Segment Information

3 Months Ended

Mar. 31, 2020

SEGMENT INFORMATION

Segments

The Company’s principal operations are comprised of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the U.S. Workplace Solutions, U.S. Individual Solutions, and Assurance IQ divisions), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The U.S. Workplace Solutions division consists of the Retirement and Group Insurance businesses, the U.S. Individual Solutions division consists of the Individual Annuities and Individual Life businesses, and the Assurance IQ division consists of the Assurance IQ business. In October 2019, the Company completed the acquisition of Assurance IQ, LLC (“Assurance IQ”), a leading consumer solutions platform that offers a range of solutions that help meet consumers’ financial needs. 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. Divested and Run-off Businesses are comprised 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 generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Company’s Corporate and Other operations include corporate items and initiatives that are not allocated to business segments and businesses that have been or will be divested or placed in run-off, excluding the Closed Block division.

Adjusted Operating Income

The Company analyzes the operating performance of each segment using “adjusted operating income.” Adjusted operating income does not equate to “Income (loss) before income taxes and equity in earnings of operating joint ventures” or “Net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss used by the Company’s chief operating decision maker to evaluate segment performance and allocate resources, and consistent with authoritative guidance, is the measure of segment performance presented below. Adjusted operating income is calculated by adjusting each segment’s “Income (loss) before income taxes and equity in earnings of operating joint ventures” for the following items:


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


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


•	Market experience updates;


•	Divested and Run-off Businesses;


•	Other adjustments; and


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

These items are important to an understanding of overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and the Company’s definition of adjusted operating income may differ from that used by other companies. The Company, however, believes that the presentation of adjusted operating income as measured for management purposes enhances the understanding of results of operations by highlighting the results from ongoing operations and the underlying profitability factors of its businesses. For additional information on these reconciling items, see Note 22 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Reconciliation of adjusted operating income to net income (loss)

The table below reconciles “Adjusted operating income before income taxes” to “Income (loss) before income taxes and equity in earnings of operating joint ventures”:



	Three Months Ended March 31,
	2020			2019
Adjusted operating income before income taxes by segment:	(in millions)
PGIM	$	164		$	214
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	245			251
Group Insurance	44			53
Total U.S. Workplace Solutions division	289			304
U.S. Individual Solutions division:
Individual Annuities(1)	373			472
Individual Life	(20		)	105
Total U.S. Individual Solutions division	353			577
Assurance IQ division(2):
Assurance IQ	(23		)	0
Total Assurance IQ division	(23		)	0
Total U.S. Businesses	619			881
International Businesses	751			922
Corporate and Other	(342		)	(412		)
Total segment adjusted operating income before income taxes	1,192			1,605
Reconciling items:
Realized investment gains (losses), net, and related adjustments(3)	105			(612		)
Charges related to realized investment gains (losses), net	(803		)	25
Market experience updates(4)	(947		)	0
Divested and Run-off Businesses:
Closed Block division	(1		)	(19		)
Other Divested and Run-off Businesses	80			174
Other adjustments(5)	45			0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests	(9		)	(33		)
Consolidated income (loss) before income taxes and equity in earnings of operating joint ventures	$	(338	)	$	1,140

________


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


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


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


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


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

Reconciliation of select financial information

The tables below present certain financial information for the Company’s segments and its Corporate and Other operations, including assets by segment and revenues by segment on an adjusted operating income basis, and the reconciliation of the segment totals to amounts reported in the Consolidated Financial Statements.



	March 31, 2020		December 31, 2019
Assets by segment:	(in millions)
PGIM	$	47,099	$	47,655
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	187,992		198,153
Group Insurance	43,706		43,712
Total U.S. Workplace Solutions division	231,698		241,865
U.S. Individual Solutions division:
Individual Annuities	179,366		189,040
Individual Life	92,364		96,072
Total U.S. Individual Solutions division	271,730		285,112
Assurance IQ division(1):
Assurance IQ	2,618		2,639
Total Assurance IQ division	2,618		2,639
Total U.S. Businesses	506,046		529,616
International Businesses	243,012		241,071
Corporate and Other	17,673		16,883
Closed Block division	59,882		61,327
Total assets per Unaudited Interim Consolidated Financial Statements	$	873,712	$	896,552

__________


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



	Three Months Ended March 31,
	2020			2019
Revenues on an adjusted operating income basis:	(in millions)
PGIM	$	778		$	870
U.S. Businesses:
U.S. Workplace Solutions division:
Retirement	2,437			2,639
Group Insurance	1,424			1,441
Total U.S. Workplace Solutions division	3,861			4,080
U.S. Individual Solutions division:
Individual Annuities	1,148			1,235
Individual Life	1,530			1,482
Total U.S. Individual Solutions division	2,678			2,717
Assurance IQ division(1):
Assurance IQ	60			0
Total Assurance IQ division	60			0
Total U.S. Businesses	6,599			6,797
International Businesses	6,162			6,152
Corporate and Other	(205		)	(171		)
Total revenues on an adjusted operating income basis	13,334			13,648
Reconciling items:
Realized investment gains (losses), net, and related adjustments(2)	(558		)	(209		)
Charges related to realized investment gains (losses), net	(62		)	(72		)
Market experience updates(3)	(332		)	0
Divested and Run-off Businesses:
Closed Block division	677			1,374
Other Divested and Run-off Businesses	359			388
Other adjustments(4)	58			0
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests	(12		)	(38		)
Total revenues per Unaudited Interim Consolidated Financial Statements	$	13,464		$	15,091

__________


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


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


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


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

Intersegment revenues

Management has determined the intersegment revenues with reference to market rates. Intersegment revenues are eliminated in consolidation in Corporate and Other operations. The PGIM segment revenues include intersegment revenues, primarily consisting of asset-based management and administration fees, as follows:



	Three Months Ended March 31,
	2020		2019
	(in millions)
PGIM segment intersegment revenues	$	217	$	180

Segments may also enter into internal derivative contracts with other segments. For adjusted operating income, each segment accounts for the internal derivative results consistent with the manner in which that segment accounts for other similar external derivatives.

Asset management and service fees

The table below presents asset management and service fees, predominantly related to investment management activities, for the periods indicated:



	Three Months Ended March 31,
	2020		2019
	(in millions)
Asset-based management fees	$	875	$	843
Performance-based incentive fees	14		35
Other fees	144		138
Total asset management and service fees	$	1,033	$	1,016