Prudential Financial, Inc. 5.62 (PRS) 8-K Results of Operations and Financial Condition

Investor Day

Investor Day

December 7, 2005

December 7, 2005

Exhibit 99.0

Prudential Financial Investor Day

Prudential Financial Investor Day

December 7, 2005

December 7, 2005

Eric Durant

Senior Vice President, Investor Relations

Eric Durant

Senior Vice President, Investor Relations

Investor Day 12.07.05

2

Forward-Looking Statements

Forward-Looking Statements

Some

of

the

statements

included

in

this

presentation

constitute

forward-looking

statements

within

the

meaning

of

the

U.

S.

Private

Securities

Litigation

Reform

Act

of

1995.

Words

such

as

“expects,”

“believes,”

“anticipates,”

“includes,”

“plans,”

“assumes,”

“estimates,”

“projects,”

“intends,”

“should,”

“will,”

“shall,”

or

variations

of

such

words

are

generally

part

of

forward-looking

statements.

Forward-looking

statements

are

made

based

on

management’s

current

expectations

expectations

and

and

beliefs

beliefs

concerning

concerning

future

future

developments

developments

and

and

their

their

potential

potential

effects

effects

upon

upon

Prudential

Prudential

Financial,

Financial,

Inc.

Inc.

and

its

subsidiaries.

There

can

be

no

assurance

that

future

developments

affecting

Prudential

Financial,

Inc.

and

its

subsidiaries

subsidiaries

will

will

be

be

those

those

anticipated

anticipated

by

by

management.

management.

These

These

forward-looking

statements

statements

are

are

not

not

a

a

guarantee

guarantee

of

of

future

performance

and

involve

risks

and

uncertainties,

and

there

are

certain

important

factors

that

could

cause

actual

actual

results

results

to

to

differ,

differ,

possibly

possibly

materially,

materially,

from

from

expectations

expectations

or

or

estimates

estimates

reflected

reflected

in

in

such

such

forward-looking

statements,

including,

among

others:

(1)

general

economic,

market

and

political

conditions,

including

the

performance

performance

of

of

financial

financial

markets

markets

and

and

interest

interest

rate

rate

fluctuations;

fluctuations;

(2)

(2)

domestic

domestic

or

or

international

military

military

or

or

terrorist

terrorist

activities

activities

or

or

conflicts;

conflicts;

(3)

(3)

volatility

volatility

in

in

the

the

securities

securities

markets;

markets;

(4)

(4)

fluctuations

fluctuations

in

in

foreign

foreign

currency

currency

exchange

exchange

rates

rates

and

and

foreign

foreign

securities

securities

markets;

markets;

(5)

(5)

regulatory

regulatory

or

or

legislative

legislative

changes,

changes,

including

including

changes

changes

in

in

tax

tax

law;

law;

(6)

(6)

changes

changes

in

in

statutory

statutory

or

or

U.S.

U.S.

GAAP

GAAP

accounting

accounting

principles,

principles,

practices

practices

or

or

policies;

policies;

(7)

(7)

differences

differences

between

between

actual

actual

experience

experience

regarding

regarding

mortality,

mortality,

morbidity,

morbidity,

persistency,

persistency,

surrender

surrender

experience,

experience,

interest

interest

rates,

rates,

or

or

market

market

returns

returns

and

and

the

the

assumptions

assumptions

we

we

use

use

in

in

pricing

pricing

our

our

products,

products,

establishing

establishing

liabilities

liabilities

and

and

reserves

reserves

or

or

for

for

other

other

purposes;

purposes;

(8) 

(8) 

reestimates

reestimates

of

of

our

our

reserves

reserves

for

for

future

future

policy

policy

benefits

benefits

and

and

claims;

claims;

(9)

(9)

changes

changes

in

in

our

our

assumptions

assumptions

related

related

to

to

deferred

deferred

policy

policy

acquisition

acquisition

costs;

costs;

(10)

(10)

events

events

resulting

resulting

in

in

catastrophic

catastrophic

loss

loss

of

of

life;

life;

(11)

(11)

investment

investment

losses

losses

and

and

defaults;

defaults;

(12)

(12)

changes

in

our

claims-paying

or

credit

ratings;

(13)

competition

in

our

product

lines

and

for

personnel;

(14)

economic,

economic,

political,

political,

currency

currency

and

and

other

other

risks

risks

relating

relating

to

to

our

our

international

international

operations;

operations;

(15)

(15)

Prudential

Prudential

Financial,

Financial,

Inc.’s

primary

reliance,

as

a

holding

company,

on

dividends

or

distributions

from

its

subsidiaries

to

meet

debt

payment

obligations

obligations

and

and

the

the

applicable

applicable

regulatory

regulatory

restrictions

restrictions

on

on

the

the

ability

ability

of

of

the

the

subsidiaries

subsidiaries

to

to

pay

pay

such

such

dividends

dividends

or

or

distributions;

distributions;

(16)

(16)

risks

risks

due

due

to

to

the

the

lack

lack

of

of

legal

legal

separation

separation

between

between

our

our

Financial

Financial

Services

Services

Businesses

Businesses

and

and

our

our

Closed

Closed

Block

Block

Business;

Business;

(17)

(17)

adverse

adverse

determinations

determinations

in

in

litigation

litigation

or

or

regulatory

regulatory

matters

matters

and

and

our

our

exposure

exposure

to

to

contingent

contingent

liabilities;

liabilities;

and

and

(18)

(18)

the

the

effects

effects

of

of

acquisitions,

acquisitions,

divestitures

divestitures

and

and

restructurings,

restructurings,

including

including

possible

possible

difficulties

difficulties

in

in

integrating

integrating

and

and

realizing

realizing

the

the

projected

projected

results

results

of

of

acquisitions.

acquisitions.

Prudential

Financial,

Inc.

does

not

intend,

and

is

under

no

obligation,

to

update

any

particular

forward-looking

statement

included

in

this

presentation.

The

information

referred

to

above,

as

well

as

the

risks

of

our

businesses

described

in

our

Annual

Report

on

Form

10-K

for

the

year

ended

December

31,

2004,

should

be

considered

by

readers

when

reviewing

forward-looking

statements

contained

in

this

presentation.

Investor Day 12.07.05

3

Non–GAAP Measure

Non–GAAP Measure

In

managing

our

businesses,

we

use

a

non-GAAP

measure

we

call

“adjusted

operating

income”

to

measure

the

performance

of

our

Financial

Services

Businesses

(FSB).

Our

goals

for

return

on

equity

(ROE)

and

earnings

per

share

(EPS)

are

based

on

FSB

after-tax

adjusted

operating

income

and

attributed

equity.

As

indicated

above,

our

expectation

of

Common

Stock

earnings

per

share

is

based

on

after-tax

adjusted

operating

income.

Adjusted

operating

income,

which

is

not

measured

in

accordance

with

GAAP,

excludes

Realized

investment

gains

(losses),

net

(other

than

those

associated

with

terminating

hedges

of

foreign

currency

earnings

and

current

period

yield

adjustments).

A

significant

element

of

realized

losses

is

impairments

and

losses

from

sales

of

credit-impaired

securities,

the

timing

of

which

depends

largely

on

market

credit

cycles

and

can

vary

considerably

across

periods.

The

timing

of

other

sales

that

would

result

in

gains

or

losses

is

largely

subject

to

our

discretion

and

influenced

by

market

opportunities.

Similarly,

adjusted

operating

income

excludes

investment

gains

and

losses

on

trading

account

assets

supporting

insurance

liabilities

and

changes

in

experience-rated

contractholder

liabilities

due

to

asset

value

changes,

because

these

recorded

changes

in

asset

and

liability

values

will

ultimately

inure

to

contractholders.

Trends

in

the

underlying

profitability

of

our

businesses

can

be

more

clearly

identified

without

the

fluctuating

effects

of

these

transactions.

Adjusted

operating

income

also

excludes

life

insurance

sales

practices

remedies

and

costs

and

the

results

of

divested

businesses,

which

are

not

relevant

to

our

ongoing

operations.

Because

we

do

not

predict

future

realized

investment

gains

/

losses

or

recorded

changes

in

asset

and

liability

values

that

will

ultimately

inure

to

contractholders,

we

cannot

provide

a

measure

of

our

Common

Stock

earnings

per

share

expectation

based

on

income

from

continuing

operations

of

the

Financial

Services

Businesses,

which

is

the

GAAP

measure

most

comparable

to

adjusted

operating

income.

We

believe

that

the

presentation

of

adjusted

operating

income

as

we

measure

it

for

management

purposes

enhances

the

understanding

of

our

results

of

operations

by

highlighting

the

results

from

ongoing

operations

and

the

underlying

profitability

factors

of

our

businesses.

ROE

based

on

annualized

after-tax

adjusted

operating

income

is

determined

by

dividing

annualized

after-tax

adjusted

operating

income

(giving

effect

to

the

direct

equity

adjustment),

by

average

FSB

attributed

equity

excluding

unrealized

gains

and

losses

on

investments.

An

alternative

measure

to

ROE

based

on

after-tax

adjusted

operating

income

is

return

on

average

equity

(based

on

income

from

continuing

operations).

Return

on

average

equity

(based

on

income

from

continuing

operations)

represents

after-

tax

income

from

continuing

operations

as

determined

in

accordance

with

GAAP

(giving

effect

to

the

direct

equity

adjustment),

annualized

for

interim

periods,

divided

by

average

total

FSB

attributed

equity.

Return

on

average

equity

(based

on

income

from

continuing

operations)

was

18.10%

for

the

nine

months

ended

September

30,

2005

and

9.35%,

5.48%

and

3.97%

for

the

years

ended

December

31,

2004,

2003

and

2002,

respectively.

For

additional

information

about

adjusted

operating

income

and

the

comparable

GAAP

measure

please

refer

to

our

Annual

Report

on

Form

10-K

for

the

year

ended

December

31,

2004

and

our

Quarterly

Report

on

Form

10-Q

for

the

quarter

ended

September

30,

2005,

on

the

Investor

Relations

Web

site

at

www.investor.prudential.com.

Reconciliations

between

adjusted

operating

income

and

the

comparable

GAAP

measure

for

the

nine

months

ended

September

30,

2005

and

years

ended

December

31,

2004,

2003

and

2002

are

included

in

this

presentation.

Additional

historical

information

relating

to

the

Company’s

financial

performance,

including

its

third

quarter

2005

Quarterly

Financial

Supplement,

is

also

located

on

the

Investor

Relations

website.

Reconciliation between adjusted operating income

Reconciliation between adjusted operating income

and the comparable GAAP measure

and the comparable GAAP measure

Prudential Financial, Inc.

FINANCIAL HIGHLIGHTS

(in millions, except per share data)

Nine months ended

2002

2003

2004

Sept 30, 2005

Financial Services Businesses:

Pre-tax adjusted operating income by division:

Insurance Division

545

$          

788

$          

991

$          

862

$                 

Investment Division

282

289

355

711

International Insurance and Investments Division

757

809

1,003

1,042

Corporate and other operations

156

88

158

123

Total pre-tax adjusted operating income

1,740

1,974

2,507

2,738

Income taxes, applicable to adjusted operating income

585

645

676

830

Financial Services Businesses after-tax adjusted operating income

1,155

1,329

1,831

1,908

Items excluded from adjusted operating income:

Realized investment gains (losses), net, and related charges and adjustments

(866)

(199)

24

565

Investment gains (losses) on trading account assets supporting insurance liabilities, net

-

-

(43)

(34)

-

-

(11)

(17)

Sales practices remedies and costs

(20)

-

-

-

Divested businesses

(9)

(162)

(24)

(5)

Total items excluded from adjusted operating income, before income taxes

(895)

(361)

(54)

509

Income taxes not applicable to adjusted operating income

(498)

(114)

(54)

(484)

Total items excluded from adjusted operating income, after income taxes

(397)

(247)

-

993

Income from continuing operations (after-tax) of Financial Services Businesses

before extraordinary gain on acquisition and cumulative effect of accounting change

758

1,082

1,831

2,901

Loss from discontinued operations, net of taxes

(79)

(57)

(99)

(59)

Extraordinary gain on acquisition, net of taxes

-

-

21

-

Cumulative effect of accounting change, net of taxes

-

-

(79)

-

Net income of Financial Services Businesses

679

1,025

1,674

2,842

Earnings per share of Common Stock (diluted):

Financial Services Businesses after-tax adjusted operating income

2.07

$         

2.53

$         

3.61

$         

3.76

$                

Items excluded from adjusted operating income:

Realized investment gains (losses), net, and related charges and adjustments

(1.50)

(0.36)

0.05

1.07

Investment gains (losses) on trading account assets supporting insurance liabilities, net

-

-

(0.08)

(0.06)

-

-

(0.02)

(0.03)

Sales practices remedies and costs

(0.03)

-

-

-

Divested businesses

(0.02)

(0.30)

(0.05)

(0.01)

Total items excluded from adjusted operating income, before income taxes

(1.55)

(0.66)

(0.10)

0.97

Income taxes, not applicable to adjusted operating income

(0.87)

(0.21)

(0.10)

(0.92)

Total items excluded from adjusted operating income, after income taxes

(0.68)

(0.45)

-

1.89

Income from continuing operations (after-tax) of Financial Services Businesses

before extraordinary gain on acquisition and cumulative effect of accounting change

1.39

2.08

3.61

5.65

Loss from discontinued operations, net of taxes

(0.14)

(0.10)

(0.19)

(0.11)

Extraordinary gain on acquisition, net of taxes

-

-

0.04

-

Cumulative effect of accounting change, net of taxes

-

-

(0.15)

-

Net income of Financial Services Businesses

1.25

1.98

3.31

5.54

Weighted average number of outstanding Common shares (diluted basis)

578.0

548.4

531.2

524.5

Reconciliation to Consolidated Net Income of Prudential Financial, Inc:

Net income of Financial Services Businesses (above)

679

$          

1,025

$        

1,674

$        

2,842

$             

Net income of Closed Block Business

(485)

239

582

334

Consolidated net income

194

1,264

2,256

3,176

Direct equity adjustments for earnings per share calculations

43

$            

60

$            

84

$            

63

$                   

Year ended December 31,

Change

in

experience-rated

contractholder

liabilities

due

to

asset

value

changes

Change

in

experience-rated

contractholder

liabilities

due

to

asset

value

changes

Reconciliation between adjusted operating income

Reconciliation between adjusted operating income

and the comparable GAAP measure (continued)

and the comparable GAAP measure (continued)

Prudential Financial, Inc.

COMBINED

STATEMENTS

OF

OPERATIONS

-

FINANCIAL

SERVICES

BUSINESSES

(in millions)

Nine months ended

2002

2003

2004

Sept 30, 2005

Revenues (1):

Premiums

7,357

$    

7,945

$  

8,820

$   

7,720

$             

Policy charges and fee income

1,780

2,024

2,426

1,901

Net investment income

5,052

4,935

5,384

4,601

Commissions, investment management fees, and other income

3,975

3,254

3,410

3,063

Total revenues

18,164

18,158

20,040

17,285

Benefits and Expenses (1):

Insurance and annuity benefits

7,793

8,307

9,032

7,596

Interest credited to policyholders' account balances

1,730

1,718

2,208

1,877

Interest expense

195

200

296

388

Deferral of acquisition costs

(1,064)

(1,270)

(1,528)

(1,358)

Amortization of acquisition costs

739

533

766

734

General and administrative expenses

7,031

6,696

6,759

5,310

Total benefits and expenses

16,424

16,184

17,533

14,547

Adjusted operating income before income taxes

1,740

1,974

2,507

2,738

Items excluded from adjusted operating income before income taxes:

Realized investment gains (losses), net, and related adjustments

(872)

(156)

82

669

Related charges

6

(43)

(58)

(104)

Total realized investment gains (losses), net, and related charges and adjustments

(866)

(199)

24

565

Investment gains (losses) on trading account assets supporting insurance liabilities, net

-

-

(43)

(34)

Change

in

experience-rated

contractholder

liabilities

due

to

asset

value

changes

-

-

(11)

(17)

Sales practices remedies and costs

(20)

-

-

-

Divested businesses

(9)

(162)

(24)

(5)

Total items excluded from adjusted operating income before

income taxes

(895)

(361)

(54)

509

Income from continuing operations before income taxes, extraordinary gain on acquisition

and cumulative effect of accounting change

845

1,613

2,453

3,247

Income tax expense

87

531

622

346

Income from continuing operations before extraordinary gain on acquisition

and cumulative effect of accounting change

758

1,082

1,831

2,901

(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on

trading account assets supporting insurance liabilities, and revenues of divested businesses.  Benefits and expenses exclude charges

related

to

realized

investment

gains,

net

of

losses;

changes

in

experience-rated

contractholder

liabilities

due

to

asset

value

changes,

benefits and expenses of divested businesses, and sales practices remedies and costs.

Year ended December 31,

Prudential Financial, Inc.

Prudential Financial, Inc.

Art Ryan

Chairman and CEO

Art Ryan

Art Ryan

Chairman and CEO

Chairman and CEO

Investor Day 12.07.05

7

ROE levers:  2001 -

ROE levers:  2001 -

2005

2005

Expense cuts

Expense cuts

Resolve underperforming businesses

Resolve underperforming businesses

Grow high return businesses

Grow high return businesses

Redeploy capital

Redeploy capital

Investor Day 12.07.05

8

What has happened since demutualization

What has happened since demutualization

Achieved significant expense reductions

Achieved significant expense reductions

Divested P&C business

Divested P&C business

Acquired and integrated American Skandia

Acquired and integrated American Skandia

Combined retail brokerage into Wachovia

Combined retail brokerage into Wachovia

Acquired CIGNA Retirement

Acquired CIGNA Retirement

Repurchased $4.8 billion of Common Stock

Repurchased $4.8 billion of Common Stock

(1)

(1)

Increased cash dividend 25% per year for ‘03, ‘04, and ‘05

Increased cash dividend 25% per year for ‘03, ‘04, and ‘05

Achieved “AA”

Achieved “AA”

financial strength ratings from four agencies

financial strength ratings from four agencies

(1)

Through September 30, 2005

Investor Day 12.07.05

9

$2.07

$2.53

$3.61

$2.65

$3.76

2002

2003

2004

9 mo 04

9 mo 05

Earnings per share growth

Earnings per share growth

(1)

(1)

(1)

Based

on

after-tax

adjusted

operating

income

of

the

Financial

Services

Businesses

Investor Day 12.07.05

10

ROE progress

ROE progress

(1)

(1)

(1)

Based

on

after-tax

adjusted

operating

income

of

the

Financial

Services

Businesses

(2)

Nine months ended September 30, 2005; annualized

6.4%

7.6%

10.2%

13.0%

0%

2%

4%

6%

8%

10%

12%

14%

2002

2003

2004

9 mo 05

12% goal

by 2005

(2)

Investor Day 12.07.05

11

Where we are today

Where we are today

Balanced mix of businesses and risks

Balanced mix of businesses and risks

Strong capital position and cash flow generation

Strong capital position and cash flow generation

Leading position in domestic retirement and savings

Leading position in domestic retirement and savings

market

market

Sustained high returns and growth of international

Sustained high returns and growth of international

insurance business

insurance business

Asset management skills complement product

Asset management skills complement product

manufacturing

manufacturing

Complementary distribution channels

Complementary distribution channels

Acquisition and integration track record

Acquisition and integration track record

Investor Day 12.07.05

12

After 2005 …

After 2005 …

Two substantial growth opportunities:

Two substantial growth opportunities:

International businesses

International businesses

Domestic retirement and savings businesses

Domestic retirement and savings businesses

Evolving multi-channel distribution strategy

Evolving multi-channel distribution strategy

Manage margins and returns

Manage margins and returns

Opportunistic acquisitions

Opportunistic acquisitions

Substantial operating cash flows enable share

Substantial operating cash flows enable share

repurchases, growing cash dividends

repurchases, growing cash dividends

Investor Day 12.07.05

13

2006 –

2006 –

2007

2007

Execution and business mix drive superior

Execution and business mix drive superior

shareholder value growth

shareholder value growth

ROE of 12% -

14%

Double digit average annual growth:  AOI, EPS

Reasonably consistent operating results

Visible, sustainable cash flow

“AA”capital management

ROE of 12% -

ROE of 12% -

14%

14%

Double digit average annual growth:  AOI, EPS

Double digit average annual growth:  AOI, EPS

Reasonably consistent operating results

Reasonably consistent operating results

Visible, sustainable cash flow

Visible, sustainable cash flow

“AA”capital management

“AA”capital management

Investor Day

Investor Day

December 7, 2005

December 7, 2005

Prudential Financial, Inc.

Prudential Financial, Inc.

Mark Grier

Mark Grier

Vice Chairman, Financial Management

Vice Chairman, Financial Management

Investor Day 12.07.05

16

Financial highlights

Financial highlights

(1)

(1)

13.0 %

$ 3.76 

$ 2,738 

Nine

months

ended

September

30, 2005

10.2 %

$ 3.61

$ 2,507

2004

2003

2002

6.4 %

$ 2.07

$ 1,740

7.6 %

Return on Equity

(3) (4)

$ 2.53

Earnings per share of Common Stock

(3)

$ 1,974

Pre-tax adjusted operating income

(2)

(1)

For the Financial Services Businesses (FSB)

(2)

In millions

(3)

Based on after-tax adjusted operating income of the FSB

(4)

Annualized for interim period

Year ended December 31

Investor Day 12.07.05

17

25%

75%

75% of equity is attributed to operating businesses

75% of equity is attributed to operating businesses

Operating Businesses

Operating Businesses

(2)

(2)

Corporate & Other

Corporate & Other

(1)

As of September 30, 2005 for the FSB; excludes unrealized gains and losses on investments.

(2)

Represents segments of the FSB

Total attributed equity of $21.0 billion

(1)

Investor Day 12.07.05

18

Attributed equity of operating businesses

Attributed equity of operating businesses

INTERNATIONAL INSURANCE

INTERNATIONAL INSURANCE

RETIREMENT & SAVINGS

RETIREMENT & SAVINGS

DOMESTIC INSURANCE

DOMESTIC INSURANCE

Attributed equity $15.8 billion

Attributed equity $15.8 billion

(1)

•

•

Life Planner model

Life Planner model

•

•

Gibraltar Life

Gibraltar Life

•

•

Retirement

Retirement

•

•

Individual Annuities

Individual Annuities

•

•

Individual Life

Individual Life

•

•

Group Insurance

Group Insurance

(1)

As of September 30, 2005 for the FSB operating businesses; excludes unrealized gains and losses on investments.

INVESTMENT BUSINESSES

INVESTMENT BUSINESSES

•

•

Financial Advisory

Financial Advisory

•

•

Asset Management

Asset Management

•

•

International Investments

International Investments

$3.6

$5.3

$3.5

$3.4

Investor Day 12.07.05

19

Complementary and diversified businesses

Complementary and diversified businesses

DOMESTIC INSURANCE

DOMESTIC INSURANCE

• Individual Life

• Group Insurance

INTERNATIONAL INSURANCE

INTERNATIONAL INSURANCE

• Life Planner model

• Life Planner model

Life Planner model

• Gibraltar Life

• Gibraltar Life

Gibraltar Life

Adjusted operating income

(1)

$2,738 million

(1)

Before-tax; for the FSB; nine months ended September 30, 2005

RETIREMENT & SAVINGS

RETIREMENT & SAVINGS

• Retirement

• Individual Annuities

INVESTMENT BUSINESSES & CORPORATE

INVESTMENT BUSINESSES & CORPORATE

• Financial Advisory

• Asset Management

• International Investments

• Corporate & Other

36%

18%

18%

28%

Investor Day 12.07.05

20

International Insurance

International Insurance

Annualized new business premiums: $945 million

(2)

6.8 million policies in force

(1)

5,702 Life Planners

(1)

5,349 Gibraltar Life Advisors

(1)

(1)

As of September 30, 2005

(2)

For

the

year

ended

December

31,

2004;

GAAP

exchange

rate

basis

–

translated

based

on

applicable

average

exchange

rate for period

Investor Day 12.07.05

21

Number of Life

Planners

15%

15%

5,385

2,332

Number of Policies

in Force (000)

23%

23%

2,661

776

Annualized New

Business

Premiums

(1)

(1)

16%

16%

$668 mm

24%

24%

Adjusted Operating

Income

(2)

(2)

$515 mm

$144 mm

CAGR 1998 –

CAGR 1998 –

2004

2004

(1)

GAAP Exchange rate basis –

translated based on applicable average exchange rates for period

(2)

Before-tax

$270 mm

Life Planner model business driver growth

Investor Day 12.07.05

22

Gibraltar Life

Gibraltar Life

Acquired by Prudential Financial in 2001

Strong affinity group relationships

High return on equity

Strong free cash flow and capital generation

Investor Day 12.07.05

23

Retirement / savings market

Retirement / savings market

Personal Savings

Personal Savings

$7.0

$7.0

IRAs

IRAs

$3.5

$3.5

Defined Contribution

Defined Contribution

$2.7

$2.7

Defined Benefit

Defined Benefit

$4.9

$4.9

Annuities

Annuities

$1.7

$1.7

$20 trillion market in 2004 

Sources: Federal Reserve Flow of Funds; LIMRA; company estimates

Investor Day 12.07.05

24

Prudential Retirement

Prudential Retirement

•Total retirement services capability provides market advantage

•Total retirement services capability provides market advantage

•Stable value products offer attractive returns with limited risk

•Stable value products offer attractive returns with limited risk

•Complementary distribution channels address selected markets

•Complementary distribution channels address selected markets

•Ratings upgrades enhancing market position

•Ratings upgrades enhancing market position

Investor Day 12.07.05

25

Leading distributor of variable annuities through

Leading distributor of variable annuities through

independent financial planners

independent financial planners

Expanding distribution

Expanding distribution

Account values exceed $53 billion

Account values exceed $53 billion

(1)

(1)

Successful recent introduction of new generation living

Successful recent introduction of new generation living

benefit feature

benefit feature

Risk management integral to product design; hedging

Risk management integral to product design; hedging

where appropriate

where appropriate

Annuities

Annuities

(1)

As of September 30, 2005

Investor Day 12.07.05

26

Individual Life ROE

Individual Life ROE

(1)

In millions

(2)

Average attributed equity for the period; in billions

(3)

Based

on

annualized

after-tax

adjusted

operating

income

giving

effect

to

direct

equity

credit

16 %

Return on equity

(3)

$ 2.6   

Equity

(2)

$ 356   

Pre-tax adjusted operating income

(1)

Nine months ended

September 30, 2005

Investor Day 12.07.05

27

$0

$50

$100

$150

$200

$250

$300

$350

$400

2002

2003

2004

9MO 04

9MO 05

Individual Life sales

Individual Life sales

(1)

Scheduled premiums from new sales on an annualized basis and first year excess premiums and deposits on a cash-received

basis, excluding COLI; for the years ended December 31 and for the nine months ended September 30

$320

$341

$391

Prudential Agents

Third-party

Sales by distribution channel

(1)

$303

$285

Investor Day 12.07.05

28

Group Insurance

Group Insurance

•

•

High persistency of quality business

High persistency of quality business

•

•

Controlled growth –

Controlled growth –

emphasis on margins

emphasis on margins

•

•

Return on equity of 13%

Return on equity of 13%

(1)

(1)

•

•

Addressing disability claims resolutions

Addressing disability claims resolutions

(1)

Based

on

annualized

after-tax

adjusted

operating

income

for

the

nine

months

ended

September

30,

2005

Investor Day 12.07.05

29

Financial Advisory

Financial Advisory

(1) Based on client assets of $532.1 billion as of March 31, 2003

Combination of Private Client Group with Wachovia closed July 1,

2003

62% Wachovia, 38% Prudential

Combined business created 3rd largest brokerage firm in the U.S.

(1)

Integration complete; JV operating results in line with expectations

Segment results absorb expense for retained obligations and costs

Prudential put options

Investor Day 12.07.05

30

Asset Management: significant scale and breadth

Asset Management: significant scale and breadth

AUM by asset type

AUM by client type

Equity

19%

Fixed

Income

45%

Real

Estate

4%

Non-proprietary

insurance,

annuity & other

18%

International

14%

Institutional

customers

25%

General account

30%

Retail

customers

13%

International

14%

CB

Total AUM $522 billion

Total AUM $522 billion

(1)

(1)

Non-proprietary

insurance,

annuity & other

18%

(1) As of September 30, 2005

Investor Day 12.07.05

31

Rating agencies have recognized financial strength

Rating agencies have recognized financial strength

Upgraded

November

2004

Upgraded

October

2004

Upgraded

February 

2004

AA-

Aa3

(2)

A+

Prudential Retirement Insurance

and Annuity Company

AA-

Aa3

A+

Prudential Insurance

Insurance Claims Paying Ratings

(1)

:

Standard

& Poor’s

Moody’s

A. M. Best

(1)

As of December 7, 2005

(2)

Assigned March 2005

Investor Day 12.07.05

32

Financial strength

Financial strength

(1)

(in millions)

Fixed Maturities

$  3,903

Net unrealized gains

$     547

Gross unrealized losses

$  4,450

Gross unrealized gains

15.0 %

Debt/Capital

(2)

$ 21,025

Attributed equity (excl FAS 115, in millions)

(1)

Financial Services Businesses; as of September 30, 2005

(2)

Based on definition in the Quarterly Financial Supplement

Investor Day

Investor Day

December 7, 2005

December 7, 2005

Prudential Retirement

Prudential Retirement

John Kim

President, Prudential Retirement

John Kim

John Kim

President, Prudential Retirement

President, Prudential Retirement

Investor Day 12.07.05

35

A growing part of “Grow and Protect”

A growing part of “Grow and Protect”

•Retirement market increasingly important in asset gathering

•Retirement market increasingly important in asset gathering

•Prudential Retirement a leading retirement market provider

•Prudential Retirement a leading retirement market provider

•Total retirement services capability provides market advantage

•Total retirement services capability provides market advantage

•Stable value products offer attractive returns with limited risk

•Stable value products offer attractive returns with limited risk

•Complementary distribution channels address selected markets

•Complementary distribution channels address selected markets

•Ratings upgrades enhancing market position

•Ratings upgrades enhancing market position

Investor Day 12.07.05

36

Retirement and Annuities –

Retirement and Annuities –

a growing contribution to

a growing contribution to

earnings results

earnings results

Adjusted operating income of Prudential

(1)

Year ended December 31, 2002

$1.7 billion 

Nine months ended September 30, 2005

$2.7 billion 

28% Retirement

28% Retirement

& Annuities

& Annuities

6% Retirement

6% Retirement

& Annuities

& Annuities

(1)

For the Financial Services Businesses; pre-tax

Investor Day 12.07.05

37

Prudential Retirement financial performance

Prudential Retirement financial performance

3.3

407

13,540

$135,565

Nine months

Nine months

ended

ended

September 30, 2005

September 30, 2005

3.4

334

15,004

$129,806

2004

2004

(1)

(1)

Year ended December 31       

Year ended December 31       

8,435

Gross sales

(2)

$70,613

Total account values

(2) (3)

2003

2003

1.6

Attributed equity

(3)(4)

192

Pre-tax adjusted operating

income

(2)

(1)

Reflects results of business acquired from CIGNA, from April 1, 2004 acquisition date

(2)

In millions

(3)

At end of period

(4)

In billions

Investor Day 12.07.05

38

Retirement business integration on track

Retirement business integration on track

•

Novation

substantially complete

•

Conversion of DC plans substantially complete

•

Systems integration on track for 1Q06 completion

•

Persistency better than expected

•

Expense saves in line with original expectations

•

Novation

substantially complete

•

Conversion of DC plans substantially complete

•

Systems integration on track for 1Q06 completion

•

Persistency better than expected

•

Expense saves in line with original expectations

Investor Day 12.07.05

39

Market leading capabilities across product

Market leading capabilities across product

offerings

offerings

“Total Retirement Services”

Full suite of stable value products

Offer access to both separate account and mutual

fund platforms

Award winning participant communications

capabilities and highest independent ratings

Extensive fiduciary support capabilities and ancillary

services

Scale of combined operations produces ability to

offer competitive pricing

“Total Retirement Services”

Full suite of stable value products

Offer access to both separate account and mutual

fund platforms

Award winning participant communications

capabilities and highest independent ratings

Extensive fiduciary support capabilities and ancillary

services

Scale of combined operations produces ability to

offer competitive pricing

Investor Day 12.07.05

40

$30 billion in stable value balances

$30 billion in stable value balances

(1)

(1)

are major

are major

source of earnings

source of earnings

Stable value characteristics

Stable value characteristics

•Low risk profile: substantially all balances experience-

•Low risk profile: substantially all balances experience-

rated with client sharing investment risk

rated with client sharing investment risk

•Rate resets semi-annually on most products

•Rate resets semi-annually on most products

•Future crediting rates typically reflect prior experience

•Future crediting rates typically reflect prior experience

•Low interest-rate floors; competitive conditions main

•Low interest-rate floors; competitive conditions main

factor in rate setting

factor in rate setting

(1)

As of September 30, 2005

Investor Day 12.07.05

41

A leader in total retirement services

A leader in total retirement services

Total

Total

Retirement

Retirement

Services

Services

Defined Benefit

Defined Benefit

Non-Qualified

Non-Qualified

Plans

Plans

Defined

Defined

Contribution

Contribution

Plan

Plan

Sponsor

Sponsor

Investor Day 12.07.05

42

Prudential Retirement lines of business

Prudential Retirement lines of business

•

Defined Contribution

•

Defined Benefit

•

Non-qualified plans

•

Retail/rollover

•

Defined Contribution

•

Defined Benefit

•

Non-qualified plans

•

Retail/rollover

Full Service Retirement (FSR)

Full Service Retirement (FSR)

Institutional Investment Products

Institutional Investment Products

Investor Day 12.07.05

43

Full service retirement market segments

Full service retirement market segments

Assets Under Management

Assets Under Management

(1)

(1)

Participants

Participants

(2)                                

(2)                                

(1)

In billions, as of September 30, 2005

(2)

As of September 30, 2005

Tax Exempt

Tax Exempt

Mid / Large Case

Mid / Large Case

Emerging (Small) Corporate

Emerging (Small) Corporate

$44

$28

$13

773,000

1,179,000

448,000

Investor Day 12.07.05

44

FSR: Mid / large case market

FSR: Mid / large case market

•

Distribution: fee based consultants, advisors, direct

•

Trend toward bundling; Total Retirement Services

•

12-24 month buying cycle

•

Decision criteria

•

Competitive pricing structure

•

Investment management capability

•

Advisory services, actuarial consulting, fiduciary support

•

Quality of service and administration

•

Distribution: fee based consultants, advisors, direct

•

Trend toward bundling; Total Retirement Services

•

12-24 month buying cycle

•

Decision criteria

•

Competitive pricing structure

•

Investment management capability

•

Advisory services, actuarial consulting, fiduciary support

•

Quality of service and administration

$44 billion      

$44 billion      

600

600

1,179,000

1,179,000

Market Profile

Market Profile

(1)

(1)

:

:

AUM

AUM

Clients

Clients

Participants

Participants

(1)

As of September 30, 2005

Investor Day 12.07.05

45

FSR: Tax exempt market

FSR: Tax exempt market

•

Distribution: specialized consultants

•

Target markets: multi-employer, not-for-profit and government

•

Very high persistency

•

Employee longevity

•

High percentage stable value

•

Distribution: specialized consultants

•

Target markets: multi-employer, not-for-profit and government

•

Very high persistency

•

Employee longevity

•

High percentage stable value

$28 billion      

$28 billion      

1,600

1,600

773,000

773,000

Market Profile

Market Profile

(1)

(1)

:

:

AUM

AUM

Clients

Clients

Participants

Participants

(1)

As of September 30, 2005

Investor Day 12.07.05

46

FSR: Emerging (small) corporate market

FSR: Emerging (small) corporate market

•

Distribution: commission based advisors

•

Fastest growing DC segment

•

Significant level of plan turnover

•

Fragmented competition

•

“Micro-market”

offers expansion opportunity

•

Distribution: commission based advisors

•

Fastest growing DC segment

•

Significant level of plan turnover

•

Fragmented competition

•

“Micro-market”

offers expansion opportunity

$13 billion      

$13 billion      

3,300

3,300

448,000

448,000

Market Profile

Market Profile

(1)

(1)

:

:

AUM

AUM

Clients

Clients

Participants

Participants

(1)

As of September 30, 2005

Investor Day 12.07.05

47

FSR: Retail / rollover market

FSR: Retail / rollover market

•

Internal retention: about 54% of $5 billion annual DC

plan distributions

•

10% CAGR projected for rollover market (2004-2011)

•

Expanding rollover platform

•

Internal retention: about 54% of $5 billion annual DC

plan distributions

•

10% CAGR projected for rollover market (2004-2011)

•

Expanding rollover platform

Investor Day 12.07.05

48

Institutional / investment products

Institutional / investment products

Account values $51.4 billion

Account values $51.4 billion

(1)

(1)

(1)

As of September 30, 2005

Structured

Structured

settlements

settlements

Group Annuities,

Group Annuities,

close-out pension

close-out pension

Investment products -

Investment products -

GICs, Funding

GICs, Funding

agreements

agreements

$33.8

$14.7

$2.9

Investor Day 12.07.05

49

Prudential Retirement –

Prudential Retirement –

2006 and beyond

2006 and beyond

Tactical objective: Complete business integration

Strategic objective: Increase asset retention and

achieve positive flows

Key growth initiatives:

-

Micro-market

-

Rollover market

-

Secure Retirement products

-

Retirement income solutions

-

Health Savings Accounts

Investor Day 12.07.05

50

Summary

Summary

Integration of CIGNA business continues on track

Our financial performance is consistent with expectations

Stable value balances a major source of earnings

A leader in total retirement services

We will implement key growth initiatives in 2006 and beyond

Integration of CIGNA business continues on track

Our financial performance is consistent with expectations

Stable value balances a major source of earnings

A leader in total retirement services

We will implement key growth initiatives in 2006 and beyond

Investor Day

Investor Day

December 7, 2005

December 7, 2005

Individual Annuities

Individual Annuities

David Odenath

President, Prudential Annuities

David Odenath

David Odenath

President, Prudential Annuities

President, Prudential Annuities

Investor Day 12.07.05

53

Individual Annuities financial performance

Individual Annuities financial performance

Nine Months Ended

September 30

Year Ended

December 31

53,517

51,297

47,463

Total  account values

$49,484

$47,418

$43,949

Variable annuities

362

5,476

4,033

2005

2003

(1)

2004

427

6,338

3,879

Account values

(2)

:

4,665

Gross sales

(3)

3,514

Fixed annuities

262

Pre-tax adjusted operating income

(3)

(1)

Reflects American Skandia results from May 1, 2003 acquisition date

(2)

In millions; at end of period

(3)

In millions

Investor Day 12.07.05

54

Key elements of our annuity business strategy

Key elements of our annuity business strategy

•

•

Develop innovative products to meet growing

Develop innovative products to meet growing

retirement market needs

retirement market needs

•

•

Expand third-party distribution while supporting

Expand third-party distribution while supporting

proprietary channel

proprietary channel

•

•

Prudently manage risk

Prudently manage risk

•

•

Focus on expense management

Focus on expense management

Investor Day 12.07.05

55

Emphasis on variable annuities

Emphasis on variable annuities

Variable

Fixed

Gross Sales

Net Sales

Account values

(1)

More than 90% of gross product sales and account

values come from variable annuity products

$ 5,142

887

49,484

$ 334

169

4,033

Nine months ended September 30, 2005

($, millions)

(1)

At end of period

Investor Day 12.07.05

56

34

35

35

37

40

48

52

60

77

$95

Top 10 VA Company AUM: 3Q’05

Top 10 VA Company AUM: 3Q’05

(1) Advisor-sold market excludes group/retirement plan contracts; Source: VARDS

Prudential Annuities is ranked #5 in advisor-sold VA Assets Under

Management

(1)

#5

($, billions)

Hartford

MetLife

AXA

Lincoln

Prudential

Prudential

Nationwide

IDS

Hancock

ING

Pacific Life

Investor Day 12.07.05

57

Full suite of living and death benefit riders

Full suite of living and death benefit riders

Guaranteed Minimum Accumulation Benefit ( “GRO Plus”)

Guaranteed Minimum Withdrawal Benefit (GMWB)

Guaranteed Minimum Income Benefit (GMIB)

Lifetime Five

Guaranteed Minimum Accumulation Benefit ( “GRO Plus”)

Guaranteed Minimum Withdrawal Benefit (GMWB)

Guaranteed Minimum Income Benefit (GMIB)

Lifetime Five

Guaranteed Minimum Death Benefit –

step-up, roll-up options

Living Benefits

3Q05 Take Rate of 79%

3Q05 Take Rate of 79%

Investor Day 12.07.05

58

Lifetime Five

Lifetime Five

Combines lifetime income guaranty with flexibility and

control of principal

Guarantees withdrawals of 5% of protected value for life or

7% for 14 years

Protected value is greater of:

-

5% roll-up for 10 years or until first withdrawal

-

Highest anniversary value for 10 years or until first withdrawal

-

Value at first withdrawal

Charge: 60 basis points of account value

Combines lifetime income guaranty with flexibility and

control of principal

Guarantees withdrawals of 5% of protected value for life or

7% for 14 years

Protected value is greater of:

-

5% roll-up for 10 years or until first withdrawal

-

Highest anniversary value for 10 years or until first withdrawal

-

Value at first withdrawal

Charge: 60 basis points of account value

Investor Day 12.07.05

59

Variable annuity guarantees

Variable annuity guarantees

1.9

--

--

Lifetime Five

0.8

0.5

--

Withdrawal (GMWB)

4.0

4.4

5.6

GMDB amount at risk

2.9

2.4

1.1

Income (GMIB)

6.8

5.7

3.7

Accumulation (“GRO”)

Account values with living benefit

features:

$49.5

$47.4

$43.9

Total variable annuity account values

(1)

9/30/05

12/31/04

12/31/03

($, billions)

(1)

At end of period

Investor Day 12.07.05

60

Active management of product risks

Active management of product risks

Innovative product design minimizes product /

benefit risk while meeting customer needs

Strong governance structure –

continual

monitoring and oversight

Strategic risk retention

-

Retain risks we are best suited to carry

-

Actively hedge risks where appropriate

Innovative product design minimizes product /

benefit risk while meeting customer needs

Strong governance structure –

continual

monitoring and oversight

Strategic risk retention

-

Retain risks we are best suited to carry

-

Actively hedge risks where appropriate

Investor Day 12.07.05

61

Product / feature risk management by design

Product / feature risk management by design

Lifetime Five

Incentive to delay first withdrawal to maintain roll-up and step-up

benefits

Minimum purchase age is 45

Requires asset allocation program –

maximum equity allocation

is 80%

Guaranteed Minimum Income Benefit (GMIB)

“Special”

annuity rates and mortality table

Guaranteed Minimum Accumulation Benefit (“GRO Plus”)

Automatic allocations to fixed bucket (i.e., self hedging)

Lifetime Five

Incentive to delay first withdrawal to maintain roll-up and step-up

benefits

Minimum purchase age is 45

Requires asset allocation program –

maximum equity allocation

is 80%

Guaranteed Minimum Income Benefit (GMIB)

“Special”

annuity rates and mortality table

Guaranteed Minimum Accumulation Benefit (“GRO Plus”)

Automatic allocations to fixed bucket (i.e., self hedging)

Investor Day 12.07.05

62

Capital markets hedging reduces market

Capital markets hedging reduces market

exposure

exposure

Three Greek hedging program for Lifetime Five, GMWB

Weekly purchasing decisions on assets for new

business and rebalancing

Long-dated options and swaps used to better match

economic risk

Three Greek hedging program for Lifetime Five, GMWB

Weekly purchasing decisions on assets for new

business and rebalancing

Long-dated options and swaps used to better match

economic risk

Investor Day 12.07.05

63

6.3%

5.0%

4.2%

4.1%

4.4%

4.6%

4.5%

3.4%

3.4%

4.0%

6.9%

5.5%

5.0%

5.0%

4.6%

4.9%

5.0%

4.6%

2%

3%

4%

5%

6%

7%

Variable annuity market share

Variable annuity market share

Prudential variable annuity market share

(1)

(1)

According to VARDS; excludes group/retirement plan contracts; Prudential and American Skandia combined

for all periods

May ‘03 American

Skandia Acquisition

Mar ‘05 Lifetime Five

launch

Oct ‘04 Systems

conversion completed

Investor Day 12.07.05

64

Prudential ranks #7 in advisor-sold VA sales

Prudential ranks #7 in advisor-sold VA sales

(1)

(1)

1,936

Pac Life

6

2,079

Lincoln

5

1,237

Jackson

10

1,551

ING

9

1,837

IDS

8

1,925

1,925

Prudential

Prudential

7

7

2,232

Hancock

4

2,619

AXA

3

2,772

Hartford

2

$2,897

Met Life

1

3Q05 Sales

($, millions)

Company

3Q05

Rank

(1)

Advisor-sold market excludes group/retirement plan contracts; Source: VARDS

Investor Day 12.07.05

65

Prudential ranks #1 in independent channel advisor-

Prudential ranks #1 in independent channel advisor-

sold VA sales

sold VA sales

(1)

(1)

533

AIG

10

672

Lincoln

9

796

Allianz

8

853

Met Life

7

894

ING

6

894

Pac Life

5

959

Jackson

4

1,001

Hartford

3

1,228

Hancock

2

$ 1,297

$ 1,297

Prudential

Prudential

1

1

3Q05 Sales

($, millions)

Company

3Q05

Rank

(1)

According to VARDS

•Independent

channel

represents

38% of

advisor-sold

market

Investor Day 12.07.05

66

Distribution channel development offers growth

Distribution channel development offers growth

opportunity

opportunity

18%

18%

7%

7%

68%

68%

7%

VA Channel Sales Share:  3Q ’05

(1)

Prudential Annuities

(1) Source: VARDS

22%

22%

23%

23%

38%

38%

16%

1%

1%

Annuity Industry

Wirehouse    

Agency

Independent

Banks

Direct

Investor Day 12.07.05

67

Summary

Summary

Leading variable annuity market position

Attractive full product suite; innovative products driving

market share growth

Risk management integral to product design; hedging

where appropriate

Complementary distribution channels; #1 position for

independent financial planner sales

Developing distribution channels offers growth

opportunity

Leading variable annuity market position

Attractive full product suite; innovative products driving

market share growth

Risk management integral to product design; hedging

where appropriate

Complementary distribution channels; #1 position for

independent financial planner sales

Developing distribution channels offers growth

opportunity

Investor Day

Investor Day

December 7, 2005

December 7, 2005

International Division

International Division

Rodger Lawson

Vice Chairman

International Insurance and Investments Division

Rodger Lawson

Rodger Lawson

Vice Chairman

Vice Chairman

International Insurance and Investments Division

International Insurance and Investments Division

Investor Day 12.07.05

70

International Division financial performance

International Division financial performance

970

Nine Months     

Ended September 30

72

86

(10)

International Investments

391

402

370

Gibraltar Life

$ 579

$ 515

$ 449

International Insurance excluding Gibraltar Life

$ 1,042

$ 1,003

$ 809

2005

2004

2003

($, millions)

Pre-tax adjusted operating income:

Year Ended December 31

(1)

Based on annualized after-tax adjusted operating income

29% ROE

(1)

Investor Day 12.07.05

71

Key elements of our international strategy

Key elements of our international strategy

•

•

Focus on a limited number of attractive countries

Focus on a limited number of attractive countries

•

•

Emphasize distribution: recruiting, selection, needs-

Emphasize distribution: recruiting, selection, needs-

based selling

based selling

•

•

Focus on life insurance and investment management

Focus on life insurance and investment management

•

•

Ensure new products address consumer needs

Ensure new products address consumer needs

•

•

Pursue opportunistic acquisitions

Pursue opportunistic acquisitions

•

•

Maintain very strict business discipline

Maintain very strict business discipline

Investor Day 12.07.05

72

Life Planner model strategy and plans

Life Planner model strategy and plans

Disciplined implementation

Organic expansion in existing markets

Continued growth in Life Planners

Maintenance of Life Planner productivity

Maintenance of policy persistency levels

Very selective entry into new markets

Investor Day 12.07.05

73

Key drivers

Key drivers

(1)

(1)

72%

75%

84%

90%

7.2

POK

POJ

79%

24 -

month

87%

12 -

month

Life Planner Retention

89%

25 -

month

95%

13 -

month

Policy Persistency

(Face-amount)

7.2

Productivity

(# of policies / LP / month)

(1) For periods ended September 30, 2005 

Investor Day 12.07.05

74

Growth in the Life Planner business

Growth in the Life Planner business

(1)

Before-tax

-

1,000

2,000

3,000

4,000

5,000

6,000

1998

1999

2000

2001

2002

2003

2004

$-

$100

$200

$300

$400

$500

$600

Life Planners

Policies in force (000)

Adjusted operating income

(1)

Investor Day 12.07.05

75

Life Planner model

Life Planner model

•

Continued selective but expanded recruiting

•

Outstanding training and motivation

•

Evolving and growing target audience

•

Continued strict operational discipline

•

Expanding geographic presence

Investor Day 12.07.05

76

Expanding Life Planner reach -

Expanding Life Planner reach -

Japan

Japan

1994: 23 agencies

1999: 37 agencies

Sept 2005: 77 agencies

Mainly in Tokyo and

major cities

Expanded to local cities with

population of 300,000+

Expanded to local cities with

population of 200,000+

Investor Day 12.07.05

77

Expanding Life Planner reach -

Expanding Life Planner reach -

Korea

Korea

1995: 8

agencies

2000: 26

agencies

Sept 2005: 75

agencies

Seoul

Capital cities of

provincial governments

Nationwide cities with

population of 300,000+

Investor Day 12.07.05

78

Gibraltar Life -

Gibraltar Life -

summary

summary

Stable earnings and distribution system

Stable earnings and distribution system

High return on equity

High return on equity

Strong free cash flow

Strong free cash flow

Nine Months            

Ended September 30

40%

33%

23%

ROE

(3)

0.9

0.8

1.1

Equity

(2)

2005

2004

2003

$ 391

$ 402

$ 370

Adjusted operating income

(1)

Year Ended December 31

(1)

Before-tax; in millions

(2)

Average attributed equity for period; in billions

(3)

Based on after-tax adjusted operating income; annualized for the nine- month period

Investor Day 12.07.05

79

Gibraltar Life Advisors

Gibraltar Life Advisors

Average LA count

5,552

4,940

4,852

5,002

6,649

2001

2002

2003

2004

2005

(2)

(1)

From date of acquisition

(2)

Based on nine months ended September 30, 2005

(1)

Investor Day 12.07.05

80

Key drivers comparison –

Key drivers comparison –

Gibraltar

Gibraltar

(1)

(1)

79%

87%

89%

95%

7.2

POJ

33%

60%

86%

94%

3.6

Gibraltar

24 –

month

12 –

month

Life Planner / Life Advisor

Retention

25 –

month

13 –

month

Policy Persistency

(Face-amount)

Productivity

(# of policies / LP  or LA /  month)

Key drivers

(1) For periods ended September 30, 2005 

Investor Day 12.07.05

81

Acquisition strategy –

Acquisition strategy –

key elements

key elements

Transactions must be:

In target countries and attractive markets

Consistent with our business strategies

Structured to achieve our financial targets

with appropriate risk

Investor Day 12.07.05

82

Where we are today –

Where we are today –

summary

summary

•

Leadership position in Life Planning

•

Gibraltar generates high ROEs and cash flows

•

Profitability dominated by Japan and Korea

•

Attractive new products complement

distribution strength

•

Management depth, country expertise

•

Acquisitions potentially additive

Investor Day

Investor Day

December 7, 2005

December 7, 2005

International Insurance Finance

International Insurance Finance

John Hanrahan

Chief Financial Officer, International Insurance

John Hanrahan

John Hanrahan

Chief Financial Officer, International Insurance

Chief Financial Officer, International Insurance

Investor Day 12.07.05

85

Sources of financial performance

Sources of financial performance

•

Sales, persistency, growth of business in-force

•

Emphasis on protection products

•

Investment portfolio strategies

•

US Dollar products

Investor Day 12.07.05

86

Sources of total profitability 2004

Sources of total profitability 2004

(1)

(1)

(40)

---

Surrenders

402

24

115

$303

Gibraltar

Life

515

TOTAL

281

Expenses

(114)

Interest

$348

Mortality

Life Planner

Business

(1) Estimated

breakdown

of

before-tax

adjusted

operating

income

for

the

twelve

months

ended

December

31,

2004

($, millions)

Investor Day 12.07.05

87

Impact from investment yield -

Impact from investment yield -

POJ

POJ

(0.1%)

(1.2%)

(1.6%)

Negative Spread

$ 15,026

$ 7,952

$ 6,836

Average Invested Assets

(1)

(2)

($ 119)

2003

($ 14)

YTD’05

(3)

($ 99)

Negative Spread

(1)

2004

(1)

In millions; translated at constant 2005 rate

(2)

Invested Assets for 2004 does not include Aoba assets

(3)

For the nine months ended September 30, 2005 

Investor Day 12.07.05

88

POJ business mix

POJ business mix

(1) Aoba business in-force of  ¥

940 billion not included 

Term & Riders

Term & Riders

Whole

Whole

Life

Life

Savings

Savings

US$

US$

Products

Products

In-force Face Amount

as of September 30, 2005

(1)

New Business Face Amount

nine months ended September 30,  2005

10%

10%

61%

61%

27%

27%

61%

61%

29%

29%

3%

3%

7%

7%

2%

2%

Investor Day 12.07.05

89

POJ sources of product profitability

POJ sources of product profitability

0%

5%

10%

15%

20%

25%

30%

Term / Riders

US$ Products

Other Yen Products

27%

27%

14%

14%

9%

9%

Estimated New Business Pre-tax Profit Margin YTD’05

(1)

Mortality & Expense Margin

Interest Margin

(1) Nine months ended September 30, 2005

Investor Day 12.07.05

90

Gibraltar Life business mix

Gibraltar Life business mix

Term & Riders

Term & Riders

Whole Life

Whole Life

Savings

Savings

US$ Fixed Annuity

US$ Fixed Annuity

In-force Annualized Premiums

as of September 30, 2005

(1)

Annualized New Business Premiums

nine months ended September 30, 2005

(2)

(1)

Does not include single premiums 

(2)

Includes single premium sales at 10% 

33%

33%

36%

36%

19%

19%

12%

12%

25%

25%

59%

59%

16%

16%

Investor Day 12.07.05

91

Foreign exchange hedge impact

Foreign exchange hedge impact

•

Yen income hedging plan on 12 quarter rolling basis

•

A strengthening Yen helps earnings

•

Yen forward rates show that Yen is expected to

strengthen against the dollar

•

Hedging delays impact on earnings, but does not

eliminate it

•

2006 Yen income hedged at a rate of 103 Yen / dollar

Investor Day 12.07.05

92

Summary

Summary

Expanding distribution and focus on key drivers are

critical to our success

Emphasis on protection products is key to our business

model

Mortality and expense gains parallel growth of the

business

Interest spread improving in Japan as investment strategy

contributed to results

Expanding distribution and focus on key drivers are

critical to our success

Emphasis on protection products is key to our business

model

Mortality and expense gains parallel growth of the

business

Interest spread improving in Japan as investment strategy

contributed to results

Investor Day

Investor Day

December 7, 2005

December 7, 2005

Financial Outlook

Financial Outlook

Rich Carbone

Chief Financial Officer

Rich Carbone

Rich Carbone

Chief Financial Officer

Chief Financial Officer

Investor Day 12.07.05

95

Considerations for 2006

Considerations for 2006

•

•

Business Growth

Business Growth

•

•

US Dollar @ 103 Yen

US Dollar @ 103 Yen

•

•

Lower Pension Credit

Lower Pension Credit

•

•

8% Market Appreciation

8% Market Appreciation

•

•

29% Effective Tax Rate

29% Effective Tax Rate

•

•

Capital Management

Capital Management

•

•

Baseline 2005 Earnings

Baseline 2005 Earnings

Investor Day 12.07.05

96

FSB full year 2006 earnings guidance

FSB full year 2006 earnings guidance

(1)

(1)

2005 Guidance

(1)

$4.85 -

$4.95

Non Recurring/

Non Recurring/

Unsustainable

Unsustainable

2005 Items

2005 Items

Baseline

Baseline

Earnings Level

Earnings Level

$4.60 -

$4.70

Reduced Pension

Reduced Pension

Credit

Credit

Share

Share

Repurchases

Repurchases

Lower Tax Rate

Lower Tax Rate

2006 Guidance

(2)

:

(1)

Based on after- tax adjusted operating income for the Financial Services Businesses

(2)

2006 guidance to be provided at Investor Day meeting

Growth / Expense

Management

Yen = 103

Yen = 103

vs. 110

vs. 110

Lower PSI Retained

Lower PSI Retained

Obligations

Obligations

Investor Day

Investor Day

December 7, 2005

December 7, 2005