Business and Basis of Presentation

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Basis of Presentation

BUSINESS AND BASIS OF PRESENTATION

Pruco Life Insurance Company (“Pruco Life”) is a wholly-owned subsidiary of Prudential Insurance, which in turn is a direct wholly-owned subsidiary of Prudential Financial, Inc. (“Prudential Financial”). Pruco Life is a stock life insurance company organized in 1971 under the laws of the State of Arizona. It is licensed to sell life insurance and annuities in the District of Columbia, Guam and in all states except New York, and sells such products primarily through affiliated and unaffiliated distributors.

Pruco Life has one wholly-owned insurance subsidiary, Pruco Life Insurance Company of New Jersey (“PLNJ”). PLNJ is a stock life insurance company organized in 1982 under the laws of the State of New Jersey. It is licensed to sell life insurance and annuities in New Jersey and New York only. Pruco Life and its subsidiaries are together referred to as the "Company", "we" or "our" and all financial information is shown on a consolidated basis.

Prudential Financial Sale of PALAC

Effective April 1, 2022, Prudential Financial completed the sale of Prudential Annuities Life Assurance Corporation (“PALAC”) to Fortitude Group Holdings, LLC (“Fortitude”). As such, PALAC is no longer an affiliate of Prudential Financial or the Company. Fortitude subsequently renamed the company Fortitude Life Insurance & Annuity Company (“FLIAC”).

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 Pruco Life and entities over which the Company exercises control, including majority-owned subsidiaries. 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, 2023.

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 future policy benefits; policyholders' account balances and reinsurance related to the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products; market risk benefits ("MRBs"); the valuation of investments including derivatives, the measurement of allowance for credit losses, and the recognition of other-than-temporary impairments; reinsurance recoverables; any 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.

Restatement of Previously Issued Unaudited Interim Consolidated Financial Statements

In connection with the Company’s close process for the three months ended June 30, 2024, the Company identified an error in the valuation of policyholder account balances of indexed variable annuity products, and certain other immaterial errors. The restatement of the three months ended March 31, 2024, relates mainly to an $86 million valuation-related pre-tax charge from an increase to the policyholder account balances of indexed variable annuity products, and certain other immaterial adjustments. In connection with this restatement, the Company also corrected for an unrelated $75 million misclassification of certain affiliated ceded activity in the Unaudited Interim Consolidated Statements of Cash Flows for the three months ended March 31, 2024, which decreased cash flows from financing activities and increased cash flows from operating activities.

The impacts of the adjustments have been reflected throughout the Unaudited Interim Consolidated Financial Statements, including the applicable footnotes, as appropriate.

The following are selected line items from the Unaudited Interim Consolidated Financial Statements illustrating the effects of these adjustments:

Unaudited Interim Consolidated Statements of Financial Position

	March 31, 2024
	As Previously Reported		Adjustment		As Restated
	(in thousands)
ASSETS
Reinsurance recoverables	$	41,060,869	$	63,663	$	41,124,532
Income tax assets	1,896,793		13,001		1,909,794
TOTAL ASSETS	$	222,134,363	$	76,664	$	222,211,027
LIABILITIES AND EQUITY
LIABILITIES
Policyholders' account balances	$	57,677,780	$	86,378	$	57,764,158
Future policy benefits	23,362,318		49,799		23,412,117
Other liabilities	8,361,698		47,466		8,409,164
Total liabilities	218,428,690		183,643		218,612,333
EQUITY
Retained earnings / (accumulated deficit)	(968,394)		(106,979)		(1,075,373)
Total equity	3,705,673		(106,979)		3,598,694
TOTAL LIABILITIES AND EQUITY	$	222,134,363	$	76,664	$	222,211,027

Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss)

	Three Months Ended March 31, 2024
	As Previously Reported		Adjustment		As Restated
	(in thousands)
REVENUES
Policy charges and fee income	$	2,928,745	$	(19,540)	$	2,909,205
Realized investment gains (losses), net	108,643		(85,643)		23,000
TOTAL REVENUES	3,996,598		(105,183)		3,891,415
BENEFITS AND EXPENSES
Policyholders’ benefits	4,091,801		14,607		4,106,408
Interest credited to policyholders’ account balances	224,258		292		224,550
General, administrative and other expenses	308,280		(102)		308,178
TOTAL BENEFITS AND EXPENSES	4,481,319		14,797		4,496,116
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURE	(484,721)		(119,980)		(604,701)
Income tax expense (benefit)	(50,616)		(13,001)		(63,617)
INCOME (LOSS) FROM OPERATIONS BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURE	(434,105)		(106,979)		(541,084)
NET INCOME (LOSS)	$	(434,262)	$	(106,979)	$	(541,241)

Unaudited Interim Consolidated Statements of Equity

	Retained Earnings						Total Equity
	As Previously Reported		Adjustment		As Restated		As Previously Reported		Adjustment		As Restated
	(in thousands)
Balance, December 31, 2023	$	(532,951)	$	0	$	(532,951)	$	4,521,425	$	0	$	4,521,425
Comprehensive income (loss):
Net income (loss)	(435,443)		(106,979)		(542,422)		(434,262)		(106,979)		(541,241)
Total comprehensive income (loss)	0		0		0		(846,784)		(106,979)		(953,763)
Balance, March 31, 2024	$	(968,394)	$	(106,979)	$	(1,075,373)	$	3,705,673	$	(106,979)	$	3,598,694

Unaudited Interim Consolidated Statements of Cash Flows

	Three Months Ended March 31, 2024
	As Previously Reported		Adjustment		As Restated
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(434,262)	$	(106,979)	$	(541,241)
Policy charges and fee income	(3,067,235)		659,787		(2,407,448)
Interest credited to policyholders’ account balances	224,258		292		224,550
Realized investment (gains) losses, net	(108,643)		85,643		(23,000)
Change in:
Future policy benefits and other insurance liabilities	709,006		49,799		758,805
Reinsurance recoverables	415,037		(635,293)		(220,256)
Income taxes	(51,422)		(13,001)		(64,423)
Other, net	3,474,569		32,180		3,506,749
Cash flows from (used in) operating activities	618,197		72,428		690,625
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity/prepayment of:
Ceded policy loans	(175,584)		22,738		(152,846)
Payments for the purchase/origination of:
Ceded policy loans	46,827		(20,152)		26,675
Cash flows from (used in) investing activities	(3,214,369)		2,586		(3,211,783)
CASH FLOWS FROM FINANCING ACTIVITIES:
Ceded policyholders’ account deposits	(278,292)		(78,113)		(356,405)
Ceded policyholders’ account withdrawals	236,285		3,099		239,384
Cash flows from (used in) financing activities	2,814,138		(75,014)		2,739,124