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Share-Based Payments | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Share-based Payment Arrangement | SHARE-BASED PAYMENTS Omnibus Incentive Plan Prudential Financial, Inc.’s Omnibus Incentive Plan provides stock-based awards including stock options, stock appreciation rights, restricted stock shares, restricted stock units, stock settled performance shares, and cash settled performance units. Dividend equivalents are generally provided on restricted stock shares and restricted stock units outstanding as of the record date. Dividend equivalents are generally accrued on target performance shares and units outstanding as of the record date. These dividend equivalents are paid only on the performance shares and units released up to a maximum of the target number of shares and units awarded. Generally, the requisite service period is the vesting period. There were 12,768,038 authorized shares available for grant under the Omnibus Incentive Plan as of December 31, 2023. Assurance IQ Acquisition The Company acquired Assurance IQ on October 10, 2019. The terms of the acquisition included compensation awards that involved share-based payment arrangements that are linked to retention and therefore fall under the reporting requirements of ASC 718, Stock Compensation. These compensation awards include stock options, restricted stock units and performance shares. Compensation Costs Compensation cost for restricted stock units, performance shares and performance units granted to employees is measured by the share price of the underlying Common Stock at the date of grant. Compensation cost for employee stock options is based on the fair values estimated on the grant date. Under the Omnibus Incentive Plan, the fair value of each stock option award is estimated using a binomial option pricing model on the date of grant for stock options issued to employees. For the awards related to the Assurance IQ acquisition, the fair value of each stock option award is based on its intrinsic value on the date of grant. There were no stock options granted in 2023, 2022 and 2021. Expected volatility is based on historical volatility of Prudential Financial’s Common Stock and implied volatility from traded options on Prudential Financial’s Common Stock. The Company uses historical data and expectations of future exercise patterns to estimate option exercises and employee terminations within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods associated with the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following table summarizes the compensation cost recognized and the related income tax benefit for stock options, restricted stock units, performance shares and performance units for the years ended December 31:
|  | 2023 |  | 2022 |  | 2021
Omnibus Incentive Plan: |  | Total Compensation Cost Recognized (1) |  | Income Tax Benefit |  | Total Compensation Cost Recognized (1) |  | Income Tax Benefit |  | Total Compensation Cost Recognized (1) |  | Income Tax Benefit
|  | (in millions)
Employee stock options |  | $ | 0 |  |  | $ | 0 |  |  | $ | 1 |  |  | $ | 0 |  |  | $ | 2 |  |  | $ | 0 |
Employee restricted stock units |  | 200 |  |  | 47 |  |  | 189 |  |  | 44 |  |  | 178 |  |  | 41 |
Employee performance shares and performance units |  | 54 |  |  | 12 |  |  | 18 |  |  | 4 |  |  | 88 |  |  | 20 |
Total |  | $ | 254 |  |  | $ | 59 |  |  | $ | 208 |  |  | $ | 48 |  |  | $ | 268 |  |  | $ | 61 |
__________ (1) Compensation costs related to retirement eligible participants are recorded on the grant date (typically in the first quarter of every year).
|  | 2023 |  | 2022 |  | 2021
Assurance IQ Acquisition: |  | Total Compensation Cost Recognized |  | Income Tax Benefit |  | Total Compensation Cost Recognized |  | Income Tax Benefit |  | Total Compensation Cost Recognized |  | Income Tax Benefit
|  | (in millions)
Employee stock options |  | $ | 2 |  |  | $ | 1 |  |  | $ | 10 |  |  | $ | 2 |  |  | $ | 14 |  |  | $ | 3 |
Employee restricted stock units |  | 1 |  |  | 0 |  |  | 2 |  |  | 1 |  |  | 2 |  |  | 0 |
Employee performance shares |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total |  | $ | 3 |  |  | $ | 1 |  |  | $ | 12 |  |  | $ | 3 |  |  | $ | 16 |  |  | $ | 3 |
Compensation costs related to stock-based compensation plans capitalized in deferred acquisition costs for the years ended December 31, 2023, 2022 and 2021 were de minimis. Stock Options Each stock option granted under the Omnibus Incentive Plan has an exercise price at the fair market value of Prudential Financial’s Common Stock on the date of grant and has a maximum term of 10 years. Generally, one third of the option grant vests in each of the first three years. Options granted related to the Assurance IQ acquisition have an exercise price based on the original strike price of the Assurance IQ options that they replaced and have a maximum term of 10 years from the date the Assurance IQ options were originally granted. Options granted related to the Assurance IQ acquisition generally vest quarterly over three years. A summary of the status of the Company’s stock option grants is as follows:
|  | Employee Stock Options
|  | Omnibus Incentive Plan |  | Assurance IQ Acquisition
|  | Shares |  | Weighted Average Exercise Price |  | Shares |  | Weighted Average Exercise Price
Outstanding at December 31, 2022 |  | 2,206,369 |  |  | $ | 92.67 |  |  | 53,768 |  |  | $ | 1.49 |
Granted |  | 0 |  |  | 0.00 |  |  | 0 |  |  | 0.00 |
Exercised |  | (349,749) |  |  | 73.87 |  |  | (32,750) |  |  | 1.17 |
Forfeited |  | 0 |  |  | 0.00 |  |  | (1,278) |  |  | 6.86 |
Expired |  | (156,288) |  |  | 106.91 |  |  | (1,382) |  |  | 3.74 |
Outstanding at December 31, 2023 |  | 1,700,332 |  |  | $ | 95.22 |  |  | 18,358 |  |  | $ | 1.53 |
Exercisable at December 31, 2023 |  | 1,700,332 |  |  | $ | 95.22 |  |  | 16,949 |  |  | $ | 1.48 |
There were no stock options granted for the years 2023, 2022 or 2021. No Assurance IQ acquisition related options were granted in 2023, 2022 or 2021. The total intrinsic value (i.e., market price of the stock less the option exercise price) of employee stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $8 million, $33 million, and $48 million, respectively. For the Assurance IQ acquisition related awards, the total intrinsic value of employee stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $3 million, $15 million and $15 million, respectively. The weighted average remaining contractual term and the aggregate intrinsic value of stock options outstanding and exercisable as of December 31, 2023 is as follows:
|  | Employee Stock Options
|  | Omnibus Incentive Plan |  | Assurance IQ Acquisition
|  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
|  | (in years) |  | (in millions) |  | (in years) |  | (in millions)
Outstanding |  | 3.59 years |  | $ | 17 |  |  | 4.87 years |  | $ | 2 |
Exercisable |  | 3.59 years |  | $ | 17 |  |  | 4.85 years |  | $ | 2 |
Restricted Stock Units, Performance Share Awards and Performance Unit Awards A restricted stock unit is an unfunded, unsecured right to receive a share of Prudential Financial’s Common Stock at the end of a specified period of time, which is subject to forfeiture and transfer restrictions. Generally, the restrictions will lapse one third annually over 3 years. Performance shares and performance units are awards denominated in Prudential Financial’s Common Stock. The number of units is determined over the performance period and may be adjusted based on the satisfaction of certain performance goals for the Company. Performance share awards are payable in Prudential Financial’s Common Stock. Performance unit awards are payable in cash. Effective October 2019, the Company no longer grants performance unit awards. Any residual compensation costs have been recorded and disclosed above through 2022. On January 10, 2024, the Board of Directors of Prudential Financial, Inc. adopted certain modifications to the terms and conditions of performance shares granted in 2021, 2022, and 2023. These modifications are intended to 1) mitigate the impact of outsized interest rate volatility, both positive and negative, as it relates to achieving adjusted book value per share growth goals, and 2) reduce certain book value per share goals and maximum payout opportunities. The estimated impact from these modifications will increase the expected shares to be delivered across all three performance plans by a total of approximately 600,000 shares. In addition, total compensation costs as a result of these modifications are estimated to increase by approximately $66 million, $64 million of which will be recorded in the first quarter of 2024. A summary of the Company’s restricted stock unit and performance share awards under the Omnibus Incentive Plan is as follows:
|  | Restricted Stock Units |  | Weighted Average Grant Date Fair Value |  | Performance Share Awards(1) |  | Weighted Average Grant Date Fair Value
Restricted at December 31, 2022 |  | 4,991,040 |  |  | $ | 99.48 |  |  | 2,061,174 |  |  | $ | 97.44 |
Granted |  | 2,192,898 |  |  | 102.64 |  |  | 749,174 |  |  | 103.27 |
Forfeited |  | (176,745) |  |  | 103.88 |  |  | (33,358) |  |  | 104.22 |
Performance adjustment(2) |  | 0 |  | 0.00 |  | (64,007) |  |  | 95.81
Released |  | (2,949,003) |  |  | 96.05 |  |  | (610,290) |  |  | 95.81 |
Restricted at December 31, 2023 |  | 4,058,190 |  |  | $ | 103.48 |  |  | 2,102,693 |  |  | $ | 99.93 |
__________ (1)Performance share awards reflect the target units awarded, reduced for forfeitures and releases to date. The actual number of units to be awarded at the end of each performance period will range between 0% and 150% of the target number of units granted, based upon a measure of the reported performance for the Company relative to stated goals. Performance awards granted to senior management in 2021 include a stated goal related to diversity & inclusion that can modify the performance result by +/- 10%. (2)Represents the difference between the target units granted and the actual units awarded based upon the attainment of performance goals for the Company. A summary of the Company’s restricted stock unit awards related to the Assurance IQ acquisition is as follows:
|  | Restricted Stock Units |  | Weighted Average Grant Date Fair Value |  |  |  |
Restricted at December 31, 2022 |  | 19,036 |  |  | $ | 87.67 |  |  |  |  |
Granted |  | 0 |  |  | 0.00 |  |  |  |  |
Forfeited |  | (2,713) |  |  | 87.67 |  |  |  |  |
Released |  | (12,222) |  |  | 87.67 |  |  |  |  |
Restricted at December 31, 2023 |  | 4,101 |  |  | $ | 87.67 |  |  |  |  |
The fair market value of restricted stock units and performance shares released under the Omnibus Incentive Plan for the years ended December 31, 2023, 2022 and 2021 was $360 million, $366 million and $155 million, respectively. The fair market value of restricted stock units for the Assurance IQ acquisition related awards under the Omnibus Incentive Plan for the years ended December 31, 2023, 2022 and 2021 was $1 million, $2 million and $3 million, respectively. The weighted average grant date fair value for restricted stock units granted under the Omnibus Incentive Plan during the years ended December 31, 2023, 2022 and 2021 was $102.64, $119.71 and $81.82, respectively. The weighted average grant date fair value for performance shares granted under the Omnibus Incentive Plan during the years ended December 31, 2023, 2022 and 2021 was $103.27, $121.29 and $81.43, respectively. There were no restricted stock units granted for the Assurance IQ acquisition during the year ended December 31, 2023, 2022 and 2021. Unrecognized Compensation Cost There was no unrecognized compensation cost for stock options under the Omnibus Incentive Plan as of December 31, 2023. Unrecognized compensation cost for restricted stock units and performance shares under the Omnibus Incentive Plan as of December 31, 2023 was $186 million with a weighted average recognition period of 1.74 years. Unrecognized compensation cost for stock options related to the Assurance IQ acquisition as of December 31, 2023 was less than $1 million with a weighted average recognition period of 0.13 years. Unrecognized compensation cost for restricted stock units related to the Assurance IQ acquisition as of December 31, 2023 was less than $1 million with a weighted average recognition period of 0.40 years. Tax Benefits Realized The Company’s tax benefit realized for exercises of stock options under the Omnibus Incentive Plan during the years ended December 31, 2023, 2022 and 2021 was $2 million, $8 million and $12 million, respectively. The tax benefit realized for exercises of stock options related to the Assurance IQ acquisition during the years ended December 31, 2023, 2022 and 2021 was $1 million, $4 million and $4 million, respectively. The Company’s tax benefit realized upon vesting of restricted stock units, performance shares and performance units under the Omnibus Incentive Plan for the years ended December 31, 2023, 2022 and 2021 was $77 million, $75 million and $30 million, respectively. The tax benefit realized upon vesting of restricted stock units related to the Assurance IQ acquisition during the years ended December 31, 2023, 2022 and 2021 was less than $1 million, less than $1 million and $1 million, respectively. Settlement of Awards The Company’s policy is to issue shares from Common Stock held in treasury upon exercise of stock options, the release of restricted stock units and performance shares. The Company uses cash to settle performance units. The amount of cash used to settle performance units during the years ended December 31, 2022 and 2021 was $1 million and $1 million, respectively. As of December 31, 2022, there were no longer any performance units outstanding.

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