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Prudential 2Q26 EARNINGS CALL AUGUST 5 , 2026 Expanding access to investing , insurance , and retirement security
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22 • Adjusted operating earnings were strong, reflecting continued disciplined execution and momentum across our businesses • The annual assumption update resulted in a one-time pre-tax AOI benefit of $65M to the enterprise, with no material ongoing impacts to AOI expected • The pre-tax GAAP net loss was ($379M), driven primarily by the assumption update in Retirement and long-term care operations within divested businesses • PGIM generated another quarter of solid earnings and margin growth, and experienced strong total flows as well as momentum in private capital deployment • Results in Retirement were solid, with robust sales in RILA and fixed products and $1B of LRT middle-market transactions • Group Insurance delivered record quarterly earnings as initiatives to strengthen the business and diversify its product and segment growth profile translated into results • Earnings in Individual Life more than doubled year over year, and sustained demand for variable accumulation products drove a record second quarter for sales • International Businesses generated strong earnings, despite the impact of Prudential of Japan’s voluntary sales suspension, demonstrating the resilience of the underlying business and continued growth in Brazil SECOND QUARTER 2026 PERFORMANCE Note: All percentage changes reflect changes from the prior-year quarter. (1) See reconciliation in Appendix for non -GAAP measures Adjusted Operating Income, Adjusted Operating Income Per Share, and Adjusted Book Value Per Share. (2) Based on year-to-date 2026 after-tax Adjusted Operating Income and average Adjusted Book Value. See Appendix for more information. HIGHLIGHTS 10% YoY $1,827M Pre-Tax Adjusted Operating Income(1) 15.5% Adjusted Operating Return on Equity(2) 110bps YoY $4.08 Adjusted Operating Income per Share(1) 14% YoY
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33 OPERATING RESULTS BY BUSINESS EARNINGS DRIVERS ($ millions, pre-tax adjusted operating income) Corporate & Other loss of ($279M) is essentially unchanged compared to 2Q25 loss of ($280M) PGIM + Higher asset management fees driven by market appreciation and strong investment performance, partially offset by the impact of net outflows and higher interest rates + Higher net service, distribution, and other revenues International Businesses + Higher spread income + More favorable assumption update + Higher joint venture earnings + Business growth in Brazil – Higher expenses and less favorable underwriting related to the Prudential of Japan sales suspension U.S. Businesses + More favorable assumption update + Higher spread income primarily driven by Retirement – Higher expenses to support business growth primarily in Retirement and Group Insurance – Less favorable underwriting $229 $294 2Q25 2Q26 $955 $957 2Q25 2Q26 $761 $855 2Q25 2Q26
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44 Earnings Contribution(1) ($ millions)($ billions) QUARTERLY EARNINGS AND DRIVERS ASSETS UNDER MANAGEMENT(2) AND NET FLOWS (1) Based on trailing twelve-month pre-tax adjusted operating income excluding Corporate & Other operations . (2) As of end of period and at fair market value. (3) Adjusted operating margin not calculated in accordance with GAAP. See reconciliation in Appendix for non-GAAP measure adjusted revenues. Adjusted revenue excludes pass -through distribution revenue, revenue attributable to consolidated entities and revenue associated with certain incentive fee -related compensation expense. Adjusted operating income before income taxes as a percentage of total adjusted revenues. (4) Reported Operating Margin based on total revenues is 26.8%, 18.3%, 22.5%, 22.3%, and 22.0% for the three months ended June 30, 2026, March 31, 2026, December 31, 2025, September 30, 2025, and June 30, 2025, respectively. ASSET MANAGEMENT FEES AND ADJUSTED OPERATING MARGIN(3)(4) Global Investment Manager with Differentiated Capabilities Across Public and Private Asset ClassesPGIM I AUM Net Flows Key Earnings Drivers (Year-over-Year) + Higher asset management fees driven by market appreciation and strong investment performance, partially offset by the impact of net outflows and higher interest rates + Higher net service, distribution, and other revenues 2Q25 3Q25 4Q25 1Q26 2Q26 Institutional $2.6 $0.3 ($4.4) $1.6 $3.1 Retail ($2.8) $0.3 ($1.3) $0.2 $1.5 Affiliated $0.6 $1.8 ($3.9) ($1.9) ($3.0) Total $0.4 $2.4 ($9.6) ($0.1) $1.6 12% $1,441 $1,491 2Q25 2Q26 $825 $844 $858 $847 $864 23.5% 23.7% 23.8% 19.1% 28.2% $8 00 $8 10 $8 20 $8 30 $8 40 $8 50 $8 60 $8 70 $8 80 $8 90 $9 00 2Q25 3Q25 4Q25 1Q26 2Q26 Asset Management Fees Adjusted Operating Margin $229 $244 $249 $190 $294 2Q25 3Q25 4Q25 1Q26 2Q26 ($ millions)
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55 ($ billions)($ billions) SALES – PRODUCT MIX (1) Based on trailing twelve-month pre-tax adjusted operating income excluding Corporate & Other operations. (2) Includes spread-based stable value, structured settlements and funding agreement -backed notes. (3) Represents notional amounts based on present value of future benefits under longevity reinsurance contracts. (4) Primarily includes FlexGuard suite (Registered Index -Linked Annuities) and fixed annuity products. (5) Represents account values net of reinsurance ceded. ENDING ACCOUNT VALUES(5) Capitalizing Secular Tailwinds Through a Diverse Product Portfolio 50 54 57 58 66 126 123 123 120 121 105 108 109 110 109 67 68 68 68 67 $348 $353 $357 $356 $363 2Q25 3Q25 4Q25 1Q26 2Q26 Fee -Based Stable Value Pension Risk Transfer and Other Longevity Reinsurance Retail AnnuitiesRETIREMENT I Bar order corresponds with the order of the legend to the left of the chartBar order corresponds with the order of the legend to the left of the chart Earnings Contribution(1) QUARTERLY EARNINGS AND DRIVERS Key Earnings Drivers (Year-over-Year) – Increased expenses to support business growth – Less favorable underwriting driven by mortality and run- off in our PRT block + Higher spread income primarily due to business growth 25% (4) (3) (2) $397 $598 $536 $572 $392 2Q25 3Q25 4Q25 1Q26 2Q26 (4) (3) (2) 3.1 3.4 3.6 3.3 3.6 5.6 1.5 0.1 0.2 1.0 2.2 4.3 2.5 2.8 1.3 1.1 0.5 1.1 1.1 0.9 $12.0 $9.7 $7.3 $7.4 $6.8 2Q25 3Q25 4Q25 1Q26 2Q26 Fee -Based Stable Value Pension Risk Transfer and Other Longevity Reinsurance Retail Annuities ($ millions)
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66 Target Range(4) GROSS PREMIUMS & FEES(2) – TRAILING 12 MONTHS (1) Based on trailing twelve-month pre-tax adjusted operating income excluding Corporate & Other operations. (2) Before returns of premiums to participating policyholders for favorable claims experience. (3) Benefits ratios excluding the impact of assumption updates and other refinements. (4) Targeted total benefits ratio range of 83% - 87%. TOTAL GROUP INSURANCE BENEFITS RATIO(3) Leveraging Group Benefits Leadership to Expand and Diversify GrowthGROUP INSURANCE I Earnings Contribution(1) QUARTERLY EARNINGS AND DRIVERS Key Earnings Drivers (Year-over-Year) + More favorable assumption update + More favorable Life underwriting due to favorable mortality in the working-age population + Higher spread income – Increased expenses to support business growth 4% Bar order corresponds with the order of the legend to the left of the chart ($ millions) 80.9% 82.8% 82.5% 83.7% 80.4% 2Q25 3Q25 4Q25 1Q26 2Q26 $125 $90 $77 $38 $155 2Q25 3Q25 4Q25 1Q26 2Q26 4,696 4,664 1,679 1,833 $6,375 $6,497 2Q25 2Q26 Group Disability Group Life ($ millions)
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77 ($ millions) SALES(2) BY PRODUCT MIX – TRAILING 12 MONTHS (1) Based on trailing twelve-month pre-tax adjusted operating income excluding Corporate & Other operations. (2) Sales represented by annualized new business premiums. SALES(2) – DISTRIBUTION MIX Broad Product Portfolio and Multi-Channel Distribution Driving ResultsINDIVIDUAL LIFE I Trailing twelve months Earnings Contribution(1) QUARTERLY EARNINGS AND DRIVERS Key Earnings Drivers (Year-over-Year) + More favorable assumption update + More favorable underwriting + Higher spread income 8% Bar order corresponds with the order of the legend to the left of the chart Independent 65% Prudential Advisors 19% Institutional 16% $82 $153 $186 $139 $176 2Q25 3Q25 4Q25 1Q26 2Q26 738 758 140 153 68 82 $946 $993 2Q25 2Q26 Universal Life Term Life Variable Life ($ millions)
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88 SEGMENT COMPONENTS ANNUITIES ACCOUNT VALUES(3) Reporting Aligned to How We Manage the BusinessU.S. LEGACY PRODUCTS I (1) Based on trailing twelve-month pre-tax adjusted operating income excluding Corporate & Other operations. (2) Includes certai n other annuity products. (3) Represents discontinued annuities and guaranteed living benefits in general account and separate account. Includes alliance deposits and supplementary contracts. Earnings Contribution(1) QUARTERLY EARNINGS AND DRIVERS Key Earnings Drivers (Year-over-Year) – Less favorable assumption update – Less favorable underwriting related to the guaranteed universal life block – Lower net fee income resulting from continued run-off of the traditional variable annuity block, partially offset by market appreciation – Lower spread income 12% ($ billions) $351 $308 $252 $207 $234 2Q25 3Q25 4Q25 1Q26 2Q26 Traditional Variable Annuities with guaranteed living benefit riders(2) Guaranteed Universal Life (Included in the former Individual Retirement Strategies segment through 4Q25) (Included in the Individual Life segment through 4Q25) $81.9 $76.1 2Q25 2Q26 ($ millions)
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99 ($ millions) SALES (2) – TRAILING TWELVE MONTHS SALES (2) – CURRENCY MIX Strong Global Presence with Market Leadership in JapanINTERNATIONAL BUSINESSES I (1) Based on trailing twelve-month pre-tax adjusted operating income excluding Corporate & Other operations. (2) Constant exchange rate basis. Foreign denominated activity translated to U.S. Dollars (USD) at uniform exchange rates for all periods presented, including Japanese Yen (JPY) 147 per USD and Brazilian Real (BRL) 6 per USD. USD-denominated activity is included based on the amounts as transacted in USD. Sales represented by annualized new business premiums. Trailing twelve months Earnings Contribution(1) QUARTERLY EARNINGS AND DRIVERS Key Earnings Drivers (Year-over-Year) + Higher spread income + More favorable assumption update + Higher joint venture earnings + Business growth in Brazil – Increased expenses and less favorable underwriting results related to the Prudential of Japan sales suspension 39% USD 56%JPY 23% BRL 19% Other 2% $761 $881 $757 $810 $855 2Q25 3Q25 4Q25 1Q26 2Q26 $2,195 $1,849 2Q25 2Q26 ($ millions)
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1010 250 250 250 250 250 485 481 480 496 493 $735 $731 $730 $746 $743 5.6% 5.4% 5.4% 5.6% 5.5% 2Q25 3Q25 4Q25 1Q26 2Q26 Common Stock Dividends Share Repurchases Adjusted Dividend Yield $3.9 $3.9 $3.8 $3.7 $4.2 2Q25 3Q25 4Q25 1Q26 2Q26 ($ millions) ($ billions) HIGHLY LIQUID ASSETS(1) REGULATORY CAPITAL RATIOS(2) – CONSISTENT WITH AA OBJECTIVES SHAREHOLDER DISTRIBUTIONS OFF-BALANCE SHEET RESOURCES SIGNIFICANT FINANCIAL STRENGTH | As of June 30, 2026 unless otherwise noted. (1) Highly liquid assets predominantly include cash, short -term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds. (2) PICA RBC ratio is disclosed in annual statutory statement. Japan economic solvency ratios are disclosed quarterly in Prudential’s Form 10-Q/10-K. Actual and estimated consolidated ratios represent Prudential Holdings of Japan, Inc. consolidated. (3) Based on annualized dividend per share divided by adjusted book value per share for each stated period. Resource Capacity Maturity Date Credit Facility $4.0 billion July 2029 Contingent Capital $1.5 billion $1.5 billion May 2030 February 2033 and 2053 Prudential Holdings of Japan Facility ¥100 billion September 2029 Strong Capital Position with Ample Liquidity Ratios remain in excess of our objectives >375% PICA RBC Ratio >150% Japan Economic Solvency Ratios Bar order corresponds with the order of the legend to the left of the chart Target: >$3.0B Actual consolidated ratio of 192% as of March 31, 2026 Estimated consolidated range of 170-190% as of June 30, 2026
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1111 Government Securities 17% Corporate Securities, Public 29%Corporate Securities, Private 18% Structured Products 10% Mortgage Loans 14% Alts 3% Equities 3% Other 6% $405 billion (1) General Account excluding the Closed Block Division, funds withheld, and assets supporting experience -related contractholder liabilities as of June 30, 2026, on a U.S. GAAP carrying value basis. Mortgage loans include commercial, agricultural, residential, and other loans. Structured products include commercial and residential mortgage -backed securities, collateralized loan obligations, and other asset -backed securities. Alternatives include investments in LPs/LLCs, and real estate held through direct ownership. Other includes policy loans, fixed maturities - trading, short-term investments, credit-like instruments, derivatives, and other miscellaneous assets. HIGHLIGHTS • Broadly diversified, high quality portfolio with strong Asset Liability Management – High allocation to government securities (mostly U.S. and Japan) – Significant protections with private credit • Benefits from PGIM’s expertise and direct origination capabilities • Disciplined framework for credit management PORTFOLIO COMPOSITION(1) GENERAL ACCOUNT |Broadly Diversified, High Quality Investment Portfolio
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1212 Private Fixed Income 21% (1) General Account excluding the Closed Block Division, funds withheld, and assets supporting experience -related contractholder liabilities as of June 30, 2026, on a U.S. GAAP carrying value basis. Private Fixed Income includes private fixed maturities ($82B) and credit-like instruments within other invested assets ($2B). • Prudential has a 30+ year track record in private fixed income investing • Private placements have long been a core allocation for the General Account – Offers a yield premium alongside enhanced protections and diversification versus public fixed income • Focus on diversified, high quality investment grade opportunities • Below investment grade private fixed income represents ~3% of invested assets • Private letter ratings account for ~4% of invested assets $84 billion or 21% of invested assets 84% investment grade$405 billion General Account(1) Private Placements 86% Private ABF 9% Direct Lending 4% Other 1% GENERAL ACCOUNT |Long History of Investments in Private Fixed Income
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1313 APPENDIX
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1414 PGIM $294 - - - 30 - $30 Retirement $392 (91) (55) (20) - - ($166) Group Insurance $155 28 5 20 15 - $68 Individual Life $176 30 - 10 - - $40 U.S. Legacy Products $234 15 (20) (10) - - ($15) International $855 79 40 - (10) (70) $39 Corporate & Other ($279) 4 - - 110 - $114 Total Pre-Tax $1,827 $65 ($30) $0 $145 ($70) $110 Total After-Tax Per Share $4.08 $0.15 ($0.07) $0.00 $0.32 ($0.16) $0.24 ($ millions, except per share amounts) Adjusted Operating Income Variances(1) Total VariancesAssumption Update Alternative Investment Income(2) Underwriting Expenses & Other(3) POJ Sales Suspension (4) (4) 2Q26 ADJUSTED OPERATING INCOME AND VARIANCES BY BUSINESS (1) Reflects favorable/(unfavorable) variances of alternative investment income, underwriting, and certain expenses and other items from the Company’s expectations, included within Adjusted Operating Income. (2) Alternative investment income includes the adjusted operating income of the General Account portfolio’s interests in private equity, hedge fund, and real estate-related investments, as well as real estate investments held through direct ownership, and excludes the results from those interests held by Divested Businesses and third parties that have been consolidated on the Company’s balan ce sheet. (3) PGIM includes $10 million of Other Related Revenues above a normalized level and seasonally lower compensation expenses as well as lower than typical expenses and other favorable items. Group Insurance reflects lower than t ypical expenses. International includes seasonally lower annual premiums, partially offset by higher earnings from joint venture investments and lower than typical expenses. Corporate & Other reflects lower than typical expenses, including a reduction in legal reserves, and other favorable items. (4) See Appendix for reconciliation of non -GAAP measures Adjusted Operating Income and Adjusted Operating Income Per Share to the most comparable GAAP measures. Total 2Q Prudential of Japan (POJ) sales suspension impact of ~$105M • ~$70M of one-time expenses primarily related to Life Planner compensation payments during the sales suspension period • ~$35M primarily related to lower sales and the impact of surrenders Corporate & Other now expects full year 2026 loss of $1.55 billion
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1515 SEASONALITY OF KEY FINANCIAL ITEMS (1) Long-term compensation expense for retiree eligible employees is recognized when awards are granted, typically in the first quarter of each year. ($ millions, pre-tax adjusted operating income) PGIM $10 Lower compensation expense $10 Lower compensation expense ($30) Higher compensation expense(1) $10 Lower compensation expense Group Insurance $10 Higher underwriting gains ($20) Lowest underwriting gains $10 Higher underwriting gains Individual Life $15 Highest underwriting gains ($20) Lowest underwriting gains $5 Higher underwriting gains U.S. Legacy Products $10 Highest underwriting gains ($5) Lower underwriting gains ($10) Lowest underwriting gains $5 Higher underwriting gains International ($10) Lower premiums ($40) Lowest premiums $80 Highest premiums ($30) Lower premiums Corporate & Other $5 Lower expenses ($15) Higher expenses ($10) Higher compensation expense(1) $20 Lower expenses 2Q271Q274Q263Q26
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1616 RECONCILIATIONS BETWEEN ADJUSTED OPERATING INCOME AND THE COMPARABLE GAAP MEASURE (1) Represents adjustments not included in the above reconciling items, including certain components of consideration for bus iness acquisitions, which are recognized as compensation expense over the requisite service periods. (2) Represents adjusted operating income after-tax, annualized for interim periods, divided by average Prudential Financial, Inc. eq uity excluding accumulated other comprehensive income, adjusted to remove amounts included for foreign currency exchange rate remeasurement and the cumulative change in fair value of funds withheld embedded derivatives related to unrealized gains and losses on avai lable-for-sale securities and certain derivatives. ($ millions) 2026 2025 2026 2025 Net income (loss) attributable to Prudential Financial, Inc. 985$ 533$ 1,582$ 1,240$ Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 51 33 60 68 Net income (loss) 1,036 566 1,642 1,308 Less: Earnings attributable to noncontrolling interests and redeemable noncontrolling interests 51 33 60 68 Income (loss) attributable to Prudential Financial, Inc. 985 533 1,582 1,240 Less: Equity in earnings of joint ventures and other operating entities, net of taxes and earnings attributable to noncontrolling interests and redeemable noncontrolling interests 25 (12) 18 (18) Income (loss) (after-tax) before equity in earnings of operating joint ventures 960 545 1,564 1,258 Less: Reconciling Items: Realized investment gains (losses), net, and related charges and adjustments (655)$ (516)$ (1,276)$ (762)$ Change in value of market risk benefits, net of related hedging gains (losses) (71) (426) (366) (777) Market experience updates (20) 42 (5) 81 Divested and Run-off Businesses: Closed Block Division (12) (18) (23) (40) Other Divested and Run-off Businesses 135 12 199 (39) Equity in earnings of joint ventures and other operating entities and earnings attributable to noncontrolling interests and redeemable noncontrolling interests (25) (18) (67) (15) Other adjustments(1) (1) (1) (4) 27 Total reconciling items, before income taxes (649) (925) (1,542) (1,525) Less: Income taxes, not applicable to adjusted operating income (171) (186) (390) (311) Total reconciling items, after income taxes (478) (739) (1,152) (1,214) After-tax adjusted operating income 1,438 1,284 2,716 2,472 Income taxes, applicable to adjusted operating income 389 381 737 713 Adjusted operating income before income taxes 1,827$ 1,665$ 3,453$ 3,185$ Net Income (loss) Return on Equity 12.4% 7.1% 9.9% 8.4% Adjusted Operating Return on Equity(2) 16.4% 14.9% 15.5% 14.4% Second Quarter Year-to-Date
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1717 RECONCILIATIONS BETWEEN ADJUSTED OPERATING INCOME PER SHARE AND THE COMPARABLE GAAP MEASURE (1) Represents adjustments not included in the above reconciling items, including certain components of consideration for bus iness acquisitions, which are recognized as compensation expense over the requisite service periods. 2026 2025 2026 2025 Net income (loss) per share attributable to Prudential Financial, Inc. 2.80$ 1.48$ 4.48$ 3.44$ Less: Reconciling Items: Realized investment gains (losses), net, and related charges and adjustments (1.88) (1.45) (3.66) (2.14) Change in value of market risk benefits, net of related hedging gains (losses) (0.20) (1.20) (1.05) (2.19) Market experience updates (0.06) 0.12 (0.01) 0.23 Divested and Run-off Businesses: Closed Block Division (0.03) (0.05) (0.07) (0.11) Other Divested and Run-off Businesses 0.39 0.03 0.57 (0.11) Difference in earnings allocated to participating unvested share-based payment awards 0.01 0.02 0.04 0.04 Other adjustments(1) - - (0.01) 0.08 Total reconciling items, before income taxes (1.77) (2.53) (4.19) (4.20) Less: Income taxes, not applicable to adjusted operating income (0.49) (0.43) (0.98) (0.77) Total reconciling items, after income taxes (1.28) (2.10) (3.21) (3.43) After-tax adjusted operating income per share 4.08$ 3.58$ 7.69$ 6.87$ Second Quarter Year-to-Date
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1818 RECONCILIATION BETWEEN ADJUSTED BOOK VALUE AND THE COMPARABLE GAAP MEASURE (1) Amount represents the cumulative change in fair value of funds withheld embedded derivatives related to unrealized gains and losses on available-for-sale securities and certain derivatives associated with customer liabilities reinsured under coinsurance with funds withheld and modified coinsurance arrangements. ($ millions, except per share data) June 30, 2026 GAAP book value 31,577$ Less: Accumulated other comprehensive income (AOCI) (4,060) GAAP book value excluding AOCI 35,637 Less: Cumulative change in fair value of funds withheld embedded derivatives(1) 20 Less: Cumulative effect of foreign exchange rate remeasurement and currency translation adjustments corresponding to realized gains (losses) 410 Adjusted book value 35,207$ Number of diluted shares 348.9 GAAP book value per Common share - diluted 90.50$ GAAP book value excluding AOCI per Common share - diluted 102.14$ Adjusted book value per Common share - diluted 100.91$
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1919 RECONCILIATION BETWEEN PGIM TOTAL REVENUES AND TOTAL ADJUSTED REVENUES (1) Revenues exclude realized investment gains, net of losses. (2) Not calculated in accordance with GAAP. Adjusted revenue excludes pass-through distribution revenue, revenue attributable to c onsolidated entities and revenue associated with certain incentive fee-related compensation expense. ($ millions) 2Q25 3Q25 4Q25 1Q26 2Q26 Total revenues (1) 1,043$ 1,095$ 1,108$ 1,040$ 1,107$ Less: Passthrough distribution revenue 20 21 21 20 20 Less: Revenue associated with consolidations 50 45 42 23 44 Total adjusted revenues (2) 973$ 1,029$ 1,045$ 997$ 1,043$
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2020 FORWARD-LOOKING STATEMENTS Certain of the statements included in this presentation, the Strategy Update presentation, and made during the earnings and strategy call, including those regarding our strategy, objectives, goals, priorities, expectations, plans, initiatives, or anticipated future performance, financial targets and objectives and capital priorities, planned transactions, actions to reduce costs and the expected impacts thereof, PGIM margin expansion, expected impacts to AOI of our annual assumption updates, our expectations for the pension risk transfer business, our expectations for earnings growth in the Individual Life business, the expected full year 2026 loss for our Corporate & Other segment, those under the heading “Seasonality of Key Financial Items,” trends and opportunities, the durability of our earnings profile, the expected duration, financial impact, including the expected impact to adjusted operating income, capital, economic solvency ratio and cash flow, and outcome of the Prudential of Japan sales suspension and the related remediation efforts, 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. Prudential Financial, Inc.’s actual results may differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements include, among others, that our remediation efforts in Japan may be unsuccessful or take longer than we expect, that we may uncover additional misconduct, that the sales suspension at Prudential of Japan may continue for longer than we expect, losses on investments or financial contracts due to deterioration in credit quality or value, or counterparty default; 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. Additional factors and uncertainties that could cause actual results to differ can be found in the “Risk Factors” and “Forward-Looking Statements” sections included in Prudential Financial, Inc.’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Each of our forward-looking statements contained herein is subject to the risk that we will be unable to execute our strategy and other risks. In addition, our statements under the heading “Seasonality of Key Financial Items” are subject to the risk that different earnings and expense patterns will emerge. Prudential Financial, Inc. does not undertake to update any particular forward-looking statement included in this presentation. ____________________________________________________________________________ Prudential Financial, Inc. of the United States is not affiliated with Prudential plc which is headquartered in the United Kingdom.
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2121 NON-GAAP MEASURES This presentation includes references to adjusted operating income, adjusted book value, and adjusted operating return on equity, which is based on adjusted operating income and adjusted book value. Consolidated adjusted operating income, adjusted book value, and adjusted operating return on equity are not calculated based on accounting principles generally accepted in the United States of America (GAAP). For additional information about adjusted operating income, adjusted book value, and adjusted operating return on equity and the comparable GAAP measures, including reconciliations between the comparable measures, please refer to our quarterly results news releases, which are available on our website at investor.prudential.com. Reconciliations are also included as part of this presentation. We believe that our use of these non-GAAP measures helps investors understand and evaluate the Company’s performance and financial position. The presentation of adjusted operating income as we measure it for management purposes enhances the understanding of the results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses. Trends in the underlying profitability of our businesses can be more clearly identified without the fluctuating effects of the items described below. Adjusted book value augments the understanding of our financial position by providing a measure of net worth that is primarily attributable to our business operations separate from the portion that is affected by capital and currency market conditions, and by isolating the accounting impact associated with insurance liabilities that are generally not marked to market and the supporting investments that are marked to market through accumulated other comprehensive income under GAAP. However, these non-GAAP measures are not substitutes for income and equity determined in accordance with GAAP, and the adjustments made to derive these measures are important to an understanding of our overall results of operations and financial position. The schedules accompanying this presentation provide reconciliations of non-GAAP measures with the corresponding measures calculated using GAAP. Additional historic information relating to our financial performance is located on our website at investor.prudential.com. Adjusted operating income is a non-GAAP measure used by the Company to evaluate segment performance and to allocate resources. Adjusted operating income excludes “Realized investment gains (losses), net, and related charges and adjustments”. A significant element of realized investment gains and losses are impairments and credit- related and interest rate-related gains and losses. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as interest rate-related gains or losses, is largely subject to our discretion and influenced by market opportunities as well as capital and other factors.
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2222 NON-GAAP MEASURES (CONTINUED) Realized investment gains (losses) within certain businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of foreign currency earnings and current period yield adjustments, are included in adjusted operating income. Adjusted operating income generally excludes realized investment gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset-liability management program related to the risk of those products. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are designated as trading. Adjusted operating income also excludes investment gains and losses on assets supporting experience-rated contractholder liabilities and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately accrue to contractholders. Additionally, adjusted operating income excludes the changes in fair value of equity securities that are recorded in net income. Additionally, adjusted operating income excludes the impact of annual assumption updates and other refinements included in the above items. Adjusted operating income excludes “Change in value of market risk benefits, net of related hedging gains (losses)”, which reflects the impact from changes in current market conditions, and market experience updates, reflecting the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which we believe enhances the understanding of underlying performance trends. Adjusted operating income also excludes the results of Divested and Run-off Businesses, which are not relevant to our ongoing operations, and discontinued operations and earnings attributable to noncontrolling interests and redeemable noncontrolling interests, each of which is presented as a separate component of net income under GAAP. Additionally, adjusted operating income excludes other items, such as certain components of the consideration for acquisitions, which are recognized as compensation expense over the requisite service periods, and goodwill impairments. Earnings attributable to noncontrolling interests and redeemable noncontrolling interests is presented as a separate component of net income under GAAP and excluded from adjusted operating income. The tax effect associated with pre-tax adjusted operating income is based on applicable IRS and foreign tax regulations inclusive of pertinent adjustments. Adjusted operating income does not equate to “Net income” as determined in accordance with U.S. GAAP. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and our definition of this non-GAAP measure may differ from that used by other companies. The items above are important to an understanding of our overall results of operations. However, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses. Trends in the underlying profitability of our businesses can be more clearly identified without the fluctuating effects of the items described above.
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2323 NON-GAAP MEASURES (CONTINUED) Adjusted book value is calculated as total equity (GAAP book value) excluding accumulated other comprehensive income (loss), the cumulative change in fair value of funds withheld embedded derivatives, and the cumulative effect of foreign currency exchange rate remeasurements and currency translation adjustments corresponding to realized investment gains and losses. These items are excluded in order to highlight the book value attributable to our core business operations separate from the portion attributable to external and potentially volatile capital and currency market conditions. PGIM’s Adjusted Operating Margin is also a non-GAAP measure and is calculated as adjusted operating income of the PGIM segment as a percentage of PGIM’s adjusted revenue. A reconciliation of PGIM’s adjusted revenue to the most comparable GAAP measure is included in our quarterly financial supplement, which is available on our website, and as part of this presentation. Due to the inherent difficulty in reliably quantifying certain items, including future realized investment gains/losses and changes in asset and liability values, given their unknown timing, unpredictable nature and potential significance, we cannot, without unreasonable effort, provide a reconciliation of our estimated future adjusted operating to net income attributable to Prudential Financial, Inc., the most directly comparable GAAP measure. The variability of these items, which are necessary for a presentation of the reconciliation, could have a significant impact on our reported U.S. GAAP financial results.