Closed Block

3 Months Ended

Mar. 31, 2021

CLOSED BLOCK

On December 18, 2001, the date of demutualization, The Prudential Insurance Company of America (“PICA”) established a closed block for certain in-force participating insurance policies and annuity products, along with corresponding assets used for the payment of benefits and policyholders’ dividends on these products, (collectively the “Closed Block”), and ceased offering these participating products. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block division. For additional information on the Closed Block, see Note 15 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020.

As of March 31, 2021 and December 31, 2020, the Company recognized a policyholder dividend obligation of $3,166 million and $2,920 million, respectively, to Closed Block policyholders for the excess of actual cumulative earnings over expected cumulative earnings. Additionally, accumulated net unrealized investment gains that have arisen subsequent to the establishment of the Closed Block have been reflected as a policyholder dividend obligation of $3,244 million and $5,867 million at March 31, 2021 and December 31, 2020, respectively, to be paid to Closed Block policyholders unless offset by future experience, with a corresponding amount reported in AOCI.

Closed Block liabilities and assets designated to the Closed Block, as well as maximum future earnings to be recognized from these liabilities and assets, are as follows:


	March 31, 2021		December 31, 2020
	(in millions)
Closed Block liabilities
Future policy benefits	$	46,392	$	46,762
Policyholders’ dividends payable	651		635
Policyholders’ dividend obligation	6,410		8,787
Policyholders’ account balances	4,839		4,874
Other Closed Block liabilities	3,358		3,141
Total Closed Block liabilities	61,650		64,199
Closed Block assets
Fixed maturities, available-for-sale, at fair value	38,687		41,959
Fixed maturities, trading, at fair value	271		277
Equity securities, at fair value	2,563		2,345
Commercial mortgage and other loans	8,297		8,421
Policy loans	3,984		4,064
Other invested assets	3,730		3,610
Short-term investments	132		124
Total investments	57,664		60,800
Cash and cash equivalents	811		269
Accrued investment income	453		431
Other Closed Block assets	129		92
Total Closed Block assets	59,057		61,592
Excess of reported Closed Block liabilities over Closed Block assets	2,593		2,607
Portion of above representing accumulated other comprehensive income (loss):
Net unrealized investment gains (losses)	3,189		5,810
Allocated to policyholder dividend obligation	(3,244)		(5,867)
Future earnings to be recognized from Closed Block assets and Closed Block liabilities	$	2,538	$	2,550

Information regarding the policyholder dividend obligation is as follows:


	Three Months Ended March 31, 2021
	(in millions)
Balance, December 31, 2020	$	8,787

Impact from earnings allocable to policyholder dividend obligation	246
Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation	(2,623)
Balance, March 31, 2021	$	6,410

Closed Block revenues and benefits and expenses are as follows for the periods indicated:


	Three Months Ended March 31,
		2021		2020
		(in millions)
Revenues
Premiums		$	431	$	480
Net investment income		590		548
Realized investment gains (losses), net		72		256
Other income (loss)		276		(603)
Total Closed Block revenues		1,369		681
Benefits and Expenses
Policyholders’ benefits		634		647
Interest credited to policyholders’ account balances		31		32
Dividends to policyholders		581		(94)
General and administrative expenses		79		85
Total Closed Block benefits and expenses		1,325		670
Closed Block revenues, net of Closed Block benefits and expenses, before income taxes		44		11
Income tax expense (benefit)		29		(6)
Closed Block revenues, net of Closed Block benefits and expenses and income taxes		$	15	$	17