Prudential Financial, Inc. 5.62 (PRS) 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010 Common Stock	Apr. 30, 2010 Class B Stock
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	PRU
Entity Registrant Name	PRUDENTIAL FINANCIAL INC
Entity Central Index Key	0001137774
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		464,000,000	2,000,000

Consolidated Statements of Fina

Consolidated Statements of Financial Position (USD $)
In Millions	3 Months Ended Mar. 31, 2010		12 Months Ended Dec. 31, 2009
ASSETS
Fixed maturities, available for sale, at fair value (amortized cost: 2010-$177,397; 2009-$174,251)	$180,450	[1]	$175,225	[1]
Fixed maturities, held to maturity, at amortized cost (fair value: 2010-$5,081; 2009-$5,197)	5,016	[1]	5,120	[1]
Trading account assets supporting insurance liabilities, at fair value	16,683	[1]	16,020	[1]
Other trading account assets, at fair value	3,371		3,033
Equity securities, available for sale, at fair value (cost: 2010-$6,082; 2009-$6,106)	7,088		6,895
Commercial mortgage and other loans (includes $359 and $479 measured at fair value under the fair value option at March 31, 2010 and December 31, 2009, respectively)	30,760	[1]	31,384	[1]
Policy loans	10,223		10,146
Other long-term investments	5,960	[1]	5,904	[1]
Short-term investments	6,924		6,825
Total investments	266,475		260,552
Cash and cash equivalents	9,626	[1]	13,164	[1]
Accrued investment income	2,368	[1]	2,322	[1]
Deferred policy acquisition costs	14,718		14,578
Other assets	16,053	[1]	15,513	[1]
Separate account assets	182,621	[1]	174,074	[1]
Total Assets	491,861		480,203
LIABILITIES
Future policy benefits	125,743		125,707
Policyholders' account balances	101,651		101,666
Policyholders' dividends	1,787		1,254
Securities sold under agreements to repurchase	6,111		6,033
Cash collateral for loaned securities	3,180		3,163
Income taxes	4,059		4,014
Short-term debt	3,066		3,122
Long-term debt (includes $0 and $429 measured at fair value under the fair option at March 31, 2010 and December 31, 2009, respectively)	21,641	[1]	21,037	[1]
Other liabilities	14,496		14,404
Separate account liabilities	182,621	[1]	174,074	[1]
Total liabilities	464,355		454,474
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 15)
EQUITY
Preferred Stock ($.01 par value; 10,000,000 shares authorized; none issued)	0		0
Additional paid-in capital	23,186		23,235
Common Stock held in treasury, at cost (178,150,917 and 179,650,931 shares at March 31, 2010 and December 31, 2009, respectively)	(11,290)		(11,390)
Accumulated other comprehensive income (loss)	620		(443)
Retained earnings	14,478		13,787
Total Prudential Financial, Inc. equity	27,000		25,195
Noncontrolling interests	506		534
Total equity	27,506		25,729
TOTAL LIABILITIES AND EQUITY	491,861		480,203
Common Stock
EQUITY
Common Stock	6		6
Class B Stock
EQUITY
Common Stock	$0		$0
[1]See Note 5 for details of balances associated with variable interest entities.

1_Consolidated Statements of Fi

Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Millions, except Share data	Mar. 31, 2010	Dec. 31, 2009
Fixed maturities, available for sale, amortized cost	$177,397	$174,251
Fixed maturities, held to maturity, fair value	5,081	5,197
Equity securities, available for sale, cost	6,082	6,106
Commercial mortgage and other loans, measured at fair value	359	479
Long-term debt, measured at fair value	$0	$429
Preferred Stock, par value	0.01	0.01
Preferred Stock, shares authorized	10,000,000	10,000,000
Preferred Stock, shares issued	0	0
Common Stock held in treasury, shares	178,150,917	179,650,931
Common Stock
Common Stock, par value	0.01	0.01
Common Stock, shares authorized	1,500,000,000	1,500,000,000
Common Stock, shares issued	641,762,125	641,762,089
Class B Stock
Common Stock, par value	0.01	0.01
Common Stock, shares authorized	10,000,000	10,000,000
Common Stock, shares issued	2,000,000	2,000,000
Common Stock, shares outstanding	2,000,000	2,000,000

Consolidated Statements of Oper

Consolidated Statements of Operations (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
REVENUES
Premiums	$4,242	$4,034
Policy charges and fee income	816	726
Net investment income	2,874	2,849
Asset management fees and other income	971	778
Realized investment gains (losses), net:
Other-than-temporary impairments on fixed maturity securities	(1,249)	(1,855)
Other-than-temporary impairments on fixed maturity securities transferred to Other Comprehensive Income	995	1,250
Other realized investment gains (losses), net	643	743
Total realized investment gains (losses), net	389	138
Total revenues	9,292	8,525
BENEFITS AND EXPENSES
Policyholders' benefits	4,243	4,341
Interest credited to policyholders' account balances	1,235	1,169
Dividends to policyholders'	517	(1)
General and administrative expenses	2,281	3,013
Total benefits and expenses	8,276	8,522
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	1,016	3
Income tax expense (benefit)	353	(2)
INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES	663	5
Equity in earnings of operating joint ventures, net of taxes	10	(6)
INCOME (LOSS) FROM CONTINUING OPERATIONS	673	(1)
Income (loss) from discontinued operations, net of taxes	(2)	4
NET INCOME	671	3
Less: Loss attributable to noncontrolling interests	(26)	(11)
NET INCOME ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.	$697	$14
Basic:
Income from continuing operations attributable to Prudential Financial, Inc. per share of Common Stock	1.17	$0
Income (loss) from discontinued operations, net of taxes	-0.01	0.01
Net income attributable to Prudential Financial, Inc. per share of Common Stock	1.16	0.01
Diluted:
Income from continuing operations attributable to Prudential Financial, Inc. per share of Common Stock	1.16	$0
Income (loss) from discontinued operations, net of taxes	-0.01	0.01
Net income attributable to Prudential Financial, Inc. per share of Common Stock	1.15	0.01
Basic and Diluted:
Income from continuing operations attributable to Prudential Financial, Inc. per share of Class B Stock	75.5	$4
Income from discontinued operations, net of taxes	$0	$0
Net income attributable to Prudential Financial, Inc. per share of Class B Stock	75.5	$4

Consolidated Statements of Equi

Consolidated Statements of Equity (USD $)
In Millions	Common Stock	Additional Paid-in Capital	Retained Earnings	Common Stock Held In Treasury	Accumulated Other Comprehensive Income (loss)	Total Prudential Financial, Inc. Equity	Noncontrolling Interests	Total
Beginning Balance at Dec. 31, 2008	$6	$22,001	$10,426	($11,655)	($7,343)	$13,435	$351	$13,786
Contributions from noncontrolling interests							276	276
Stock-based compensation programs		(74)	(9)	110		27		27
Impact of adoption of guidance for other-than-temporary impairments of debt securities, net of taxes			686		(686)	0		0
Comprehensive income:
Net income			14			14	(11)	3
Other comprehensive income (loss), net of tax					(546)	(546)	(40)	(586)
Total comprehensive income (loss)						(532)	(51)	(583)
Ending Balance at Mar. 31, 2009	6	21,927	11,117	(11,545)	(8,575)	12,930	576	13,506
Beginning Balance at Dec. 31, 2009	6	23,235	13,787	(11,390)	(443)	25,195	534	25,729
Contributions from noncontrolling interests							3	3
Distributions to noncontrolling interests							(4)	(4)
Consolidations/deconsolidations of noncontrolling interests		(2)				(2)	(1)	(3)
Stock-based compensation programs		(47)	(6)	100		47		47
Comprehensive income:
Net income			697			697	(26)	671
Other comprehensive income (loss), net of tax					1,063	1,063	0	1,063
Total comprehensive income (loss)						1,760	(26)	1,734
Ending Balance at Mar. 31, 2010	$6	$23,186	$14,478	($11,290)	$620	$27,000	$506	$27,506

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$671		$3
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment (gains) losses, net	(389)		(138)
Policy charges and fee income	(277)		(450)
Interest credited to policyholders' account balances	1,235		1,169
Depreciation and amortization	(31)		142
Gains on trading account assets supporting insurance liabilities, net	(253)		(148)
Change in:
Deferred policy acquisition costs	(294)		624
Future policy benefits and other insurance liabilities	930		1,373
Other trading account assets	(298)		539
Income taxes	(1,238)		322
Other, net	(107)		(900)
Cash flows from (used in) operating activities	(51)		2,536
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available for sale	5,598		13,174
Fixed maturities, held to maturity	114		62
Trading account assets supporting insurance liabilities and other trading account assets	14,974		8,234
Equity securities, available for sale	833		243
Commercial mortgage and other loans	997		834
Policy loans	418		427
Other long-term investments	106		290
Short-term investments	4,332		6,868
Payments for the purchase/origination of:
Fixed maturities, available for sale	(9,600)		(13,472)
Fixed maturities, held to maturity	(57)		(573)
Trading account assets supporting insurance liabilities and other trading account assets	(15,098)		(9,114)
Equity securities, available for sale	(750)		(194)
Commercial mortgage and other loans	(487)		(775)
Policy loans	(379)		(446)
Other long-term investments	(117)		(419)
Short-term investments	(4,691)		(6,104)
Other, net	137		(66)
Cash flows used in investing activities	(3,670)		(1,031)
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholders' account deposits	5,302		7,914
Policyholders' account withdrawals	(5,859)		(6,517)
Net change in securities sold under agreements to repurchase and cash collateral for loaned securities	145		(410)
Cash dividends paid on Common Stock	(34)		(31)
Net change in financing arrangements (maturities 90 days or less)	108		(1,906)
Common Stock reissued for exercise of stock options	30		9
Proceeds from the issuance of debt (maturities longer than 90 days)	1,407		964
Repayments of debt (maturities longer than 90 days)	(1,020)		(2,257)
Excess tax benefits from share-based payment arrangements	5		0
Other, net	201		59
Cash flows from (used in) financing activities	285		(2,175)
Effect of foreign exchange rate changes on cash balances	(102)		(22)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(3,538)		(692)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	13,164	[1]	15,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	9,626	[1]	14,336
NON-CASH TRANSACTIONS DURING THE PERIOD
Treasury Stock shares issued for stock-based compensation programs	$67		$96
[1]See Note 5 for details of balances associated with variable interest entities.

BUSINESS AND BASIS OF PRESENTAT

BUSINESS AND BASIS OF PRESENTATION
	3 Months Ended Mar. 31, 2010
BUSINESS AND BASIS OF PRESENTATION	1.BUSINESS AND BASIS OF PRESENTATION Prudential Financial, Inc. (Prudential Financial) and its subsidiaries (collectively, Prudential or the Company) provide a wide range of insurance, investment management, and other financial products and services to both individual and institutional customers throughout the United States and in many other countries. Principal products and services provided include life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. The Company has organized its principal operations into the Financial Services Businesses and the Closed Block Business. The Financial Services Businesses operate through three operating divisions: U.S. Retirement Solutions and Investment Management, U.S. Individual Life and Group Insurance, and International Insurance and Investments. The Companys real estate and relocation services business as well as businesses that are not sufficiently material to warrant separate disclosure and divested businesses, are included in Corporate and Other operations within the Financial Services Businesses. The Closed Block Business, which includes the Closed Block (see Note 6), is managed separately from the Financial Services Businesses. The Closed Block Business was established on the date of demutualization and includes the Companys in force participating insurance and annuity products and assets that are used for the payment of benefits and policyholders dividends on these products, as well as other assets and equity that support these products and related liabilities. In connection with the demutualization, the Company ceased offering these participating products. Basis of Presentation The Unaudited Interim Consolidated Financial Statements include the accounts of Prudential Financial, entities over which the Company exercises control, including majority-owned subsidiaries and minority-owned entities such as limited partnerships in which the Company is the general partner, and variable interest entities in which the Company is considered the primary beneficiary. See Note 5 for more information on the Companys consolidated variable interest entities. The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Companys Audited Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the year ended December31, 2009. Use of Estimates The preparation of financ

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS
	3 Months Ended Mar. 31, 2010
SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS	2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS Investments in Debt and Equity Securities The Companys investments in debt and equity securities include fixed maturities; trading account assets; equity securities; and short-term investments. The accounting policies related to these are as follows: Fixed maturities are comprised of bonds, notes and redeemable preferred stock. Fixed maturities classified as available for sale are carried at fair value. See Note 13 for additional information regarding the determination of fair value. Fixed maturities that the Company has both the positive intent and ability to hold to maturity are carried at amortized cost and classified as held to maturity. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity. Interest income, as well as the related amortization of premium and accretion of discount, is included in Net investment income under the effective yield method. For mortgage-backed and asset-backed securities, the effective yield is based on estimated cash flows, including prepayment assumptions based on data from widely accepted third-party data sources or internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions regarding the underlying collateral, including default rates and changes in value. These assumptions can significantly impact income recognition and the amount of other-than-temporary impairments recognized in earnings and other comprehensive income. For high credit quality mortgage-backed and asset-backed securities (those rated AA or above), cash flows are provided quarterly, and the amortized cost and effective yield of the security are adjusted as necessary to reflect historical prepayment experience and changes in estimated future prepayments. The adjustments to amortized cost are recorded as a charge or credit to net investment income in accordance with the retrospective method. For asset-backed and mortgage-backed securities rated below AA, the effective yield is adjusted prospectively for any changes in estimated cash flows. See the discussion below on realized investment gains and losses for a description of the accounting for impairments, as well as the impact of the Companys adoption on January1, 2009 of new authoritative guidance for the recognition and presentation of other-than-temporary impairments for debt securities. Unrealized gains and losses on fixed maturities classified as available for sale, net of tax, and the effect on deferred policy acquisition costs, valuation of business acquired, deferred sales inducements, future policy benefits and policyholders dividends that would result from the realization of unrealized gains and losses, are included in Accumulated other comprehensive income (loss). Trading account assets supporting insurance liabilities, at fair value includes invested assets that support certain products included in the Retirement segment, as well as certain products included in the International Insurance segment, which are experience rated, meaning that the investment results associated with these products are expected t

ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS AND DISPOSITIONS
	3 Months Ended Mar. 31, 2010
ACQUISITIONS AND DISPOSITIONS	3.ACQUISITIONS AND DISPOSITIONS Sale of investment in Wachovia Securities On December31, 2009, the Company completed the sale of its minority joint venture interest in Wachovia Securities Financial Holdings, LLC (Wachovia Securities), which includes Wells Fargo Advisors, to Wells Fargo Company (Wells Fargo). The Companys minority joint venture interest in Wachovia Securities originated as a result of the Company combining its retail securities brokerage and clearing operations with those of Wachovia Corporation (Wachovia) in 2003. On December31, 2008, Wachovia merged with and into Wells Fargo, which succeeded to Wachovias rights and obligations under the joint venture arrangements. At the closing, the Company received $4.5 billion in cash as the purchase price of its joint venture interest and de-recognized the carrying value of its investment in the joint venture and the carrying value of the associated lookback option. The pre-tax gain on sale recognized by the Company was $2.247 billion and was reflected in Equity in earnings of operating joint ventures, net of taxes. Acquisition of Yamato Life On May1, 2009, the Companys Gibraltar Life operations acquired Yamato Life, a Japanese life insurance company that declared bankruptcy in October 2008. Gibraltar Life served as the reorganization sponsor for Yamato and under the reorganization agreement acquired Yamato by contributing $72 million of capital to Yamato. At the date of acquisition the Company recognized $2.3 billion of assets and $2.3 billion of liabilities related to Yamato. Subsequent to the acquisition, the Company renamed the acquired company The Prudential Gibraltar Financial Life Insurance Company, Ltd. Discontinued Operations Income (loss) from discontinued businesses, including charges upon disposition, are as follows: ThreeMonthsEnded March 31, 2010 2009 (in millions) Korean asset management operations $ 1 $ 9 Real estate investments sold or held for sale 2 2 International securities operations (1 ) Income from discontinued operations before income taxes 2 11 Income tax expense 4 7 Income (loss) from discontinued operations, net of taxes $ (2 ) $ 4 In the first quarter of 2010, the Company signed a definitive agreement, which is subject to local regulatory approval, to sell Prudential Investment Securities Co. Ltd. and Prudential Asset Management Co. Ltd., which together comprise the Companys Korean asset management operations. The net proceeds from this agreement are expected to be approximately equal to the book value. The transaction is expected to close in the second quarter of 2010. Also included in the table above are amounts related to currency hedging activities related to these operations. Real estate investments sold or held for sale reflects the income or loss from discontinued real estate investments. Charges recorded in connection with the disposals of businesses include estimates that are subject to subsequent adjustment. The Companys Unaudited Interim Consolidated Stateme

INVESTMENTS

INVESTMENTS
	3 Months Ended Mar. 31, 2010
INVESTMENTS	4. INVESTMENTS Fixed Maturities and Equity Securities The following tables provide information relating to fixed maturities and equity securities (excluding investments classified as trading) as of the dates indicated: March31, 2010 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Other-than- temporary impairments in AOCI(3) (in millions) Fixed maturities, available for sale U.S. Treasury securities and obligations of U.S. government authorities and agencies $ 8,943 $ 404 $ 384 $ 8,963 $ Obligations of U.S. states and their political subdivisions 1,493 37 24 1,506 Foreign government bonds 40,076 1,422 132 41,366 Corporate securities 92,545 5,286 2,168 95,663 (28 ) Asset-backed securities(1) 12,300 174 2,370 10,104 (1,742 ) Commercial mortgage-backed securities 11,249 529 93 11,685 5 Residential mortgage-backed securities(2) 10,791 465 93 11,163 (10 ) Total fixed maturities, available for sale $ 177,397 $ 8,317 $ 5,264 $ 180,450 $ (1,775 ) Equity securities, available for sale $ 6,082 $ 1,111 $ 105 $ 7,088 (1) Includes credit tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans, and other asset types. (2) Includes publicly traded agency pass-through securities and collateralized mortgage obligations. (3) Represents the amount of other-than-temporary impairment losses in Accumulated other comprehensive income (loss), or AOCI, which were not included in earnings. Amount excludes $475 million of net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date. March31, 2010 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses FairValue Other-than- temporary impairments in AOCI(3) (in millions) Fixed maturities, held to maturity Foreign government bonds $ 1,043 $ 17 $ 4 $ 1,056 $ Corporate securities 912 1 126 787 Asset-backed securities(1) 1,076 15 4 1,087 Commercial mortgage-backed securities 466 114 580 Residential mortgage-backed securities(2) 1,519 54 2 1,571 Total fixed maturities, held to maturity $ 5,016 $ 201 $ 136 $ 5,081 $ (1) Includes credit tranched securities collateralized by auto loans, credit cards, education loans, and other asset types. (2) Includes publicly traded agency pass-through securities and collateralized mortgage obligations. (3) Represents the amount of other-than-temporary impairment losses in Accumulated other comprehensive income (loss), or AOCI, which were not included in earnings.

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES
	3 Months Ended Mar. 31, 2010
VARIABLE INTEREST ENTITIES	5. VARIABLE INTEREST ENTITIES In the normal course of its activities, the Company enters into relationships with various special purpose entities and other entities that are deemed to be variable interest entities (VIEs). A VIE is an entity that either (1)has equity investors that lack certain essential characteristics of a controlling financial interest (including the ability to control activities of the entity, the obligation to absorb the entitys expected losses and the right to receive the entitys expected residual returns) or (2)lacks sufficient equity to finance its own activities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the VIE. If the Company determines that it is the VIEs primary beneficiary it consolidates the VIE. There are currently two models for determining whether or not the Company is the primary beneficiary of a VIE. The first relates to those VIEs that have the characteristics of an investment company and for which certain other conditions are true. These conditions are that (1)the Company does not have the implicit or explicit obligation to fund losses of the VIE and (2)the VIE is not a securitization entity, asset-backed financing entity or an entity that was formerly considered a qualified special-purpose entity. In this model the Company is the primary beneficiary if it stands to absorb a majority of the VIEs expected losses or to receive a majority of the VIEs expected residual returns and would be required to consolidate the VIE. For all other VIEs, the Company is the primary beneficiary if the Company has (1)the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (2)the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. If both conditions are present the Company would be required to consolidate the VIE. Consolidated Variable Interest Entities for which the Company is the Sponsor The Company is the sponsor of certain asset-backed investment vehicles (commonly referred to as collateralized debt obligations, or CDOs) and certain other vehicles for which the Company earns fee income for investment management services, including certain investment structures which the Companys asset management business invests with other co-investors in investment funds referred to as feeder funds. The Company sells or syndicates investments through these vehicles, principally as part of the proprietary investing activity of the Companys asset management businesses. Additionally, the Company may invest in debt or equity securities issued by these vehicles. CDOs raise capital by issuing debt securities, and use the proceeds to purchase investments, typically interest-bearing financial instruments. The Company analyzes these relationships to determine whether it has (1)the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (2)the obligation to absorb losses of the entity tha

CLOSED BLOCK

CLOSED BLOCK
	3 Months Ended Mar. 31, 2010
CLOSED BLOCK	6.CLOSED BLOCK On the date of demutualization, Prudential Insurance established a Closed Block for certain individual life insurance policies and annuities issued by Prudential Insurance in the U.S. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block Business. The policies included in the Closed Block are specified individual life insurance policies and individual annuity contracts that were in force on the effective date of the Plan of Reorganization and for which Prudential Insurance is currently paying or expects to pay experience-based policy dividends. Assets have been allocated to the Closed Block in an amount that has been determined to produce cash flows which, together with revenues from policies included in the Closed Block, are expected to be sufficient to support obligations and liabilities relating to these policies, including provision for payment of benefits, certain expenses, and taxes and to provide for continuation of the policyholder dividend scales in effect in 2000, assuming experience underlying such scales continues. To the extent that, over time, cash flows from the assets allocated to the Closed Block and claims and other experience related to the Closed Block are, in the aggregate, more or less favorable than what was assumed when the Closed Block was established, total dividends paid to Closed Block policyholders may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect in 2000 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to Closed Block policyholders and will not be available to stockholders. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the Closed Block. The Closed Block will continue in effect as long as any policy in the Closed Block remains in force unless, with the consent of the New Jersey insurance regulator, it is terminated earlier. The excess of Closed Block Liabilities over Closed Block Assets at the date of the demutualization (adjusted to eliminate the impact of related amounts in Accumulated other comprehensive income (loss)) represented the estimated maximum future earnings at that date from the Closed Block expected to result from operations attributed to the Closed Block after income taxes. In establishing the Closed Block, the Company developed an actuarial calculation of the timing of such maximum future earnings. If actual cumulative earnings of the Closed Block from inception through the end of any given period are greater than the expected cumulative earnings, only the expected earnings will be recognized in income. Any excess of actual cumulative earnings over expected cumulative earnings will represent undistributed accumulated earnings attributable to policyholders, which are recorded as a policyholder dividend obligation. The policyholder dividend obligation represents amounts to be paid to Closed Block policyhol

EQUITY

EQUITY
	3 Months Ended Mar. 31, 2010
EQUITY	7.EQUITY The Company has outstanding two classes of common stock: the Common Stock and the Class B Stock. The changes in the number of shares issued, held in treasury and outstanding are as follows for the periods indicated: Common Stock ClassBStock Issued Held In Treasury Outstanding Issued and Outstanding (in millions) Balance, December31, 2009 641.8 179.7 462.1 2.0 Common Stock issued Common Stock acquired Stock-based compensation programs(1) (1.5 ) 1.5 Balance, March31, 2010 641.8 178.2 463.6 2.0 (1) Represents net shares issued from treasury pursuant to the Companys stock-based compensation program. Comprehensive Income The components of comprehensive income (loss) are as follows: ThreeMonthsEnded March31, 2010 2009 (in millions) Net income $ 671 $ 3 Other comprehensive income (loss), net of taxes: Change in foreign currency translation adjustments (35 ) (328 ) Change in net unrealized investments gains (losses)(1) 1,078 (267 ) Change in pension and postretirement unrecognized net periodic benefit 20 9 Other comprehensive income (loss)(2) 1,063 (586 ) Comprehensive income (loss) 1,734 (583 ) Comprehensive loss attributable to noncontrolling interests 26 51 Comprehensive income (loss) attributable to Prudential Financial, Inc. $ 1,760 $ (532 ) (1) Includes cash flow hedges of $40 million and $25 million for the three months ended March31, 2010 and 2009, respectively. See Note 4 for additional information regarding unrealized investment gains (losses), including the split between amounts related to fixed maturity securities on which an other-than-temporary impairment loss has been recognized, and all other unrealized investment gains (losses). (2) Amounts are net of tax expense (benefit) of $524 million and $(227) million for the three months ended March31, 2010 and 2009, respectively. The balance of and changes in each component of Accumulated other comprehensive income (loss) attributable to Prudential Financial, Inc. for the three months ended March31, 2010 and 2009 are as follows (net of taxes): AccumulatedOtherComprehensiveIncome(Loss)Attributable to Prudential Financial, Inc. Foreign Currency Translation Adjustment Net Unrealized Investment Gains (Losses)(1) Pension and Postretirement Unrecognized Net Periodic Benefit (Cost) Total Accumulated Other Comprehensive Income (Loss) (in millions) Balance, December31, 2009 $ 674 $ 511 $ (1,628 ) $ (443 ) Change in component during period (35 ) 1,078 20 1,063 Balance, March31, 2010 $ 639 $ 1,589 $ (1,608 ) $ 620 AccumulatedOtherComprehensiveIncome(Loss)Attributableto Pruden

EARNINGS PER SHARE

EARNINGS PER SHARE
	3 Months Ended Mar. 31, 2010
EARNINGS PER SHARE	8.EARNINGS PER SHARE The Company has outstanding two separate classes of common stock. The Common Stock reflects the performance of the Financial Services Businesses and the Class B Stock reflects the performance of the Closed Block Business. Accordingly, earnings per share is calculated separately for each of these two classes of common stock. Net income for the Financial Services Businesses and the Closed Block Business is determined in accordance with U.S. GAAP and includes general and administrative expenses charged to each of the respective businesses based on the Companys methodology for the allocation of such expenses. Cash flows between the Financial Services Businesses and the Closed Block Business related to administrative expenses are determined by a policy servicing fee arrangement that is based upon insurance and policies in force and statutory cash premiums. To the extent reported administrative expenses vary from these cash flow amounts, the differences are recorded, on an after tax basis, as direct equity adjustments to the equity balances of the businesses. The direct equity adjustments modify the earnings available to each of the classes of common stock for earnings per share purposes. Common Stock A reconciliation of the numerators and denominators of the basic and diluted per share computations is as follows: Three Months Ended March31, 2010 2009 Income Weighted Average Shares Per Share Amount Income Weighted Average Shares Per Share Amount (in millions except per share amounts) Basic earnings per share Income (loss) from continuing operations attributable to the Financial Services Businesses $ 512 $ (20 ) Direct equity adjustment 10 11 Less: Income (loss) attributable to noncontrolling interests (26 ) (11 ) Less: Earnings allocated to participating unvested share-based payment awards 7 Income from continuing operations attributable to the Financial Services Businesses available to holders of Common Stock after direct equity adjustment $ 541 463.0 $ 1.17 $ 2 422.1 $ 0.00 Effect of dilutive securities and compensation programs Add: Earnings allocated to participating unvested share-based payment awardsBasic $ 7 $ Less: Earnings allocated to participating unvested share-based payment awardsDiluted 7 Stock options 2.9 0.1 Deferred and long-term compensation programs 0.5 1.0 Exchangeable Surplus Notes 4 5.1 Diluted earnings per share Income from continuing operations attributable to the Financial Services Businesses available to holders of Common Stock after direct equity adjustment $ 545 471.5 $ 1.16 $ 2 423.2 $ 0.00

SHORT-TERM AND LONG-TERM DEBT

SHORT-TERM AND LONG-TERM DEBT
	3 Months Ended Mar. 31, 2010
SHORT-TERM AND LONG-TERM DEBT	9. SHORT-TERM AND LONG-TERM DEBT Commercial Paper The Company issues commercial paper under the two programs described below primarily to manage operating cash flows and existing commitments, to meet working capital needs and to take advantage of current investment opportunities. At March31, 2010 and December31, 2009, the weighted average maturity of total commercial paper outstanding was 29 and 27 days, respectively. Prudential Financial has a commercial paper program rated A-1 by Standard Poors Rating Services (SP), P-2 by Moodys Investors Service, Inc. (Moodys) and F2 by Fitch Ratings Ltd. (Fitch) as of March31, 2010. Prudential Funding, LLC, a wholly owned subsidiary of Prudential Insurance, has a commercial paper program, rated A-1+ by SP, P-2 by Moodys and F1 by Fitch as of March31, 2010. Prudential Financial has issued a subordinated guarantee covering Prudential Fundings domestic commercial paper program. The table below presents the Companys total outstanding commercial paper borrowings as of the dates indicated: March31, 2010 December31, 2009 (in millions) Prudential Financial $ 143 $ 146 Prudential Funding, LLC 733 730 Total outstanding commercial paper borrowings $ 876 $ 876 Medium-term Notes On January14, 2010, Prudential Financial issued under its Medium-term Notes, Series D program $500 million of 2.75% notes due January 2013 and $750 million of 3.875% notes due January 2015. Federal Home Loan Bank of New York Prudential Insurance is a member of the Federal Home Loan Bank of New York or FHLBNY. Membership allows Prudential Insurance access to the FHLBNYs financial services, including the ability to obtain collateralized loans and to issue collateralized funding agreements that can be used as an alternative source of liquidity. FHLBNY borrowings and funding agreements are collateralized by qualifying mortgage-related assets or U.S. Treasury securities, the fair value of which must be maintained at certain specified levels relative to outstanding borrowings, depending on the type of asset pledged. FHLBNY membership requires Prudential Insurance to own member stock and borrowings require the purchase of activity-based stock in an amount equal to 4.5% of outstanding borrowings. Under FHLBNY guidelines, if Prudential Insurances financial strength ratings decline below A/A2/A Stable by SP/Moodys/Fitch, respectively, and the FHLBNY does not receive written assurances from the New Jersey Department of Banking and Insurance, or NJDOBI, regarding Prudential Insurances solvency, new borrowings from the FHLBNY would be limited to a term of 90 days or less. Currently there are no restrictions on the term of borrowings from the FHLBNY. NJDOBI permits Prudential Insurance to pledge collateral to the FHLBNY in an amount up to 7% of its prior year-end statutory net admitted assets, excluding separate account assets. This limitation resets to 5% on December31, 2010 unless extended by NJDOBI. NJDOBI has also limited the aggregate amount of assets that Prudential Insurance may pledge for any loans, including FHLBNY borrowin

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS
	3 Months Ended Mar. 31, 2010
EMPLOYEE BENEFIT PLANS	10.EMPLOYEE BENEFIT PLANS Pension and Other Postretirement Plans The Company has funded and non-funded contributory and non-contributory defined benefit pension plans, which cover substantially all of its employees. For some employees, benefits are based on final average earnings and length of service, while benefits for other employees are based on an account balance that takes into consideration age, service and earnings during their career. The Company provides certain health care and life insurance benefits for its retired employees, their beneficiaries and covered dependents (other postretirement benefits). The health care plan is contributory; the life insurance plan is non-contributory. Substantially all of the Companys U.S. employees may become eligible to receive other postretirement benefits if they retire after age55 with at least 10 years of service or under certain circumstances after age 50 with at least 20 years of continuous service. The Company has elected to amortize its transition obligation for other postretirement benefits over 20years. Net periodic (benefit) cost included in General and administrative expenses includes the following components: ThreeMonthsEndedMarch31, Pension Benefits OtherPostretirement Benefits 2010 2009 2010 2009 (in millions) Components of net periodic (benefit) cost Service cost $ 45 $ 41 $ 3 $ 3 Interest cost 117 115 28 29 Expected return on plan assets (186 ) (182 ) (27 ) (27 ) Amortization of prior service cost 6 7 (3 ) (3 ) Amortization of actuarial (gain) loss, net 10 8 10 11 Special termination benefits 1 Net periodic (benefit) cost $ (7 ) $ (11 ) $ 11 $ 13 The Company has evaluated the impact of the Patient Protection and Affordable Care Act (PPACA) and Health Care and Education Reconciliation Act (HCERA) signed into law in March 2010 on its Retiree Medical obligations and has concluded the impact is not material. The effects of the Acts will be included in the next measurement of the obligation at December31, 2010.

SEGMENT INFORMATION

SEGMENT INFORMATION
	3 Months Ended Mar. 31, 2010
SEGMENT INFORMATION	11.SEGMENT INFORMATION Segments The Company has organized its principal operations into the Financial Services Businesses and the Closed Block Business. Within the Financial Services Businesses, the Company operates through three divisions, which together encompass seven reportable segments. The Companys real estate and relocation services business, as well as businesses that are not sufficiently material to warrant separate disclosure and divested businesses are included in Corporate and Other operations within the Financial Services Businesses. Collectively, the businesses that comprise the three operating divisions and Corporate and Other are referred to as the Financial Services Businesses. Adjusted Operating Income In managing the Financial Services Businesses, the Company analyzes the operating performance of each segment using adjusted operating income. Adjusted operating income does not equate to income from continuing operations before income taxes and equity in earnings of operating joint ventures or net income as determined in accordance with U.S. GAAP but is the measure of segment profit or loss used by the Company to evaluate segment performance and allocate resources, and consistent with authoritative guidance, is the measure of segment performance presented below. Adjusted operating income is calculated by adjusting each segments income from continuing operations before income taxes and equity in earnings of operating joint ventures for the following items, which are described in greater detail below: realized investment gains (losses), net, and related charges and adjustments; net investment gains and losses on trading account assets supporting insurance liabilities and changes in experience-rated contractholder liabilities due to asset value changes; the contribution to income/loss of divested businesses that have been or will be sold or exited but that did not qualify for discontinued operations accounting treatment under U.S. GAAP; and equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests. These items are important to an understanding of overall results of operations. Adjusted operating income is not a substitute for income determined in accordance with U.S. GAAP, and the Companys definition of adjusted operating income may differ from that used by other companies. However, the Company believes that the presentation of adjusted operating income as measured for management purposes enhances the understanding of results of operations by highlighting the results from ongoing operations and the underlying profitability factors of the Financial Services Businesses. Realized investment gains (losses), net, and related charges and adjustments. Adjusted operating income excludes realized investment gains (losses), net, except as indicated below. A significant element of realized investment gains and losses are impairments and credit-related and interest rate-related gains and losses from sales of securities. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on

INCOME TAXES

INCOME TAXES
	3 Months Ended Mar. 31, 2010
INCOME TAXES	12.INCOME TAXES The Companys liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by the Internal Revenue Service (IRS) or other taxing authorities. Audit periods remain open for review until the statute of limitations has passed. Generally, for tax years which produce net operating losses, capital losses or tax credit carryforwards (tax attributes), the statute of limitations does not close, to the extent of these tax attributes, until the expiration of the statute of limitations for the tax year in which they are fully utilized. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The statute of limitations for the 2002 tax year expired on April30, 2009. The statute of limitations for the 2003 tax year expired on July31, 2009. The statute of limitations for the 2004, 2005, and 2006 tax years is set to expire in April 2011. Tax years 2007 through 2009 are still open for IRS examination. The Company does not anticipate any significant changes within the next 12 months to its total unrecognized tax benefits related to tax years for which the statute of limitations has not expired. The dividends received deduction (DRD) reduces the amount of dividend income subject to U.S. tax and is a significant component of the difference between the Companys effective tax rate and the federal statutory tax rate of 35%. The DRD for the current period was estimated using information from 2009, current year results, and was adjusted to take into account the current years equity market performance. The actual current year DRD can vary from the estimate based on factors such as, but not limited to, changes in the amount of dividends received that are eligible for the DRD, changes in the amount of distributions received from mutual fund investments, changes in the account balances of variable life and annuity contracts, and the Companys taxable income before the DRD. In August 2007, the IRS released Revenue Ruling 2007-54, which included, among other items, guidance on the methodology to be followed in calculating the DRD related to variable life insurance and annuity contracts. In September 2007, the IRS released Revenue Ruling 2007-61. Revenue Ruling 2007-61 suspended Revenue Ruling 2007-54 and informed taxpayers that the U.S. Treasury Department and the IRS intend to address through new regulations the issues considered in Revenue Ruling 2007-54, including the methodology to be followed in determining the DRD related to variable life insurance and annuity contracts. On February1, 2010, the Obama Administration released the General Explanations of the Administrations Revenue Proposals. Although the Administration has not released proposed statutory language, one proposal would change the method used to determine the amount of the DRD. A change in the DRD, including the possible retroactive or prospective elimination of this deduction through regulation or legislation, could increase actual tax expense and reduce the Companys consolidated n

FAIR VALUE OF ASSETS AND LIABIL

FAIR VALUE OF ASSETS AND LIABILITIES
	3 Months Ended Mar. 31, 2010
FAIR VALUE OF ASSETS AND LIABILITIES	13.FAIR VALUE OF ASSETS AND LIABILITIES Fair Value MeasurementFair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance around fair value established a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows: Level 1Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following characteristics for the measured asset/liability: (i)many transactions, (ii)current prices, (iii)price quotes not varying substantially among market makers, (iv)narrow bid/ask spreads and (v)most information publicly available. The Companys Level 1 assets and liabilities primarily include certain cash equivalents and short term investments, equity securities and derivative contracts that are traded in an active exchange market. Prices are obtained from readily available sources for market transactions involving identical assets or liabilities. Level 2Fair value is based on significant inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs. The Companys Level 2 assets and liabilities include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed securities, etc.), certain equity securities and commercial mortgage loans, short-term investments and certain cash equivalents (primarily commercial paper), and certain over-the-counter derivatives. Valuations are generally obtained from third party pricing services for identical or comparable assets or liabilities or through the use of valuation methodologies using observable market inputs. Prices from services are validated through comparison to trade data and internal estimates of current fair value, generally developed using market observable inputs and economic indicators. Level 3Fair value is based on at least one or more significant unobservable inputs for the asset or liability. These inputs reflect the Companys assumptions about the assumptions market participants would use in pricing the asset or liability. The Companys Level 3 assets and liabilities primarily in

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS
	3 Months Ended Mar. 31, 2010
DERIVATIVE INSTRUMENTS	14. DERIVATIVE INSTRUMENTS Types of Derivative Instruments and Derivative Strategies used in a non- dealer or broker capacity Interest rate swaps are used by the Company to manage interest rate exposures arising from mismatches between assets and liabilities (including duration mismatches) and to hedge against changes in the value of assets it anticipates acquiring and other anticipated transactions and commitments. Swaps may be attributed to specific assets or liabilities or may be used on a portfolio basis. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated by reference to an agreed upon notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty at each due date. Exchange-traded futures and options are used by the Company to reduce risks from changes in interest rates, to alter mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, and to hedge against changes in the value of securities it owns or anticipates acquiring or selling. In exchange-traded futures transactions, the Company agrees to purchase or sell a specified number of contracts, the values of which are determined by the values of underlying referenced investments, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures and options with regulated futures commissions merchants who are members of a trading exchange. Currency derivatives, including exchange-traded currency futures and options, currency forwards and currency swaps, are used by the Company to reduce risks from changes in currency exchange rates with respect to investments denominated in foreign currencies that the Company either holds or intends to acquire or sell. The Company also uses currency forwards to hedge the currency risk associated with net investments in foreign operations and anticipated earnings of its foreign operations. Under currency forwards, the Company agrees with other parties to deliver a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. As noted above, the Company uses currency forwards to mitigate the risk that unfavorable changes in currency exchange rates will reduce U.S. dollar equivalent earnings generated by certain of its non-U.S. businesses, primarily its international insurance and investments operations. The Company executes forward sales of the hedged currency in exchange for U.S. dollars at a specified exchange rate. The maturities of these forwards correspond with the future periods in which the non-U.S. earnings are expected to be generated. These earnings hedges do not qualify for hedge

COMMITMENTS AND GUARANTEES, CON

COMMITMENTS AND GUARANTEES, CONTINGENT LIABILITIES AND LITIGATION AND REGULATORY MATTERS
	3 Months Ended Mar. 31, 2010
COMMITMENTS AND GUARANTEES, CONTINGENT LIABILITIES AND LITIGATION AND REGULATORY MATTERS	15. COMMITMENTS AND GUARANTEES, CONTINGENT LIABILITIES AND LITIGATION AND REGULATORY MATTERS Commitments and GuaranteesOff-Balance Sheet Arrangements The following information presents the Companys off-balance sheet commitments and guarantees: Commercial Mortgage Loan Commitments AsofMarch31,2010 (in millions) Total outstanding mortgage loan commitments $ 2,055 Portion of commitment where prearrangement to sell to investor exists $ 1,104 In connection with the Companys commercial mortgage operations, it originates commercial mortgage loans. Commitments for loans that will be held for sale are recognized as derivatives and recorded at fair value. In certain of these transactions, the Company prearranges that it will sell the loan to an investor, including to governmental sponsored entities as discussed below, after the Company funds the loan. Commitments to Purchase Investments (excluding Commercial Mortgage Loans) AsofMarch31,2010 (in millions) Expected to be funded from the general account and other operations outside the separate accounts $ 3,316 Expected to be funded from separate accounts $ 3,891 Portion of separate account commitments with recourse to Prudential Insurance $ 1,628 The Company has other commitments to purchase or fund investments, some of which are contingent upon events or circumstances not under the Companys control, including those at the discretion of the Companys counterparties. The Company anticipates a portion of these commitments will ultimately be funded from its separate accounts. Some of the separate account commitments have recourse to Prudential Insurance if the separate accounts are unable to fund the amounts when due. Guarantees of Investee Debt AsofMarch31,2010 (in millions) Total guarantees of debt issued by entities in which the separate accounts have invested $ 1,888 Amount of above guarantee that is limited to separate account assets $ 1,775 Accrued liability associated with guarantee $ A number of guarantees provided by the Company relate to real estate investments held in its separate accounts, in which entities that the separate account has invested in have borrowed funds, and the Company has guaranteed their obligations. The Company provides these guarantees to assist these entities in obtaining financing. The Companys maximum potential exposure under these guarantees is mostly limited to the assets of the separate account. The exposure that is not limited to the separate account assets relates to guarantees limited to fraud, criminal activity or other bad acts. These guarantees generally expire at various times over the next fifteen years. At March31, 2010, the Companys assessment is that it is unlikely payments will be required. Any payments that may become required under these guarantees would either first be reduced by proceeds received by the creditor on a sale of the underlying collateral, or would provide rights to obtain the underlying collateral. Guarantee of Retail Development Project Costs AsofMarch31,2010 (in million