of allowance for credit losses: 2021-$16; 2020-$11)(1)
20,735 22,801 
Separate account assets241,852 327,277 
TOTAL ASSETS$932,582 $940,722 
LIABILITIES AND EQUITY
LIABILITIES
Future policy benefits$291,721 $306,343 
Policyholders’ account balances122,337 161,682 
Policyholders’ dividends8,448 9,524 
Securities sold under agreements to repurchase9,899 10,894 
Cash collateral for loaned securities4,382 3,499 
Income taxes10,540 12,022 
Short-term debt909 925 
Long-term debt18,687 19,718 
Liabilities held-for-sale(2)140,736 0 
Other liabilities (net of allowance for credit losses: 2021-$21; 2020-$20 )(1)
20,230 20,323 
Notes issued by consolidated variable interest entities(1)282 305 
Separate account liabilities241,852 327,277 
Total liabilities870,023 872,512 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 14)
EQUITY
Preferred Stock ($0.01 par value; 10,000,000 shares authorized; none issued)
0 0 
Common Stock ($0.01 par value; 1,500,000,000 shares authorized; 666,305,189 shares issued as of both September 30, 2021 and December 31, 2020)
6 6 
Additional paid-in capital
25,680 25,584 
Common Stock held in treasury, at cost (287,361,658 and 269,867,738 shares at September 30, 2021 and December 31, 2020, respectively)
(21,522)(19,652)
Accumulated other comprehensive income (loss)21,836 30,738 
Retained earnings35,887 30,749 
Total Prudential Financial, Inc. equity61,887 67,425 
Noncontrolling interests672 785 
Total equity62,559 68,210 
TOTAL LIABILITIES AND EQUITY$932,582 $940,722 
__________
(1)See Note 4 for details of balances associated with variable interest entities.
(2)See Note 1 for details of the assets and liabilities classified as “held-for-sale” as of September 30, 2021.

See Notes to Unaudited Interim Consolidated Financial Statements
1

Table of Contents
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2021 and 2020 (in millions, except per share amounts)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
REVENUES
Premiums$13,193 $7,482 $27,515 $22,839 
Policy charges and fee income1,570 1,464 4,460 4,476 
Net investment income4,717 4,446 13,651 12,834 
Asset management and service fees1,229 1,120 3,603 3,144 
Other income (loss)500 992 2,135 (125)
Realized investment gains (losses), net432 (79)3,146 (2,164)
Total revenues21,641 15,425 54,510 41,004 
BENEFITS AND EXPENSES
Policyholders’ benefits14,401 8,312 30,126 25,768 
Interest credited to policyholders’ account balances917 1,151 2,759 3,375 
Dividends to policyholders602 554 2,039 1,008 
Amortization of deferred policy acquisition costs529 638 1,662 1,882 
General and administrative expenses3,386 3,323 9,931 10,194 
Total benefits and expenses19,835 13,978 46,517 42,227 
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES
1,806 1,447 7,993 (1,223)
Total income tax expense (benefit)259 (50)1,504 7 
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES
1,547 1,497 6,489 (1,230)
Equity in earnings of operating joint ventures, net of taxes18 10 63 62 
NET INCOME (LOSS)1,565 1,507 6,552 (1,168)
Less: Income (loss) attributable to noncontrolling interests35 20 36 25 
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.
$1,530 $1,487 $6,516 $(1,193)
EARNINGS PER SHARE
Basic earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.$3.92 $3.72 $16.44 $(3.06)
Diluted earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.$3.90 $3.70 $16.32 $(3.06)






See Notes to Unaudited Interim Consolidated Financial Statements
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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Comprehensive Income
Three and Nine Months Ended September 30, 2021 and 2020 (in millions)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
NET INCOME (LOSS)$1,565 $1,507 $6,552 $(1,168)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments for the period
(160)329 (889)122 
Net unrealized investment gains (losses)(1,740)(1,853)(10,515)6,894 
Defined benefit pension and postretirement unrecognized periodic benefit (cost)
69 74 239 218 
Total(1,831)(1,450)(11,165)7,234 
Less: Income tax expense (benefit) related to other comprehensive income (loss)
(397)(620)(2,254)1,265 
Other comprehensive income (loss), net of taxes(1,434)(830)(8,911)5,969 
Comprehensive income (loss)131 677 (2,359)4,801 
Less: Comprehensive income (loss) attributable to noncontrolling interests
42 26 27 32 
Comprehensive income (loss) attributable to Prudential Financial, Inc.
$89 $651 $(2,386)$4,769 
 



See Notes to Unaudited Interim Consolidated Financial Statements
 
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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Equity
Three and Nine Months Ended September 30, 2021 (in millions)
 
 Prudential Financial, Inc. Equity  
 Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Common
Stock
Held In
Treasury
Accumulated
Other
Comprehensive
Income (Loss)
Total
Prudential
Financial, Inc.
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2020$6 $25,584 $30,749 $(19,652)$30,738 $67,425 $785 $68,210 
Common Stock acquired(375)(375)(375)
Contributions from noncontrolling interests3 3 
Distributions to noncontrolling interests(6)(6)
Stock-based compensation programs(5)149 144 144 
Dividends declared on Common Stock(467)(467)(467)
Comprehensive income:
Net income (loss)2,828 2,828 (24)2,804 
Other comprehensive income (loss), net of tax(11,519)(11,519)(18)(11,537)
Total comprehensive income (loss)(8,691)(42)(8,733)
Balance, March 31, 20216 25,579 33,110 (19,878)19,219 58,036 740 58,776 
Common Stock acquired(875)(875)(875)
Contributions from noncontrolling interests9 9 
Distributions to noncontrolling interests(22)(22)
Consolidations (deconsolidations) of noncontrolling interests(118)(118)
Stock-based compensation programs65 66 131 131 
Dividends declared on Common Stock(460)(460)(460)
Comprehensive income:
Net income (loss)2,158 2,158 25 2,183 
Other comprehensive income (loss), net of tax4,058 4,058 2 4,060 
Total comprehensive income (loss)6,216 27 6,243 
Balance, June 30, 20216 25,644 34,808 (20,687)23,277 63,048 636 63,684 
Common Stock acquired(875)(875)(875)
Contributions from noncontrolling interests16 16 
Distributions to noncontrolling interests(22)(22)
Stock-based compensation programs36 40 76 76 
Dividends declared on Common Stock(451)(451)(451)
Comprehensive income:
Net income (loss)1,530 1,530 35 1,565 
Other comprehensive income (loss), net of tax(1,441)(1,441)7 (1,434)
Total comprehensive income (loss)89 42 131 
Balance, September 30, 2021$6 $25,680 $35,887 $(21,522)$21,836 $61,887 $672 $62,559 

















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PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Equity—Continued
Three and Nine Months Ended September 30, 2020 (in millions)

 Prudential Financial, Inc. Equity  
 Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Common
Stock
Held In
Treasury
Accumulated
Other
Comprehensive
Income (Loss)
Total
Prudential
Financial, Inc.
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2019$6 $25,532 $32,991 $(19,453)$24,039 $63,115 $604 $63,719 
Cumulative effect of adoption of accounting changes(1)(99)(99)(99)
Common Stock acquired(500)(500)(500)
Contributions from noncontrolling interests31 31 
Distributions to noncontrolling interests(11)(11)
Stock-based compensation programs(26)112 86 86 
Dividends declared on Common Stock(445)(445)(445)
Comprehensive income:
Net income (loss)(271)(271)1 (270)
Other comprehensive income (loss), net of tax(1,439)(1,439)0 (1,439)
Total comprehensive income (loss)(1,710)1 (1,709)
Balance, March 31, 20206 25,506 32,176 (19,841)22,600 60,447 625 61,072 
Common Stock acquired
Contributions from noncontrolling interests4 4 
Distributions to noncontrolling interests(23)(23)
Stock-based compensation programs7 56 63 63 
Dividends declared on Common Stock(441)(441)(441)
Comprehensive income:
Net income (loss)(2,409)(2,409)4 (2,405)
Other comprehensive income (loss), net of tax8,237 8,237 1 8,238 
Total comprehensive income (loss)5,828 5 5,833 
Balance, June 30, 20206 25,513 29,326 (19,785)30,837 65,897 611 66,508 
Common Stock acquired
Contributions from noncontrolling interests50 50 
Distributions to noncontrolling interests(14)(14)
Stock-based compensation programs50 60 110 110 
Dividends declared on Common Stock(441)(441)(441)
Comprehensive income:
Net income (loss)1,487 1,487 20 1,507 
Other comprehensive income (loss), net of tax(836)(836)6 (830)
Total comprehensive income (loss)651 26 677 
Balance, September 30, 2020$6 $25,563 $30,372 $(19,725)$30,001 $66,217 $673 $66,890 
__________
(1)Includes the impact from the adoption of ASU 2016-13. See Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.

See Notes to Unaudited Interim Consolidated Financial Statements
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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2021 and 2020 (in millions)
Nine Months Ended
September 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)$6,552 $(1,168)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Realized investment (gains) losses, net(3,146)2,164 
Policy charges and fee income(1,730)(1,995)
Interest credited to policyholders’ account balances2,759 3,375 
Depreciation and amortization87 448 
(Gains) losses on assets supporting experience-rated contractholder liabilities, net167 (393)
Change in:
Deferred policy acquisition costs(287)(206)
Future policy benefits and other insurance liabilities5,779 7,656 
Income taxes506 (331)
Derivatives, net(2,893)6,477 
Other, net(1,315)(3,146)
Cash flows from (used in) operating activities6,479 12,881 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale48,950 31,989 
Fixed maturities, held-to-maturity155 76 
Fixed maturities, trading2,357 444 
Assets supporting experience-rated contractholder liabilities13,878 22,534 
Equity securities3,463 1,974 
Commercial mortgage and other loans5,506 3,629 
Policy loans1,591 1,862 
Other invested assets2,151 1,376 
Short-term investments24,692 35,401 
Payments for the purchase/origination of:
Fixed maturities, available-for-sale(46,831)(39,692)
Fixed maturities, trading(5,525)(869)
Assets supporting experience-rated contractholder liabilities(15,187)(24,390)
Equity securities(2,959)(2,025)
Commercial mortgage and other loans(5,624)(3,913)
Policy loans(924)(1,700)
Other invested assets(2,434)(2,089)
Short-term investments(21,641)(40,009)
Dispositions, net of cash disposed132 1,454 
Derivatives, net(622)434 
Other, net(531)(225)
Cash flows from (used in) investing activities597 (13,739)
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholders’ account deposits23,582 33,268 
Policyholders’ account withdrawals(22,131)(26,944)
Net change in securities sold under agreements to repurchase and cash collateral for loaned securities(110)50 
Cash dividends paid on Common Stock(1,374)(1,325)
Net change in financing arrangements (maturities 90 days or less)108 (56)
Common Stock acquired(2,097)(500)
Common Stock reissued for exercise of stock options150 106 
Proceeds from the issuance of debt (maturities longer than 90 days)73 2,948 
Repayments of debt (maturities longer than 90 days)(1,167)(2,113)
Repayments of notes issued by consolidated VIEs0 (19)
Other, net(561)(349)
Cash flows from (used in) financing activities(3,527)5,066 
Effect of foreign exchange rate changes on cash balances(252)122 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS INCLUDING BALANCES CLASSIFIED AS HELD-FOR-SALE3,297 4,330 
NET CHANGE IN CASH BALANCES CLASSIFIED AS HELD-FOR-SALE1,499 0 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS1,798 4,330 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR13,855 16,474 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD$15,653 $20,804 
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PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2021 and 2020 (in millions)

Nine Months Ended
September 30,
20212020
HELD-FOR-SALE CLASSIFICATION(1)
Assets classified as held-for-sale$143,910 $0 
Liabilities classified as held-for-sale140,736 0 
Net assets classified as held-for-sale$3,174 $0 
NON-CASH TRANSACTIONS DURING THE PERIOD
Treasury Stock shares issued for stock-based compensation programs$135 $147 
Significant Pension Risk Transfer transactions:
Assets received, excluding cash and cash equivalents$5,377 $317 
Liabilities assumed6,397 584 
Net cash received$1,020 $267 
RECONCILIATION TO THE UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Cash and cash equivalents$15,605 $20,658 
Restricted cash and restricted cash equivalents (included in “Other assets”)48 146 
Total cash, cash equivalents, restricted cash and restricted cash equivalents$15,653 $20,804 
__________
(1)See Note 1 for details of the assets and liabilities classified as “held-for-sale” as of September 30, 2021.


See Notes to Unaudited Interim Consolidated Financial Statements
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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements

1. BUSINESS AND BASIS OF PRESENTATION
 
Prudential Financial, Inc. (“Prudential Financial”) 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 consist of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the Retirement, Group Insurance, Individual Annuities, Individual Life and Assurance IQ businesses), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other operations. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under U.S. GAAP. The Company’s Corporate and Other operations include corporate items and initiatives that are not allocated to business segments as well as the Divested and Run-off Businesses described above.
 
Basis of Presentation
 
The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). The Unaudited Interim 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.

In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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.

Reclassifications
 
Certain amounts in prior periods have been reclassified to conform to the current period presentation.

COVID-19
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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Since the first quarter of 2020, the novel coronavirus (“COVID-19”) has resulted in extreme stress and disruption in the global economy and financial markets. While markets have rebounded, the pandemic 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; and 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.). The Company cannot predict what impact the COVID-19 pandemic will ultimately have on its businesses.

Business Dispositions

Prudential Annuities Life Assurance Corporation, Representing a Portion of Individual Annuities’ Traditional Variable Annuity Block of Business

In September 2021, the Company entered into a definitive agreement to sell its equity interest in Prudential Annuities Life Assurance Corporation (“PALAC”), which represents a portion of its in-force traditional variable annuity block of business, to Fortitude Group Holdings, LLC. The transaction has a total value of approximately $2.2 billion, comprising the sales price for PALAC, a pre-closing net capital release to the Company and the expected tax impact from the sale. The PALAC block primarily consists of non-New York traditional variable annuities with guaranteed living benefits that were issued prior to 2011, which constitute approximately $30 billion or 18% of Prudential’s total in-force individual annuity account values as of September 30, 2021. The Company will retain, through a reinsurance agreement, its interest in all FlexGuard products and all fixed annuities and fixed indexed annuities remaining in PALAC.

The Company expects to record a gain on the sale of the business upon the closing of the transaction, which is expected to occur in the first half of 2022, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions.

Beginning with the third quarter of 2021, the Company is reporting the assets and liabilities of this block of business as “held-for-sale” with results continuing to be reported within the Individual Annuities segment.

Full Service Retirement Business

In July 2021, the Company entered into a definitive agreement with Great-West Life & Annuity Insurance Company (“Great-West”) pursuant to which the Company has agreed to sell to Great-West the Company’s Full Service Retirement business, primarily through a combination of (i) the sale of all of the outstanding equity interests of certain legal entities, including Prudential Retirement Insurance and Annuity Company (“PRIAC”); (ii) the ceding of certain insurance policies through reinsurance; and (iii) the sale, transfer and/or novation of certain in-scope contracts and brokerage accounts.

The Company expects to record a gain on the sale of the business upon the closing of the transaction, which is expected to occur by the end of the first quarter of 2022, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions.

Total proceeds from the sale are expected to be approximately $2.8 billion, which includes cash consideration for the sale of PRIAC, ceding commission for the reinsured business and capital available to be released from PICA. Separately, the Company expects to incur approximately $400 million of taxes and transaction related costs.

Beginning with the third quarter of 2021, the Company is reporting the assets and liabilities of the Full Service Retirement business as “held-for-sale” and has transferred the results of this business to Divested and Run-off Businesses within Corporate and Other operations. All prior period amounts have been restated, which impacts both segment reporting and adjusted operating income, but does not impact results reported under GAAP. The Full Service Retirement business generated pre-tax income of $18 million and $117 million for the three and nine months ended September 30, 2021, respectively, and pre-tax income of $49 million and $158 million for the three and nine months ended September 30, 2020, respectively. These amounts exclude the impacts of overhead costs, retained in the Company’s Corporate and Other operations, that will not be transferred to the buyer or eliminated with the sale.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The table below reflects the carrying amounts of assets and liabilities held-for-sale related to the pending dispositions described above:

September 30, 2021
Retirement
Full Service
Individual
Annuities
PALAC
Total
(in millions)
Assets held-for-sale(1):
Fixed maturities, available-for-sale, at fair value$5,062 $10,581 $15,643 
Fixed maturities, trading, at fair value383 342 725 
Assets supporting experience-rated contractholder liabilities, at fair value18,031 0 18,031 
Equity securities0 236 236 
Commercial mortgage and other loans(2)5,503 2,036 7,539 
Policy loans0 12 12 
Other invested assets64 96 160 
Short-term investments 6 91 97 
Cash and cash equivalents86 1,413 1,499 
Accrued investment income159 74 233 
Deferred policy acquisition costs102 1,051 1,153 
Value of business acquired186 29 215 
Other assets812 1,179 1,991 
Separate account assets64,460 31,916 96,376 
Total assets held-for-sale$94,854 $49,056 $143,910 
Liabilities held-for-sale(1):
Future policy benefits$111 $4,651 $4,762 
Policyholders’ account balances28,186 10,719 38,905 
Cash collateral for loaned securities3 0 3 
Other liabilities414 276 690 
Separate account liabilities64,460 31,916 96,376 
Total liabilities held-for-sale$93,174 $47,562 $140,736 
__________
(1)Under the terms of the sales agreements, certain of these assets and liabilities held-for-sale may be subject to capital transactions or substituted for other similar items prior to the closing of each transaction.
(2)Net of allowance for credit losses of $12 million as of September 30, 2021.

The Prudential Life Insurance Company of Taiwan Inc.

In June 2021, Prudential International Insurance Holdings, Ltd. (“PIIH”), a subsidiary of Prudential Financial, completed the sale of The Prudential Life Insurance Company of Taiwan Inc. (“POT”) to Taishin Financial Holding Co, Ltd. (the “Buyer”) for cash consideration of approximately NT5.5 billion, equal to approximately $200 million at then current exchange rates, and contingent consideration with a fair value of approximately $21 million as of September 30, 2021. The fair value of the contingent consideration is tied to the level of yields for the 10-year Taiwanese Government bond for 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. In connection with the transaction, the Company recognized a liability with a fair value of approximately $34 million as of September 30, 2021, representing its financial guarantee of certain insurance obligations of POT.

The after-tax loss on the sale of POT was approximately $400 million, of which approximately $350 million was recorded during 2020, and approximately $40 million and $10 million were recorded during the first and second quarters of 2021, respectively.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Prior to the sale, in the third quarter of 2020, the Company transferred the results of POT and the anticipated impact of its sale from the International Businesses segment to Divested and Run-off Businesses within Corporate & Other operations. Prior period amounts were restated at that time, which impacted both segment reporting and adjusted operating income, but did not impact results reported under GAAP. Results for the nine months ended September 30, 2020 contained herein reflect this restatement.

Pramerica SGR (PGIM Italy Joint Venture)

In March 2021, the Company sold its 35% ownership stake in Pramerica SGR, PGIM’s asset management joint venture in Italy, to its partner UBI Banca, which was acquired in 2020 by Intesa Sanpaolo Group. The after-tax gain on the sale of Pramerica SGR was approximately $330 million, which was recognized in adjusted operating income in the first quarter of 2021.

The Prudential Life Insurance Company of Korea, Ltd.

In August 2020, PIIH 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.

Prior to the sale, in the second quarter of 2020, the Company transferred the results of POK and the anticipated impact of its sale from the International Businesses segment to Divested and Run-off Businesses within Corporate & Other operations. Prior period amounts were restated at that time, which impacted both segment reporting and adjusted operating income, but did not impact results reported under GAAP. Results for the nine months ended September 30, 2020 contained herein reflect this restatement.

2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS

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 September 30, 2021, and as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material.

ASU issued but not yet adopted as of September 30, 2021 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. 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 using the modified retrospective transition method where permitted.

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. The Company expects the standard to have a significant financial impact on the Consolidated Financial Statements and it requires significantly enhanced disclosures. In addition to the significant impacts to the balance sheet upon adoption, the Company also expects an impact to the pattern of earnings emergence following the transition date. Outlined below are four key areas of change, although there are other less significant changes not noted below.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
ASU 2018-12 Amended TopicDescriptionMethod of adoptionEffect 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 Company currently intends to adopt this guidance effective January 1, 2023 using the modified retrospective transition method. The impacts of electing such method are currently 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.
As noted above, the Company currently intends to adopt the guidance for the liability for future policy benefits effective January 1, 2023 using the modified retrospective transition method. Upon adoption, 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.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
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 Company currently intends to adopt this guidance effective January 1, 2023 using the modified retrospective transition method. 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 non-performance risk (“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.
The Company currently intends to adopt this guidance effective January 1, 2023 using the retrospective transition method. 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.

Modifications related to COVID-19

We assess modifications to certain fixed income instruments on a case-by-case basis to evaluate whether a troubled debt restructuring ("TDR") has occurred. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") provides a temporary suspension of TDR accounting for certain COVID-19 related modifications where the investment was not more than 30 days past due as of December 31, 2019 (“TDR Relief”). The TDR Relief was set to expire on December 31, 2020, but was extended through December 31, 2021 by the Consolidated Appropriations Act of 2021. The Company elected to apply the TDR Relief beginning in the first quarter of 2021. The TDR Relief does not apply to modifications completed 60 days after the national emergency related to COVID-19 ends, or December 31, 2021, whichever comes earlier. As of September 30, 2021, any such modifications did not have a material impact on the Company's results of operations. For additional information regarding the Company’s policies for troubled debt restructurings, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

3. 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:
 
 September 30, 2021
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesFair
Value
 (in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$27,512 $5,491 $97 $0 $32,906 
Obligations of U.S. states and their political subdivisions10,444 1,774 15 0 12,203 
Foreign government bonds85,627 12,594 475 0 97,746 
U.S. public corporate securities97,127 13,819 452 12 110,482 
U.S. private corporate securities(2)34,035 2,903 150 54 36,734 
Foreign public corporate securities24,995 2,806 95 18 27,688 
Foreign private corporate securities26,712 1,669 355 8 28,018 
Asset-backed securities(3)11,120 140 15 0 11,245 
Commercial mortgage-backed securities12,480 728 14 0 13,194 
Residential mortgage-backed securities(4)2,905 143 12 0 3,036 
Total fixed maturities, available-for-sale(1)(2)$332,957 $42,067 $1,680 $92 $373,252 
 
 September 30, 2021
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Allowance for Credit LossesAmortized Cost,
Net of Allowance
 (in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds$859 $235 $0 $1,094 $0 $859 
Foreign public corporate securities500 54 0 554 6 494 
Foreign private corporate securities81 1 0 82 0 81 
Residential mortgage-backed securities(4)210 16 0 226 0 210 
Total fixed maturities, held-to-maturity(5)$1,650 $306 $0 $1,956 $6 $1,644 
__________
(1)Excludes “Assets held-for-sale” with amortized cost of $14,985 million, fair value of $15,643 million, unrealized gains of $783 million, unrealized losses of $123 million and allowance for credit losses of $2 million. See Note 1 for additional information on the pending dispositions.
(2)Excludes notes with amortized cost of $5,616 million (fair value, $5,693 million), which have been offset with the associated debt under a netting agreement.
(3)Includes credit-tranched securities collateralized by loan obligations, auto loans, education loans, credit cards and other asset types.
(4)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
(5)Excludes notes with amortized cost of $5,000 million (fair value, $5,727 million), which have been offset with the associated debt under a netting agreement.
 
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 December 31, 2020
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesFair
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 subdivisions10,668 2,144 1 0 12,811 
Foreign government bonds94,110 16,373 239 0 110,244 
U.S. public corporate securities95,299 18,516 213 47 113,555 
U.S. private corporate securities(1)36,894 4,196 134 19 40,937 
Foreign public corporate securities25,857 3,768 64 24 29,537 
Foreign private corporate securities28,668 3,183 226 33 31,592 
Asset-backed securities(2)14,489 176 74 0 14,591 
Commercial mortgage-backed securities15,036 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 LossesAmortized
Cost, Net of Allowance
 (in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds$935 $270 $0 $1,205 $0 $935 
Foreign public corporate securities651 68 0 719 9 642 
Foreign private corporate securities87 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 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)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.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 
The following tables set 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 dates indicated:
 
 September 30, 2021
 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$4,478 $94 $30 $3 $4,508 $97 
Obligations of U.S. states and their political subdivisions575 13 17 2 592 15 
Foreign government bonds4,586 192 6,680 283 11,266 475 
U.S. public corporate securities13,162 371 1,027 73 14,189 444 
U.S. private corporate securities2,832 66 866 84 3,698 150 
Foreign public corporate securities2,839 57 584 36 3,423 93 
Foreign private corporate securities5,386 196 1,399 156 6,785 352 
Asset-backed securities3,995 14 301 1 4,296 15 
Commercial mortgage-backed securities524 10 146 4 670 14 
Residential mortgage-backed securities657 12 1 0 658 12 
Total fixed maturities, available-for-sale(1)$39,034 $1,025 $11,051 $642 $50,085 $1,667 
__________
(1)Excludes “Assets held-for-sale” with fair value of $4,068 million and gross unrealized losses of $123 million. See Note 1 for additional information on the pending dispositions.

 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 subdivisions73 1 0 0 73 1 
Foreign government bonds6,536 231 39 8 6,575 239 
U.S. public corporate securities3,905 87 1,197 106 5,102 193 
U.S. private corporate securities1,712 52 843 82 2,555 134 
Foreign public corporate securities1,412 30 376 23 1,788 53 
Foreign private corporate securities798 34 2,371 192 3,169 226 
Asset-backed securities4,132 25 4,685 49 8,817 74 
Commercial mortgage-backed securities284 8 93 3 377 11 
Residential mortgage-backed securities116 1 1 0 117 1 
Total fixed maturities, available-for-sale$19,718 $486 $9,605 $463 $29,323 $949 

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
As of September 30, 2021 and December 31, 2020, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of $1,303 million and $636 million, respectively, related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $364 million and $313 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of September 30, 2021, the $642 million of gross unrealized losses of twelve months or more were concentrated in the consumer non-cyclical, finance and utility sectors within corporate securities and foreign government securities. As of December 31, 2020, the $463 million of gross unrealized losses of twelve months or more were concentrated in corporate securities within the energy, utility and finance sectors.

In accordance with its policy described in Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at September 30, 2021. This conclusion was based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to increases in interest rates, general credit spread widening, foreign currency exchange rate movements and the financial condition or near-term prospects of the issuer. As of September 30, 2021, 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: 
September 30, 2021
Available-for-Sale(1)Held-to-Maturity
 Amortized CostFair ValueAmortized Cost, Net of AllowanceFair Value
(in millions)
Fixed maturities:
Due in one year or less$10,255 $10,668 $0 $0 
Due after one year through five years47,749 51,188 566 627 
Due after five years through ten years68,170 75,046 31 33 
Due after ten years(2)180,278 208,875 837 1,070 
Asset-backed securities11,120 11,245 0 0 
Commercial mortgage-backed securities12,480 13,194 0 0 
Residential mortgage-backed securities2,905 3,036 210 226 
Total$332,957 $373,252 $1,644 $1,956 
__________
(1)Excludes “Assets held-for-sale” with amortized cost of $14,985 million and fair value of $15,643 million. See Note 1 for additional information on the pending dispositions.
(2)Excludes available-for-sale notes with amortized cost of $5,616 million (fair value, $5,693 million) and held-to-maturity notes with amortized cost of $5,000 million (fair value, $5,727 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 and the allowance for credit losses of fixed maturities, for the periods indicated:

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
 (in millions)
Fixed maturities, available-for-sale:
Proceeds from sales(1)$7,273 $4,284 $27,041 $14,654 
Proceeds from maturities/prepayments7,040 7,181 21,936 17,603 
Gross investment gains from sales and maturities301 578 2,264 1,451 
Gross investment losses from sales and maturities(69)(129)(558)(339)
Write-downs recognized in earnings(2)0 (134)0 (289)
(Addition to) release of allowance for credit losses(12)86 41 (152)
Fixed maturities, held-to-maturity:
Proceeds from maturities/prepayments(3)$11 $14 $155 $77 
(Addition to) release of allowance for credit losses1 0 3 0 
__________ 
(1)Includes $27 million and $268 million of non-cash related proceeds due to the timing of trade settlements for the nine months ended September 30, 2021 and 2020, respectively.
(2)Amounts represent write-downs on credit adverse securities, write-downs on securities approaching maturity related to foreign exchange movements and securities actively marketed for sale.
(3)Includes $0 million and $1 million of non-cash related proceeds due to the timing of trade settlements for the nine months ended September 30, 2021 and 2020, respectively.


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

Three Months Ended September 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period$0 $0 $80 $0 $0 $0 $80 
Additions to allowance for credit losses not previously recorded
0 0 35 0 0 0 35 
Reductions for securities sold during the period
0 0 (16)0 0 0 (16)
Additions (reductions) on securities with previous allowance0 0 (5)0 0 0 (5)
Reclassified to “Assets held-for-sale”(1)0 0 (2)0 0 0 (2)
Balance, end of period$0 $0 $92 $0 $0 $0 $92 
__________
(1)See Note 1 for additional information on the pending dispositions.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Three Months Ended September 30, 2020
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period$0 $38 $199 $0 $1 $0 $238 
Additions to allowance for credit losses not previously recorded
0 1 33 0 0 0 34 
Reductions for securities sold during the period
0 (38)(73)0 0 0 (111)
Additions (reductions) on securities with previous allowance0 0 (12)0 3 0 (9)
Balance, end of period$0 $1 $147 $0 $4 $0 $152 


Nine Months Ended September 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period$0 $0 $123 $0 $10 $0 $133 
Additions to allowance for credit losses not previously recorded
0 0 75 0 0 0 75 
Reductions for securities sold during the period
0 0 (46)0 (9)0 (55)
Additions (reductions) on securities with previous allowance0 0 (58)0 (1)0 (59)
Reclassified to “Assets held-for-sale”(1)0 0 (2)0 0 0 (2)
Balance, end of period$0 $0 $92 $0 $0 $0 $92 
__________
(1)See Note 1 for additional information on the pending dispositions.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Nine Months Ended September 30, 2020
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(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 39 238 0 1 0 278 
Reductions for securities sold during the period
0 (38)(101)0 0 0 (139)
Additions (reductions) on securities with previous allowance0 0 10 0 3 0 13 
Balance, end of period$0 $1 $147 $0 $4 $0 $152 


Three Months Ended September 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period$0 $0 $7 $0 $0 $0 $7 
Current period provision for expected losses0 0 0 0 0 0 0 
Change in foreign exchange0 0 (1)0 0 0 (1)
Balance, end of period$0 $0 $6 $0 $0 $0 $6 

Three Months Ended September 30, 2020
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period$0 $0 $9 $0 $0 $0 $9 
Balance, end of period$0 $0 $9 $0 $0 $0 $9 


20

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Nine Months Ended September 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period$0 $0 $9 $0 $0 $0 $9 
Current period provision for expected losses0 0 (3)0 0 0 (3)
Balance, end of period$0 $0 $6 $0 $0 $0 $6 

Nine Months Ended September 30, 2020
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(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 

For additional information about the Company’s methodology for developing our allowance and expected losses, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

For the three months ended September 30, 2021, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to net additions in the transportation and capital goods sectors within corporate securities due to adverse projected cash flows, partially offset by a net release on restructured securities in the energy sector within corporate securities. For the three months ended September 30, 2020, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to a release on restructured securities in the energy sector within corporate securities and foreign government securities, partially offset by net additions concentrated in the energy and utility sectors within corporate securities due to adverse projected cash flows.

For the nine months ended September 30, 2021, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to the overall improving credit environment in the energy and consumer cyclical sectors within corporate securities, partially offset by net additions in the transportation and utility sectors within corporate securities due to adverse projected cash flows. For the nine months ended September 30, 2020, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to securities within the energy, communications and consumer cyclical sectors within corporate securities due to adverse projected cash flows, partially offset by a release on restructured securities in the energy sector within corporate securities and foreign government securities.

The Company did not have any fixed maturity securities purchased with credit deterioration, as of September 30, 2021 or December 31, 2020.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
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:
 September 30, 2021December 31, 2020
Assets Held-for-Sale(1)
 Amortized
Cost or Cost
Fair
Value
Amortized
Cost or Cost
Fair
Value
Amortized
Cost or Cost
Fair
Value
 (in millions)
Short-term investments and cash equivalents$65 $65 $965 $965 $658 $658 
Fixed maturities:
Corporate securities106 108 11,414 11,899 14,442 15,472 
Commercial mortgage-backed securities0 0 1,661 1,717 1,743 1,839 
Residential mortgage-backed securities(2)0 0 720 755 964 1,018 
Asset-backed securities(3)0 0 1,843 1,860 1,665 1,697 
Foreign government bonds790 791 206 204 934 945 
U.S. government authorities and agencies and obligations of U.S. states188 197 244 304 371 443 
Total fixed maturities(4)1,084 1,096 16,088 16,739 20,119 21,414 
Equity securities1,805 2,263 328 327 1,661 2,043 
Total assets supporting experience-rated contractholder liabilities(5)$2,954 $3,424 $17,381 $18,031 $22,438 $24,115 
__________ 
(1)See Note 1 for additional information on the pending dispositions.
(2)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
(3)Includes collateralized loan obligations, auto loans, education loans, home equity and other asset types. Collateralized loan obligations at fair value, included “Assets held-for-sale” were $1,358 million and $1,102 million as of September 30, 2021 and December 31, 2020, respectively, all of which were rated A or higher.
(4)As a percentage of amortized cost, 97% and 94% of the portfolio including “Assets held-for-sale” was considered high or highest quality based on NAIC or equivalent ratings, as of September 30, 2021 and December 31, 2020, respectively.
(5)As a percentage of amortized cost, 94% and 79% of the portfolio including “Assets held-for-sale” consisted of public securities as of September 30, 2021 and December 31, 2020, respectively.
The net change in unrealized gains (losses) from assets supporting experience-rated contractholder liabilities, including “Assets held-for-sale” still held at period end, recorded within “Other income (loss),” was $(263) million and $255 million during the three months ended September 30, 2021 and 2020, respectively, and $(557) million and $397 million during the nine months ended September 30, 2021 and 2020, respectively.

Equity Securities
 
The net change in unrealized gains (losses) from equity securities still held at period end, including “Assets held-for-sale” recorded within “Other income (loss),” was $19 million and $324 million during the three months ended September 30, 2021 and 2020, respectively, and $457 million and $(332) million during the nine months ended September 30, 2021 and 2020, 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:
 
22

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 September 30, 2021December 31, 2020
 Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
 (in millions)
Investments in Japanese government and government agency securities:
Fixed maturities, available-for-sale$75,703 $86,011 $80,273 $92,764 
Fixed maturities, held-to-maturity838 1,066 912 1,173 
Fixed maturities, trading24 24 25 25 
Assets supporting experience-rated contractholder liabilities971 968 849 855 
Total$77,536 $88,069 $82,059 $94,817 

Commercial Mortgage and Other Loans
 
The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:
 
 September 30, 2021December 31, 2020
 Amount
(in millions)
% of
Total
Amount
(in millions)
% of
Total
Commercial mortgage and agricultural property loans by property type:
Office$10,534 18.4 %$12,750 19.7 %
Retail6,694 11.7 7,326 11.3 
Apartments/Multi-Family16,769 29.3 18,330 28.3 
Industrial13,004 22.7 14,954 23.1 
Hospitality1,879 3.3 2,395 3.7 
Other4,192 7.3 4,981 7.7 
Total commercial mortgage loans53,072 92.7 60,736 93.8 
Agricultural property loans4,114 7.3 4,048 6.2 
Total commercial mortgage and agricultural property loans57,186 100.0 %64,784 100.0 %
Allowance for credit losses(112)(227)
Total net commercial mortgage and agricultural property loans57,074 64,557 
Other loans:
Uncollateralized loans574 655 
Residential property loans74 101 
Other collateralized loans69 120 
Total other loans717 876 
Allowance for credit losses(5)(8)
Total net other loans712 868 
Total net commercial mortgage and other loans(1)(2)$57,786 $65,425 
__________ 
(1)Excludes “Assets held-for-sale” of $7,539 million net of allowance for credit losses of $12 million as of September 30, 2021. See Note 1 for additional information on the pending dispositions.
(2)Includes loans held for sale which are carried at fair value and are collateralized primarily by apartment complexes. As of September 30, 2021 and December 31, 2020, the net carrying value of these loans was $1,106 million and $1,092 million, respectively.

As of September 30, 2021, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in California (29%), Texas (8%) and New York (7%)) and included loans secured by properties in Europe (7%), Australia (1%) and Asia (2%).

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The following tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:
Three Months Ended September 30, 2021
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$160 $6 $0 $2 $4 $172 
Addition to (release of) allowance for expected losses(40)(2)0 (2)0 (44)
Reclassified to “Asset held-for-sale”(1)(12)0 0 0 0 (12)
Other0 0 0 1 0 1 
Allowance, end of period$108 $4 $0 $1 $4 $117 
_________
(1)See Note 1 for additional information on the pending dispositions.

Three Months Ended September 30, 2020
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$230 $8 $0 $3 $4 $245 
Addition to (release of) allowance for expected losses(5)1 0 0 1 (3)
Write-downs charged against the
allowance
(7)0 0 0 0 (7)
Other0 0 0 0 0 0 
Allowance, end of period$218 $9 $0 $3 $5 $235 
 
Nine Months Ended September 30, 2021
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$218 $9 $0 $3 $5 $235 
Addition to (release of) allowance for expected losses(98)(5)0 (2)(1)(106)
Reclassified to “Assets held-for-sale”(1)(12)0 0 0 0 (12)
Other0 0 0 0 0 0 
Allowance, end of period$108 $4 $0 $1 $4 $117 
_________
(1)See Note 1 for additional information on the pending dispositions.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Nine Months Ended September 30, 2020
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$114 $3 $0 $0 $4 $121 
Cumulative effect of adoption of ASU 2016-13110 5 0 0 0 115 
Addition to (release of) allowance for expected losses1 1 0 0 1 3 
Write-downs charged against the
allowance
(7)0 0 0 0 (7)
Other0 0 0 3 0 3 
Allowance, end of period$218 $9 $0 $3 $5 $235 

For additional information about the Company’s methodology for developing our allowance and expected losses, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

For the three months ended September 30, 2021, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to the improving credit environment. For the three months ended September 30, 2020, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily due to a release related to a loan payoff.

For the nine months ended September 30, 2021, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to the improving credit environment. For the nine months ended September 30, 2020, the net 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 dates indicated:
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
September 30, 2021
Amortized Cost by Origination Year
20212020201920182017PriorTotal(1)
(in millions)
Commercial Mortgage Loans
Loan-to-Value Ratio:
0%-59.99%$967 $590 $2,437 $3,191 $2,977 $14,587 $24,749 
60%-69.99%2,207 1,861 3,848 3,791 1,543 5,260 18,510 
70%-79.99%1,561 1,360 2,026 978 904 2,228 9,057 
80% or greater46 0 0 61 68 581 756 
Total$4,781 $3,811 $8,311 $8,021 $5,492 $22,656 $53,072 
Debt Service Coverage Ratio:
Greater or Equal to 1.2x$4,361 $3,583 $7,309 $7,398 $4,934 $19,811 $47,396 
1.0 - 1.2x364 97 676 398 271 1,718 3,524 
Less than 1.0x56 131 326 225 287 1,127 2,152 
Total$4,781 $3,811 $8,311 $8,021 $5,492 $22,656 $53,072 
Agricultural Property Loans
Loan-to-Value Ratio:
0%-59.99%$578 $753 $482 $316 $354 $1,311 $3,794 
60%-69.99%60 123 39 62 26 10 320 
70%-79.99%0 0 0 0 0 0 0 
80% or greater0 0 0 0 0 0 0 
Total$638 $876 $521 $378 $380 $1,321 $4,114 
Debt Service Coverage Ratio:
Greater or Equal to 1.2x$630 $853 $510 $371 $322 $1,214 $3,900 
1.0 - 1.2x8 23 10 1 58 41 141 
Less than 1.0x0 0 1 6 0 66 73 
Total$638 $876 $521 $378 $380 $1,321 $4,114 
__________
(1)Excludes “Assets held-for-sale” of $7,551 million. See Note 1 for additional information on the pending dispositions.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
December 31, 2020
Amortized Cost by Origination Year
20202019201820172016PriorTotal
(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 greater23 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 - 1.2x118 711 383 263 384 1,719 3,578 
Less than 1.0x2 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 greater0 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 - 1.2x23 0 1 59 1 40 124 
Less than 1.0x0 1 6 3 58 12 80 
Total$964 $545 $388 $530 $367 $1,254 $4,048 

For additional information about the Company’s commercial mortgage and other loans credit quality monitoring process, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
 
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:
 
 September 30, 2021
 Current30-59 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$53,072 $0 $0 $0 $0 $53,072 $2 
Agricultural property loans4,106 0 4 4 8 4,114 19 
Residential property loans73 0 0 1 1 74 1 
Other collateralized loans69 0 0 0 0 69 0 
Uncollateralized loans574 0 0 0 0 574 0 
Total(3)$57,894 $0 $4 $5 $9 $57,903 $22 

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
__________
(1)As of September 30, 2021, there were no loans in this category accruing interest.
(2)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
(3)Excludes “Assets held-for-sale” of $7,551 million. See Note 1 for additional information on the pending dispositions.

 December 31, 2020
 Current30-59 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 loans3,996 37 0 15 52 4,048 15 
Residential property loans99 1 0 1 2 101 1 
Other collateralized loans120 0 0 0 0 120 0 
Uncollateralized loans655 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 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Loans on non-accrual status recognized interest income of $2 million for both the three months and nine months ended September 30, 2021 and 2020, respectively. Loans on non-accrual status that did not have a related allowance for credit losses were $20 million and $15 million as of September 30, 2021 and December 31, 2020, respectively.

The Company did not have any significant losses on commercial mortgage and other loans purchased with credit deterioration as of both September 30, 2021 and December 31, 2020.

Other Invested Assets
 
The following table sets forth the composition of “Other invested assets,” as of the dates indicated:
September 30, 2021December 31, 2020
 (in millions)
LPs/LLCs:
Equity method:
Private equity(1)$5,952 $4,311 
Hedge funds2,807 2,451 
Real estate-related(1)2,179 1,985 
Subtotal equity method10,938 8,747 
Fair value:
Private equity1,903 1,786 
Hedge funds2,168 2,036 
Real estate-related311 314 
Subtotal fair value4,382 4,136 
Total LPs/LLCs15,320 12,883 
Real estate held through direct ownership(2)1,753 2,027 
Derivative instruments2,218 1,915 
Other(3)914 1,300 
Total other invested assets(4)$20,205 $18,125 
_________ 
(1)Prior period amounts have been updated to conform to current period presentation.
(2)As of September 30, 2021 and December 31, 2020, real estate held through direct ownership had mortgage debt of $276 million and $409 million, respectively.
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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
(3)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. For additional information regarding the Company’s holdings in the Federal Home Loan Banks of New York, see Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
(4)Excludes “Assets held-for-sale” of $160 million as of September 30, 2021. See Note 1 for additional information on the pending dispositions.

Accrued Investment Income

The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:
 September 30, 2021December 31, 2020
 (in millions)
Fixed maturities$2,339 $2,676 
Equity securities7 7 
Commercial mortgage and other loans175 205 
Policy loans264 274 
Other invested assets21 27 
Short-term investments and cash equivalents2 4 
Total accrued investment income(1)$2,808 $3,193 
__________
(1)Excludes “Assets held-for-sale” of $233 million as of September 30, 2021. See Note 1 for additional information on the pending dispositions.

Write-downs on accrued investment income were less than $1 million and $3 million for the three months ended September 30, 2021 and 2020, respectively, and less than $1 million and $15 million for the nine months ended September 30, 2021 and 2020, respectively.

Net Investment Income
 
The following table sets forth “Net investment income” by investment type, for the periods indicated: 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
 (in millions)
Fixed maturities, available-for-sale(1)$2,995 $3,113 $9,000 $9,292 
Fixed maturities, held-to-maturity(1)56 59169 176 
Fixed maturities, trading53 32114 100 
Assets supporting experience-rated contractholder liabilities148 179474 527 
Equity securities23 36104 119 
Commercial mortgage and other loans621 6081,882 1,866 
Policy loans132 147403 450 
Other invested assets806 4151,939 693 
Short-term investments and cash equivalents18 3048 182 
Gross investment income4,852 4,619 14,133 13,405 
Less: investment expenses(135)(173)(482)(571)
Net investment income$4,717 $4,446 $13,651 $12,834 
__________ 
(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.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Realized Investment Gains (Losses), Net
 
The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
 (in millions)
Fixed maturities(1)$221 $401 $1,750 $671 
Commercial mortgage and other loans67 41 158 65 
Investment real estate49 5 113 15 
LPs/LLCs(43)8 (26)2 
Derivatives131 (537)1,145 (2,926)
Other7 3 6 9 
Realized investment gains (losses), net$432 $(79)$3,146 $(2,164)
__________ 
(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:
September 30, 2021December 31, 2020
 (in millions)
Fixed maturity securities, available-for-sale with an allowance(1)$22 $(25)
Fixed maturity securities, available-for-sale without an allowance(1)41,025 58,593 
Derivatives designated as cash flow hedges(2)867 (168)
Derivatives designated as fair value hedges(2)(29)10 
Other investments(3)11 7 
Net unrealized gains (losses) on investments$41,896 $58,417 
__________ 
(1)Includes net unrealized gains of $660 million on “Assets held-for-sale” as of September 30, 2021.
(2)For additional information on cash flow and fair value hedges, see Note 5.
(3)As of September 30, 2021, 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:
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
September 30, 2021December 31, 2020
Remaining Contractual Maturities of the AgreementsRemaining Contractual Maturities of the Agreements
 Overnight & ContinuousUp to 30 DaysTotal  Overnight & ContinuousUp to 30 DaysTotal
(in millions)
U.S. Treasury securities and obligations of U.S.
government authorities and agencies
$8,842 $479 $9,321 $9,548 $546 $10,094 
Commercial mortgage-backed securities338 0 338 463 0 463 
Residential mortgage-backed securities240 0 240 337 0 337 
Total securities sold under agreements to repurchase(1)$9,420 $479 $9,899 $10,348 $546 $10,894 
__________ 
(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:

September 30, 2021December 31, 2020
Remaining Contractual Maturities of the AgreementsRemaining Contractual Maturities of the Agreements
 Overnight & ContinuousUp to 30 DaysTotal  Overnight & ContinuousUp to 30 DaysTotal
(in millions)
Obligations of U.S. states and their political
subdivisions
$75 $0 $75 $108 $0 $108 
Foreign government bonds222 0 222 426 0 426 
U.S. public corporate securities2,943 0 2,943 2,360 0 2,360 
Foreign public corporate securities709 0 709 567 0 567 
Equity securities433 0 433 38 0 38 
Total cash collateral for loaned securities(1)(2)$4,382 $0 $4,382 $3,499 $0 $3,499 
__________ 
(1)The Company did not have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.
(2)Excludes “Liabilities held-for-sale” of $3 million as of September 30, 2021. See Note 1 for additional information on the pending dispositions.


4. 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 variable interest entities (“VIEs”). For additional information, see Note 4 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
 
Consolidated Variable Interest Entities
 
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.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 Consolidated VIEs for which the
Company is the Investment
Manager(1)
Other Consolidated VIEs(1)
 September 30,
2021
December 31,
2020
September 30,
2021
December 31,
2020
 (in millions)
Fixed maturities, available-for-sale$127 $110 $271 $296 
Fixed maturities, held-to-maturity81 87 816 882 
Fixed maturities, trading174 160 0 0 
Equity securities74 42 0 0 
Commercial mortgage and other loans949 975 0 0 
Other invested assets2,668 2,221 142 127 
Cash and cash equivalents172 101 0 0 
Accrued investment income2 2 3 4 
Other assets469 594 798 768 
Total assets of consolidated VIEs$4,716 $4,292 $2,030 $2,077 
Other liabilities$565 $256 $3 $2 
Notes issued by consolidated VIEs(2)282 305 0 0 
Total liabilities of consolidated VIEs$847 $561 $3 $2 
 __________
(1)Total assets of consolidated VIEs reflect $2,747 million and $2,538 million as of September 30, 2021 and December 31, 2020, 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 September 30, 2021, the maturity of this obligation was within 3 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. 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 $960 million and $935 million at September 30, 2021 and December 31, 2020, 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 Unaudited Interim Consolidated Statements of Financial Position.
 
In the normal course of its activities, the Company will invest in limited partnerships and limited liability companies (“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 classifies these investments as “Other invested assets” and its maximum exposure to loss associated with these entities, excluding “Assets held-for-sale,” was $15,320 million and $12,883 million as of September 30, 2021 and December 31, 2020, 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.

5. DERIVATIVES AND HEDGING
 
Types of Derivative and Hedging Instruments

The Company utilizes various derivatives and hedging instruments to manage its risk. Commonly used derivative and non-derivative hedging instruments include, but are not necessarily limited to:
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Interest rate contracts: futures, swaps, forwards, options, caps and floors
Equity contracts: futures, options and total return swaps
Foreign exchange contracts: futures, options, forwards, swaps, and foreign currency debt instruments
Credit contracts: single and index reference credit default swaps

Other types of financial contracts that the Company accounts for as derivatives are:
To-be-announced (“TBA”) forward contracts, loan commitments, embedded derivatives and synthetic guaranteed investment contracts (“GICs”).

For detailed information on these contracts and the related strategies, see Note 5 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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 $2,213 million and $1,906 million as of September 30, 2021 and December 31, 2020, respectively, and total derivative liabilities of $1,185 million and $792 million as of September 30, 2021 and December 31, 2020, respectively, reflected in the Unaudited Interim Consolidated Statements of Financial Position.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Primary Underlying Risk /Instrument TypeSeptember 30, 2021December 31, 2020
 Fair Value Fair Value
Gross NotionalAssetsLiabilitiesGross NotionalAssetsLiabilities
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps$3,182 $716 $(76)$3,065 $978 $(90)
Interest Rate Forwards298 8 (11)249 0 (8)
Foreign Currency
Foreign Currency Forwards4,258 59 (101)2,577 68 (116)
Currency/Interest Rate
Foreign Currency Swaps20,908 1,097 (268)22,642 878 (1,037)
Total Derivatives Designated as Hedge Accounting Instruments$28,646 $1,880 $(456)$28,533 $1,924 $(1,251)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps$196,080 $10,549 $(14,874)$178,803 $17,174 $(13,172)
Interest Rate Futures17,449 6 (14)15,778 99 (5)
Interest Rate Options15,368 532 (240)14,593 914 (233)
Interest Rate Forwards3,509 26 (4)2,910 25 0 
Foreign Currency
Foreign Currency Forwards28,903 930 (1,061)35,478 764 (647)
Foreign Currency Options0 0 0 0 0 0 
Currency/Interest Rate
Foreign Currency Swaps11,493 661 (257)13,661 537 (601)
Credit
Credit Default Swaps6,849 168 0 3,360 63 (28)
Equity
Equity Futures4,329 0 (43)5,668 10 (25)
Equity Options35,514 405 (682)36,250 1,731 (1,028)
Total Return Swaps13,990 287 (20)22,489 32 (1,277)
Other
Other(1)1,258 0 0 1,262 0 0 
Synthetic GICs83,200 1 0 86,264 0 0 
Total Derivatives Not Qualifying as Hedge Accounting Instruments$417,942 $13,565 $(17,195)$416,516 $21,349 $(17,016)
Total Derivatives(2)(3)(4)$446,588 $15,445 $(17,651)$445,049 $23,273 $(18,267)
__________
(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 $9,994 million and $20,119 million as of September 30, 2021 and December 31, 2020, respectively, primarily included in “Future policy benefits.”
(3)Recorded in “Other invested assets” and “Other liabilities” on the Unaudited Interim Consolidated Statements of Financial Position.
(4)Excludes “Assets held-for-sale” with fair value of $1,282 million and “Liabilities held-for-sale” with fair value of $1,309 million with outstanding gross notional amounts of $38,690 million as of September 30, 2021. See Note 1 for additional information on the pending dispositions.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
As of September 30, 2021, the following amounts were recorded on the Unaudited Interim 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.
September 30, 2021December 31, 2020
Balance Sheet Line Item in which Hedged Item is RecordedCarrying 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$418 $59 $402 $79 
Commercial mortgage and other loans$18 $1 $20 $2 
Policyholders’ account balances$(1,533)$(166)$(1,627)$(303)
Future policy benefits$(2,539)$(252)$(1,585)$(372)
__________
(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 GICs, 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 Unaudited Interim 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 Unaudited Interim Consolidated Statements of Financial Position.
 
 September 30, 2021
 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:(2)
Derivatives$15,301 $(13,233)$2,068 $(787)$1,281 
Securities purchased under agreement to resell69 0 69 (69)0 
Total assets$15,370 $(13,233)$2,137 $(856)$1,281 
Offsetting of Financial Liabilities:(2)
Derivatives$17,646 $(16,466)$1,180 $(956)$224 
Securities sold under agreement to repurchase9,899 0 9,899 (9,561)338 
Total liabilities$27,545 $(16,466)$11,079 $(10,517)$562 
 
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 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$23,144 $(21,367)$1,777 $(806)$971 
Securities purchased under agreement to resell252 0 252 (252)0 
Total assets$23,396 $(21,367)$2,029 $(1,058)$971 
Offsetting of Financial Liabilities:
Derivatives$18,265 $(17,475)$790 $(790)$0 
Securities sold under agreement to repurchase10,894 0 10,894 (10,432)462 
Total liabilities$29,159 $(17,475)$11,684 $(11,222)$462 
__________
(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.
(2)Excludes “Assets held-for-sale” with fair value of $1,282 million and “Liabilities held-for-sale” with fair value of $1,309 million. See Note 1 for additional information on the pending dispositions.


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 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020.
 
Cash Flow, Fair Value and Net Investment Hedges
 
The primary derivative and non-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, or 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.

















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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

 Three Months Ended September 30, 2021
 Realized
Investment
Gains
(Losses)
Net
Investment
Income
Other
Income (Loss)
Interest
Expense
Interest
Credited to
Policyholders’
Account
Balances
Policyholders’ BenefitsAOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$3 $(2)$0 $0 $(16)$(15)$0 
Currency1 0 0 0 0 (16)0 
Total gains (losses) on derivatives designated as hedge instruments4 (2)0 0 (16)(31)0 
Gains (losses) on the hedged item:
Interest Rate(9)4 0 0 27 21 0 
Currency0 0 0 0 0 16 0 
Total gains (losses) on hedged item(9)4 0 0 27 37 0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 (1)(12)
Total Amortization for Gain (Loss) Excluded from Assessment of the Effectiveness0 0 0 0 0 (1)(12)
Total gains (losses) on fair value hedges net of hedged item(5)2 0 0 11 5 (12)
Cash flow hedges
Interest Rate(7)0 0 0 0 0 0 
Currency(1)0 0 0 0 0 55 
Currency/Interest Rate18 66 145 0 0 0 551 
Total gains (losses) on cash flow hedges10 66 145 0 0 0 606 
Net investment hedges
Currency0 0 0 0 0 0 1 
Currency/Interest Rate0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 1 
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate(413)0 0 0 0 0 0 
Currency88 0 1 0 0 0 0 
Currency/Interest Rate205 0 2 0 0 0 0 
Credit1 0 0 0 0 0 0 
Equity(111)0 0 0 0 0 0 
Other(1)0 0 0 0 0 0 
Embedded Derivatives354 0 0 0 0 0 0 
Total gains (losses) on derivatives not qualifying as hedge accounting instruments123 0 3 0 0 0 0 
Total$128 $68 $148 $0 $11 $5 $595 






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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

 Nine Months Ended September 30, 2021
 Realized
Investment
Gains
(Losses)
Net
Investment
Income
Other
Income (Loss)
Interest
Expense
Interest
Credited to
Policyholders’
Account
Balances
Policyholders’ BenefitsAOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$17 $(7)$0 $0 $(108)$(93)$0 
Currency(1)0 0 0 0 (8)0 
Total gains (losses) on derivatives designated as hedge instruments16 (7)0 0 (108)(101)0 
Gains (losses) on the hedged item:
Interest Rate(22)12 0 0 138 109 0 
Currency1 1 0 0 0 8 0 
Total gains (losses) on hedged item(21)13 0 0 138 117 0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 (4)(39)
Total Amortization for Gain (Loss) Excluded from Assessment of the Effectiveness0 0 0 0 0 (4)(39)
Total gains (losses) on fair value hedges net of hedged item(5)6 0 0 30 12 (39)
Cash flow hedges
Interest Rate6 1 0 0 0 0 (30)
Currency(4)0 0 0 0 0 53 
Currency/Interest Rate56 204 175 0 0 0 1,012 
Total gains (losses) on cash flow hedges58 205 175 0 0 0 1,035 
Net investment hedges
Currency0 0 0 0 0 0 (12)
Currency/Interest Rate0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 (12)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate(2,969)0 0 0 0 0 0 
Currency(249)0 (3)0 0 0 0 
Currency/Interest Rate620 0 1 0 0 0 0 
Credit28 0 0 0 0 0 0 
Equity(2,017)0 0 0 0 0 0 
Other1