Related Party Transactions

6 Months Ended

Jun. 30, 2024

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 $0.4 million for both the three months ended June 30, 2024 and 2023, and $0.6 million and $0.5 million for the six months ended June 30, 2024 and 2023, respectively. The expense charged to the Company for the deferred compensation program was $0.8 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively, and $4.1 million and $3.4 million for the six months ended June 30, 2024 and 2023, 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 $2 million and $4 million for the three months ended June 30, 2024 and 2023, respectively, and $5 million and $7 million for the six months ended June 30, 2024 and 2023, 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 $5 million and $3 million for the three months ended June 30, 2024 and 2023, respectively, and $9 million and $7 million for the six months ended June 30, 2024 and 2023, 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 $2 million for both the three months ended June 30, 2024 and 2023, and $4 million for both the six months ended June 30, 2024 and 2023.

The Company is charged distribution expenses from Prudential’s proprietary nationwide sales organization, “Prudential Advisors” through a transfer pricing agreement, which is intended to reflect a market-based pricing arrangement. Prudential Advisors distributes Prudential life insurance, annuities, and investment products with proprietary and non-proprietary product options.

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 $211 million and $147 million for the three months ended June 30, 2024 and 2023, respectively, and $389 million and $287 million for the six months ended June 30, 2024 and 2023, 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 $32 million and $34 million for the three months ended June 30, 2024 and 2023, respectively, and $68 million and $73 million six months ended June 30, 2024 and 2023, 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 $4,410 million and $4,156 million at June 30, 2024 and December 31, 2023, respectively. Fees related to these COLI policies were $14 million and $12 million for the three months ended June 30, 2024 and 2023, respectively, and $27 million and $25 million for the six months ended June 30, 2024 and 2023, 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.

In May 2023, the Company funded a policy loan from the Prudential Financial COLI policy noted above in an amount of $900 million to an affiliated irrevocable trust, commonly referred to as a “rabbi trust”, which Prudential Financial created to support certain non-qualified retirement plans. The outstanding balance of the policy loan with the rabbi trust was $897 million and $898 million as of June 30, 2024 and December 31, 2023, respectively. Interest income related to the policy loan was $11 million and $5 million for the three months ended June 30, 2024 and 2023, respectively, and $21 million and $5 million for the six months ended June 30, 2024 and 2023, respectively.

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 $17 million and $13 million for the three months ended June 30, 2024 and 2023, respectively, and $32 million and $25 million for the six months ended June 30, 2024 and 2023, respectively. These expenses are recorded as “Net investment income” in the 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.

The interest income to the Company from PGF related to affiliated cash collateral was $127 million and $120 million for the three months ended June 30, 2024 and 2023, respectively, and $254 million and $230 million for the six months ended June 30, 2024 and 2023, respectively, and are included in "Other income (loss)".

Joint Ventures

The Company has made investments in joint ventures with certain subsidiaries of Prudential Financial. "Other invested assets" includes $936 million and $754 million of investments in joint ventures as of June 30, 2024 and December 31, 2023, respectively. "Net investment income" related to these ventures includes gains (losses) of $10 million and $(6) million for the three months ended June 30, 2024 and 2023, respectively, and $19 million and $(4) million for the six months ended June 30, 2024 and 2023, 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 $67 million and $70 million for the three months ended June 30, 2024 and 2023, respectively, and $136 million and $139 million for the six months ended June 30, 2024 and 2023, respectively. These revenues are recorded as “Asset administration fees” in the 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 $11 million and $9 million for the three months ended June 30, 2024 and 2023, respectively, and $22 million and $18 million for the six months ended June 30, 2024 and 2023, respectively. These revenues are recorded as “Asset administration fees” in the Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss).

Affiliated Notes Receivable

Affiliated notes receivable included in “Receivables from parent and affiliates” at June 30, 2024 and December 31, 2023 is as follows:

	Maturity Dates			Interest Rates				June 30, 2024		December 31, 2023
								(in thousands)
U.S. dollar fixed rate notes	2025	-	2032	0.00%	-	14.85	%	$	330,814	$	147,984
Total notes receivable - affiliated(1)								$	330,814	$	147,984

(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 June 30, 2024 and December 31, 2023, and is included in “Other assets”. Revenues related to these loans were $0 million and $1 million for the three months ended June 30, 2024 and 2023, respectively, and $1 million and $2 million for the six months ended June 30, 2024 and 2023, respectively, and are included in “Other income (loss)”.

Affiliated Commercial Mortgage Loan

The affiliated commercial mortgage loan included in "Commercial mortgage and other loans" at June 30, 2024 and December 31, 2023 were as follows:

	Maturity Date	Interest Rate		June 30, 2024		December 31, 2023
				(in thousands)
Affiliated Commercial Mortgage Loan	2025	9.83	%	$	70,445	$	71,038

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 $0.5 million at both June 30, 2024 and December 31, 2023, and is included in "Accrued investment income". Revenues were $2 million and $1 million for the three months ended June 30, 2024 and 2023, respectively, and $4 million and $3 million for the six months ended June 30, 2024 and 2023, 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 six months ended June 30, 2024 and for the year ended December 31, 2023.

Affiliate	Date	Transaction	Security Type	Fair Value		Book Value		APIC, Net of Tax Increase/(Decrease)		Realized Investment Gain (Loss)
				(in thousands)
Prudential Insurance	January 2023	Purchase	Fixed Maturities	$	48,329	$	50,372	$	1,614	$	0
Prudential Insurance	March 2023	Purchase	Fixed Maturities	$	7,175	$	7,500	$	256	$	0
PURC	April 2023	Purchase	Fixed Maturities	$	102,804	$	102,804	$	0	$	0

Term Re	June 2023	Purchase	Fixed Maturities	$	115,573	$	115,573	$	0	$	0
Prudential Insurance	June 2023	Purchase	Fixed Maturities	$	4,298	$	4,443	$	114	$	0
Prudential Insurance	June 2023	Purchase	Fixed Maturities	$	4,394	$	4,494	$	80	$	0
Prudential Insurance	June 2023	Purchase	Fixed Maturities	$	19,453	$	19,203	$	(198)	$	0
Prudential Insurance	June 2023	Purchase	Fixed Maturities	$	14,452	$	15,086	$	502	$	0
Prudential Insurance	September 2023	Purchase	Fixed Maturities	$	15,880	$	15,801	$	(62)	$	0
PURC	December 2023	Sale	Commercial Mortgage and Other Loans	$	762	$	754	$	0	$	8
PAR U	January 2024	Transfer in	Fixed Maturities	$	1,598,161	$	1,598,161	$	0	$	0
PAR U	January 2024	Transfer in	Fixed Maturities	$	778,745	$	778,745	$	0	$	0
PURC	January 2024	Transfer in	Fixed Maturities	$	2,155,560	$	2,155,560	$	0	$	0
GUL Re	January 2024	Transfer in	Fixed Maturities	$	1,685,582	$	1,685,582	$	0	$	0
GUL Re	January 2024	Transfer in	Fixed Maturities	$	4,976	$	4,976	$	0	$	0
PURE	January 2024	Transfer out	Fixed Maturities	$	1,598,161	$	1,598,161	$	0	$	0
PURE	January 2024	Transfer out	Fixed Maturities	$	778,745	$	778,745	$	0	$	0
PURE	January 2024	Transfer out	Fixed Maturities	$	2,155,560	$	2,155,560	$	0	$	0
PURE	January 2024	Transfer out	Fixed Maturities	$	1,685,582	$	1,685,582	$	0	$	0
PURE	January 2024	Transfer out	Fixed Maturities	$	4,976	$	4,976	$	0	$	0
Ironbound	January 2024	Purchase	Other Invested Assets	$	60,414	$	60,414	$	0	$	0
Windhill CLO 1, Ltd.	February 2024	Sale	Fixed Maturities	$	18,428	$	18,858	$	0	$	(430)
Windhill CLO 2, Ltd.	February 2024	Sale	Fixed Maturities	$	19,652	$	20,057	$	0	$	(405)
PAR Term	February 2024	Purchase	Fixed Maturities	$	43,084	$	43,084	$	0	$	0
Windhill CLO 1, Ltd.	March 2024	Sale	Fixed Maturities	$	10,148	$	10,387	$	0	$	(239)
Windhill CLO 2, Ltd.	March 2024	Sale	Fixed Maturities	$	14,763	$	15,091	$	0	$	(328)
Prudential Insurance	March 2024	Purchase	Fixed Maturities	$	198,804	$	206,285	$	5,910	$	0
PAR U	March 2024	Transfer in	Other Invested Assets	$	188,500	$	188,500	$	0	$	0
PURE	March 2024	Transfer out	Other Invested Assets	$	188,500	$	188,500	$	0	$	0
Windhill CLO 1, Ltd.	April 2024	Sale	Fixed Maturities	$	2,261	$	2,300	$	0	$	(39)
Windhill CLO 2, Ltd.	May 2024	Sale	Fixed Maturities	$	14,034	$	14,415	$	0	$	(381)

Windhill CLO 1, Ltd.	June 2024	Sale	Fixed Maturities	$	2,045	$	2,100	$	0	$	(55)
Windhill CLO 2, Ltd.	June 2024	Sale	Fixed Maturities	$	23,342	$	23,743	$	0	$	(401)
PAR U	June 2024	Transfer in	Other Invested Assets	$	326	$	326	$	0	$	0
PURE	June 2024	Transfer out	Other Invested Assets	$	326	$	326	$	0	$	0
PAR U	June 2024	Purchase	Commercial Mortgage and Other Loans	$	12,555	$	12,555	$	0	$	0

Debt Agreements

The Company is authorized to borrow funds up to $7 billion from affiliates to meet its capital and other funding needs. The following table provides the breakout of the Company's short-term debt. There is no long-term debt to affiliates as of June 30, 2024 and December 31, 2023.

Affiliate	Date Issued	Amount of Notes - June 30, 2024		Amount of Notes - December 31, 2023		Interest Rate			Date of Maturity
		(in thousands)
Prudential Insurance	8/13/2021	$	0	$	94,953		3.95	%		6/20/2024
Prudential Insurance	8/13/2021	0		37,981			3.95	%		6/20/2024
Prudential Insurance	8/13/2021	0		47,477			3.95	%		6/20/2024
Total Loans Payable to Affiliates(1)		$	0	$	180,411

(1) Includes $180 million of loans reclassified as current portion of long-term debt as of December 31, 2023.

The total interest expense to the Company related to affiliated loans and cash collateral with PGF was $7 million and $2 million for the three months ended June 30, 2024 and 2023, respectively, and $11 million and $5 million for the six months ended June 30, 2024 and 2023, respectively.

All debt outstanding as of December 31, 2023 is that of Pruco Life.

Contributed Capital and Dividends

In February and December 2023, the Company received capital contributions in the amount of $405 million and $7 million, respectively, from Prudential Insurance.

In June 2024, there was a $550 million return of capital to Prudential Insurance. In June, September, and December 2023, there was a $300 million, $650 million and $450 million return of capital, respectively, to Prudential Insurance.

Through June 2024 and December 2023, the Company did not pay any dividends to Prudential Insurance.

Reinsurance with Affiliates

As discussed in Note 11, the Company participates in reinsurance transactions with certain affiliates.