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Related Party Transactions
 9 Months Ended
Sep. 30, 2022
Related Party Transactions [Abstract]  
Related Party Transactions RELATED PARTY TRANSACTIONS
The Company has extensive transactions and relationships with Prudential Insurance and other affiliates. Although we seek to ensure that these transactions and relationships are fair and reasonable, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties.

Expense Charges and Allocations

The majority of the Company’s expenses are allocations or charges from Prudential Insurance or other affiliates. These expenses can be grouped into general and administrative expenses and agency distribution expenses.

The Company’s general and administrative expenses are charged to the Company using allocation methodologies based on business production processes. Management believes that the methodology is reasonable and reflects costs incurred by Prudential Insurance to process transactions on behalf of the Company. The Company operates under service and lease agreements whereby services of officers and employees, supplies, use of equipment and office space are provided by Prudential Insurance. The Company reviews its allocation methodology periodically which it may adjust accordingly. General and administrative expenses include allocations of stock compensation expenses related to a stock-based awards program and a deferred compensation program issued by Prudential Financial. The expense charged to the Company for the stock-based awards program was $0.3 million and $0.0 million for the three months ended September 30, 2022 and 2021, respectively, and $0.8 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively. The expense charged to the Company for the deferred compensation program was $0.7 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively, and $3.9 million and $2.9 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company is charged for its share of employee benefit expenses. These expenses include costs for funded and non-funded, non-contributory defined benefit pension plans. Some of these benefits are based on final earnings and length of service while others are based on an account balance, which takes into consideration age, service and earnings during a career. The Company’s share of net expense for the pension plans was $4 million and $2 million for the three months ended September 30, 2022 and 2021, respectively, and $14 million and $8 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company is also charged for its share of the costs associated with welfare plans issued by Prudential Insurance. These expenses include costs related to medical, dental, life insurance and disability. The Company's share of net expense for the welfare plans was $4 million and $3 million for the three months ended September 30, 2022 and 2021, respectively, and $11 million and $9 million for the nine months ended September 30, 2022 and 2021, respectively.

Prudential Insurance sponsors voluntary savings plans for its employee 401(k) plans. The plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The Company’s expense for its share of the voluntary savings plan was $3 million and $1 million for the three months ended September 30, 2022 and 2021, respectively, and $7 million and $3 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company is charged distribution expenses from Prudential Insurance’s agency network for both its domestic life and annuity products through a transfer pricing agreement, which is intended to reflect a market-based pricing arrangement.

The Company pays commissions and certain other fees to Prudential Annuities Distributors, Inc. (“PAD”) in consideration for PAD’s marketing and underwriting of the Company’s annuity products. Commissions and fees are paid by PAD to broker-dealers who sell the Company’s annuity products. Commissions and fees paid by the Company to PAD were $139 million and $98 million for the three months ended September 30, 2022 and 2021, respectively, and $471 million and $291 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company is charged for its share of corporate expenses incurred by Prudential Financial to benefit its businesses, such as advertising, executive oversight, external affairs and philanthropic activity. The Company’s share of corporate expenses was $24 million and $17 million for the three months ended September 30, 2022 and 2021, respectively, and $58 million and $49 million for the nine months ended September 30, 2022 and 2021, respectively.
Corporate-Owned Life Insurance

The Company has sold five Corporate-Owned Life Insurance (“COLI”) policies to Prudential Insurance, and one to Prudential Financial. The cash surrender value included in separate accounts for these COLI policies was $4,322 million at September 30, 2022 and $5,248 million at December 31, 2021. Fees related to these COLI policies were $13 million and $15 million for the three months ended September 30, 2022 and 2021, respectively, and $40 million and $42 million for the nine months ended September 30, 2022 and 2021, respectively. The Company reinsures the risk associated with these COLI policies to an affiliate reinsurer as part of a broader program related to variable insurance policies.

Affiliated Investment Management Expenses

In accordance with an agreement with PGIM, Inc. ("PGIM"), the Company pays investment management expenses to PGIM who acts as investment manager to certain Company general account and separate account assets. Investment management expenses paid to PGIM related to this agreement were $11 million and $6 million for the three months ended September 30, 2022 and 2021, respectively, and $29 million and $13 million for the nine months ended September 30, 2022 and 2021, respectively. These expenses are recorded as “Net investment income” in the Company's Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss).

Derivative Trades

In its ordinary course of business, the Company enters into OTC derivative contracts with an affiliate, PGF. For these OTC derivative contracts, PGF has a substantially equal and offsetting position with an external counterparty. See Note 4 for additional information.

Joint Ventures

The Company has made investments in joint ventures with certain subsidiaries of Prudential Financial. "Other invested assets" includes $563 million and $466 million as of September 30, 2022 and December 31, 2021, respectively. "Net investment income" related to these ventures includes gains of $2 million and $20 million for the three months ended September 30, 2022 and 2021, respectively, and gains of $21 million and $27 million for the nine months ended September 30, 2022 and 2021, respectively.
Affiliated Asset Administration Fee Income

The Company has a revenue sharing agreement with AST Investment Services, Inc. ("ASTISI") and PGIM Investments LLC ("PGIM Investments") whereby the Company receives fee income based on policyholders' separate account balances invested in the Advanced Series Trust. Income received from ASTISI and PGIM Investments related to this agreement was $74 million and $95 million for the three months ended September 30, 2022 and 2021, respectively, and $237 million and $280 million for the nine months ended September 30, 2022 and 2021, respectively. These revenues are recorded as “Asset administration fees” in the Company's Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company has a revenue sharing agreement with PGIM Investments, whereby the Company receives fee income based on policyholders' separate account balances invested in The Prudential Series Fund. Income received from PGIM Investments related to this agreement was $9 million and $4 million for the three months ended September 30, 2022 and 2021, respectively, and $28 million and $11 million for the nine months ended September 30, 2022 and 2021, respectively. These revenues are recorded as “Asset administration fees” in the Company's Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss).
Affiliated Notes Receivable

Affiliated notes receivable included in “Receivables from parent and affiliates” at September 30, 2022 and December 31, 2021 were as follows:
Maturity DatesInterest RatesSeptember 30, 2022December 31, 2021
(in thousands)
U.S. dollar fixed rate notes2022-20270.00%-14.85 %$147,896 $162,045 
Total notes receivable - affiliated(1)$147,896 $162,045 

(1)All notes receivable may be called for prepayment prior to the respective maturity dates under specified circumstances.

The affiliated notes receivable shown above are classified as available-for-sale securities and other trading assets carried at fair value. The Company monitors the internal and external credit ratings of these loans and loan performance. The Company also considers any guarantees made by Prudential Insurance for loans due from affiliates.

Accrued interest receivable related to these loans was $1 million at both September 30, 2022 and December 31, 2021, and is included in “Other assets”. Revenues related to these loans were $1 million for both the three months ended September 30, 2022 and 2021, and $3 million for both the nine months ended September 30, 2022 and 2021, and are included in “Other income (loss)”.

Affiliated Commercial Mortgage Loan

The affiliated commercial mortgage loan included in "Commercial mortgage and other loans" at September 30, 2022 and December 31, 2021 were as follows:
Maturity DateInterest RateSeptember 30, 2022December 31, 2021
(in thousands)
Affiliated Commercial Mortgage Loan20257.13 %$72,522 $73,412 

This affiliated commercial mortgage loan was transferred from PALAC as part of the 2021 Variable Annuities Recapture. 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, 2021, for more details.

The commercial mortgage loan shown above is carried at unpaid principal balance, net of unamortized deferred loan origination fees and expenses, and net of an allowance for losses. The Company reviews the performance and credit quality of the commercial mortgage loan on an on-going basis.

Accrued interest receivable related to the loan was $0.4 million and $0.3 million at September 30, 2022 and December 31, 2021, respectively, and is included in "Accrued investment income". Revenues were $1 million for both the three months ended September 30, 2022 and 2021, and $3 million and $1 million for the nine months ended September 30, 2022, and 2021, respectively and are included in "Net investment income".
Affiliated Asset Transfers

The Company participates in affiliated asset trades with parent and sister companies. Book and market value differences for trades with a parent and sister are recognized within "Additional paid-in capital" (“APIC”) and "Realized investment gains (losses), net", respectively. The table below shows affiliated asset trades for the nine months ended September 30, 2022 and for the year ended December 31, 2021, excluding those related to the 2021 Variable Annuities Recapture effective July 1, 2021, as described in Note 1 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
AffiliateDateTransaction Security Type  Fair Value  Book Value  APIC, Net of Tax Increase/(Decrease)Realized
Investment
Gain (Loss)
 (in thousands)
PALACJune 2021PurchaseEquities$40,284 $40,284 $0 $0 
Prudential InsuranceSeptember 2021PurchaseFixed Maturities$64,374 $59,642 $(3,739)$0 
Prudential InsuranceSeptember 2021SaleFixed Maturities$37,887 $35,264 $2,073 $0 
Hirakata LLCSeptember 2021PurchaseFixed Maturities$13,944 $13,944 $0 $0 
Prudential Retirement Insurance & Annuity CoSeptember 2021PurchaseFixed Maturities$120,256 $120,256 $0 $0 
Prudential Retirement Insurance & Annuity CoSeptember 2021SaleFixed Maturities$173,590 $166,427 $0 $7,163 
Prudential InsuranceSeptember 2021PurchaseCommercial Mortgage and Other Loans$45,358 $42,127 $(2,553)$0 
Prudential InsuranceSeptember 2021SaleCommercial Mortgage and Other Loans$22,796 $21,780 $802 $0 
Prudential Retirement Insurance & Annuity CoSeptember 2021PurchaseCommercial Mortgage and Other Loans$29,483 $29,483 $0 $0 
Prudential Retirement Insurance & Annuity CoSeptember 2021SaleCommercial Mortgage and Other Loans$51,005 $47,020 $0 $3,985 
Prudential InsuranceSeptember 2021PurchaseDerivatives$600 $494 $(84)$0 
Prudential InsuranceSeptember 2021SaleDerivatives$335 $175 $127 $0 
Prudential Retirement Insurance & Annuity CoSeptember 2021PurchaseDerivatives$(1,243)$(1,243)$0 $0 
Prudential Retirement Insurance & Annuity CoSeptember 2021SaleDerivatives$2,846 $770 $0 $2,076 
PAR UNovember 2021PurchaseFixed Maturities$41,021 $41,021 $0 $0 
PALACNovember 2021PurchaseDerivatives$1,112 $1,112 $0 $0 
PALACDecember 2021Transfer InFixed Maturities$2,037,320 $2,037,320 $0 $0 
PURCDecember 2021PurchaseFixed Maturities$48,041 $48,041 $0 $0 
PALACDecember 2021PurchaseFixed Maturities$57,087 $57,087 $0 $0 
PALACDecember 2021Transfer InCommercial Mortgage and Other Loans$517,309 $517,309 $0 $0 
Prudential InsuranceDecember 2021Contributed CapitalFixed Maturities$166,676 $166,676 $0 $0 
Prudential Retirement Insurance & Annuity CoDecember 2021SaleDerivatives$31,567 $0 $0 $31,567 
Prudential Retirement Insurance & Annuity CoDecember 2021PurchaseDerivatives$73,572 $73,572 $0 $0 
PALACDecember 2021PurchaseDerivatives$8,455 $8,455 $0 $0 
PALACJanuary 2022PurchaseFixed Maturities$4,432 $4,432 $0 $0 
PALACJanuary 2022PurchaseDerivatives$404 $404 $0 $0 
PALACFebruary 2022PurchaseFixed Maturities$128,909 $128,909 $0 $0 
PAR UApril 2022PurchaseFixed Maturities$48,970 $48,970 $0 $0 
Prudential InsuranceMay 2022PurchaseFixed Maturities$233,426 $241,128 $6,085 $0 
Prudential InsuranceJune 2022PurchaseFixed Maturities$88,754 $81,216 $(5,955)$0 
Prudential InsuranceJune 2022Transfer InFixed Maturities$52,089 $45,031 $(5,577)$0 
Prudential InsuranceJune 2022Transfer OutFixed Maturities$48,786 $58,984 $(8,057)$0 
PAR UJune 2022PurchaseCommercial Mortgage and Other Loans$6,492 $6,492 $0 $0 
PAR UJune 2022SaleCommercial Mortgage and Other Loans$14,853 $15,725 $0 $(872)
GUL ReJune 2022PurchaseCommercial Mortgage and Other Loans$13,551 $13,551 $0 $0 
GUL ReJune 2022SaleCommercial Mortgage and Other Loans$8,692 $9,033 $0 $(341)
PURCJune 2022PurchaseCommercial Mortgage and Other Loans$4,403 $4,403 $0 $0 
Prudential InsuranceJuly 2022Transfer InFixed Maturities$6,319 $7,230 $719 $0 
Prudential Arizona Reinsurance Captive Co.July 2022PurchaseFixed Maturities$16,284 $16,284 $0 $0 
Prudential InsuranceAugust 2022PurchaseFixed Maturities$155,823 $139,712 $(12,728)$0 
Vantage Casualty Insurance CoSeptember 2022PurchaseFixed Maturities$3,497 $3,497 $0 $0 
 
Debt Agreements

The Company is authorized to borrow funds up to $2.2 billion from affiliates to meet its capital and other funding needs. The following table provides the breakout of the Company's long-term debt to affiliates as of September 30, 2022 and December 31, 2021:
AffiliateDate
Issued		Amount of Notes - September 30, 2022Amount of Notes - December 31, 2021Interest Rate  Date of Maturity  
  (in thousands)  
Prudential Insurance8/13/2021$97,445 $99,770 4.39 %12/15/2023
Prudential Insurance8/13/202129,233 29,931 4.39 %12/15/2023
Prudential Insurance8/13/202198,338 100,348 3.95 %6/20/2024
Prudential Insurance8/13/202139,335 40,139 3.95 %6/20/2024
Prudential Insurance8/13/202149,169 50,174 3.95 %6/20/2024
Total Loans Payable to Affiliates$313,520 $320,362 

Effective August 2021, the affiliated long-term debt was transferred to the Company from PALAC based on the market value of $324 million. The Company recorded a premium of $24 million which is amortized into earnings over the life of the loans.

The total interest expense to the Company related to affiliated loans and cash collateral with PGF was $(32) million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, and $(37) million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Contributed Capital and Dividends

In March, June and September 2022, the Company received a capital contribution in the amount of $8 million, $3 million and $7 million, respectively, from Prudential Insurance. In January, July and December of 2021, the Company received capital contributions in the amount of $106 million, $3,813 million and $457 million, respectively, from Prudential Insurance. The December 2021 capital contribution includes $167 million of invested assets related to the Reinsurance Agreement with PALAC.

In June 2021, there was a $34 million return of capital to Prudential Insurance associated with the financial guarantee related to the sale of Prudential of Taiwan.

In 2021 and through September 2022, the Company did not pay any dividends to Prudential Insurance.
Reinsurance with Affiliates

As discussed in Note 6, the Company participates in reinsurance transactions with certain affiliates.