August 5, 2003 - QUARTERLY FINANCIAL SUPPLEMENT - 8-K: Current report

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Prudential Financial, Inc. (PRU)

Quarterly Financial Supplement

FINANCIAL SERVICES BUSINESSES

SECOND QUARTER 2003

Reference is made to Prudential Financial, Inc.’s filings with the Securities and Exchange Commission for general information, and consolidated financial information, regarding Prudential Financial, Inc., including its Closed Block Business.

August 5, 2003

Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

CONTENTS

		Page
HIGHLIGHTS
Financial Highlights		1-2
Operations Highlights		3

FINANCIAL SERVICES BUSINESSES
Combined Statements of Operations		4
Combined Balance Sheets		5
Combining Statements of Operations by Division (Quarter)		6
Combining Statements of Operations by Division (Year-to Date)		7
Combining Balance Sheets by Division		8
Short-Term Debt		9
Long-Term Debt		10

INSURANCE DIVISION
Combined Statements of Operations		11
Combining Statements of Operations (Quarter)		12
Combining Statements of Operations (Year-to-Date)		13
Individual Life and Annuities Sales Results and Account Values		14
Individual Life and Annuities Segment Account Value Activity		15
Deferred Policy Acquisition Costs		16
Supplementary Information for Individual Life Insurance		17
Supplementary Information for Group Insurance		18

INVESTMENT DIVISION
Combined Statements of Operations		19
Combining Statements of Operations (Quarter)		20
Combining Statements of Operations (Year-to-Date)		21
Supplementary Revenue Information for Investment Management and Financial Advisory Segments		22
Assets Under Management for Investment Management and Advisory Services operations		23
Mutual Funds and Wrap-fee Products Sales Results and Assets Under Management		24
Retirement Sales Results and Account Values		25

INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION
Combined Statements of Operations		26
Combining Statements of Operations		27
Sales Results and Supplementary Information		28-29

INVESTMENT PORTFOLIO
Investment Portfolio Composition		30
Financial Services Businesses Investment Portfolio Composition—Japanese Insurance Operations and Excluding Japanese Insurance Operations		31
Financial Services Businesses Investment Results		32
Financial Services Businesses Investment Results—Japanese Insurance Operations		33
Financial Services Businesses Investment Results—Excluding Japanese Insurance Operations		34

RECLASSIFIED STATEMENTS OF OPERATIONS		35-39

FINANCIAL SERVICES BUSINESSES RECONCILIATION OF ADJUSTED OPERATING INCOME TO INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		40

KEY DEFINITIONS AND FORMULAS		41-43

RATINGS AND INVESTOR INFORMATION		44

Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

In May 2003, Prudential Financial, Inc. announced its agreements to sell its National and New Jersey property and casualty insurance businesses.

This Quarterly Financial Supplement presents historical results of the Company’s Financial Services Businesses, reflecting the classification of results for the National and New Jersey property and casualty insurance businesses as well as its Merastar personal lines property and casualty business as divested business. Results of the specialty automobile insurance business, for which the Company announced an agreement to sell in March 2003, are classified as discontinued operations.

In addition, this Quarterly Financial Supplement reflects the classification of certain operations of two Japanese asset management units of the International Investments segment (Prudential Asset Management Japan and Prudential Investment Management Japan) as divested businesses for all periods presented, as a result of the company’s decision to exit these operations.

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Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

FINANCIAL HIGHLIGHTS

(in millions, except per share data)

Year-to-date							2002						2003
2003		2002		% Change			2Q		3Q		4Q		1Q		2Q
						Financial Services Businesses:
						Pre-tax adjusted operating income by division:
399		332		20	%	Insurance Division	149		76		137		163		236
152		196		-22	%	Investment Division	92		52		36		74		78
395		387		2	%	International Insurance and Investments Division	183		188		176		178		217
19		53		-64	%	Corporate and other operations	41		114		1		19		—

965		968		—		Total pre-tax adjusted operating income	465		430		350		434		531
314		362		-13	%	Income taxes, applicable to adjusted operating income	175		126		100		141		173

651		606		7	%	Financial Services Businesses after-tax adjusted operating income	290		304		250		293		358


						Items excluded from adjusted operating income:
(124	)	(441	)	72	%	Realized investment losses, net, and related charges and adjustments	(345	)	(142	)	(284	)	(113	)	(11	)
—		—		—		Sales practices remedies and costs	—		—		(20	)	—		—
(399	)	49		-914	%	Divested businesses	31		(13	)	(59	)	3		(402	)

(523	)	(392	)	-33	%	Total items excluded from adjusted operating income, before income taxes	(314	)	(155	)	(363	)	(110	)	(413	)
(205	)	(151	)	-36	%	Income taxes, applicable to items excluded from adjusted operating income	(122	)	(231	)	(120	)	(36	)	(169	)

(318	)	(241	)	-32	%	Total items excluded from adjusted operating income, after income taxes	(192	)	76		(243	)	(74	)	(244	)

333		365		-9	%	Income from continuing operations (after-tax) of Financial Services Businesses	98		380		7		219		114
(9	)	(7	)	-29	%	Income (loss) from discontinued operations, net of taxes	(3	)	12		(78	)	(22	)	13

324		358		-9	%	Net income (loss) of Financial Services Businesses	95		392		(71	)	197		127


						Earnings per share of Common Stock (diluted):
1.22		1.07				Financial Services Businesses after-tax adjusted operating income	0.52		0.54		0.47		0.56		0.67
						Items excluded from adjusted operating income:
(0.22	)	(0.75	)			Realized investment losses, net, and related charges and adjustments	(0.59	)	(0.25	)	(0.50	)	(0.20	)	(0.02	)
—		—				Sales practices remedies and costs	—		—		(0.04	)	—		—
(0.72	)	0.08				Divested businesses	0.05		(0.02	)	(0.10	)	—		(0.73	)

(0.94	)	(0.67	)			Total items excluded from adjusted operating income, before income taxes	(0.54	)	(0.27	)	(0.64	)	(0.20	)	(0.75	)
(0.37	)	(0.26	)			Income taxes, applicable to items excluded from adjusted operating income	(0.21	)	(0.40	)	(0.21	)	(0.07	)	(0.30	)

(0.57	)	(0.41	)			Total items excluded from adjusted operating income, after income taxes	(0.33	)	0.13		(0.43	)	(0.13	)	(0.45	)

0.65		0.66				Income from continuing operations (after-tax) of Financial Services Businesses	0.19		0.67		0.04		0.43		0.22
(0.02	)	(0.01	)			Income (loss) from discontinued operations, net of taxes	—		0.03		(0.14	)	(0.04	)	0.03

0.63		0.65				Net income (loss) of Financial Services Businesses	0.19		0.70		(0.10	)	0.39		0.25

552.9		585.2				Weighted average number of outstanding Common shares (diluted basis)	585.2		576.8		565.0		556.5		549.4

7.37	%	6.60	%			Operating Return on Average Equity (based on adjusted operating income)	6.37	%	6.58	%	5.64	%	6.76	%	7.98	%

						Reconciliation to Consolidated Net Income of Prudential Financial, Inc:
324		358				Net income (loss) of Financial Services Businesses (above)	95		392		(71	)	197		127
68		(273	)			Net income (loss) of Closed Block Business	(163	)	(90	)	(122	)	(1	)	69

392		85				Consolidated net income (loss)	(68	)	302		(193	)	196		196

26		21				Direct equity adjustments for earnings per share calculations	14		9		13		18		8

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Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

FINANCIAL HIGHLIGHTS

(in millions, except per share data)

Year-to-date			2002			2003
2003	2002		2Q	3Q	4Q	1Q	2Q
		Financial Services Businesses Capitalization Data (1):
		Short-term debt	4,221	3,852	3,469	4,212	5,416
		Long-term debt	3,003	3,077	3,007	2,582	2,663
		Equity Security Units (2)	690	690	690	690	690

		Attributed Equity (3):
		Including accumulated other comprehensive income	20,258	21,039	20,562	21,059	21,768
		Excluding unrealized gains and losses on investments	19,144	18,931	18,394	18,388	18,318
		Excluding accumulated other comprehensive income	19,321	19,153	18,621	18,596	18,523

		Total Capitalization:
		Including accumulated other comprehensive income	23,951	24,806	24,259	24,331	25,121
		Excluding unrealized gains and losses on investments	22,837	22,698	22,091	21,660	21,671
		Excluding accumulated other comprehensive income	23,014	22,920	22,318	21,868	21,876

		Book value per share of Common Stock:
		Including accumulated other comprehensive income	34.72	37.03	36.67	38.12	39.83
		Excluding unrealized gains and losses on investments	32.81	33.32	32.80	33.28	33.52
		Excluding accumulated other comprehensive income	33.12	33.71	33.20	33.66	33.89

		Number of diluted shares at end of period	583.4	568.1	560.8	552.5	546.5

		Common Stock Price Range (based on closing price):
34.50	35.75	High	35.75	32.99	32.10	33.93	34.50
27.56	30.05	Low	31.05	27.35	25.50	27.56	29.84
33.65	33.36	Close	33.36	28.56	31.74	29.25	33.65

		Common Stock market capitalization (1)	19,448	16,235	17,782	16,153	18,405

(1)

As of end of period.

(2)

Guaranteed beneficial interest in Trust holding solely debentures of Parent, as reported in combined balance sheet.

(3)

During the third quarter of 2002, in conjunction with the Company’s review of its allocation of deferred taxes between the Closed Block and Financial Services Businesses, the Company determined that deferred taxes that had been included in the Closed Block Business were more appropriately reflected within the Financial Services Businesses. Accordingly, deferred taxes of $130 million were transferred from the Closed Block Business to the Financial Services Businesses resulting in a $130 million decrease in “Other attributed equity” of the Financial Services Businesses and a corresponding increase in “Other attributed equity” of the Closed Block Business.

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Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

OPERATIONS HIGHLIGHTS

Year-to-date			2002			2003
2003	2002		2Q	3Q	4Q	1Q	2Q
		Assets Under Management and Administration ($ billions) (1) (2):
		Assets Under Management :
		Managed by Investment Division:
		Investment Management Segment—Investment Management & Advisory Services
		Retail customers	84.8	77.3	79.9	78.9	82.5
		Institutional customers	83.5	79.8	85.2	84.2	89.2
		General account	116.0	119.5	122.9	123.6	127.1

		Total Investment Management and Advisory Services	284.3	276.6	288.0	286.7	298.8
		Non-proprietary wrap-fee and other assets under management	38.2	32.7	33.0	32.7	40.7

		Total managed by Investment Division	322.5	309.3	321.0	319.4	339.5
		Managed by International Insurance and Investments Division (3):	37.9	46.6	47.9	47.6	50.0
		Managed by Insurance Division	8.0	7.2	8.8	8.5	32.9

		Total assets under management	368.4	363.1	377.7	375.5	422.4
		Client assets under administration (3) (4)	188.4	173.7	177.9	174.4	186.5

		Total assets under management and administration	556.8	536.8	555.6	549.9	608.9

		Assets managed or administered for customers outside of the United States at end of period (4)	70.5	77.9	83.6	83.4	89.6

		Distribution Representatives (1):
		Prudential Agents	4,551	4,478	4,389	4,327	4,290
		Financial Advisors (5)	5,306	4,960	4,731	4,519	4,233
		International Life Planners	4,207	4,353	4,505	4,552	4,689
		Gibraltar Life Advisors	5,525	5,233	5,155	4,993	4,877

		Distribution Representative Productivity:
36	37	Prudential Agent productivity ($ thousands)	38	36	43	34	39
410	375	Financial Advisor productivity ($ thousands)	372	378	357	390	429

		Third Party Distribution—Retail Products ($ millions) (6):
41	33	Individual life insurance (7)	17	15	24	21	20
18	85	Corporate-owned life insurance sales	76	21	15	4	14
757	35	Individual annuities	24	50	48	58	699
1,399	1,475	Mutual funds and wrap-fee products	1,019	970	1,207	616	783

(1)

As of end of period.

(2)

At fair market value.

(3)

Reflects inclusion in assets managed by International Insurance and Investments Division of $3.9 billion at September 30, 2002 and $4.3 billion at December 31, 2002, representing amounts relating to recently acquired entities and formerly classified as client assets under administration, to conform to current presentation based on internal management criteria.

(4)

Assets under administration and Assets managed or administered for customers outside of the United States at end of period at June 30, 2003 include approximately $155 billion and $8 billion, respectively associated with businesses that were combined into Wachovia Securities, LLC effective July 1, 2003. As a result, Prudential Financial, Inc. will no longer report these assets as a component of its assets under management and administration, for periods after June 30, 2003.

(5)

All periods exclude financial advisors associated with our discontinued international securities operations. June 30, 2003, includes approximately 3,900 financial advisors of our Financial Advisory segment that were combined into Wachovia Securities, LLC effective July 1, 2003. As a result, Prudential Financial, Inc. will no longer include these financial advisors in reported amounts for periods after June 30, 2003.

(6)

Represents statutory first year premiums and deposits for Individual Life Insurance, including corporate-owned life insurance, and gross sales for Individual Annuities, Mutual Funds and Wrap-fee products.

(7)

Excludes corporate-owned life insurance sales.

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Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

COMBINED STATEMENTS OF OPERATIONS—FINANCIAL SERVICES BUSINESSES

(in millions)

Year-to-date				% Change			2002						2003
2003		2002		% Change			2Q		3Q		4Q		1Q		2Q
						Revenues(1):
3,998		3,600		11	%	Premiums	1,815		1,870		1,991		2,015		1,983
867		846		2	%	Policy charges and fee income	412		400		407		416		451
2,505		2,517		—		Net investment income	1,313		1,282		1,256		1,253		1,252
1,965		2,106		-7	%	Commissions, investment management fees, and other income	1,031		996		974		899		1,066

9,335		9,069		3	%	Total revenues	4,571		4,548		4,628		4,583		4,752

						Benefits and Expenses(1):
4,090		3,750		9	%	Insurance and annuity benefits	1,912		1,913		2,130		2,107		1,983
839		829		1	%	Interest credited to policyholders’ account balances	415		434		444		418		421
74		91		-19	%	Interest expense	43		43		36		37		37
(605	)	(505	)	-20	%	Deferral of acquisition costs	(263	)	(275	)	(284	)	(285	)	(320	)
302		318		-5	%	Amortization of acquisition costs	179		263		158		160		142
1,166		1,281		-9	%	Securities operations non-interest expenses	641		609		599		550		616
2,504		2,337		7	%	General and administrative expenses	1,179		1,131		1,195		1,162		1,342

8,370		8,101		3	%	Total benefits and expenses	4,106		4,118		4,278		4,149		4,221

965		968		—		Adjusted operating income before income taxes	465		430		350		434		531

						Items excluded from adjusted operating income before income taxes:
(105	)	(442	)	76	%	Realized investment gains (losses), net, and related adjustments	(341	)	(141	)	(290	)	(114	)	9
(19	)	1		-2000	%	Related charges	(4	)	(1	)	6		1		(20	)

(124	)	(441	)	72	%	Total realized investment losses, net, and related charges and adjustments	(345	)	(142	)	(284	)	(113	)	(11	)

—		—		—		Sales practices remedies and costs	—		—		(20	)	—		—
(399	)	49		-914	%	Divested businesses	31		(13	)	(59	)	3		(402	)

(523	)	(392	)	-33	%	Total items excluded from adjusted operating income before income taxes	(314	)	(155	)	(363	)	(110	)	(413	)

442		576		-23	%	Income (loss) from continuing operations before income taxes	151		275		(13	)	324		118
109		211		-48	%	Income tax expense (benefit)	53		(105	)	(20	)	105		4

333		365		-9	%	Income from continuing operations, after-tax	98		380		7		219		114

(1)

Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses and discontinued operations. Benefits and expenses exclude charges related to realized investment gains, net of losses, sales practices remedies and costs, and benefits and expenses of divested businesses and discontinued operations.

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Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

COMBINED BALANCE SHEETS—FINANCIAL SERVICES BUSINESSES

(in millions)

	6/30/2002	9/30/2002	12/31/2002	3/31/2003	6/30/2003
Assets:
Investments:
Fixed maturities, available for sale, at fair value
(amortized cost $70,745; $72,962; $74,665; $76,766; $77,995)	72,700	76,815	79,230	82,311	85,283
Fixed maturities, held to maturity, at amortized cost
(fair value $2,293; $2,385; $2,673; $2,859; $2,867)	2,268	2,376	2,612	2,772	2,793
Trading account assets, at fair value	6,038	4,419	3,449	3,359	3,831
Equity securities, available for sale, at fair value
(cost $1,748; $1,815; $1,313; $1,101; $991)	1,868	1,714	1,286	1,038	1,044
Commercial loans	12,752	12,649	12,300	12,234	12,040
Policy loans	2,982	3,036	3,146	2,923	2,992
Securities purchased under agreements to resell	5,136	5,256	4,844	5,990	5,424
Cash collateral for borrowed securities	5,530	5,691	4,978	4,429	5,440
Other long-term investments	4,216	4,329	4,333	4,476	4,546
Short-term investments	2,848	2,082	2,840	1,671	1,960

Total investments	116,338	118,367	119,018	121,203	125,353
Cash and cash equivalents	8,344	9,115	7,470	7,339	6,743
Accrued investment income	1,069	1,084	1,021	1,095	1,095
Broker-dealer related receivables	7,091	5,486	5,631	5,126	6,425
Deferred policy acquisition costs	5,859	5,750	5,875	5,926	5,997
Other assets	16,213	14,699	13,730	15,001	17,369
Separate account assets	75,101	69,900	70,555	70,710	99,116

Total assets	230,015	224,401	223,300	226,400	262,098

Liabilities:
Future policy benefits	40,319	41,395	42,213	43,243	43,792
Policyholders’ account balances	38,916	40,325	40,799	41,487	42,345
Unpaid claims and claim adjustment expenses	3,352	3,363	3,428	3,513	3,494
Securities sold under agreements to repurchase	10,557	10,675	10,250	10,907	9,835
Cash collateral for loaned securities	8,959	7,645	7,517	7,300	7,289
Income taxes payable	1,609	1,967	1,910	2,259	2,352
Broker-dealer related payables	6,076	4,498	4,838	4,915	6,099
Securities sold but not yet purchased	3,185	2,417	1,996	2,076	2,220
Short-term debt	4,221	3,852	3,469	4,212	5,416
Long-term debt	3,003	3,077	3,007	2,582	2,663
Other liabilities	13,769	13,558	12,066	11,447	15,019
Separate account liabilities	75,101	69,900	70,555	70,710	99,116

Total liabilities	209,067	202,672	202,048	204,651	239,640

Guaranteed beneficial interest in Trust holding solely debentures of Parent	690	690	690	690	690
Attributed Equity:
Accumulated other comprehensive income	937	1,886	1,941	2,463	3,245
Other attributed equity	19,321	19,153	18,621	18,596	18,523

Total attributed equity	20,258	21,039	20,562	21,059	21,768

Total liabilities and attributed equity	230,015	224,401	223,300	226,400	262,098

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Quarterly Financial Supplement

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES COMBINING STATEMENTS OF OPERATIONS—BY DIVISION

(in millions)

	Quarter Ended June 30, 2003
	Total Financial Services Businesses		Insurance Division		Investment Division		International Insurance & Investments Division		Corporate and Other Operations
Revenues (1) :
Premiums	1,983		852		8		1,129		(6	)
Policy charges and fee income	451		378		19		58		(4	)
Net investment income	1,252		365		557		205		125
Commissions, investment management fees, and other income	1,066		84		908		87		(13	)

Total revenues	4,752		1,679		1,492		1,479		102

Benefits and Expenses (1):
Insurance and annuity benefits	1,983		891		204		865		23
Interest credited to policyholders’ account balances	421		161		233		27		—
Interest expense	37		(1	)	4		1		33
Deferral of acquisition costs	(320	)	(149	)	(8	)	(175	)	12
Amortization of acquisition costs	142		69		17		71		(15	)
Securities operations non-interest expenses	616		—		600		—		16
General and administrative expenses	1,342		472		364		473		33

Total benefits and expenses	4,221		1,443		1,414		1,262		102

Adjusted operating income before income taxes	531		236		78		217		—


	Quarter Ended June 30, 2002
	Total Financial Services Businesses		Insurance Division		Investment Division		International Insurance & Investments Division		Corporate and Other Operations
Revenues (1):
Premiums	1,815		790		21		1,006		(2	)
Policy charges and fee income	412		350		19		49		(6	)
Net investment income	1,313		348		603		181		181
Commissions, investment management fees, and other income	1,031		59		958		93		(79	)

Total revenues	4,571		1,547		1,601		1,329		94

Benefits and Expenses (1):
Insurance and annuity benefits	1,912		851		231		799		31
Interest credited to policyholders’ account balances	415		153		238		24		—
Interest expense	43		(1	)	5		—		39
Deferral of acquisition costs	(263	)	(123	)	(14	)	(147	)	21
Amortization of acquisition costs	179		133		27		44		(25	)
Securities operations non-interest expenses	641		—		645		—		(4	)
General and administrative expenses	1,179		385		377		426		(9	)

Total benefits and expenses	4,106		1,398		1,509		1,146		53

Adjusted operating income before income taxes	465		149		92		183		41

(1)

Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses and discontinued operations. Benefits and expenses exclude charges related to realized investment gains, net of losses, and benefits and expenses of divested businesses and discontinued operations.

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Quarterly Financial Supplement

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES COMBINING STATEMENTS OF OPERATIONS—BY DIVISION

(in millions)

	Six Months Ended June 30, 2003
	Total Financial Services Businesses		Insurance Division		Investment Division		International Insurance & Investments Division		Corporate and Other Operations
Revenues (1) :
Premiums	3,998		1,718		22		2,270		(12	)
Policy charges and fee income	867		725		37		112		(7	)
Net investment income	2,505		724		1,116		398		267
Commissions, investment management fees, and other income	1,965		139		1,724		161		(59	)

Total revenues	9,335		3,306		2,899		2,941		189

Benefits and Expenses (1):
Insurance and annuity benefits	4,090		1,847		414		1,771		58
Interest credited to policyholders’ account balances	839		318		469		52		—
Interest expense	74		(2	)	8		1		67
Deferral of acquisition costs	(605	)	(261	)	(15	)	(352	)	23
Amortization of acquisition costs	302		154		36		145		(33	)
Securities operations non-interest expenses	1,166		—		1,141		—		25
General and administrative expenses	2,504		851		694		929		30

Total benefits and expenses	8,370		2,907		2,747		2,546		170

Adjusted operating income before income taxes	965		399		152		395		19


	Six Months Ended June 30, 2002
	Total Financial Services Businesses		Insurance Division		Investment Division		International Insurance & Investments Division		Corporate and Other Operations
Revenues (1):
Premiums	3,600		1,549		29		2,022		—
Policy charges and fee income	846		708		38		106		(6	)
Net investment income	2,517		689		1,168		339		321
Commissions, investment management fees, and other income	2,106		116		1,925		191		(126	)

Total revenues	9,069		3,062		3,160		2,658		189

Benefits and Expenses (1):
Insurance and annuity benefits	3,750		1,682		428		1,582		58
Interest credited to policyholders’ account balances	829		300		481		48		—
Interest expense	91		(1	)	8		—		84
Deferral of acquisition costs	(505	)	(219	)	(28	)	(298	)	40
Amortization of acquisition costs	318		206		48		109		(45	)
Securities operations non-interest expenses	1,281		—		1,280		—		1
General and administrative expenses	2,337		762		747		830		(2	)

Total benefits and expenses	8,101		2,730		2,964		2,271		136

Adjusted operating income before income taxes	968		332		196		387		53

(1)

Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses and discontinued operations. Benefits and expenses exclude charges related to realized investment gains, net of losses, and benefits and expenses of divested businesses and discontinued operations.

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES COMBINING BALANCE SHEETS—BY DIVISION

(in millions)

	As of June 30, 2003
	Total Financial Services Businesses	Insurance Division	Investment Division	International Insurance & Investments Division	Corporate and Other Operations
Assets:
Total investments	125,353	26,837	47,847	38,090	12,579
Broker-dealer related receivables	6,425	—	5,407	779	239
Deferred policy acquisition costs	5,997	3,647	18	2,301	31
Other assets	25,207	4,570	10,759	4,002	5,876
Separate account assets	99,116	58,325	41,202	541	(952	)

Total assets	262,098	93,379	105,233	45,713	17,773

Liabilities:
Future policy benefits	43,792	4,712	13,383	24,571	1,126
Policyholders’ account balances	42,345	15,806	16,854	9,676	9
Debt	8,079	188	3,749	709	3,433
Other liabilities	46,308	7,466	25,795	5,866	7,181
Separate account liabilities	99,116	58,325	41,202	541	(952	)

Total liabilities	239,640	86,497	100,983	41,363	10,797

Guaranteed beneficial interest in Trust holding solely debentures of Parent	690	—	—	—	690

Attributed Equity:
Accumulated other comprehensive income	3,245	831	833	1,190	391
Other attributed equity	18,523	6,051	3,417	3,160	5,895

Total attributed equity	21,768	6,882	4,250	4,350	6,286

Total liabilities and attributed equity	262,098	93,379	105,233	45,713	17,773


	As of December 31, 2002
	Total Financial Services Businesses	Insurance Division	Investment Division	International Insurance & Investments Division	Corporate and Other Operations
Assets:
Total investments	119,018	25,091	44,947	36,358	12,622
Broker-dealer related receivables	5,631	—	4,516	399	716
Deferred policy acquisition costs	5,875	3,640	28	2,158	49
Other assets	22,221	3,128	7,898	4,141	7,054
Separate account assets	70,555	31,175	39,715	499	(834	)

Total assets	223,300	63,034	97,104	43,555	19,607

Liabilities:
Future policy benefits	42,213	4,634	12,835	23,624	1,120
Policyholders’ account balances	40,799	14,947	16,252	9,598	2
Debt	6,476	—	3,551	849	2,076
Other liabilities	42,005	6,789	20,873	5,484	8,859
Separate account liabilities	70,555	31,175	39,715	499	(834	)

Total liabilities	202,048	57,545	93,226	40,054	11,223

Guaranteed beneficial interest in Trust holding solely debentures of Parent	690	—	—	—	690

Attributed Equity:
Accumulated other comprehensive income (loss)	1,941	885	587	480	(11	)
Other attributed equity	18,621	4,604	3,291	3,021	7,705

Total attributed equity	20,562	5,489	3,878	3,501	7,694

Total liabilities and attributed equity	223,300	63,034	97,104	43,555	19,607

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Second Quarter 2003

SHORT TERM DEBT—FINANCIAL SERVICES BUSINESSES

(in millions)

	As of June 30, 2003				As of December 31, 2002
	Prudential Financial, Inc.	The Prudential Insurance Co. of America(a)	Other Affiliates	Total	Prudential Financial, Inc.	The Prudential Insurance Co. of America(a)	Other Affiliates	Total


Borrowings by use of proceeds:
General corporate purposes	—	49	—	49	—	306	—	306
Investment related	443	254	—	697	—	154	—	154
Securities business related	9	1,957	1,748	3,714	—	959	1,256	2,215
Specified other businesses	47	744	164	955	—	514	279	793
Limited recourse and non-recourse borrowing	—	—	1	1	—	—	1	1

Total short-term debt	499	3,004	1,913	5,416	—	1,933	1,536	3,469

Borrowings by type:
Long-term debt due within one year	—	546	—	546	—	637	—	637
Commercial paper	499	2,442	—	2,941	—	1,265	—	1,265
Bank borrowings	—	—	1,406	1,406	—	—	913	913
Other short-term debt	—	16	506	522	—	31	622	653

Total general obligations	499	3,004	1,912	5,415	—	1,933	1,535	3,468
Limited recourse and non-recourse borrowing	—	—	1	1	—	—	1	1

Total short-term debt	499	3,004	1,913	5,416	—	1,933	1,536	3,469

(a)

Includes Prudential Funding, LLC.

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Second Quarter 2003

LONG TERM DEBT

(in millions)

	As of June 30, 2003
	General Corporate Purposes		Investment Related	Securities Business Related	Specified Other Businesses	Total General Obligations	Limited Recourse and non-Recourse	Total Borrowing



Financial Services Businesses:
Prudential Financial, Inc.:
Long-term fixed and floating rate notes	388		—	21	103	512	—	512
Hybrid notes	—		—	—	—	—	—	—

Total	388		—	21	103	512	—	512

The Prudential Insurance Company of America (a):
Surplus notes	691		—	—	—	691	—	691
Long-term fixed and floating rate notes	600		318	—	—	918	—	918
Commercial paper backed by long-term credit agreements	—		—	—	—	—	—	—

Total	1,291		318	—	—	1,609	—	1,609

Long-term debt of other affiliated companies	—		—	—	—	—	542	542

Total long-term debt of Financial Services Businesses	1,679		318	21	103	2,121	542	2,663

Ratio of long-term and short-term corporate debt to capitalization	9.0	%

Closed Block Business:
Limited recourse notes of Prudential Holdings, LLC	—		—	—	—	—	1,750	1,750


	As of December 31, 2002
	General Corporate Purposes		Investment Related	Securities Business Related	Specified Other Businesses	Total General Obligations	Limited Recourse and non-Recourse	Total Borrowing
Financial Services Businesses:
Prudential Financial, Inc.:
Long-term fixed and floating rate notes	—		—	—	—	—	—	—
Hybrid notes	—		—	—	—	—	—	—

Total	—		—	—	—	—	—	—

The Prudential Insurance Company of America (a):
Surplus notes	690		—	—	—	690	—	690
Long-term fixed and floating rate notes	600		745	399	—	1,744	—	1,744
Commercial paper backed by long-term credit agreements	—		—	—	—	—	—	—

Total	1,290		745	399	—	2,434	—	2,434

Long-term debt of other affiliated companies	—		—	—	—	—	573	573

Total long-term debt of Financial Services Businesses	1,290		745	399	—	2,434	573	3,007

Ratio of long-term and short-term corporate debt to capitalization	8.4	%

Closed Block Business:
Limited recourse notes of Prudential Holdings, LLC	—		—	—	—	—	1,750	1,750

(a)

Includes Prudential Funding, LLC.

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Second Quarter 2003

COMBINED STATEMENTS OF OPERATIONS—INSURANCE DIVISION

(in millions)

Year-to-date				%			2002						2003
2003		2002		Change			2Q		3Q		4Q		1Q		2Q
						Revenues (1):
1,718		1,549		11	%	Premiums	790		802		899		866		852
725		708		2	%	Policy charges and fee income	350		342		347		347		378
724		689		5	%	Net investment income	348		359		363		359		365
139		116		20	%	Commissions, investment management fees, and other income	59		58		54		55		84

3,306		3,062		8	%	Total revenues	1,547		1,561		1,663		1,627		1,679

						Benefits and Expenses (1):
1,847		1,682		10	%	Insurance and annuity benefits	851		863		989		956		891
318		300		6	%	Interest credited to policyholders’ account balances	153		163		170		157		161
(2	)	(1	)	-102	%	Interest expense	(1	)	(2	)	(2	)	(1	)	(1	)
(261	)	(219	)	-19	%	Deferral of acquisition costs	(123	)	(117	)	(116	)	(112	)	(149	)
154		206		-25	%	Amortization of acquisition costs	133		198		94		85		69
851		762		12	%	General and administrative expenses	385		380		391		379		472

2,907		2,730		6	%	Total benefits and expenses	1,398		1,485		1,526		1,464		1,443

399		332		20	%	Adjusted operating income before income taxes	149		76		137		163		236

(1)

Revenues exclude realized investment gains, net of losses and related adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.

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Second Quarter 2003

COMBINING STATEMENTS OF OPERATIONS—INSURANCE DIVISION

(in millions)

	Quarter Ended June 30, 2003
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life and Annuities
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life		Individual Annuities
Revenues (1):
Premiums	852		111		741		96		15
Policy charges and fee income	378		366		12		258		108
Net investment income	365		215		150		101		114
Commissions, investment management fees, and other income	84		77		7		31		46

Total revenues	1,679		769		910		486		283

Benefits and Expenses (1):
Insurance and annuity benefits	891		219		672		178		41
Interest credited to policyholders’ account balances	161		104		57		38		66
Interest expense	(1	)	(1	)	—		(1	)	—
Deferral of acquisition costs	(149	)	(139	)	(10	)	(74	)	(65	)
Amortization of acquisition costs	69		69		—		49		20
General and administrative expenses (2)	472		339		133		183		156

Total benefits and expenses	1,443		591		852		373		218

Adjusted operating income before income taxes	236		178		58		113		65


	Quarter Ended June 30, 2002
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life and Annuities
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life		Individual Annuities
Revenues (1):
Premiums	790		86		704		65		21
Policy charges and fee income	350		308		42		252		56
Net investment income	348		201		147		101		100
Commissions, investment management fees, and other income	59		53		6		37		16

Total revenues	1,547		648		899		455		193

Benefits and Expenses (1):
Insurance and annuity benefits	851		165		686		128		37
Interest credited to policyholders’ account balances	153		96		57		36		60
Interest expense	(1	)	—		(1	)	—		—
Deferral of acquisition costs	(123	)	(115	)	(8	)	(80	)	(35	)
Amortization of acquisition costs	133		133		—		63		70
General and administrative expenses	385		256		129		178		78

Total benefits and expenses	1,398		535		863		325		210

Adjusted operating income before income taxes	149		113		36		130		(17	)

(1)

Revenues exclude realized investment gains, net of losses and related adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.

(2)

General and administrative expenses for Individual Annuities include $11 million for the quarter ended June 30, 2003 for the amortization of value of business acquired (VOBA) associated with the May 1, 2003 acquisition of American Skandia.

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Second Quarter 2003

COMBINING STATEMENTS OF OPERATIONS—INSURANCE DIVISION

(in millions)

	Six Months Ended June 30, 2003
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life and Annuities
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life		Individual Annuities
Revenues (1):
Premiums	1,718		224		1,494		190		34
Policy charges and fee income	725		664		61		512		152
Net investment income	724		423		301		202		221
Commissions, investment management fees, and other income	139		124		15		65		59

Total revenues	3,306		1,435		1,871		969		466

Benefits and Expenses (1):
Insurance and annuity benefits	1,847		435		1,412		351		84
Interest credited to policyholders’ account balances	318		201		117		74		127
Interest expense	(2	)	(2	)	—		(2	)	—
Deferral of acquisition costs	(261	)	(243	)	(18	)	(151	)	(92	)
Amortization of acquisition costs	154		153		1		116		37
General and administrative expenses (2)	851		584		267		362		222

Total benefits and expenses	2,907		1,128		1,779		750		378

Adjusted operating income before income taxes	399		307		92		219		88


	Six Months Ended June 30, 2002
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life and Annuities
	Total Insurance Division		Individual Life and Annuities		Group Insurance		Individual Life		Individual Annuities
Revenues (1):
Premiums	1,549		151		1,398		121		30
Policy charges and fee income	708		614		94		502		112
Net investment income	689		406		283		206		200
Commissions, investment management fees, and other income	116		102		14		69		33

Total revenues	3,062		1,273		1,789		898		375

Benefits and Expenses (1):
Insurance and annuity benefits	1,682		322		1,360		257		65
Interest credited to policyholders’ account balances	300		189		111		69		120
Interest expense	(1	)	—		(1	)	—		—
Deferral of acquisition costs	(219	)	(209	)	(10	)	(146	)	(63	)
Amortization of acquisition costs	206		209		(3	)	116		93
General and administrative expenses	762		503		259		355		148

Total benefits and expenses	2,730		1,014		1,716		651		363

Adjusted operating income before income taxes	332		259		73		247		12

(1)

Revenues exclude realized investment gains, net of losses and related adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.

(2)

General and administrative expenses for Individual Annuities include $11 million for the six months ended June 30, 2003 for the amortization of value of business acquired (VOBA) associated with the May 1, 2003 acquisition of American Skandia.

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Second Quarter 2003

INSURANCE DIVISION—INDIVIDUAL LIFE AND ANNUITIES SALES RESULTS AND ACCOUNT VALUES

(in millions)

Year-to-date					2002						2003
2003		2002			2Q		3Q		4Q		1Q		2Q
				INDIVIDUAL LIFE INSURANCE SALES (1):
				Excluding corporate-owned life insurance:
51		85		Variable life	41		35		33		25		26
49		27		Universal life	16		16		27		26		23
48		28		Term life	15		17		17		23		25

148		140		Total excluding corporate-owned life insurance	72		68		77		74		74
18		86		Corporate-owned life insurance	76		21		15		4		14

166		226		Total	148		89		92		78		88

				ANNUITY SALES AND ACCOUNT VALUES
				Variable Annuities:
15,338		18,689		Beginning total account value	18,435		16,802		14,961		15,338		14,965
1,401		780		Sales	406		339		276		331		1,070
(1,460	)	(1,224	)	Surrenders and withdrawals	(627	)	(546	)	(497	)	(473	)	(987	)
2,070		(1,443	)	Change in market value, interest credited, and other activity	(1,412	)	(1,634	)	598		(231	)	2,301
22,431		—		Acquisition	—		—		—		—		22,431

39,780		16,802		Ending total account value	16,802		14,961		15,338		14,965		39,780

(59	)	(444	)	Net sales (redemptions)	(221	)	(207	)	(221	)	(142	)	83

				Fixed Annuities:
3,396		2,975		Beginning total account value	2,909		3,048		3,260		3,396		3,473
167		218		Sales	181		224		163		110		57
(100	)	(95	)	Surrenders and withdrawals	(45	)	(42	)	(47	)	(49	)	(51	)
35		(50	)	Interest credited and other activity	3		30		20		16		19

3,498		3,048		Ending account value	3,048		3,260		3,396		3,473		3,498

67		123		Net sales	136		182		116		61		6

				SALES BY DISTRIBUTION CHANNEL
				Life Insurance (1):
				Excluding corporate-owned life insurance:
107		107		Prudential Agents	55		53		53		53		54
41		33		Third party distribution	17		15		24		21		20
18		86		Corporate-owned life insurance	76		21		15		4		14

166		226		Total	148		89		92		78		88

				Variable and Fixed Annuities (2):
706		742		Prudential Agents	405		392		315		326		380
188		230		Wirehouses	165		141		101		79		109
674		26		Independent Financial Planners (3)	17		30		23		36		638

1,568		998		Total	587		563		439		441		1,127

(1)

Statutory first year premiums and deposits.

(2)

Amounts represent gross sales.

(3)

Including bank distribution.

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Quarterly Financial Supplement

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Second Quarter 2003

INSURANCE DIVISION—INDIVIDUAL LIFE AND ANNUITIES SEGMENT ACCOUNT VALUE ACTIVITY

(in millions)

Year-to-date					2002						2003
2003		2002			2Q		3Q		4Q		1Q		2Q
				INDIVIDUAL LIFE INSURANCE:
				Policyholders’ Account Balances:
4,112		3,826		Beginning balance	3,924		3,992		4,033		4,112		4,205
486		453		Premiums and deposits	226		223		226		249		237
49		43		Interest credited	23		25		24		23		26
(265	)	(273	)	Surrenders and withdrawals	(138	)	(157	)	(137	)	(122	)	(143	)
(9	)	28		Net transfers (to) from separate account	14		5		(4	)	(7	)	(2	)
(54	)	(38	)	Policy charges	(22	)	(21	)	(19	)	(25	)	(29	)
(44	)	(47	)	Benefits and other	(35	)	(34	)	(11	)	(25	)	(19	)

4,275		3,992		Ending balance	3,992		4,033		4,112		4,205		4,275

				Separate Account Liabilities:
11,412		13,010		Beginning balance	13,129		12,117		10,702		11,412		11,235
752		864		Premiums and deposits	468		430		563		373		379
1,157		(986	)	Change in market value and interest credited	(1,097	)	(1,385	)	624		(154	)	1,311
(334	)	(256	)	Surrenders and withdrawals	(132	)	(209	)	(245	)	(157	)	(177	)
(52	)	(75	)	Net transfers to general account	(37	)	(44	)	(14	)	(29	)	(23	)
(411	)	(418	)	Policy charges	(207	)	(203	)	(209	)	(205	)	(206	)
(13	)	(22	)	Benefits and other	(7	)	(4	)	(9	)	(5	)	(8	)

12,511		12,117		Ending balance	12,117		10,702		11,412		11,235		12,511

				INDIVIDUAL ANNUITIES:
				Account Values in General Account (1):
6,795		6,152		Beginning balance	5,825		6,093		6,533		6,795		7,073
600		600		Premiums and deposits	372		403		292		270		330
149		143		Interest credited	71		77		80		72		77
(252	)	(262	)	Surrenders and withdrawals	(129	)	(119	)	(127	)	(129	)	(123	)
85		(345	)	Net transfers (to) from separate account	(7	)	105		52		100		(15	)
(4	)	(3	)	Policy charges	(2	)	(2	)	(2	)	(2	)	(2	)
(74	)	(192	)	Benefits and other	(37	)	(24	)	(33	)	(33	)	(41	)
158		—		Acquisition	—		—		—		—		158

7,457		6,093		Ending balance	6,093		6,533		6,795		7,073		7,457

				Account Values in Separate Account:
11,939		15,512		Beginning balance	15,519		13,757		11,688		11,939		11,365
968		398		Premiums and deposits	215		160		147		171		797
2,221		(1,341	)	Change in market value and interest credited	(1,392	)	(1,613	)	614		(213	)	2,434
(1,308	)	(1,057	)	Surrenders and withdrawals	(543	)	(469	)	(417	)	(393	)	(915	)
(85	)	345		Net transfers (to) from general account	7		(105	)	(52	)	(100	)	15
(133	)	(100	)	Policy charges	(49	)	(42	)	(41	)	(39	)	(94	)
(54	)	—		Benefits and other	—		—		—		—		(54	)
22,273		—		Acquisition	—		—		—		—		22,273

35,821		13,757		Ending balance	13,757		11,688		11,939		11,365		35,821

(1)

Premiums and deposits, and surrenders and withdrawals, are classified within the general account and separate account for purposes of this presentation based on the allocation of customer funds. For example, premiums allocated by customers to separate account investments at the time of sale, while remitted through the company’s general account, are shown as separate account premium in this display, rather than as general account premium and transfers to the separate account. Activity for periods prior to the second quarter of 2003 has been reclassified to conform to the current presentation.

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Second Quarter 2003

INSURANCE DIVISION—DEFERRED POLICY ACQUISITION COSTS

(in millions)

Year-to-date					2002						2003
2003		2002			2Q		3Q		4Q		1Q		2Q
				INDIVIDUAL LIFE INSURANCE:
3,110		3,133		Beginning balance	3,160		3,155		3,111		3,110		3,104
151		146		Capitalization	80		76		79		77		74
(116	)	(116	)	Amortization—operating results	(63	)	(92	)	(71	)	(67	)	(49	)
—		—		Amortization—realized investment gains and losses	—		—		—		—		—
(43	)	(8	)	Impact of unrealized gains on AFS securities	(22	)	(28	)	(9	)	(16	)	(27	)

3,102		3,155		Ending balance	3,155		3,111		3,110		3,104		3,102

				INDIVIDUAL ANNUITIES:
473		628		Beginning balance	654		598		485		473		471
92		63		Capitalization	35		34		25		27		65
(37	)	(93	)	Amortization—operating results	(70	)	(105	)	(23	)	(17	)	(20	)
(3	)	2		Amortization—realized investment gains and losses	1		3		10		(2	)	(1	)
(54	)	(2	)	Impact of unrealized gains on AFS securities	(22	)	(45	)	(24	)	(10	)	(44	)

471		598		Ending balance	598		485		473		471		471

				GROUP INSURANCE (1):
57		26		Beginning balance	31		39		45		57		64
18		10		Capitalization	8		7		12		8		10
(1)		3		Amortization—operating results	—		(1	)	—		(1	)	—
—		—		Amortization—realized investment gains and losses	—		—		—		—		—
—		—		Impact of unrealized losses on AFS securities	—		—		—		—		—

74		39		Ending balance	39		45		57		64		74

				TOTAL INSURANCE DIVISION:
3,640		3,787		Beginning balance	3,845		3,792		3,641		3,640		3,639
261		219		Capitalization	123		117		116		112		149
(154	)	(206	)	Amortization—operating results	(133	)	(198	)	(94	)	(85	)	(69	)
(3	)	2		Amortization—realized investment gains and losses	1		3		10		(2	)	(1	)
(97	)	(10	)	Impact of unrealized gains on AFS securities	(44	)	(73	)	(33	)	(26	)	(71	)

3,647		3,792		Ending balance	3,792		3,641		3,640		3,639		3,647

(1)

Represents long-term care products.

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Second Quarter 2003

INSURANCE DIVISION—SUPPLEMENTARY INFORMATION FOR INDIVIDUAL LIFE INSURANCE

(dollar amounts in millions)

Year-to-date				2002						2003
2003	2002			2Q		3Q		4Q		1Q		2Q
			Individual Life Insurance:
			Policy Surrender Experience:
352	310		Cash value of surrenders	148		185		197		170		182
4.2%	3.8	%	Cash value of surrenders as a percentage of mean future policy benefits, policyholders’ account balances, and separate account balances	3.6	%	4.7	%	5.0	%	4.2	%	4.4	%

			Death claims per $1,000 of in force (1):
2.36	2.06		Variable and universal life	2.06		1.85		3.30		2.13		2.59
1.11	1.49		Term life	1.56		1.92		2.12		1.36		0.88
1.95	1.90		Total, Individual Life Insurance	1.94		1.96		2.90		1.93		1.99

(1)

Annualized, for interim reporting periods.

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INSURANCE DIVISION—SUPPLEMENTARY INFORMATION FOR GROUP INSURANCE

(dollar amounts in millions)

Year-to-date			2002			2003
2003	2002		2Q	3Q	4Q	1Q	2Q
		GROUP INSURANCE NEW ANNUALIZED PREMIUMS:
123	189	Group life	27	36	44	88	35
96	86	Group disability (1)	33	25	49	67	29

219	275	Total	60	61	93	155	64

		Future Policy Benefits (2):
		Group life	1,609	1,580	1,742	1,754	1,730
		Group disability (1)	138	148	151	191	201

		Total	1,747	1,728	1,893	1,945	1,931

		Policyholders’ Account Balances (2):
		Group life	4,238	4,512	4,684	4,471	4,729
		Group disability (1)	63	68	67	61	60

		Total	4,301	4,580	4,751	4,532	4,789

		Separate Account Liabilities (2):
		Group life	7,745	7,260	7,824	8,977	9,994
		Group disability (1)	—	—	—	—	—

		Total	7,745	7,260	7,824	8,977	9,994

		Group Life Insurance:
1,327	1,331	Gross premiums, policy charges and fee income (3)	664	654	677	691	636
1,229	1,203	Earned premiums, policy charges and fee income	600	578	607	638	591
90.9%	92.3%	Benefits ratio	92.8%	93.3%	88.8%	91.9%	89.9%
9.1%	10.1%	Administrative operating expense ratio	10.2%	9.6%	9.9%	9.1%	9.1%
		Persistency ratio	96.1%	95.2%	94.5%	96.4%	95.6%

		Group Disability Insurance (1):
332	299	Gross premiums, policy charges and fee income (3)	149	153	152	171	161
326	289	Earned premiums, policy charges and fee income	146	147	149	164	162
90.5%	86.2%	Benefits ratio	87.7%	91.8%	87.3%	93.9%	87.0%
21.7%	22.7%	Administrative operating expense ratio	22.8%	21.6%	21.1%	20.5%	23.0%
		Persistency ratio	93.0%	90.1%	86.8%	92.1%	89.2%

(1)

Group disability amounts include long-term care products.

(2)

As of end of period.

(3)

Before returns of premiums to participating policyholders for favorable claims experience.

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COMBINED STATEMENTS OF OPERATIONS—INVESTMENT DIVISION

(in millions)

Year-to-date						2002						2003
2003		2002		% Change		2Q		3Q		4Q		1Q		2Q
					Revenues (1):
22		29		-24%	Premiums	21		10		38		14		8
37		38		-3%	Policy charges and fee income	19		15		18		18		19
1,116		1,168		-4%	Net investment income	603		570		571		559		557
1,724		1,925		-10%	Commissions, investment management fees, and other income	958		893		864		816		908

2,899		3,160		-8%	Total revenues	1,601		1,488		1,491		1,407		1,492

					Benefits and Expenses (1):
414		428		-3%	Insurance and annuity benefits	231		220		232		210		204
469		481		-2%	Interest credited to policyholders’ account balances	238		247		250		236		233
8		8		—	Interest expense	5		4		2		4		4
(15	)	(28	)	46%	Deferral of acquisition costs	(14	)	(8	)	(8	)	(7	)	(8	)
36		48		-25%	Amortization of acquisition costs	27		21		23		19		17
1,141		1,280		-11%	Securities operations non-interest expenses	645		601		583		541		600
694		747		-7%	General and administrative expenses	377		351		373		330		364

2,747		2,964		-7%	Total benefits and expenses	1,509		1,436		1,455		1,333		1,414

152		196		-22%	Adjusted operating income before income taxes	92		52		36		74		78

(1)

Revenues exclude realized investment gains, net of losses and related adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.

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COMBINING STATEMENTS OF OPERATIONS—INVESTMENT DIVISION

(in millions)

	Quarter Ended June 30, 2003
	Total Investment Division		Investment Management		Financial Advisory		Retirement		Other Asset Management
Revenues (1):
Premiums	8		—		—		8		—
Policy charges and fee income	19		—		—		19		—
Net investment income	557		7		34		511		5
Commissions, investment management fees, and other income	908		296		555		31		26

Total revenues	1,492		303		589		569		31

Benefits and Expenses (1):
Insurance and annuity benefits	204		—		—		204		—
Interest credited to policyholders’ account balances	233		—		—		233		—
Interest expense	4		1		—		—		3
Deferral of acquisition costs	(8	)	(5	)	—		(3	)	—
Amortization of acquisition costs	17		14		—		3		—
Securities operations non-interest expenses	600		—		600		—		—
General and administrative expenses	364		256		9		87		12

Total benefits and expenses	1,414		266		609		524		15

Adjusted operating income before income taxes	78		37		(20	)	45		16


	Quarter Ended June 30, 2002
	Total Investment Division		Investment Management		Financial Advisory		Retirement		Other Asset Management
Revenues (1):
Premiums	21		—		—		21		—
Policy charges and fee income	19		—		—		19		—
Net investment income	603		7		48		542		6
Commissions, investment management fees, and other income	958		309		599		35		15

Total revenues	1,601		316		647		617		21

Benefits and Expenses (1):
Insurance and annuity benefits	231		—		—		231		—
Interest credited to policyholders’ account balances	238		—		—		238		—
Interest expense	5		3		—		2		—
Deferral of acquisition costs	(14	)	(12	)	—		(2	)	—
Amortization of acquisition costs	27		19		—		8		—
Securities operations non-interest expenses	645		—		645		—		—
General and administrative expenses	377		270		8		90		9

Total benefits and expenses	1,509		280		653		567		9

Adjusted operating income before income taxes	92		36		(6	)	50		12

(1)

Revenues exclude realized investment gains, net of losses and related adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.

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Second Quarter 2003

COMBINING STATEMENTS OF OPERATIONS—INVESTMENT DIVISION

(in millions)

	Six Months Ended June 30, 2003
	Total Investment Division		Investment Management		Financial Advisory		Retirement		Other Asset Management
Revenues (1):
Premiums	22		—		—		22		—
Policy charges and fee income	37		—		—		37		—
Net investment income	1,116		14		68		1,024		10
Commissions, investment management fees, and other income	1,724		574		1,046		63		41

Total revenues	2,899		588		1,114		1,146		51

Benefits and Expenses (1):
Insurance and annuity benefits	414		—		—		414		—
Interest credited to policyholders’ account balances	469		—		—		469		—
Interest expense	8		2		—		1		5
Deferral of acquisition costs	(15	)	(10	)	—		(5	)	—
Amortization of acquisition costs	36		30		—		6		—
Securities operations non-interest expenses	1,141		—		1,141		—		—
General and administrative expenses	694		493		17		163		21

Total benefits and expenses	2,747		515		1,158		1,048		26

Adjusted operating income before income taxes	152		73		(44	)	98		25


	Six Months Ended June 30, 2002
	Total Investment Division		Investment Management		Financial Advisory		Retirement		Other Asset Management
Revenues (1):
Premiums	29		—		—		29		—
Policy charges and fee income	38		—		—		38		—
Net investment income	1,168		13		96		1,044		15
Commissions, investment management fees, and other income	1,925		620		1,200		70		35

Total revenues	3,160		633		1,296		1,181		50

Benefits and Expenses (1):
Insurance and annuity benefits	428		—		—		428		—
Interest credited to policyholders’ account balances	481		—		—		481		—
Interest expense	8		3		—		3		2
Deferral of acquisition costs	(28	)	(22	)	—		(6	)	—
Amortization of acquisition costs	48		37		—		11		—
Securities operations non-interest expenses	1,280		—		1,280		—		—
General and administrative expenses	747		532		15		180		20

Total benefits and expenses	2,964		550		1,295		1,097		22

Adjusted operating income before income taxes	196		83		1		84		28

(1)

Revenues exclude realized investment gains, net of losses and related adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.

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Second Quarter 2003

INVESTMENT DIVISION—SUPPLEMENTARY REVENUE INFORMATION FOR INVESTMENT MANAGEMENT AND FINANCIAL ADVISORY SEGMENTS

(dollar amounts in millions unless otherwise noted)

Year-to-date					2002						2003
2003	2002	% Change			2Q		3Q		4Q		1Q		2Q
				Investment Management Segment:
				Analysis of revenues by source:
				Investment Management and Advisory Services:
88	97	-9	%	Retail customers	48		43		44		43		45
166	171	-3	%	Institutional customers	87		79		85		79		87
105	111	-5	%	General account	57		51		59		55		50

359	379	-5	%	Subtotal	192		173		188		177		182
229	254	-10	%	Mutual Fund revenues (1)	124		120		121		108		121

588	633	-7	%	Total Investment Management segment revenues	316		293		309		285		303

				Analysis of commissions, investment management fees and other revenues by type:
				Investment Management and Advisory Services:
327	354	-8	%	Asset-based fees	178		160		167		165		162
19	13	46	%	Transaction-based and other revenues	8		7		11		5		14

346	367	-6	%	Subtotal	186		167		178		170		176
228	253	-10	%	Mutual Fund revenues (1)	123		119		121		108		120

574	620	-7	%	Total	309		286		299		278		296

				Financial Advisory Segment:
				Non-Interest Revenues:
623	722	-14	%	Commissions	364		335		326		288		335
338	396	-15	%	Fees	199		189		165		166		172
85	82	4	%	Other non-interest revenues	36		34		31		37		48

1,046	1,200	-13	%	Total non-interest revenues	599		558		522		491		555

				Recurring revenue as a percentage of total non-interest revenue (2)	38.1	%	38.2	%	39.2	%	39.5	%	38.7	%
2.3	3.3			Average customer margin lending balances ($ in billions)	3.1		2.6		2.4		2.3		2.3

(1)

Represents mutual fund revenues other than asset management fees paid to affiliates, which are included in appropriate categories above.

(2)

Calculated on a trailing 12 month basis excluding Consumer Banking and Equity sales and trading revenue.

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Second Quarter 2003

INVESTMENT DIVISION—ASSETS UNDER MANAGEMENT FOR INVESTMENT MANAGEMENT AND ADVISORY SERVICES OPERATIONS

(in billions)

	June 30, 2003
	Equity	Fixed Income	Real Estate	Total
Retail customers	36.7	44.4	1.4	82.5
Institutional customers	26.7	49.7	12.8	89.2
General account	2.9	123.0	1.2	127.1

Total	66.3	217.1	15.4	298.8


	June 30, 2002
	Equity	Fixed Income	Real Estate	Total
Retail customers	38.0	46.7	0.1	84.8
Institutional customers	28.5	44.9	10.1	83.5
General account	2.2	112.4	1.4	116.0

Total	68.7	204.0	11.6	284.3

Year-to-date				2002						2003
2003	2002			2Q		3Q		4Q		1Q		2Q
			Institutional Assets Under Management (1):
			Assets gathered by Investment Management & Advisory Services sales force (2):
62.0	67.9		Beginning assets under management	62.6		60.2		56.9		62.0		60.8
4.7	5.9		Additions to managed portfolio	2.9		2.9		7.2		2.6		2.1
(5.7)	(10.9	)	Withdrawals	(2.5	)	(3.1	)	(4.3	)	(3.1	)	(2.6	)
4.2	(2.3	)	Change in market value	(2.4	)	(2.0	)	1.7		—		4.2
(0.8)	3.6		Net money market flows	(0.4	)	(1.1	)	0.5		(0.7	)	(0.1	)
—	(4.0	)	Other (2)	—		—		—		—		—

64.4	60.2		Ending assets under management	60.2		56.9		62.0		60.8		64.4
24.8	23.3		Other institutional assets under management (2)	23.3		22.9		23.2		23.4		24.8

89.2	83.5		Total assets managed for institutional customers at end of period	83.5		79.8		85.2		84.2		89.2

(1)

Reflects reclassification of amounts by client category as of January 1, 2002, based on internal management criteria which increased the amounts attributable to institutional customers by $2.8 billion.

(2)

Reflects reclassification of amounts by asset gatherer category as of January 1, 2002, based on internal management criteria, which reduced the amount attributed to assets gathered by Investment Management & Advisory Services sales force and increased the amount attributed to other institutional assets under management by $4.0 billion.

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INVESTMENT DIVISION—MUTUAL FUNDS AND WRAP-FEE PRODUCTS SALES RESULTS AND ASSETS UNDER MANAGEMENT

(in millions)

Year-to-date					2002						2003
2003		2002			2Q		3Q		4Q		1Q		2Q
				MUTUAL FUNDS AND WRAP-FEE PRODUCTS SALES AND
				ASSETS UNDER MANAGEMENT
				Mutual Funds:
49,756		57,809		Beginning total mutual funds assets	56,743		52,459		48,639		49,756		48,170
2,186		2,374		Sales (other than money market)	1,460		1,146		1,356		1,086		1,100
(2,320	)	(2,455	)	Redemptions (other than money market)	(1,339	)	(1,259	)	(1,421	)	(962	)	(1,358	)
2,686		(2,418	)	Reinvestment of distributions and change in market value	(2,450	)	(2,620	)	1,188		103		2,583
(4,605	)	(2,851	)	Net money market sales	(1,955	)	(1,087	)	(6	)	(1,813	)	(2,792	)
4,132		—		Acquisition	—		—		—		—		4,132

51,835		52,459		Ending total mutual funds assets	52,459		48,639		49,756		48,170		51,835

(134	)	(81	)	Net Mutual Funds sales (redemptions) other than money market	121		(113	)	(65	)	124		(258	)

				Wrap-fee Products (1):
15,153		17,955		Beginning total wrap-fee product assets	18,192		16,676		14,383		15,153		14,860
2,749		3,543		Sales	1,876		1,223		1,361		1,287		1,462
(2,523	)	(2,979	)	Redemptions	(1,618	)	(1,440	)	(1,275	)	(1,178	)	(1,345	)
1,323		(1,843	)	Reinvestment of distributions and change in market value	(1,774	)	(2,076	)	684		(402	)	1,725

16,702		16,676		Ending total wrap-fee product assets	16,676		14,383		15,153		14,860		16,702
18,089		16,827		Other managed accounts at end of period (2)	16,827		15,424		16,394		16,712		18,089

34,791		33,503		Total wrap-fee products and other managed accounts at end of period	33,503		29,807		31,547		31,572		34,791

226		564		Net wrap-fee product sales (redemptions) (1)	258		(217	)	86		109		117

				MUTUAL FUNDS AND WRAP-FEE PRODUCTS GROSS SALES BY DISTRIBUTION CHANNEL
				Mutual funds, excluding wrap-fee products (3):
218		314		Prudential Agents	158		107		98		99		119
826		746		Financial Advisors	407		168		162		469		357
1,117		1,277		Third party distributors	890		866		1,090		501		616
25		37		Other	5		5		6		17		8

2,186		2,374		Total	1,460		1,146		1,356		1,086		1,100

				Wrap-fee products (1):
198		247		Prudential Agents	132		104		90		118		80
2,269		3,098		Financial Advisors	1,615		1,015		1,154		1,054		1,215
282		198		Third party distributors	129		104		117		115		167

2,749		3,543		Total	1,876		1,223		1,361		1,287		1,462

(1)

Excludes other managed accounts.

(2)

All of these assets are associated with businesses that were combined into Wachovia Securities, LLC effective July 1, 2003. Prudential Financial, Inc. owns a 38% interest in Wachovia Securities, LLC. As a result, Prudential Financial, Inc. will no longer report these assets as a component of its mutual fund and wrap-fee assets under management, for periods after June 30, 2003.

(3)

Other than money market.

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INVESTMENT DIVISION—RETIREMENT SALES RESULTS AND ACCOUNT VALUES

(in millions)

Year-to-date					2002						2003
2003		2002			2Q		3Q		4Q		1Q		2Q
				RETIREMENT SALES AND ACCOUNT VALUES
				Defined Contribution:
22,914		24,640		Beginning total account value	25,337		24,036		21,911		22,914		22,757
1,904		1,914		Sales	904		859		1,085		1,028		876
(1,908	)	(1,572	)	Withdrawals	(755	)	(770	)	(906	)	(638	)	(1,270	)
1,405		(946	)	Change in market value and interest credited (1)	(1,450	)	(2,214	)	824		(547	)	1,952

24,315		24,036		Ending total account value	24,036		21,911		22,914		22,757		24,315

(4	)	342		Net sales (withdrawals)	149		89		179		390		(394	)

				Asset management of ending total account value:
				Proprietary	17,075		15,752		16,152		15,927		17,023
				Non-proprietary	6,961		6,159		6,762		6,830		7,292

				Total	24,036		21,911		22,914		22,757		24,315

				Guaranteed Products:
39,058		39,825		Beginning total account value	39,400		39,172		38,647		39,058		38,925
1,202		765		Sales	506		291		411		554		648
(2,065	)	(1,857	)	Withdrawals and benefits	(993	)	(775	)	(958	)	(1,045	)	(1,020	)
2,001		750		Change in market value and interest income	395		553		863		481		1,520
176		(311	)	Other (2)	(136	)	(594	)	95		(123	)	299

40,372		39,172		Ending total account value	39,172		38,647		39,058		38,925		40,372

(863	)	(1,092	)	Net withdrawals	(487	)	(484	)	(547	)	(491	)	(372	)

				Product composition of ending total account value:
				Spread-based products	18,869		18,702		18,729		18,791		18,994
				Fee-based products	20,303		19,945		20,329		20,134		21,378

				Total	39,172		38,647		39,058		38,925		40,372

(1)

Includes increases to account values of $8 million in the quarter ended December 31, 2002, $4 million in the quarter ended September 30, 2002, $247 million in the quarter ended June 30, 2002 and $101 million in the quarter ended March 31, 2002, added to customer accounts due to Common Stock received as demutualization consideration. Year-to-date 2002 results also includes $448 million added to customer accounts from inclusion of amounts not previously reflected in this segment.

(2)

Represents changes in asset balances for externally managed accounts.

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Second Quarter 2003

COMBINED STATEMENTS OF OPERATIONS—INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION

(in millions)

Year-to-date							2002						2003
2003		2002		% Change			2Q		3Q		4Q		1Q		2Q
						Revenues (1):
2,270		2,022		12	%	Premiums	1,006		1,061		1,054		1,141		1,129
112		106		6	%	Policy charges and fee income	49		46		52		54		58
398		339		17	%	Net investment income	181		195		185		193		205
161		191		-16	%	Commissions, investment management fees, and other income	93		68		79		74		87

2,941		2,658		11	%	Total revenues	1,329		1,370		1,370		1,462		1,479

						Benefits and Expenses (1):
1,771		1,582		12	%	Insurance and annuity benefits	799		830		866		906		865
52		48		8	%	Interest credited to policyholders’ account balances	24		24		24		25		27
1		—		—		Interest expense	—		—		1		—		1
(352	)	(298	)	-18	%	Deferral of acquisition costs	(147	)	(162	)	(170	)	(177	)	(175	)
145		109		33	%	Amortization of acquisition costs	44		65		60		74		71
929		830		12	%	General and administrative expenses	426		425		413		456		473

2,546		2,271		12	%	Total benefits and expenses	1,146		1,182		1,194		1,284		1,262

395		387		2	%	Adjusted operating income before income taxes	183		188		176		178		217

(1)

Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

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Second Quarter 2003

COMBINING STATEMENTS OF OPERATIONS—INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION

(in millions)

	Six Months Ended June 30, 2003								Quarter Ended June 30, 2003
	Total International Insurance & Investments Division		International Insurance excl. Gibraltar Life		International Insurance—Gibraltar Life		International Investments		Total International Insurance & Investments Division		International Insurance excl. Gibraltar Life		International Insurance—Gibraltar Life		International Investments
Revenues (1):
Premiums	2,270		1,229		1,041		—		1,129		603		526		—
Policy charges and fee income	112		65		47		—		58		32		26		—
Net investment income	398		103		272		23		205		54		140		11
Commissions, investment management fees, and other income	161		(1	)	(2	)	164		87		—		—		87

Total revenues	2,941		1,396		1,358		187		1,479		689		692		98

Benefits and Expenses (1):
Insurance and annuity benefits	1,771		925		846		—		865		451		414		—
Interest credited to policyholders’ account balances	52		6		46		—		27		3		24		—
Interest expense	1		6		(5	)	—		1		3		(2	)	—
Deferral of acquisition costs	(352	)	(253	)	(99	)	—		(175	)	(123	)	(52	)	—
Amortization of acquisition costs	145		126		19		—		71		62		9		—
General and administrative expenses	929		377		378		174		473		184		201		88

Total benefits and expenses	2,546		1,187		1,185		174		1,262		580		594		88

Adjusted operating income before income taxes	395		209		173		13		217		109		98		10


	Six Months Ended June 30, 2002								Quarter Ended June 30, 2002
	Total International Insurance & Investments Division		International Insurance excl. Gibraltar Life		International Insurance— Gibraltar Life		International Investments		Total International Insurance & Investments Division		International Insurance excl. Gibraltar Life		International Insurance— Gibraltar Life		International Investments
Revenues (1):
Premiums	2,022		981		1,041		—		1,006		495		511		—
Policy charges and fee income	106		50		56		—		49		21		28		—
Net investment income	339		86		235		18		181		45		126		10
Commissions, investment management fees, and other income	191		14		34		143		93		4		18		71

Total revenues	2,658		1,131		1,366		161		1,329		565		683		81

Benefits and Expenses (1):
Insurance and annuity benefits	1,582		730		852		—		799		374		425		—
Interest credited to policyholders’ account balances	48		3		45		—		24		2		22		—
Interest expense	—		2		(2	)	—		—		1		(1	)	—
Deferral of acquisition costs	(298	)	(224	)	(74	)	—		(147	)	(111	)	(36	)	—
Amortization of acquisition costs	109		100		9		—		44		48		(4	)	—
General and administrative expenses	830		334		331		165		426		165		176		85

Total benefits and expenses	2,271		945		1,161		165		1,146		479		582		85

Adjusted operating income before income taxes	387		186		205		(4	)	183		86		101		(4	)

(1)

Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

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Second Quarter 2003

INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION—SALES RESULTS AND SUPPLEMENTARY INFORMATION

(dollar amounts in millions unless otherwise noted)

Year-to-date			2002			2003
2003	2002		2Q	3Q	4Q	1Q	2Q
		INTERNATIONAL INSURANCE OPERATING DATA:

		Actual exchange rate basis (1):
		Net premiums, policy charges and fee income:
935	769	Japan, excluding Gibraltar Life	374	424	413	484	451
1,088	1,097	Gibraltar Life	539	528	525	536	552
359	262	All other countries	142	155	168	175	184

2,382	2,128	Total	1,055	1,107	1,106	1,195	1,187

		Annualized new business premiums:
191	144	Japan, excluding Gibraltar Life	67	79	84	106	85
153	108	Gibraltar Life	59	62	63	64	89
96	104	All other countries	51	44	55	50	46

440	356	Total	177	185	202	220	220

		Constant exchange rate basis (2):
		Net premiums, policy charges and fee income:
888	797	Japan, excluding Gibraltar Life	378	405	404	462	426
1,038	1,144	Gibraltar Life	558	506	513	512	526
350	269	All other countries	144	150	166	171	179

2,276	2,210	Total	1,080	1,061	1,083	1,145	1,131

		Annualized new business premiums:
182	149	Japan, excluding Gibraltar Life	67	75	83	101	81
146	112	Gibraltar Life	61	60	62	62	84
94	107	All other countries	53	43	53	49	45

422	368	Total	181	178	198	212	210

(1)

Translated based on applicable average exchange rates for the period shown.

(2)

Translated based on average exchange rates for the year ended December 31, 2002.

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Second Quarter 2003

INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION—SALES RESULTS AND SUPPLEMENTARY INFORMATION

	2002						2003
	2Q		3Q		4Q		1Q		2Q
Face amount of individual policies in force at end of period (in billions) (1):
(Constant exchange rate basis)
Japan, excluding Gibraltar Life	136		138		141		145		147
Gibraltar Life	222		217		213		208		204
All other countries	45		47		49		52		55

Total	403		402		403		405		406

Number of individual policies in force at end of period (in thousands):
Japan, excluding Gibraltar Life	990		1,011		1,037		1,069		1,099
Gibraltar Life	4,666		4,602		4,537		4,461		4,380
All other countries	609		643		682		716		745

Total	6,265		6,256		6,256		6,246		6,224

International insurance policy persistency (2):
13 months	93.8	%	93.2	%	93.0	%	93.3	%	93.1	%
25 months	86.9	%	86.4	%	86.3	%	86.9	%	87.1	%
Number of Life Planners at end of period (3):
Japan	1,985		2,055		2,119		2,159		2,175
All other countries	2,222		2,298		2,386		2,393		2,514

Total	4,207		4,353		4,505		4,552		4,689

(1)

Translated based on exchange rates as of December 31, 2002.

(2)

Excluding Gibraltar Life.

(3)

Excluding Gibraltar Life Advisors.

Page 29

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Second Quarter 2003

INVESTMENT PORTFOLIO COMPOSITION

(in millions)

	June 30, 2003					December 31, 2002
	Consolidated Portfolio (1)	Closed Block Business	Financial Services Businesses			Consolidated Portfolio (1)	Closed Block Business	Financial Services Businesses
	Consolidated Portfolio (1)	Closed Block Business	Amount	% of Total		Consolidated Portfolio (1)	Closed Block Business	Amount	% of Total
Fixed maturities:
Public, available for sale, at fair value	100,944	32,833	68,111	61.9	%	92,966	30,991	61,975	59.0	%
Public, held to maturity, at amortized cost	2,733	—	2,733	2.5	%	2,563	—	2,563	2.5	%
Private, available for sale, at fair value	32,851	15,681	17,170	15.6	%	32,490	15,242	17,248	16.4	%
Private, held to maturity, at amortized cost	57	—	57	0.1	%	46	—	46	0.0	%
Trading account assets, at fair value	200	—	200	0.2	%	96	—	96	0.1	%
Equity securities, available for sale, at fair value	3,001	1,975	1,026	0.9	%	2,788	1,521	1,267	1.2	%
Commercial loans	18,301	6,996	11,305	10.3	%	18,593	6,987	11,606	11.1	%
Policy loans	8,574	5,582	2,992	2.7	%	8,827	5,681	3,146	3.0	%
Cash collateral for borrowed securities	350	—	350	0.3	%	323	—	323	0.3	%
Other long-term investments (2)	5,138	1,042	4,096	3.7	%	4,951	1,075	3,876	3.7	%
Short-term investments	3,728	1,768	1,960	1.8	%	5,420	2,579	2,841	2.7	%

Subtotal	175,877	65,877	110,000	100.0	%	169,063	64,076	104,987	100.0	%

Invested assets of other entities and operations (3)	15,353	—	15,353			14,031	—	14,031

Total investments	191,230	65,877	125,353			183,094	64,076	119,018

Fixed Maturities by Credit Quality (1):

		June 30, 2003						December 31, 2002
		Financial Services Businesses						Financial Services Businesses
		Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value	% of Total		Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value	% of Total
Public Fixed Maturities:
NAIC Rating (4)	Rating Agency Equivalent
1	Aaa, Aa, A	50,150	4,497	37	54,610	77.0	%	47,430	2,968	35	50,363	78.0	%
2	Baa	12,434	1,151	34	13,551	19.1	%	11,281	671	110	11,842	18.3	%
3	Ba	1,717	147	17	1,847	2.6	%	1,730	68	56	1,742	2.7	%
4	B	671	67	7	731	1.0	%	519	20	23	516	0.8	%
5	C and lower	89	26	1	114	0.2	%	94	5	17	82	0.1	%
6	In or near default	61	6	2	65	0.1	%	50	3	1	52	0.1	%

	Total	65,122	5,894	98	70,918	100.0	%	61,104	3,735	242	64,597	100.0	%

Private Fixed Maturities:
NAIC Rating (4)	Rating Agency Equivalent
1	Aaa, Aa, A	4,752	557	4	5,305	30.8	%	4,945	457	5	5,397	31.2	%
2	Baa	7,267	833	14	8,086	46.9	%	7,519	632	23	8,128	47.0	%
3	Ba	2,262	163	21	2,404	14.0	%	2,275	99	41	2,333	13.5	%
4	B	513	30	12	531	3.1	%	597	21	13	605	3.5	%
5	C and lower	586	33	9	610	3.5	%	700	20	24	696	4.0	%
6	In or near default	281	16	6	291	1.7	%	135	4	3	136	0.8	%

	Total	15,661	1,632	66	17,227	100.0	%	16,171	1,233	109	17,295	100.0	%

(1)

Excludes investments of securities brokerage, securities trading, banking operations, assets of our asset management operations managed for third parties, and separate account assets for which the customer assumes risks of ownership.

(2)

Other long-term investments consist of real estate and non-real estate related investments in joint ventures and partnerships, investment real estate held through direct ownership, our interest in separate account investments and other miscellaneous investments.

(3)

Includes invested assets of securities brokerage, securities trading, and banking operations. Excludes assets of our asset management operations managed for third parties, and separate account assets for which the customer assumes risks of ownership.

(4)

Reflects equivalent ratings for investments of international insurance operations that are not rated by United States insurance regulatory authorities. Includes, as of June 30, 2003 and December 31, 2002, respectively, 383 securities with amortized cost of $2,577 million (fair value $2,679 million) and 345 securities with amortized cost of $2,683 million (fair value, $2,727 million) that have been categorized based on expected NAIC designations pending receipt of SVO ratings.

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES INVESTMENT PORTFOLIO COMPOSITION

(in millions)

	June 30, 2003			December 31, 2002
	Amount	% of Total		Amount	% of Total
Japanese Insurance Operations:
Fixed maturities:
Public, available for sale, at fair value	26,868	74.7	%	25,288	73.2	%
Public, held to maturity, at amortized cost	2,733	7.6	%	2,563	7.4	%
Private, available for sale, at fair value	229	0.6	%	387	1.1	%
Private, held to maturity, at amortized cost	57	0.2	%	46	0.1	%
Trading account assets, at fair value	77	0.2	%	75	0.2	%
Equity securities, available for sale, at fair value	822	2.3	%	901	2.6	%
Commercial loans	2,934	8.2	%	3,158	9.1	%
Policy loans	729	2.0	%	685	2.0	%
Cash collateral for borrowed securities	350	1.0	%	318	1.0	%
Other long-term investments (2)	1,129	3.1	%	1,125	3.3	%
Short-term investments	29	0.1	%	6	0.0	%

Total	35,957	100.0	%	34,552	100.0	%


	June 30, 2003			December 31, 2002
	Amount	% of Total		Amount	% of Total
Financial Services Businesses excluding Japanese Insurance Operations (1):
Fixed maturities:
Public, available for sale, at fair value	41,243	55.6	%	36,687	52.1	%
Public, held to maturity, at amortized cost	—	0.0	%	—	0.0	%
Private, available for sale, at fair value	16,941	22.9	%	16,861	24.0	%
Private, held to maturity, at amortized cost	—	0.0	%	—	0.0	%
Trading account assets, at fair value	123	0.2	%	21	0.0	%
Equity securities, available for sale, at fair value	204	0.3	%	366	0.5	%
Commercial loans	8,371	11.3	%	8,448	12.0	%
Policy loans	2,263	3.1	%	2,461	3.5	%
Cash collateral for borrowed securities	—	0.0	%	5	0.0	%
Other long-term investments (2)	2,967	4.0	%	2,751	3.9	%
Short-term investments	1,931	2.6	%	2,835	4.0	%

Total	74,043	100.0	%	70,435	100.0	%

(1)

(2)

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS

(in millions)

	Quarter Ended June 30
	2003						2002
	Investment Income				Realized Gains / (Losses)		Investment Income				Realized Gains / (Losses)
	Yield (3)		Amount		Realized Gains / (Losses)		Yield (3)		Amount		Realized Gains / (Losses)
Financial Services Businesses (1):
Fixed maturities	4.85	%	940		17		5.24	%	910		(86	)
Equity securities	1.63	%	4		(52	)	1.58	%	7		9
Commercial loans	6.95	%	196		12		8.24	%	251		17
Policy loans	5.40	%	40		—		5.68	%	41		—
Short-term investments and cash equivalents	1.70	%	25		—		2.68	%	59		(9	)
Other investments	8.11	%	94		31		7.58	%	84		(245	)

Gross investment income before investment expenses	5.10	%	1,299		8		5.48	%	1,352		(314	)
Investment expenses	-0.21	%	(68	)	—		-0.12	%	(50	)	—

Subtotal	4.89	%	1,231		8		5.36	%	1,302		(314	)

Investment results of other entities and operations (2)			56		—				59		(1	)
Less, investment income relating to divested businesses			(35	)					(48	)

Total			1,252		8				1,313		(315	)


	Six Months Ended June 30
	2003						2002
	Investment Income				Realized Gains / (Losses)		Investment Income				Realized Gains / (Losses)
	Yield (3)		Amount		Realized Gains / (Losses)		Yield (3)		Amount		Realized Gains / (Losses)
Financial Services Businesses (1):
Fixed maturities	4.90	%	1,867		(63	)	5.30	%	1,795		(194	)
Equity securities	1.33	%	7		(96	)	1.51	%	13		(53	)
Commercial loans	7.01	%	395		18		7.58	%	467		18
Policy loans	5.63	%	84		—		5.63	%	80		—
Short-term investments and cash equivalents	1.79	%	53		—		2.02	%	117		8
Other investments	8.22	%	188		41		4.88	%	122		(163	)

Gross investment income before investment expenses	5.14	%	2,594		(100	)	5.21	%	2,594		(384	)
Investment expenses	-0.19	%	(130	)	—		-0.16	%	(118	)	—

Subtotal	4.95	%	2,464		(100	)	5.05	%	2,476		(384	)

Investment results of other entities and operations (2)			107		—				123		(1	)
Less, investment income relating to divested businesses			(66	)					(82	)

Total			2,505		(100	)			2,517		(385	)

(1)

(2)

Investment income of securities brokerage, securities trading, and banking operations.

(3)

Yields are annualized, for interim periods, and based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for securities lending activity are calculated net of corresponding liabilities and rebate expenses. Yields for periods prior to the fourth quarter of 2002 are presented on a basis consistent with our current reporting practices, including reclassification of investment income among certain investment categories.

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS—JAPANESE INSURANCE OPERATIONS

(in millions)

	Quarter Ended June 30
	2003						2002
	Investment Income				Realized Gains / (Losses)		Investment Income				Realized Gains / (Losses)
	Yield (1)		Amount		Realized Gains / (Losses)		Yield (1)		Amount		Realized Gains / (Losses)
Japanese Insurance Operations:
Fixed maturities	1.83	%	127		1		1.51	%	97		(24	)
Equity securities	1.07	%	2		(54	)	0.24	%	—		(17	)
Commercial loans	4.70	%	36		12		4.67	%	42		12
Policy loans	2.81	%	5		—		2.79	%	4		—
Short-term investments and cash equivalents	3.54	%	1		—		1.05	%	1		(10	)
Other investments	6.76	%	23		(43	)	5.66	%	17		21

Gross investment income before investment expenses	2.29	%	194		(84	)	2.00	%	161		(18	)
Investment expenses	-0.25	%	(21	)	—		-0.12	%	(9	)	—

Total	2.04	%	173		(84	)	1.88	%	152		(18	)


	Six Months Ended June 30
	2003						2002
	Investment Income				Realized Gains / (Losses)		Investment Income				Realized Gains / (Losses)
	Yield (1)		Amount		Realized Gains / (Losses)		Yield (1)		Amount		Realized Gains / (Losses)
Japanese Insurance Operations:
Fixed maturities	1.76	%	243		9		1.48	%	174		(4	)
Equity securities	0.94	%	4		(96	)	0.62	%	3		(73	)
Commercial loans	4.78	%	73		20		4.56	%	86		14
Policy loans	2.87	%	10		—		2.66	%	8		—
Short-term investments and cash equivalents	1.13	%	1		—		0.59	%	5		8
Other investments	6.49	%	46		(45	)	6.10	%	35		(54	)

Gross investment income before investment expenses	2.23	%	377		(112	)	1.96	%	311		(109	)
Investment expenses	-0.26	%	(44	)	—		-0.11	%	(17	)	—

Total	1.97	%	333		(112	)	1.85	%	294		(109	)

(1)

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS—EXCLUDING JAPANESE INSURANCE OPERATIONS

(in millions)

	Quarter Ended June 30
	2003						2002
	Investment Income				Realized Gains / (Losses)		Investment Income				Realized Gains / (Losses)
	Yield (2)		Amount		Realized Gains / (Losses)		Yield (2)		Amount		Realized Gains / (Losses)
Financial Services Businesses excluding Japanese Insurance Operations (1):
Fixed maturities	6.55	%	813		16		7.31	%	813		(62	)
Equity securities	4.80	%	2		2		3.55	%	7		26
Commercial loans	7.77	%	160		—		9.72	%	209		5
Policy loans	6.25	%	35		—		6.45	%	37		—
Short-term investments and cash equivalents	1.66	%	24		—		2.86	%	58		1
Other investments	8.74	%	71		74		8.40	%	67		(266	)

Gross investment income before investment expenses	6.53	%	1,105		92		7.18	%	1,191		(296	)
Investment expenses	-0.18	%	(47	)	—		-0.12	%	(41	)	—

Total	6.35	%	1,058		92		7.06	%	1,150		(296	)


	Six Months Ended June 30
	2003						2002
	Investment Income				Realized Gains / (Losses)		Investment Income				Realized Gains / (Losses)
	Yield (2)		Amount		Realized Gains / (Losses)		Yield (2)		Amount		Realized Gains / (Losses)
Financial Services Businesses excluding Japanese Insurance Operations (1):
Fixed maturities	6.68	%	1,624		(72	)	7.35	%	1,621		(190	)
Equity securities	2.82	%	3		—		2.94	%	10		20
Commercial loans	7.84	%	322		(2	)	8.91	%	381		4
Policy loans	6.47	%	74		—		6.43	%	72		—
Short-term investments and cash equivalents	1.81	%	52		—		2.36	%	112		—
Other investments	9.06	%	142		86		4.39	%	87		(109	)

Gross investment income before investment expenses	6.64	%	2,217		12		6.78	%	2,283		(275	)
Investment expenses	-0.16	%	(86	)	—		-0.18	%	(101	)	—

Total	6.48	%	2,131		12		6.60	%	2,182		(275	)

(1)

(2)

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Prudential Financial, Inc.

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Second Quarter 2003

RECLASSIFIED STATEMENTS OF OPERATIONS—FINANCIAL SERVICES BUSINESSES

(in millions)

Year ended December 31					2002								2003
2000		2001			1Q		2Q		3Q		4Q		1Q
				Revenues (1):
4,227		6,343		Premiums	1,785		1,815		1,870		1,991		2,015
1,639		1,803		Policy charges and fee income	434		412		400		407		416
4,991		5,038		Net investment income	1,204		1,313		1,282		1,256		1,253
5,034		4,247		Commissions, investment management fees, and other income	1,075		1,031		996		974		899

15,891		17,431		Total revenues	4,498		4,571		4,548		4,628		4,583

				Benefits and Expenses (1):
5,058		6,925		Insurance and annuity benefits	1,838		1,912		1,913		2,130		2,107
1,618		1,670		Interest credited to policyholders’ account balances	414		415		434		444		418
448		326		Interest expense	48		43		43		36		37
(821	)	(935	)	Deferral of acquisition costs	(242	)	(263	)	(275	)	(284	)	(285	)
469		538		Amortization of acquisition costs	139		179		263		158		160
3,010		2,889		Securities operations non-interest expenses	640		641		609		599		550
4,609		4,849		General and administrative expenses	1,158		1,179		1,131		1,195		1,162

14,391		16,262		Total benefits and expenses	3,995		4,106		4,118		4,278		4,149

1,500		1,169		Adjusted operating income before income taxes	503		465		430		350		434

				Items excluded from adjusted operating income before income taxes:
(378	)	(165	)	Realized investment losses, net, and related adjustments	(101	)	(341	)	(141	)	(290	)	(114	)
(29	)	26		Related charges	5		(4	)	(1	)	6		1

(407	)	(139	)	Total realized investment losses, net, and related charges and adjustments	(96	)	(345	)	(142	)	(284	)	(113	)

—		—		Sales practices remedies and costs	—		—		—		(20	)	—
(426	)	23		Divested businesses	18		31		(13	)	(59	)	3
(143	)	(588	)	Demutualization costs and expenses	—		—		—		—		—

(976	)	(704	)	Total items excluded from adjusted operating income before income taxes	(78	)	(314	)	(155	)	(363	)	(110	)

524		465		Income (loss) from continuing operations before income taxes	425		151		275		(13	)	324
290		125		Income tax expense (benefit)	158		53		(105	)	(20	)	105

234		340		Income from continuing operations, after-tax	267		98		380		7		219

(1)

Page 35

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Second Quarter 2003

RECLASSIFIED STATEMENTS OF OPERATIONS—INSURANCE DIVISION

(in millions)

Year ended December 31					2002								2003
2000		2001			1Q		2Q		3Q		4Q		1Q
				Revenues (1):
2,461		2,945		Premiums	759		790		802		899		866
1,479		1,423		Policy charges and fee income	358		350		342		347		347
1,330		1,378		Net investment income	341		348		359		363		359
272		222		Commissions, investment management fees, and other income	57		59		58		54		55

5,542		5,968		Total revenues	1,515		1,547		1,561		1,663		1,627

				Benefits and Expenses (1):
2,835		3,299		Insurance and annuity benefits	831		851		863		989		956
595		620		Interest credited to policyholders’ account balances	147		153		163		170		157
7		1		Interest expense	—		(1	)	(2	)	(2	)	(1	)
(430	)	(418	)	Deferral of acquisition costs	(96	)	(123	)	(117	)	(116	)	(112	)
306		370		Amortization of acquisition costs	73		133		198		94		85
1,810		1,646		General and administrative expenses	377		385		380		391		379

5,123		5,518		Total benefits and expenses	1,332		1,398		1,485		1,526		1,464

419		450		Adjusted operating income before income taxes	183		149		76		137		163

(1)

Revenues exclude realized investment gains, net of losses and related adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 36

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Second Quarter 2003

RECLASSIFIED STATEMENTS OF OPERATIONS—INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION

(in millions)

Year ended December 31					2002								2003
2000		2001			1Q		2Q		3Q		4Q		1Q
				Revenues (1):
1,680		3,337		Premiums	1,016		1,006		1,061		1,054		1,141
92		307		Policy charges and fee income	57		49		46		52		54
161		483		Net investment income	158		181		195		185		193
342		315		Commissions, investment management fees, and other income	98		93		68		79		74

2,275		4,442		Total revenues	1,329		1,329		1,370		1,370		1,462

				Benefits and Expenses (1):
1,266		2,674		Insurance and annuity benefits	783		799		830		866		906
2		72		Interest credited to policyholders’ account balances	24		24		24		24		25
4		4		Interest expense	—		—		—		1		—
(404	)	(539	)	Deferral of acquisition costs	(151	)	(147	)	(162	)	(170	)	(177	)
146		164		Amortization of acquisition costs	65		44		65		60		74
989		1,500		General and administrative expenses	404		426		425		413		456

2,003		3,875		Total benefits and expenses	1,125		1,146		1,182		1,194		1,284

272		567		Adjusted operating income before income taxes	204		183		188		176		178

(1)

Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

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Second Quarter 2003

RECLASSIFIED STATEMENTS OF OPERATIONS—INTERNATIONAL INVESTMENTS SEGMENT

(in millions)

Year ended December 31				2002						2003
2000	2001			1Q	2Q		3Q	4Q		1Q
			Revenues (1):
—	—		Premiums	—	—		—	—		—
—	—		Policy charges and fee income	—	—		—	—		—
32	33		Net investment income	8	10		9	10		12
323	263		Commissions, investment management fees, and other income	72	71		74	71		77

355	296		Total revenues	80	81		83	81		89

			Benefits and Expenses (1):
—	—		Insurance and annuity benefits	—	—		—	—		—
—	—		Interest credited to policyholders’ account balances	—	—		—	—		—
—	—		Interest expense	—	—		—	—		—
(1)	—		Deferral of acquisition costs	—	—		—	—		—
1	1		Amortization of acquisition costs	—	—		1	—		—
379	339		General and administrative expenses	80	85		80	85		86

379	340		Total benefits and expenses	80	85		81	85		86

(24)	(44	)	Adjusted operating income before income taxes	—	(4	)	2	(4	)	3

(1)

Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 38

Prudential Financial, Inc.

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Second Quarter 2003

RECLASSIFIED STATEMENTS OF OPERATIONS—CORPORATE AND OTHER OPERATIONS

(in millions)

Year ended December 31					2002								2003
2000		2001			1Q		2Q		3Q		4Q		1Q
				Revenues (1):
15		41		Premiums	2		(2	)	(3	)	—		(6	)
(10	)	(7	)	Policy charges and fee income	—		(6	)	(3	)	(10	)	(3	)
825		686		Net investment income	140		181		158		137		142
(313	)	(306	)	Commissions, investment management fees, and other income	(47	)	(79	)	(23	)	(23	)	(46	)

517		414		Total revenues	95		94		129		104		87

				Benefits and Expenses (1):
27		39		Insurance and annuity benefits	27		31		—		43		35
(3	)	1		Interest credited to policyholders’ account balances	—		—		—		—		—
385		289		Interest expense	45		39		41		35		34
105		82		Deferral of acquisition costs	19		21		12		10		11
(84	)	(82	)	Amortization of acquisition costs	(20	)	(25	)	(21	)	(19	)	(18	)
54		37		Securities operations non-interest expenses	5		(4	)	8		16		9
57		66		General and administrative expenses	7		(9	)	(25	)	18		(3	)

541		432		Total benefits and expenses	83		53		15		103		68

(24	)	(18	)	Adjusted operating income before income taxes	12		41		114		1		19

(1)

Page 39

Prudential Financial, Inc.

Quarterly Financial Supplement

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Second Quarter 2003

FINANCIAL SERVICES BUSINESSES RECONCILIATION OF ADJUSTED OPERATING INCOME TO INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(in millions)

Year-to-date					2002						2003
2003		2002			2Q		3Q		4Q		1Q		2Q
				Financial Services Businesses:

307		259		Individual Life and Annuities	113		46		85		129		178
92		73		Group Insurance	36		30		52		34		58

399		332		Insurance Division	149		76		137		163		236

73		83		Investment Management	36		29		27		36		37
(44	)	1		Financial Advisory	(6	)	(14	)	(28	)	(24	)	(20	)
98		84		Retirement	50		24		33		53		45
25		28		Other Asset Management	12		13		4		9		16

152		196		Investment Division	92		52		36		74		78

382		391		International Insurance	187		186		180		175		207
13		(4	)	International Investments	(4	)	2		(4	)	3		10

395		387		International Insurance and Investments Division	183		188		176		178		217

19		53		Corporate and Other	41		114		1		19		—

965		968		Sub-total	465		430		350		434		531

				Items excluded from adjusted operating income:
				Realized investment gains (losses), net, and related charges and adjustments
(61	)	(111	)	Insurance Division	(90	)	(84	)	(81	)	(51	)	(10	)
(15	)	(93	)	Investment Division	(124	)	(99	)	(120	)	(32	)	17
(108	)	(120	)	International Insurance and Investments Division	(35	)	(30	)	(23	)	(33	)	(75	)
60		(117	)	Corporate and Other	(96	)	71		(60	)	3		57

(124	)	(441	)	Total	(345	)	(142	)	(284	)	(113	)	(11	)

—		—		Sales practices remedies and costs—Corporate and Other	—		—		(20	)	—		—
(399	)	49		Divested businesses—Corporate and Other	31		(13	)	(59	)	3		(402	)

(523	)	(392	)	Total items excluded from adjusted operating income	(314	)	(155	)	(363	)	(110	)	(413	)

442		576		Income (loss) from continuing operations before income taxes—Financial Services Businesses	151		275		(13	)	324		118

Page 40

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Second Quarter 2003

KEY DEFINITIONS AND FORMULAS

1. Adjusted operating income before income taxes:

Adjusted operating income is a non-GAAP measure that excludes realized investment gains, net of losses, and related charges and adjustments; results of divested businesses and discontinued operations; sales practices remedies and costs and the related tax effects thereof. Revenues and benefits and expenses shown as components of adjusted operating income, and for the divisions of the Financial Services Businesses, are presented on the same basis as pre-tax adjusted operating income and exclude these items as well. Adjusted operating income should not be viewed as a substitute for net income determined in accordance with GAAP, and our definition of adjusted operating income may differ from that used by other companies. The excluded items are important to an understanding of our overall results of operations. However, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability factors of our businesses.

2. After-tax adjusted operating income:

Adjusted operating income before taxes, as defined above, less the income tax effect applicable to adjusted operating income before taxes.

3. Assets Under Management:

Fair market value or account value of assets which Prudential manages directly in proprietary products, such as mutual funds and variable annuities, in separate accounts, wrap-fee products and the general account, and assets invested in investment options included in the Company’s products that are managed by third party sub-managers (i.e., the non-proprietary investment options in the Company’s products).

4. Attributed Equity:

Amount of capital assigned to each of the Company’s segments for purposes of measuring segment adjusted operating income before income taxes, established at a level which management considers necessary to support the segment’s risks. Attributed equity for the Financial Services Businesses represents all of the Company’s equity that is not included in the Closed Block Business.

5. Book value per share of Common Stock:

Equity attributed to Financial Services Businesses divided by the number of Common shares outstanding at end of period, on a diluted basis.

6. Borrowings—General Corporate Purposes:

Amounts used for corporate purposes including uses for cash flow timing mismatches at Prudential Financial and investments in equity and debt securities of subsidiaries including amounts utilized for regulatory capital purposes.

7. Borrowings—Investment Related:

Debt issued to finance specific investment assets or portfolios of investment assets, including institutional spread lending investment portfolios, real estate, and real estate related investments held in consolidated joint ventures, as well as institutional and insurance company portfolio cash flow timing differences.

8. Borrowings—Securities Business Related:

Debt issued to finance primarily the liquidity of our broker-dealers, and our capital markets and other securities business related operations.

9. Borrowings—Specified Other Businesses:

Borrowings associated with consumer banking activities, real estate franchises, and relocation services.

10. Client Assets:

Fair market value of assets in client accounts of Prudential Securities and Prudential Bank, and trust client accounts, that are not included in Assets Under Management. Prudential does not receive a management or administrative fee on these assets, but may receive a fee for executing trades, custody or recordkeeping services.

Page 41

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Second Quarter 2003

KEY DEFINITIONS AND FORMULAS

11. Earned Premiums:

The portion of a premium, net of any amount ceded, that represents coverage already provided or that belongs to the insurer based on the part of the policy period that has passed.

12. Earnings Per Share of Common Stock:

Net income for the Financial Services Businesses and the Closed Block Business is determined in accordance with GAAP and includes general and administrative expenses charged to each of the businesses based on the Company’s 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 each business. The direct equity adjustments modify earnings available to holders of Common Stock and Class B Stock for earnings per share purposes. Earnings per share of Common Stock based on adjusted operating income of the Financial Services Businesses reflects these adjustments as well.

13. Financial Advisors:

Financial advisors and securities brokers in our Financial Advisory and International Investments segments.

14. Financial Advisor Productivity:

Financial Advisory segment total non-interest revenues, excluding revenues generated by the consumer bank and by the segment’s retail fixed income and equity sales and trading operations, divided by the average number of retail Financial Advisors for the period. For interim reporting periods, the productivity measures are annualized.

15. General Account:

Invested assets and policyholder liabilities and reserves for which the Company bears the investment risk. Excludes assets recognized for statutory purposes that are specifically allocated to a separate account. General account assets also include assets of the parent company, Prudential Financial, Inc.

16. Gibraltar Life Advisors:

Insurance representatives for Gibraltar Life.

17. Group Life Insurance and Group Disability Insurance Administrative Operating Expense Ratios:

Ratio of administrative operating expenses (excluding commissions) to gross premiums, policy charges and fee income.

18. Group Life Insurance and Group Disability Insurance Benefits Ratios:

Ratio of policyholder benefits to earned premiums, policy charges and fee income.

19. Insurance and Annuity Benefits:

Total death benefits, annuity benefits, disability benefits, other policy benefits, and losses paid or incurred, under insurance and annuity contracts, plus the change in reserves for future policy benefits and losses.

20. International Life Planners:

Insurance agents in our insurance operations outside the United States, excluding Gibraltar Life Advisors.

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Second Quarter 2003

KEY DEFINITIONS AND FORMULAS

21. New annualized premiums:

Premiums from new sales that are expected to be collected over a one year period. Group insurance new annualized premiums exclude new premiums resulting from rate changes on existing policies, from additional coverage issued under our Servicemembers’ Group Life Insurance contract, and from excess premiums on group universal life insurance that build cash value but do not purchase face amounts.

22. Non-recourse and Limited-recourse Debt:

Limited and non-recourse borrowing is where the holder is entitled to collect only against the assets pledged to the debt as collateral or has only very limited rights to collect against other assets.

23. Operating return on average equity (based on adjusted operating income):

Adjusted operating income after-tax (giving effect to the direct equity adjustment for earnings per share calculation), annualized for interim periods, divided by average attributed equity for the Financial Services Businesses excluding unrealized gains and losses on investments.

An alternative measure to operating return on average equity (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 3.40% for the six months ended June 30, 2003, 3.90% for the six months ended June 30, 2002, 2.28% for the three months ended June 30, 2003, 2.26% for the three months ended June 30, 2002, 7.54% for the three months ended September 30, 2002, 0.38% for the three months ended December 31, 2002 and 4.56% for the three months ended March 31, 2003.

24. Policy Persistency—Group Insurance:

Percentage of the premiums in force at the end of the prior year that are still in force at the end of the period (excluding Servicemembers’ Group Life Insurance and Prudential Employee Benefit Plan).

25. Policy Persistency—International Insurance:

13 month persistency represents the percentage of policies issued that are still in force at the beginning of their second policy year. 25 month persistency represents the percentage of policies issued that are still in force at the beginning of their third policy year.

26. Prudential Agents:

Insurance agents in our insurance operations in the United States.

27. Prudential Agent productivity:

Commissions on new sales of all products by Prudential Agents under contract for the entire period, divided by the number of those Prudential Agents. Excludes commissions on new sales by Prudential Agents hired or departed during the period. For interim reporting periods, the productivity measures are annualized.

28. Ratio of corporate debt to total capitalization:

For purposes of this ratio, we measure “debt” as the sum of borrowings for general corporate purposes and 20% of the stated aggregate liquidation amount of the Equity Security Units, and we measure “total capitalization” as the sum of equity excluding unrealized gains and losses on investments, corporate debt and the stated aggregate liquidation amount of the Equity Security Units. The ratio is calculated by dividing debt by total capitalization.

29. Redeemable Capital Securities:

Capital Trust Certificates of Prudential Financial Capital Trust I (element of Equity Security Units).

30. Separate Accounts:

Assets of our insurance companies allocated under certain policies and contracts that are segregated from the general account and other separate accounts. The policyholder or contractholder predominantly bears the risk of investments held in a separate account.

31. Wrap-Fee Products:

Investment products generating asset-based fees in which the funds of the customer are generally invested in other investment products such as mutual funds.

Page 43

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Second Quarter 2003

RATINGS AND INVESTOR INFORMATION

INSURANCE CLAIMS PAYING RATINGS

as of August 5, 2003

	A.M. Best	Standard & Poor’s	Moody’s	Fitch Ratings
The Prudential Insurance Company of America	A	A+	A1	AA-
PRUCO Life Insurance Company	A	A+	A1	NR*
PRUCO Life Insurance Company of New Jersey	A	A+	NR	NR
Prudential Property and Casualty Insurance Company	A-	BBB+	A2	NR
The Prudential Property & Casualty Insurance Company of New Jersey	A-	NR	NR	NR
The Prudential Life Insurance Co., Ltd. (Prudential of Japan)	A+	AA-	NR	NR
Gibraltar Life Insurance Company, Ltd.	NR	A	A2	NR
American Skandia Life Assurance Corporation	A-	A	NR	A+

CREDIT RATINGS: as of August 5, 2003
Prudential Financial, Inc.:
Short-Term Borrowings	AMB-1	A-2	P-2	F1
Long-Term Senior Debt	a-	A-	A3	A
Redeemable Capital Securities	a-	A-	A3	A
The Prudential Insurance Company of America :
Capital and surplus notes	a-	A-	A3	NR
Prudential Funding, LLC:
Commercial Paper	AMB-1	A-1	P-1	NR
Long-Term Senior Debt	a	A+	A2	NR
American Skandia Life Assurance Corporation	NR	A	NR	NR
* NR indicates not rated.

INVESTOR INFORMATION:
Corporate Offices:		Investor Information Hotline:

Prudential Financial, Inc. 751 Broad Street Newark, New Jersey 07102		Dial 877-998-ROCK for additional printed information or inquiries.
		Web Site:
		www.prudential.com

Publicly Traded Securities:

Common Stock of Prudential Financial, Inc. is traded on the New York Stock Exchange under the symbol PRU.
Equity Security Units of Prudential Financial, Inc. are traded on the New York Stock Exchange under the symbol PFA.

Page 44

Form: 8-K

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