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

1

Investor Day 12.04.07

Prudential Financial, Inc.

Investor Day

December 4, 2007

Prudential Financial, Inc.

Investor Day

December 4, 2007

Exhibit 99.1

2

Investor Day

December 4, 2007

Investor Day

December 4, 2007

Eric Durant

Senior Vice President

Investor Relations

Eric Durant

Senior Vice President

Investor Relations

3

Investor Day 12.04.07

Forward-Looking Statements

Certain

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.

It

is

possible

that

actual

results

may

differ

materially

from

any

expectations

or

predictions

expressed

in

this

presentation.

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

and

beliefs

concerning

future

developments

and

their

potential

effects

upon

Prudential

Financial,

Inc.

and

its

subsidiaries.

There

can

be

no

assurance

that

future

developments

affecting

Prudential

Financial,

Inc.

and

its

subsidiaries

will

be

those

anticipated

by

management.

These

forward-looking

statements

are

not

a

guarantee

of

future

performance

and

involve

risks

and

uncertainties,

and

there

are

certain

important

factors

that

could

cause

actual

results

to

differ,

possibly

materially,

from

expectations

or

estimates

reflected

in

such

forward-looking

statements,

including,

among

others:

(1)

general

economic,

market

and

political

conditions,

including

the

performance

and

fluctuations

of

stock,

real

estate,

and

other

financial

markets;

(2)

interest

rate

fluctuations;

(3)

reestimates

of

our

reserves

for

future

policy

benefits

and

claims;

(4)

differences

between

actual

experience

regarding

mortality,

morbidity,

persistency,

surrender

experience,

interest

rates

or

market

returns

and

the

assumptions

we

use

in

pricing

our

products,

establishing

liabilities

and

reserves

or

for

other

purposes;

(5)

changes

in

our

assumptions

related

to

deferred

policy

acquisition

costs,

valuation

of

business

acquired

or

goodwill;

(6)

changes

in

our

claims-paying

or

credit

ratings;

(7)

investment

losses

and

defaults;

(8)

competition

in

our

product

lines

and

for

personnel;

(9)

changes

in

tax

law;

(10)

economic,

political,

currency

and

other

risks

relating

to

our

international

operations;

(11)

fluctuations

in

foreign

currency

exchange

rates

and

foreign

securities

markets;

(12)

regulatory

or

legislative

changes;

(13)

adverse

determinations

in

litigation

or

regulatory

matters

and

our

exposure

to

contingent

liabilities,

including

in

connection

with

our

divestiture

or

winding

down

of

businesses;

(14)

domestic

or

international

military

actions,

natural

or

man-made

disasters

including

terrorist

activities

or

pandemic

disease,

or

other

events

resulting

in

catastrophic

loss

of

life;

(15)

ineffectiveness

of

risk

management

policies

and

procedures

in

identifying,

monitoring

and

managing

risks;

(16)

effects

of

acquisitions,

divestitures

and

restructurings,

including

possible

difficulties

in

integrating

and

realizing

the

projected

results

of

acquisitions;

(17)

changes

in

statutory

or

U.S.

GAAP

accounting

principles,

practices or policies; (18)

changes in assumptions for retirement expense; (19)

Prudential Financial, Inc.’s primary reliance, as a holding

company,

on

dividends

or

distributions

from

its

subsidiaries

to

meet

debt

payment

obligations

and

continue

share

repurchases,

and

the

applicable

regulatory

restrictions

on

the

ability

of

the

subsidiaries

to

pay

such

dividends

or

distributions;

and

(20)

risks

due

to

the

lack

of

legal

separation

between

our

Financial

Services

Businesses

and

our

Closed

Block

Business.

Prudential

Financial,

Inc.

does

not

intend,

and

is

under

no

obligation,

to

update

any

particular

forward-looking

statement

included

in

this

presentation.

_______________________________________________________________________________

Prudential

Financial,

Inc.

of

the

United

States

is

not

affiliated

with

Prudential

PLC

which

is

headquartered

in

the

United

Kingdom.

4

Investor Day 12.04.07

Non–GAAP Measure

Adjusted

operating

income

is

a

non-GAAP

measure

of

performance

of

our

Financial

Services

Businesses.

Adjusted

operating

income

excludes

"Realized

investment

gains

(losses),

net,"

as

adjusted,

and

related

charges

and

adjustments.

A

significant

element

of

realized

investment

gains

and

losses

are

impairments

and

credit-related

and

interest

rate-related

gains

and

losses.

Impairments

and

losses

from

sales

of

credit-impaired

securities,

the

timing

of

which

depends

largely

on

market

credit

cycles,

can

vary

considerably

across

periods.

The

timing

of

other

sales

that

would

result

in

gains

or

losses,

such

as

interest

rate-related

gains

or

losses,

is

largely

subject

to

our

discretion

and

influenced

by

market

opportunities

as

well

as

our

tax

profile.

Realized

investment

gains

(losses)

representing

profit

or

loss

of

certain

of

our

businesses

which

primarily

originate

investments

for

sale

or

syndication

to

unrelated

investors,

and

those

associated

with

terminating

hedges

of

foreign

currency

earnings

and

current

period

yield

adjustments

are

included

in

adjusted

operating

income.

Realized

investment

gains

and

losses

from

products

that

are

free

standing

derivatives

or

contain

embedded

derivatives,

and

from

associated

derivative

portfolios

that

are

part

of

an

economic

hedging

program

related

to

the

risk

of

those

products,

are

included

in

adjusted

operating

income.

Adjusted

operating

income

also

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

accrue

to

contractholders.

Trends

in

the

underlying

profitability

of

our

businesses

can

be

more

clearly

identified

without

the

fluctuating

effects

of

these

transactions.

In

addition,

adjusted

operating

income

excludes

the

results

of

divested

businesses,

which

are

not

relevant

to

our

ongoing

operations.

Discontinued

operations,

which

is

presented

as

a

separate

component

of

net

income

under

GAAP,

is

also

excluded

from

adjusted

operating

income.

We

believe

that

the

presentation

of

adjusted

operating

income

as

we

measure

it

for

management

purposes

enhances

understanding

of

the

results

of

operations

of

the

Financial

Services

Businesses

by

highlighting

the

results

from

ongoing

operations

and

the

underlying

profitability

of

our

businesses.

However,

adjusted

operating

income

is

not

a

substitute

for

income

determined

in

accordance

with

GAAP,

and

the

excluded

items

are

important

to

an

understanding

of

our

overall

results

of

operations.

The

schedules

on

the

following

three

pages

provide

a

reconciliation

of

adjusted

operating

income

for

the

Financial

Services

Businesses

to

income

from

continuing

operations

in

accordance

with

GAAP.

Return

on

equity

(“ROE”)

based

on

adjusted

operating

income

is

determined

by

dividing

adjusted

operating

income

after-tax

(giving

effect

to

the

direct

equity

adjustment

for

earnings

per

share

calculation),

annualized

for

interim

periods,

by

average

attributed

equity

for

the

Financial

Services

Businesses

excluding

accumulated

other

comprehensive

income

related

to

unrealized

gains

and

losses

on

investments

for

all

periods

and

accumulated

other

comprehensive

income

related

to

pension

and

postretirement

benefits

for

periods

including

and

after

2004.

An

alternative

measure

to

ROE

based

on

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

income

from

continuing

operations

after-tax

as

determined

in

accordance

with

GAAP

(giving

effect

to

the

direct

equity

adjustment

for

earnings

per

share

calculation),

annualized

for

interim

periods,

divided

by

average

total

attributed

equity

for

the

Financial

Services

Businesses.

Return

on

average

equity

based

on

income

from

continuing

operations

is

16.82%

and

14.04%

for

the

nine

months

ended

September

30,

2007

and

2006,

respectively,

and

14.67%,

15.48%,

9.23%,

5.38%

and

3.79%

for

the

years

ended

December

31,

2006,

2005,

2004,

2003

and

2002,

respectively.

Our

expectations

of

Common

Stock

earnings

per

share

and

return

on

equity

are

based

on

after-tax

adjusted

operating

income.

Because

we

do

not

predict

future

realized

investment

gains

/

losses

or

recorded

changes

in

asset

and

liability

values

that

will

ultimately

accrue

to

contractholders,

we

cannot

provide

a

measure

of

our

Common

Stock

earnings

per

share

or

return

on

equity

expectations

based

on

income

from

continuing

operations

of

the

Financial

Services

Businesses,

which

is

the

GAAP

measure

most

comparable

to

adjusted

operating

income.

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,

2006,

our

Quarterly

Report

on

Form

10-Q

for

the

quarter

ended

September

30,

2007

and

our

Current

Report

on

Form

8-K

dated

October

4,

2007

on

the

Investor

Relations

Web

site

at

www.investor.prudential.com.

Additional

historical

information

relating

to

the

Company’s

financial

performance,

including

its

third

quarter

2007

Quarterly

Financial

Supplement,

is

also

located

on

the

Investor

Relations

website.

The

information

referred

to

above

and

on

the

prior

page,

as

well

as

the

risks

of

our

businesses

described

in

our

Annual

Report

on

Form

10-K

for

the

year

ended

December

31,

2006,

and

our

Quarterly

Report

on

Form

10-Q

for

the

quarter

ended

September

30,

2007,

should

be

considered

by

readers

when

reviewing

forward-looking

statements

contained

in

this

presentation.

5

Investor Day 12.04.07

Reconciliation between adjusted operating income

and the comparable GAAP measure

Reconciliation between adjusted operating income

and the comparable GAAP measure

Prudential Financial, Inc.

(in millions, except per share data)

2002

2003

2004

2005

2006

Financial Services Businesses:

Pre-tax adjusted operating income by division:

Insurance Division

545

$      

788

$      

991

$      

1,227

$   

1,359

$   

Investment Division

238

287

351

707

1,129

International Insurance and Investments Division

757

803

994

1,416

1,566

Corporate and other operations

133

75

161

188

47

Total pre-tax adjusted operating income

1,673

1,953

2,497

3,538

4,101

Income taxes, applicable to adjusted operating income

559

638

673

1,115

1,174

Financial Services Businesses after-tax adjusted operating income

1,114

1,315

1,824

2,423

2,927

Reconciling items:

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

(856)

(204)

4

561

90

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

-

-

(55)

(33)

35

Change in experience-rated contractholder

liabilities due to asset value changes

-

-

1

(44)

11

Sales practices remedies and costs

(20)

-

-

-

-

Divested businesses

(10)

(171)

(24)

(16)

76

Equity in earnings of operating joint ventures

(7)

(71)

(72)

(214)

(322)

Total reconciling items, before income taxes

(893)

(446)

(146)

254

(110)

Income taxes, not applicable to adjusted operating income

(497)

(148)

(75)

(473)

(48)

Total reconciling items, after income taxes

(396)

(298)

(71)

727

(62)

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

before equity in earnings of operating joint ventures, extraordinary gain on acquisition

and cumulative effect of accounting change

718

1,017

1,753

3,150

2,865

Equity in earnings of operating joint ventures, net of taxes

5

45

55

142

208

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

before extraordinary gain on acquisition and cumulative effect of accounting change

723

1,062

1,808

3,292

3,073

Income (loss) from discontinued operations, net of taxes

(44)

(37)

(76)

(73)

71

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

$   

3,219

$   

3,144

$   

Earnings per share of Common Stock (diluted):

Financial Services Businesses after-tax adjusted operating income

2.00

$     

2.51

$     

3.59

$     

4.81

$     

6.06

$     

Reconciling items:

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

(1.48)

(0.37)

0.01

1.08

0.18

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

-

-

(0.10)

(0.06)

0.07

Change in experience-rated contractholder

liabilities due to asset value changes

-

-

-

(0.08)

0.02

Sales practices remedies and costs

(0.03)

-

-

-

-

Divested businesses

(0.02)

(0.31)

(0.05)

(0.03)

0.15

Equity in earnings of operating joint ventures

(0.01)

(0.13)

(0.13)

(0.42)

(0.64)

Total reconciling items, before income taxes

(1.54)

(0.81)

(0.27)

0.49

(0.22)

Income taxes, not applicable to adjusted operating income

(0.86)

(0.26)

(0.14)

(0.91)

(0.10)

Total reconciling items, after income taxes

(0.68)

(0.55)

(0.13)

1.40

(0.12)

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

before equity in earnings of operating joint ventures, extraordinary gain on acquisition

and cumulative effect of accounting change

1.32

1.96

3.46

6.21

5.94

Equity in earnings of operating joint ventures, net of taxes

0.01

0.09

0.10

0.27

0.42

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

before extraordinary gain on acquisition and cumulative effect of accounting change

1.33

2.05

3.56

6.48

6.36

Income (loss) from discontinued operations, net of taxes

(0.08)

(0.07)

(0.14)

(0.14)

0.14

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

$     

6.34

$     

6.50

$     

Weighted average number of outstanding Common shares (diluted basis)

578.0

548.4

531.2

520.9

494.0

Reconciliation to Consolidated Net Income of Prudential Financial, Inc:

Net income of Financial Services Businesses (above)

679

$      

1,025

$   

1,674

$   

3,219

$   

3,144

$   

Net income (loss) of Closed Block Business

(485)

239

582

321

284

Consolidated net income

194

$      

1,264

$   

2,256

$   

3,540

$   

3,428

$   

Direct equity adjustments for earnings per share calculations

43

$        

60

$        

84

$        

82

$        

68

$        

Year ended December 31,

6

Investor Day 12.04.07

Reconciliation between adjusted operating income

and the comparable GAAP measure (continued)

Reconciliation between adjusted operating income

and the comparable GAAP measure (continued)

Prudential Financial, Inc.

(in millions, except per share data)

Sept 30, 2006

Sept 30, 2007

Financial Services Businesses:

Pre-tax adjusted operating income by division:

Insurance Division

1,010

$        

1,255

$        

Investment Division

768

1,086

International Insurance and Investments Division

1,168

1,410

Corporate and other operations

60

(4)

Total pre-tax adjusted operating income

3,006

3,747

Income taxes, applicable to adjusted operating income

861

1,104

Financial Services Businesses after-tax adjusted operating income

2,145

2,643

Reconciling items:

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

(40)

63

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

(8)

10

Change in experience-rated contractholder

liabilities due to asset value changes

28

4

Sales practices remedies and costs

-

-

Divested businesses

58

29

Equity in earnings of operating joint ventures

(223)

(323)

Total reconciling items, before income taxes

(185)

(217)

Income taxes, not applicable to adjusted operating income

(91)

(90)

Total reconciling items, after income taxes

(94)

(127)

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

before equity in earnings of operating joint ventures, extraordinary gain on acquisition

and cumulative effect of accounting change

2,051

2,516

Equity in earnings of operating joint ventures, net of taxes

146

200

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

before extraordinary gain on acquisition and cumulative effect of accounting change

2,197

2,716

Income (loss) from discontinued operations, net of taxes

54

4

Extraordinary gain on acquisition, net of taxes

-

-

Cumulative effect of accounting change, net of taxes

-

-

Net income of Financial Services Businesses

2,251

$        

2,720

$        

Earnings per share of Common Stock (diluted):

Financial Services Businesses after-tax adjusted operating income

4.41

$          

5.69

$          

Reconciling items:

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

(0.08)

0.13

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

(0.02)

0.02

Change in experience-rated contractholder

liabilities due to asset value changes

0.06

0.01

Sales practices remedies and costs

-

-

Divested businesses

0.12

0.06

Equity in earnings of operating joint ventures

(0.45)

(0.68)

Total reconciling items, before income taxes

(0.37)

(0.46)

Income taxes, not applicable to adjusted operating income

(0.18)

(0.19)

Total reconciling items, after income taxes

(0.19)

(0.27)

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

before equity in earnings of operating joint ventures, extraordinary gain on acquisition

and cumulative effect of accounting change

4.22

5.42

Equity in earnings of operating joint ventures, net of taxes

0.29

0.43

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

before extraordinary gain on acquisition and cumulative effect of accounting change

4.51

5.85

Income (loss) from discontinued operations, net of taxes

0.11

0.01

Extraordinary gain on acquisition, net of taxes

-

-

Cumulative effect of accounting change, net of taxes

-

-

Net income of Financial Services Businesses

4.62

$          

5.86

$          

Weighted average number of outstanding Common shares (diluted basis)

497.8

471.6

Reconciliation to Consolidated Net Income of Prudential Financial, Inc:

Net income of Financial Services Businesses (above)

2,251

$        

2,720

$        

Net income (loss) of Closed Block Business

140

113

Consolidated net income

2,391

$        

2,833

$        

Direct equity adjustments for earnings per share calculations

51

$             

42

$             

Nine months ended

7

Investor Day 12.04.07

Reconciliation between adjusted operating income

and the comparable GAAP measure (continued)

Reconciliation between adjusted operating income

and the comparable GAAP measure (continued)

Prudential Financial, Inc.

COMBINED STATEMENTS OF OPERATIONS -

FINANCIAL SERVICES BUSINESSES

(in millions)

2002

2003

2004

2005

2006

Sept 30, 2006

Sept 30, 2007

Revenues (1):

Premiums

7,195

$   

7,848

$   

8,736

$   

10,128

$ 

10,287

$ 

7,694

$         

8,077

$         

Policy charges and fee income

1,815

1,978

2,385

2,529

2,649

1,912

2,294

Net investment income

5,017

4,913

5,771

6,861

7,657

5,647

6,240

Asset management fees, commissions and other income

3,618

2,971

2,783

3,358

3,969

2,831

3,406

Total revenues

17,645

17,710

19,675

22,876

24,562

18,084

20,017

Benefits and Expenses (1):

Insurance and annuity benefits

7,662

8,158

8,897

9,990

10,423

7,818

8,104

Interest credited to policyholders' account balances

1,730

1,718

2,220

2,516

2,790

2,045

2,286

Interest expense

195

200

334

615

949

694

831

Deferral of acquisition costs

(1,064)

(1,270)

(1,528)

(1,801)

(2,037)

(1,492)

(1,649)

Amortization of acquisition costs

739

533

766

910

670

431

643

General and administrative expenses

6,710

6,418

6,489

7,108

7,666

5,582

6,055

Total benefits and expenses

15,972

15,757

17,178

19,338

20,461

15,078

16,270

Adjusted operating income before income taxes

1,673

1,953

2,497

3,538

4,101

3,006

3,747

Reconciling items:

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

(862)

(161)

62

669

73

(70)

80

Related charges

6

(43)

(58)

(108)

17

30

(17)

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

(856)

(204)

4

561

90

(40)

63

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

-

-

(55)

(33)

35

(8)

10

Change in experience-rated contractholder

liabilities due to asset value changes

-

-

1

(44)

11

28

4

Sales practices remedies and costs

(20)

-

-

-

-

-

-

Divested businesses

(10)

(171)

(24)

(16)

76

58

29

Equity in earnings of operating joint ventures

(7)

(71)

(72)

(214)

(322)

(223)

(323)

Total reconciling items, before income taxes

(893)

(446)

(146)

254

(110)

(185)

(217)

Income from continuing operations before income taxes, equity inearnings of operating

joint ventures, extraordinary gain on acquisition and cumulative effect of accounting change

780

1,507

2,351

3,792

3,991

2,821

3,530

Income tax expense

62

490

598

642

1,126

770

1,014

Income from continuing operations before equity in earnings of operating joint ventures,

extraordinary gain on acquisition and cumulative effect of accounting change

718

$      

1,017

$   

1,753

$   

3,150

$   

2,865

$   

2,051

$         

2,516

$         

(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, and include revenues representing equity in earnings of operating joint ventures.  Benefits and expenses exclude charges related to

realized investment gains, net of losses; change 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,

Nine months ended

8

Prudential Financial, Inc.

Prudential Financial, Inc.

Art Ryan

CEO and Chairman

Art Ryan

CEO and Chairman

9

Investor Day 12.04.07

Where We Are Today

•

Balanced portfolio of businesses and risks

•

High ROE combined with strong capital position and

cash flow generation

•

Growth engines in international insurance and

domestic retirement and savings

•

Asset management capabilities complement product

manufacturing and generate strong earnings

•

Diversified distribution channels

•

Acquisition and integration track record

10

Investor Day 12.04.07

ROE Progress

(1)

16.5%

7.5%

14.3%

12.3%

10.1%

6.1%

0.0%

5.0%

10.0%

15.0%

20.0%

2002

2003

2004

2005

2006

YTDSept07

1)

For

the Financial Services Businesses (FSB); based on after-tax adjusted operating income and on attributed equity

excluding accumulated other comprehensive income related to unrealized gains and losses on investments for all periods

and accumulated other comprehensive income related to pension and postretirement benefits for periods including and after

2004; YTD September 2007 on an annualized basis.

11

Investor Day 12.04.07

$2.51

$3.59

$4.81

$6.06

$2.00

2002

2003

2004

2005

2006

Earnings Per Share Growth

(1)

1)

Based on after-tax adjusted operating income of the FSB

12

Investor Day 12.04.07

83% of Equity is Attributed to

Operating Businesses

1)

As of September 30, 2007 for the FSB; excludes accumulated other comprehensive income related to

unrealized gains and losses on investments and pension/postretirement benefits

Total

Total

attributed

attributed

equity

equity

of

of

$22.2

$22.2

billion

billion

(1)

17%

83%

Operating Businesses

Corporate & Other

13

Investor Day 12.04.07

$3.7

$4.9

$6.4

$3.6

Attributed Equity of Operating Businesses

INTERNATIONAL INSURANCE

RETIREMENT & SAVINGS

DOMESTIC INSURANCE

Attributed

Attributed

equity

equity

$18.6

$18.6

billion

billion

(1)

•

Life Planner model

•

Gibraltar Life

•

Retirement

•

Individual Annuities

•

Individual Life

•

Group Insurance

INVESTMENT BUSINESSES

•

Financial Advisory

•

Asset Management

•

International Investments

1)

As of September 30, 2007 for the FSB; excludes accumulated other comprehensive income related to

unrealized gains and losses on investments and pension/postretirement benefits

14

Investor Day 12.04.07

32%

25%

19%

24%

Complementary and Diversified Businesses

DOMESTIC INSURANCE

Individual

Life

Group

Insurance

Adjusted

Adjusted

operating

operating

income

income

$3.747

$3.747

billion

billion

(1)

(1)

)

1)

Before-tax; for the FSB; for the nine months ended September 30, 2007

RETIREMENT

& SAVINGS

Retirement

Individual

Annuities

INVESTMENT BUSINESSES

& CORPORATE

Financial

Advisory

Asset

Management

International

Investments

Corporate

&

Other

INTERNATIONAL

INSURANCE

Life

Planner

model

Gibraltar

Life

15

International Division

International Division

Mark Grier

Vice Chairman

Prudential Financial, Inc.

Mark Grier

Vice Chairman

Prudential Financial, Inc.

16

Investor Day 12.04.07

International Developments

•

•

Market Needs

•

Distribution

•

Regulation

17

Investor Day 12.04.07

Japanese

Life Planner

Operations

International Division

Organizational Structure

International

Division

Finance

Investment

Management

Operations

and

Technology

Human

Resources

Gibraltar

Life

Insurance

Operations

Outside Japan

International

Investments

Businesses

18

Investor Day 12.04.07

International Division Today

India

Mexico

Poland

Germany

Brazil

Argentina

China

Taiwan

Korea

Italy

Life Planning

Insurance

Japan

International

Investments

Traditional

Insurance

19

Investor Day 12.04.07

Key Elements of Our International Strategy

•

Concentrate on a limited number of attractive

countries

•

Emphasize proprietary distribution: recruiting,

selection, needs-based selling

•

Target the affluent and mass affluent consumer

•

Focus on both life insurance and asset management

•

Grow both organically and through

opportunistic acquisitions

20

Investor Day 12.04.07

Our Division Goals

•

Sustainable low to mid-teen AOI growth

•

Sustainable 20% ROE’s

•

Strong free cash flow

•

Complementary group of International businesses

with short-term and long-term growth potential

21

Investor Day 12.04.07

Where We Are Today

•

Leadership positions in life planning

•

Gibraltar generates high ROE’s and cash flows

•

Developing asset management platforms

•

Profitability dominated by Japan and Korea

•

Acquisitions potentially additive

•

Expect to achieve our financial goals

22

Investor Day 12.04.07

Japan

Room for Growth in a Leading Market

•

Japan is world’s second largest life insurance

market with a 16.4% world share

(1)

•

88% of households have life insurance

(2)

•

Industry’s insurance in-force has

been declining

•

Prudential’s market share is

4.1% and has been

increasing

(3)

1)

World Insurance in 2006, SGMA, Swiss RE

2)

As of April-June 2006, according to Japanese Institute of Life Insurance

3)

Based on face amount in-force as of March 31, 2007, according to Statistics of Life Insurance Business

in Japan 2006

23

Investor Day 12.04.07

Competitive Advantage

Life Planning Insurance

•

Variable compensation structure

•

Rewards productivity and persistency

•

Identify protection needs before

discussing products

•

Protection life insurance purchased as

a solution to identified need

•

Life Planner profile similar to

customer profile

•

Life Planner maintains contact with client,

as trusted professional

Compensation structure

•

Aligns customer/agent/company interest

Needs-based selling

•

Financial planning approach

•

Emphasis on protection products

Life Planners

•

Very selective recruiting

•

Highly trained career professionals

24

Investor Day 12.04.07

17%

16%

16%

51%

Yen-based

protection

products

(2)

Yen-based

savings and retirement

income products

(3)

U.S. Dollar-based

products

(4)

Prudential of Japan

In Force Annualized Premium

as

of

September

30,

2007

(1)

1)

Includes single premium business at 10%

2)

Primarily whole life and term

3)

Primarily endowment

4)

Whole life and retirement income

5)

Cancer, medical, accident and sickness; primarily riders

Third

Sector

(5)

Life Planner Business

Emphasis on Protection Products

25

Investor Day 12.04.07

1997

1999

2000

2001

2002

2003

1,603

1,908

2,332

2,813

3,416

4,026

4,432

2004

2005

4,910

2006

5,316

Korea

Taiwan

Japan

All other countries

1)

At end of period

1998

1996

5,627

5,828

Life Planners

(1)

3Q2007

6,038

26

Investor Day 12.04.07

Growth in the Life Planner Business

1)

Before-tax, GAAP exchange rate basis

Units

Life Planners

Policies in force (000)

Adjusted operating income

(1)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1998

1999

2000

2001

2002

2003

2004

2005

2006

$-

$200

$400

$600

$800

$1,000

27

Investor Day 12.04.07

Gibraltar Life:  “Prudentialized”

Traditional

Model Japanese Life Insurance Company

•

Variable agent compensation

•

Life Planner training principles adapted to traditional

field force

•

Emphasize protection products

•

Introduce products targeted to customer base

•

Maintain and cultivate strong affinity group

relationships

•

Develop third party distribution for selected

products

28

Investor Day 12.04.07

Gibraltar Life:  Retirement Market Products

Complement Core Protection Portfolio

60%

1%

8%

31%

8%

1%

76%

15%

Yen-based

protection

products

(2)

In-force Annualized Premium

as of September 30, 2007

(1)

New Business Annualized Premium

nine months ended September 30, 2007

(1)

Yen-based

savings and retirement

income

products

(3)

U.S. dollar-based

life insurance

1)

Includes single premium business at 10%

2)

Primarily whole life and term

3)

Primarily endowment

U.S. dollar

fixed annuities

29

Investor Day 12.04.07

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Gibraltar Life –

Growing Distribution,

Maintaining High Persistency

90%

94%

13 Month Persistency Ratio

Number of Life

Advisors

30

Investor Day 12.04.07

Market Developments

Drive Growth Opportunities

•

Lifetime relationships with clients support sales through life cycle

•

Gibraltar’s association relationships: strong market access

•

U.S. dollar retirement income and fixed annuity products offer

attractive value proposition, favorable returns for Prudential

•

Growing demand for

retirement products with

aging customer bases

•

Emphasis on protection insurance targeted to income

replacement: higher income means greater need

•

Japan enjoys longest post-

World War II economic

recovery (since 2002)

•

Selected Gibraltar products adaptable for postal distribution

•

Needs-based selling continues as competitive advantage for

protection products

•

Privatization of

Japanese “Kampo”

postal life insurance

•

Formed major bank relationships; commenced bank distribution

of selected products

•

Transferred approximately 70 Life Planners to Gibraltar, to

contribute

to

bank

channel

expansion

(1)

•

Japan regulation changes

support bancassurance

sales growth;

alliances emerging

Prudential Positioning

Development

Emerging/Developing Markets Complement Long Term Prospects

1)

Through September 30, 2007

31

International Division

International Division

John Hanrahan

Chief Financial Officer

International Insurance and Investments

John Hanrahan

Chief Financial Officer

International Insurance and Investments

32

Investor Day 12.04.07

Prudential International Insurance

Sustainable Financial Performance

•

High ROE products generate substantial

excess capital

•

Capital management opportunities enhance

overall returns

•

Duration lengthening supported by long-term

nature of liabilities contributes to returns

•

U.S. dollar investing: natural hedge for

Prudential, enhanced portfolio returns

•

Strong persistency drives revenue growth

•

Margins earned throughout in-force period

•

Business growth increases scale benefits

•

Favorable mortality margins drive strong

returns

Investment Portfolio Strategies

Capital Management

Needs-Based Selling

Emphasis on Protection Products

33

Investor Day 12.04.07

93%

93%

93%

93%

93%

93%

93%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2001

2002

2003

2004

2005

2006

3Q2007

0%

20%

40%

60%

80%

100%

# of Life Planners

13 Month Persistency

Disciplined Life Planner Growth

Continued Strong Persistency

Number of

Number of

Life Planners

Life Planners

13 Month

Persistency Ratio

34

Investor Day 12.04.07

Life Planner Business

Established Sales Force and Excellent

Persistency Drive Baseline Growth

Illustration assuming current policy persistency and Life Planner productivity, and

No Life Planner count increase

5% annual Life Planner count increase

10% annual Life Planner count increase

(Not a forecast)

Years

4,000

5,000

6,000

7,000

8,000

9,000

0

1

2

3

4

5

Revenues

($ millions)

35

Investor Day 12.04.07

Prudential International Insurance

Capital Management Opportunities

•

Inter-company reinsurance arrangements

•

Inter-company loans

•

Dividends

•

Gibraltar subordinated debt repayment

•

Acquisition and expansion funding

•

Purchase of parent company debt

36

Investor Day 12.04.07

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Prudential International Insurance

Capital Redeployment

$-

$500

$1,000

$1,500

2002

2003

2004

2005

2006

$millions

Cumulative 2002 –

9/30/07

504

419

551

273

669

541

897

151

1,016

414

4,478

2,760

After-Tax Adjusted Operating Income

Capital Redeployment

37

Investor Day 12.04.07

International Division Financial Performance

1)

Based on annualized after-tax adjusted operating income

$ 736

$  930

$   808

Life Planner businesses

$ 1,410

$1,566

$1,416

International Division

219

143

106

International Investments

1,191

455

Nine months

ended

September

30, 2007

$1,423

493

2006

2005

($millions)

$1,310

International Insurance

502

Gibraltar Life

Adjusted operating income

before tax:

Year ended

December 31,

23.2% ROE

(1)

38

Prudential’s U. S. Businesses

Growing and Protecting Wealth

in the Domestic Market

Prudential’s U. S. Businesses

Growing and Protecting Wealth

in the Domestic Market

John

Strangfeld

Vice Chairman

Prudential Financial, Inc.

John

Strangfeld

Vice Chairman

Prudential Financial, Inc.

39

Investor Day 12.04.07

2002 AOI

$783

million

(2)

1)

Insurance and Investment Divisions of Financial Services Businesses

2)

Before income taxes

2002 –

2006 U.S. Business Mix

(1)

2006 AOI

$2,488

million

(2)

Individual Annuities      –5%

Financial Advisory        –11%

Individual

Life

55%

Group Insurance

20%

Retirement

18%

Individual

Life

22%

Retirement

20%

Asset Management

23%

9%

Asset Management

24%

Individual Annuities               

24%

Financial Advisory

1%

Group Insurance

40

Investor Day 12.04.07

Domestic Business Portfolio

(1)

Growing Wealth

2006

AOI

$1,715

million

(2)

Protecting Wealth

2006

AOI

$773

million

(2)

68%                      

32%                      

AOI

AOI

Contribution

Contribution

Favorable Growth

Prospects

Earnings/Cash Flow

Contributors

1)

Insurance and Investment Divisions of Financial Services Businesses

2)

Before income taxes

41

Investor Day 12.04.07

Financial Advisory

•

Combination of Private Client Group with Wachovia

July 1, 2003

•

62% Wachovia, 38% Prudential

•

Combined business created one of the top 5

brokerage firms in the U.S.

(1)

•

Segment operating results represent 19.4% ROE

(2)

•

Wachovia acquires A.G. Edwards in 2007;

Prudential exercised “look-back”

option

1)

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

2)

Based on annualized after-tax adjusted operating income contribution for  the nine months ended

September 30, 2007

42

Investor Day 12.04.07

Wachovia JV Look-Back Option

Significant Upside Opportunities, Strong Downside Protection

•

Prudential’s ownership is diluted during two-year

look-back period while business integration

proceeds

•

After two years, Prudential can:

–

Restore ownership up to 38% level, at today’s price; or

–

Retain diluted investment stake going forward ; or

–

Put ownership position to Wachovia at today’s price

•

Prudential will retain its option to put its investment

at fair market value commencing on July 1, 2008

43

Investor Day 12.04.07

Domestic Protection Businesses

•

Maintain market position:

#2 in Group Life

(1)

•

Focus on returns: case

selection; appropriate

pricing

•

Generate strong cash

flows

•

Optional life purchases

contribute to growth

prospects

Group

Insurance

•

Focus on returns through

capital management, cost-

effective distribution

•

Expanded third party

distribution is growth

opportunity

•

Deliver stable earnings

and strong cash flows

•

Mature, low-growth

industry

•

Overcapacity

•

Commodity products

Individual

Life

Prudential Strategies

Protection Marketplace

1)

Based on A.M. Best ranking of statutory premiums for the year ended December 31, 2006

44

Investor Day 12.04.07

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

the

direct

equity

adjustment

4)

For the three years ended December 31, 2006

22.1 %

Return on equity

(3)

$ 2.3   

Equity

(2)

$ 489   

Pre-tax

adjusted

operating

income

(1)

Nine months

ended

September 30,

2007

Three-year

average

ROE

(4)

16.1%

45

Investor Day 12.04.07

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

Sales by distribution channel

(1)

$320

$341

$391

$419

$430

$287

$372

Nine

Months

ended

9/30/06

Nine

Months

ended

9/30/07

2006

2005

2004

2003

2002

$0

$100

$200

$300

$400

$500

Prudential Agents

Third Party

46

Investor Day 12.04.07

Group Insurance

•

Primarily group life business

•

Controlled growth –

focus on margins

•

High persistency of quality business

•

Voluntary life opportunity

•

Return on equity of 16.6%

(1)

1)

Based on annualized after-tax adjusted operating income for the nine months ended September 30, 2007

47

Investor Day 12.04.07

U.S. Retirement Market

Prudential’s Key Domestic Growth Opportunity

$23 Trillion Market

(1)

Personal

Savings

$13.5T

Employer

Controlled

(DB)

$6.4T

Employer

Sponsored

(DC)

$3.3T

Prudential

Investment

Management

•

$430 billion AUM

(2)

•

Top 10 DB Asset

manager

(3)

Prudential

Retirement

•

$157 billion account

values

(2)

Prudential

Annuities

•

$85 billion account

values

(2)

1)

As of December 31, 2006 according to the Flow of Fund Accounts of the United States (September 2007), the

Investment Company Institute, and internal calculations

2)

As of September 30, 2007

3)

As

of

December

31,

2006

according

to

Pensions

&

Investments

(May

2007)

48

Investor Day 12.04.07

Retirement Market Trends Drive

Prudential’s Growth Opportunities

•

Platforms, scale, business integration skills

support attractive acquisitions

•

Industry consolidation continues

•

Asset management, risk management, and

product skills support development of

innovative solutions

•

Legislation and accounting changes

encourage employers to transfer pension

risk

•

A leader in Total Retirement Services

•

Employers seek to outsource retirement

benefit programs

•

Implementing “auto-pilot”

features and lifetime

income products

•

Efforts to make DC plans more like DB

plans

•

Unique

standing:

Market

leading

annuity

and

full

service retirement provider

•

Risk management, product design skills and

innovation culture support development of

income products and features

•

Individuals increasingly responsible for

their own retirement security

•

Aging baby boomers need to convert

assets into income but want continued

control, flexibility, upside potential

Prudential Positioning

Market Dynamic

49

Investor Day 12.04.07

Retirement and Annuities

A Leading Provider in a Growing Market

$0

$50

$100

$150

$200

$250

$300

Retirement

Annuities

12/31/02

12/31/03

12/31/04

12/31/05

12/31/06

1)

Includes acquired businesses from dates of acquisitions

$226

$191

$183

$120

$82

9/30/2007

$242

50

Investor Day 12.04.07

Prudential Retirement

Emphasis on Full Service Retirement

1)

Includes business acquired from CIGNA from April 1, 2004 acquisition date

$157

$143

$148

$136

$132

$72

$0

$25

$50

$75

$100

$125

$150

$175

12/31/03

12/31/04

12/31/05

12/31/06

09/30/06

09/30/07

Institutional Investment Products

Full Service

51

Investor Day 12.04.07

Full Service Retirement

Asset Flows

-$2,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Deposits and Sales

Net Flows

1)

For the nine months ended September 30, 2007

97% plan

persistency

(1)

2004

2005

2006

Nine months

ended 9/30/06

Nine months

ended 9/30/07

52

Investor Day 12.04.07

Emphasis on Mid/Large Case and

Tax Exempt Markets

938,000

1,589,000

Participants

(2)

$ 35,300

$ 67,100

Account Values

(1) (2)

Specialized consultants

-

Fee based consultants

-

Commission based advisors

-

Third party administrators

-

Direct

Distribution

Channels

Primary Products

Tax Exempt Market

Corporate Markets

-

DC plans

-

DB plans

-

Total Retirement Services

-

Non-qualified plans

-

Investment only products

1)

In millions

2)

As of September 30, 2007; excludes $3.2 billion retail account values for approximately 54,400 participants

Emphasis on

mid/large

case market

53

Investor Day 12.04.07

A Leader In Total Retirement Services

•

Recordkeeping

•

Participant communications

•

Actuarial services

•

Compliance

•

Investment products and services

DC

Plan

DC

Plan

Non-

qualified

Plan

Non-

qualified

Plan

Integrated Solution for Plan Sponsors

1)

As of September 30, 2007

TRS Account Values: $39 billion

(1)

DB

Plan

DB

Plan

54

Investor Day 12.04.07

Retirement Solutions

Lifetime Relationship Opportunities

•

Variable annuities

feature professional

asset allocation

•

Guaranteed minimum

accumulation and

death benefits

•

DC plan investment

options; Lifecycle

funds; “Goal Maker”

asset allocation

•

Stable value products

offer principal

guarantee

Age

20 yrs       30 yrs        40 yrs       50 yrs        60 yrs   

65+

Accumulation

Income

Prudential

Annuities

Prudential

Retirement

•

Lifetime Five

•

Spousal

Lifetime Five

•

HD Lifetime Five

•

Income Flex

•

Rollover platform

55

Investor Day 12.04.07

43%

21%

11%

5%

20%

27%

27%

21%

11%

14%

AUM by Asset Type

AUM by Client Type

Equity

Real

Estate

Institutional

Customers

General

account

Retail

customers

CB

Total AUM $637 billion

(1)

(1)

1)

As of September 30, 2007

International

Fixed Income

Non-

proprietary

insurance,

annuity &

other

Non-

proprietary

insurance,

annuity &

other

International

Assets Under Management

Significant Scale and Breadth

56

Investor Day 12.04.07

0

500

1,000

1,500

2,000

2,500

3,000

2002

2003

2004

2005

2006

Nine

Months

ended

9/30/06

Nine

Months

ended

9/30/07

Domestic Businesses: Financial

Performance

(1)

1)

Insurance and Investment Divisions of Financial Services Businesses

2)

Based

on

after-tax

adjusted

operating

income

giving

effect

to

the

direct

equity

adjustment;

annualized for interim periods

$1,075

$783

$1,342

$1,934

$2,488

$1,778

$2,341

Growing wealth: Individual Annuities, Retirement, Asset Management, Financial Advisory

Protecting wealth: Individual Life, Group Insurance

ROE

(2)

7.4%      8.6%        9.8%        12.5%       15.5%            

15.0%      18.1%

57

Asset Management

Asset Management

Bernard Winograd

President

Prudential Investment Management

Bernard Winograd

President

Prudential Investment Management

58

Investor Day 12.04.07

Asset Management

Commercial Business and Competitive Advantage

Robust institutional business enhances capabilities, attracts

talented managers

Market leading capabilities: private placement fixed income,

commercial mortgages and real estate

Prominent manager in pension market

Low capital requirements: high ROE opportunity; strong available

cash flows

A Business, Not a “Department”

A Source of Competitive Advantage Throughout The Firm

Seasoned skills in multiple asset classes: risk diversification,

enhanced returns

Differentiated capabilities drive superior value proposition for

stable value retirement products

59

Investor Day 12.04.07

Prudential Investment Management

Competitive Advantages

Scale

Brand and

Reputation

Experience and

Track Record

Breadth and

Depth of

Capabilities

Access to Capital

and Co-investing

Institutional Clients

•

$135 billion third

party institutional

AUM

(1)

•

16% AUM CAGR

(2002 –

2006)

Manager Continuity

•

163 portfolio

managers

(1)

•

Average tenure

14 years

1)

As of September 30, 2007; AUM excludes affiliated institutional assets under management

60

Investor Day 12.04.07

Prudential Investment Management

Business Overview

$   59

Quantitative Equity

Quantitative Management

Associates

$   85

Fundamental Equity

Jennison Associates

(2)

$   29

Real Estate Equity

Prudential Real Estate Investors

$   29

$   42

$ 186

AUM

(1)

Real Estate Debt

Prudential Mortgage Capital

Company

Private Fixed Income

Prudential Capital Group

Public Fixed Income  

Prudential Fixed Income

Investment Discipline

Investment Manager

1)

As of September 30, 2007; in billions

2)

AUM includes $18.5 billion public fixed income securities managed by Jennison Associates

61

Investor Day 12.04.07

Public

Equity

30%

Public

Fixed

Income

47%

9%

Private

Fixed

Income

7%

Commercial

Mortgages

7% 

Real

Estate

Assets Under Management

$430 Billion

(1)

Public

Equity

(3)

19%

Public

Fixed

Income

20%

Private

Fixed

Income 8%

Commercial

Mortgages

15%

Asset Management Revenue

$1.6 Billion

(2)

Real

Estate

38%

1)

As of September 30, 2007

2)

For the year ended December 31, 2006; excludes mutual fund distribution revenues

3)

Includes revenue from management of public fixed income securities by Jennison Associates

Fixed

Income

Broad Asset Class Capabilities

62

Investor Day 12.04.07

Public Fixed Income

$186 Billion AUM

(1)

1)

As of September 30, 2007; excludes public fixed income securities managed by Jennison Associates

Retail

11%

General

Account

57%

•

Comprehensive product line offers

traditional and alternative strategies

•

Corporates, Governments, Structured

Products, Mortgages, Emerging

Markets, Money Markets

•

Proprietary models for risk analysis

and management

•

Managing Asset-Backed Securities

since 1991

•

Internal collateral evaluation and rating

assignments

Breadth of Capabilities Serves

General Account and Third Parties

Institutional

32%

63

Investor Day 12.04.07

Private Fixed Income

$42 Billion AUM

(1)

1)

As of September 30, 2007

Private Placement Debt Market

•

Often well-suited to fund

insurance liability cash flows

•

Terms and covenants offer

investors protection from

“event risks”

•

Attractive long-term capital

source for middle

market companies

•

Higher credit spreads or

coupons relative to like-quality

public securities

Prudential Positioning

•

Prudential general account is

preferred customer

•

Not a “price taker”

–

direct

access to issuers allows

negotiation of terms

and covenants

•

“Reliable partner”: proprietary

direct origination network built

on relationships

•

Over 60 years experience;

over 1,000 issuers

(1)

64

Investor Day 12.04.07

1)

In billions

2)

Source: SourceMedia

–

Private Placement Letter

(September 24, 2007)

Market Leader in

Private Placement Debt

Originations

(1)

Portfolio –

12/31/06

(1) (2)

1.

Prudential

$ 38.9

2.

MetLife

30.8

3.

NY Life 

23.1

4.

Principal Global    17.6

5.

Sun Life

17.1

$5.3

$6.6

$6.9

$7.3

2004

2005

2006

YTD 3Q2007

General Account

Non-Affiliates

65

Investor Day 12.04.07

Non-Affiliates

General Account

$8.0

$9.4

$11.0

2004

2005

Originations

(2)

2006

Commercial Mortgages

$29 Billion AUM

(1)

1)

As of September 30, 2007

2)

In billions

$10.8

YTD 3Q2007

66

Investor Day 12.04.07

Global real estate investment manager, 18 offices worldwide

(1)

;

serving institutional investors since 1970

Approximately 190 investment professionals and 430 institutional

clients

(1)

Prudential Real Estate Investors

$29 Billion AUM

(1)

1)

As of September 30, 2007

Intermediary

between

pension funds

and developers

Opportunities

for upside

participation

Benefits from

strong recent

market

conditions

Chicago

Parsippany

Atlanta

San Francisco

London

Singapore

Rio de Janeiro

Amsterdam

Munich

Zurich

Milan

Madrid

Lisbon

Paris

Mexico City

Budapest

Luxembourg

Hong Kong

67

Investor Day 12.04.07

Public Equity

Two Distinct Approaches

•

Approximately 150

Institutional clients

(1)

•

Approximately 150

Institutional clients

(1)

•

Decades of experience

•

Established 1969; acquired 1984

•

Quantitative equity

management

•

Fundamental equity

management

•

$59 billion AUM

(1)

•

$85 billion AUM

(1) (2)

1)

As of September 30, 2007

2)

Includes $18.5 billion public fixed income securities

68

Investor Day 12.04.07

74%

54%

88%

93%

88%

95%

1 Year

3 Year

5 Year

AUM = $170 Billion

(1)

September 2006

September

2007

1)

As of September 30, 2007

Percentage of Third Party AUM

At or Exceeding Benchmark

69

Investor Day 12.04.07

$6.8

$11.6

$0.9

$3.9

$5.4

$4.3

$1.4

$11.1

$2.3

$1.8

$6.7

$10.8

$1.8

($0.6)

$3.1

($0.7)

Equity

Fixed Income

Real Estate

Total

2004

2005

2006

YTD3Q2007

Third Party Institutional Flows are the Best

Indicator of Competitiveness

Percent of Beginning of Period Assets

(2)

13%

10%

4%

13%

9%

10%

7%

10%

13%

12%

9%

8%

-1%

4%

-3%

1%

Institutional

Net

Flows

($Billions)

(1)

1)

Excludes money market funds and the effects of certain nonrecurring transfer and disposition events.

Includes assets transferred from the Retirement segment.

2)

Third party institutional net flows as a percentage of total institutional assets under management.

70

Investor Day 12.04.07

Prudential Investment Management

$288

$304

$338

$367

$403

$430

Proprietary Assets Under Management

12/31/02

12/31/03

12/31/04

12/31/05

12/31/06

9/30/07

$ in Billions

71

Investor Day 12.04.07

$0

$500

$1,000

$1,500

$2,000

$2,500

2003

2004

2005

2006

9 mos 2006

9 mos 2007

$ in Millions

Asset Management

Fees

Asset Management Revenues

Service,

Distribution

and Other

Revenue

Incentive,

Transaction,

Principal Investing

and Capital Markets

Revenue

$1,360

$1,464

$1,696

$2,050

$1,692

$1,414

72

Investor Day 12.04.07

7%

    17%

5%

42%

5%

24%

Year Ended 12/31/06

$593 Million

(1)

Equity

Public

Fixed

Income

Prudential

Capital Group

Prudential

Mortgage

Capital

Company

Prudential

Real Estate

Investors

Nine Months Ended 9/30/07

$493 Million

(1)

Prudential

Investments

(2)

Asset Management

Adjusted Operating Income by Business

1)

Before income taxes

2)

Mutual fund distribution

15%

    13%

6%

45%

4%

17%

Equity

Prudential

Capital Group

Prudential

Mortgage

Capital

Company

Prudential

Real Estate

Investors

Prudential

Investments

(2)

Public

Fixed

Income

73

Investor Day 12.04.07

36%

33%

27%

Return on equity

(5)

1.3

1.3

1.2

Attributed equity

(1) (4)

493

$ 430.2

Nine months

ended

September

30, 2007

593

$ 403.4

2006

2005

464

Pre-tax adjusted

operating income

(3)

$ 367.4

Assets under management

(1) (2)

1)

In billions

2)

At end of period

3)

In millions

4)

Average attributed equity for period

5)

Based on after-tax adjusted operating income; annualized for interim period

Asset Management

Financial Performance

74

Individual Annuities

Individual Annuities

David Odenath

President

Prudential Annuities

David Odenath

President

Prudential Annuities

75

Investor Day 12.04.07

Variable Annuity Market Trends

•

Retirement income solutions drive sales

•

Continued customer interest in downside protection

•

Increased customer focus on locking in gains

•

Industry consolidation likely to increase as

manufacturers require greater scale to compete

76

Investor Day 12.04.07

Prudential Annuities: Competitive Advantages

in a Retirement-Focused Market

•

Proven product innovation capabilities

•

Sophisticated risk management and hedging

•

Scale

•

Strong branding

•

Broad, multi-channel distribution capabilities

•

Acquisition integration expertise

77

Investor Day 12.04.07

1)

Source: VARDS 2Q07; Advisor-sold market excludes group/retirement plan contracts

Prudential Annuities is ranked #4 in advisor-sold VA account values

(1)

($ billions)

#4

#4

111.9

95.9

85.1

76.2

72.0

52.0

51.5

50.8

48.5

46.0

Top 10 Variable Annuity Company

Account Values

Hartford

Met Life

AXA Equitable

Prudential

Lincoln National

John Hancock

Ameriprise

Financial

Pacific Life

ING

Nationwide

78

Investor Day 12.04.07

Prudential Annuities

Innovation Team

•

Innovation: a

proven strength

•

Informal weekly

meetings, an

11-year tradition

•

Spirited discussion:

leave your title at

the door; have an

open mind; be

a subject

matter expert

•

Listen to

the marketplace

•

Lifetime Five

•

Spousal

Lifetime Five

•

HD Lifetime Five

•

More to come…

Attractive value

propositions for

retirement-focused

customers

©

2007 Annuity Market News and SourceMedia, Inc.  All rights reserved.

79

Investor Day 12.04.07

Awarded “Best Living Benefits”

by Boomer Market Advisor

Magazine for Third Consecutive Year

•

“HD Lifetime Five…the living benefit that best addresses the 

income and longevity issues clients face.”

2006

2006

2007

2007

2005

2005

Market-Leading Retirement Solutions

80

Investor Day 12.04.07

Active Management of Product Risks

•

•

Innovative product design minimizes

product/benefit risk while meeting

customers’

needs

•

Strategic risk retention

–

Retain risks we are best suited to carry

–

Actively hedge risks where appropriate

•

Strong governance structure provides constant

monitoring and oversight

81

Investor Day 12.04.07

Lower Risk Profile in Newest Benefits

Reduces equity risk in

severe market

conditions

Effectively self hedges

much of the equity risk

Systematically takes

money “off the table”

as market declines,

preserving

account value

Daily Rebalancing by

Individual Contract

(“GRO”; HD-Lifetime

Five)

Reduces concentration

risk

Access to

professionally

managed, diversified

investment options

Required Asset

Allocation Portfolios

Reduces longevity risk

Reduces cost of

benefit

Minimum Age

Requirement

Benefit to

Benefit to

Prudential

Prudential

Benefit to

Benefit to

Policyholder

Policyholder

Feature

Feature

•

Attractive Value Proposition

Attractive Value Proposition

•

•

Minimizes Risk to Prudential

Minimizes Risk to Prudential

Living Benefit

Living Benefit

Product Design

Product Design

82

Investor Day 12.04.07

Excludes GMIB as election rate is de-minimus

Risk Profile of HD-5 Compared to Lifetime Five

•

HD-5 has lower overall risk profile due to reduced tail exposure

•

Less hedge rebalancing required during volatile markets

•

Interest rate exposure more efficient to hedge –

lower basis risk,

better liquidity

Self Hedged

GRO

HD-5

Hedged

LT5

SLT5

GMWB

Allstate

GMAB

Living Benefit Election Rates

New Living Benefits Feature Self-Hedging

0%

10%

20%

30%

40%

50%

60%

70%

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

Hedged

Self Hedge

Self Hedge Trend

83

Investor Day 12.04.07

$5

$10

$15

$20

$25

$30

$35

$40

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

HD5 -

26% election rate

(1)

$2.6

Equity

Risk Self

Hedged

$16.0

Fully

Hedged

LT5, GMWB, and GMAB -

40% election rate

(1)

$10.1

Equity

and Int

Rate Risk

Self Hedged

“GRO”

-

15% election rate

(1)

$7.3

Retain

Risk

GMIB

(2)

Account Values ($ billions)

Living Benefit Risk Management

1)

For the nine months ended September 30, 2007

2)

Includes Prudential and Allstate business; no significant recent

sales

$0

84

Investor Day 12.04.07

Broad Multi-Channel Distribution Capabilities

203

358

607

$1,673

3Q:07

Sales

(1)

226

257

466

$1,407

3Q:06

Sales

(1)

•

Increase distribution through

Allstate and Prudential bank

relationships

•

Pursue new relationships on

opportunistic basis

7%

Banks

•

Expand distribution through

Allstate and current

relationships

13%

Wirehouses

•

Continued focus on captive

sales to maintain momentum

•

Ongoing focus on expanding

distribution in Allstate 

channel

21%

Insurance

Agents

•

Maintain leadership position

•

Enhance distribution through

existing relationships

59%

Independent

Financial

Planners

Strategy

Percentage

of 3Q:07

Sales

Channel

1)

In millions; all annuity products (variable and fixed)

85

Investor Day 12.04.07

Products and Distribution Drive Sales Growth

0

2

4

6

8

10

12

2002

2003

2004

2005

2006

2006

2007

Year ended

December 31

(1)

Nine months ended

September 30

(1)

1)

Includes American Skandia from May 1, 2003 acquisition date and Allstate variable annuity business from

June 1, 2006 acquisition date

2)

All annuity products (variable and fixed)

Allstate Distribution

$4.7

$2.0

$6.3

$7.5

$9.7

$7.0

$8.7

86

Investor Day 12.04.07

Sustained Account Value Growth

1)

As of end of period; all annuity products (variable and fixed)

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

2003

2004

2005

2006

Sep-07

Allstate

$47.5

$51.3

$54.8

$78.3

$84.7

87

Investor Day 12.04.07

Allstate Variable Annuity Business

Integration on Track

Major Project Milestones

2006

2007

September

February

Closed Allstate

transaction

June 1

August

Transition Service Agreement Period with Allstate

Transition Service Agreement Period with Allstate

July

Launched

Prudential

products in

Allstate

proprietary

channel

Launched

Prudential

products in

Morgan Stanley

Launched

Allstate-branded,

Prudential-

designed product

in Bank Channel

2008

May

Launched

Prudential

products in A.G.

Edwards

Se2 selected to

integrate Allstate

book and provide

processing

support

Prudential to

assume

responsibility for

administration of

Allstate’s book of

business

January

88

Investor Day 12.04.07

3,546

3,748

3,991

Fixed annuities

18.2%

18.2%

17.9%

Return on equity

(5)

$ 2.8

$2.3

$1.9

Attributed equity

(4)

549

84,719 

$ 81,173 

Nine months

ended

September

30, 2007

586

78,303

$ 74,555

2006

2005

505

Pre-tax adjusted

operating income

(3)

54,769

Total

$ 50,778

Account Values

(2)

Variable annuities

1)

Includes

results

of

Allstate

variable

annuity

business

from

June

1,

2006

acquisition

date

2)

In millions; at end of period

3)

In millions

4)

In billions; average attributed equity for period

5)

Based on after-tax adjusted operating income; annualized for interim period

Individual Annuities Financial Performance

(1)

89

Financial Position and Outlook

Financial Position and Outlook

Rich Carbone

Chief Financial Officer

Rich Carbone

Chief Financial Officer

90

Investor Day 12.04.07

Financial Review and Outlook

•

Strong capital position; significant financial

flexibility

•

Disciplined investment portfolio risk selection

and management

•

Financial outlook for 2008

91

Investor Day 12.04.07

“Available Capital”

Capacity $7 -

$8 Billion

(1)

Over

$2.5 bn

$7 –

$8 bn

1)

As of September 30, 2007

2)

Attributed equity of Financial Services Businesses, excluding accumulated other comprehensive income

related to unrealized gains and losses on investments and pension/postretirement benefits

Outstanding

Capital

Required

Capital

“On Balance

Sheet”

Excess

Capital

Unused

Capacity:

Capital Debt,

Hybrid Equity

Securities

Available

Capital

Capacity

$26 bn

$4 bn

Capital

Debt

$22 bn

Equity

(2)

$22 bn

Equity

(2)

$23 bn

$23 bn

$5 bn

Targeted Structure:

70% Equity,

30% Capital Debt and

Hybrid Securities

92

Investor Day 12.04.07

Insurance Operations are Overcapitalized

“AA”

Ratings

Target  

350

“AA”

Ratings

Target

700 -

800

Risk-Based Capital

(1)

Solvency Margins

(2)

Prudential

Insurance

Gibraltar

Life

Prudential

of Japan

1)

Based on U.S. statutory accounting

2)

Based on Japanese statutory accounting

93

Investor Day 12.04.07

“Available Capital”

Capacity       Financial Flexibility

1)

Assuming a capital structure of 70% common equity, 30% capital debt and hybrids

International

Insurance

excess capital

Hybrid security

and debt

issuance capacity

(1)

Corporate &

other excess

capital

Available for

share

repurchases

Potentially

available for

attractive

transactions

September 30, 2007

Potential value of

Wachovia JV “put”

$7+

94

Investor Day 12.04.07

Strong and Sustainable Ongoing

Capital Generation

•

Focus on high ROE businesses with

favorable growth prospects

•

Mature businesses: favorable returns,

modest capital needs, strong cash flows

95

Investor Day 12.04.07

Diverse Sources of Cash Flow

Domestic

Insurance

Companies

Domestic

Insurance

Companies

Asset

Management

Operations

Asset

Management

Operations

Wachovia

Joint

Venture

Wachovia

Joint

Venture

2006 Dividends

& Returns of

Capital $3.2

billion

International

Operations

International

Operations

96

Investor Day 12.04.07

Capital Returned to Shareholders

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2002

2003

2004

2005

2006

9 Mos

ended

9/30/06

9 Mos

ended

9/30/07

Dividends

Share Repurchases

$1,026

$1,270

$1,831

$2,483

$2,953

$ millions

$1,873

$2,250

$3.5 billion

annual share repurchase

authorization,

effective 2008

97

Investor Day 12.04.07

Book Value per Share of Common Stock

(1)

01/01/02

01/01/03

01/01/04

01/01/05

01/01/06

01/01/07

12/31/02

12/31/03

12/31/04

12/31/05

12/31/06

9/30/07

$32.80

$34.10

$37.10

$40.37

$44.38

1)

Excluding

accumulated other comprehensive income related to unrealized gains and losses on investments for

all periods and accumulated other comprehensive income related to pension and postretirement benefits for

periods including and after 2004

$48.15

98

Investor Day 12.04.07

Disciplined Investment Portfolio Management

Leverages Proven Investment Expertise

•

Asset Management is a key Prudential business

•

Asset selection reflects liability characteristics

•

Broad capabilities support risk diversification:

–

Asset class

–

Sector

–

Issuer   

•

Well-managed exposure to “risk”

assets

99

Investor Day 12.04.07

Asset Selection

Focus on Liability Characteristics

Public fixed

maturities

Long-term Japanese

government bonds;

equities support

“tail”

Private placement

bonds, commercial

mortgages

Representative

Asset Types

Long duration,

variable crediting

rates; floor

guarantees

Domestic Universal Life

Extremely long

duration (30 years +);

fixed rate guarantees

Japanese Life Planner

Protection Products

Predictable

withdrawals, crediting

rates experience-

based

Retirement –

Full Service Stable Value

Liability

Characteristics

Products

100

Investor Day 12.04.07

9%

12%

13%

58%

Asset Selection

Skill Sets Support Risk Diversification

1)

As of September 30, 2007 at balance sheet carrying amount; excludes invested assets of securities brokerage,

securities

trading,

banking

and

asset

management

operations,

and

real

estate

and

relocation

services

2)

Trading account assets supporting insurance liabilities (investment results ultimately accrue

to contract-holders)

FSB Fixed Maturities

$114.8 billion

(1)

US Government

3%

Foreign

Government

24%

Other Asset-

Backed

12%

Commercial

Mortgage-

Backed

7%

Residential MBS

Agency

passthroughs

7%

Corporate

47%

FSB General Account

$161.1 billion

(1)

Public

Private

Commercial Loans

“TAASIL”

(2)

Fixed

Maturities

Equities 3%

Other long-term 2%

Policy loans,

Short-term, other 3%

101

Investor Day 12.04.07

Asset Selection

Focus on Quality

1)

In billions; at fair value. Excludes invested assets of securities brokerage, securities trading,

banking and asset management operations, and real estate and relocation services

FSB Fixed Maturity Portfolio

(1)

$81.9

$87.4

$104.7

$107.9

$114.6

$114.7

6.2

6.2

6.2

6.2

5.9

5.9

6.2

6.2

7.4

7.4

7.5

7.5

Investment

grade

Non-investment

grade

12/31/02

12/31/03

12/31/04

12/31/05

12/31/06

9/30/07

102

Investor Day 12.04.07

$855

$48

$288

$129

$100

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

2002

2003

2004

2005

2006

1)

Other than temporary impairments and credit-related losses on sales of securities included in

realized investment gains and losses of  the Financial Services Businesses

Fixed Maturities

Impairments and Credit-Related Losses

(1)

103

Investor Day 12.04.07

AAA

AA

A             

BBB

Sub-Prime Mortgage Exposure

Risk-Based Selection

1)

Financial Services Businesses, as of September 30, 2007.  At amortized cost.

2)

The short-term portfolio is used primarily to invest proceeds of securities lending and repurchase

activities, and cash generated from certain trading and operating activities; securities have remaining

expected average life of 2 years or less when purchased.

81%

AAA/AA

Short Term Portfolio

$3.8 billion

(1) (2)

All Other Portfolios

$4.4 billion

(1)

Total      ’07         ’06        ’05        Pre ’05

<Vintages>

Total        ’07        ’06         ’05        Pre ‘05

100%

AAA

$3.8

$0.8

$2.8

$0.2

$4.4

$0.5

$1.8

$0.6

$1.5

$5.0

104

Investor Day 12.04.07

Financial Strength and Flexibility

•

Strong “available capital”

position provides

significant financial flexibility; migrating to optimal

capital structure

•

Insurance operations capitalized in excess of “AA”

ratings objectives

•

Diverse cash flow sources contribute to flexibility

•

Sustained growth in book value per share while

returning capital through share repurchases

•

Investment portfolio: disciplined management;

leverages proven investment expertise

105

Investor Day 12.04.07

Considerations for 2008

•

2007 baseline earnings

•

Business growth

•

Capital management: share repurchases,

increased leverage

•

8% equity market appreciation from year end

•

Less favorable commercial real estate environment

•

US dollar @ 106 yen

•

28.4% effective tax rate

•

Wachovia Securities one-time costs

106

Investor Day 12.04.07

FSB Full Year 2008

Earnings Guidance

2007 Guidance

(1)

$7.45 -

$7.60

Non-Recurring/

Unsustainable

2007 Items

Baseline

Baseline

Earnings Level

Earnings Level

$7.15

$7.15

-

-

$7.30

$7.30

7.30

Capital

management:

share repurchases,

increased leverage

1)

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

Growth/

Expense

Management

2008 Guidance

(1)

Baseline

Baseline

Earnings

Earnings

Growth

Growth

Non-Recurring

2008 Items

Wachovia Securities

one-time costs