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Prudential Financial, Inc. Announces 2012 Results

Stocks in this article: PRU

The Closed Block Business includes our in-force participating life insurance and annuity policies, and assets that are being used for the payment of benefits and policyholder dividends on these policies, as well as other assets and equity that support these policies. We have ceased offering these participating policies.

The Closed Block Business reported a loss from continuing operations before income taxes of $33 million for the fourth quarter of 2012, compared to income from continuing operations before income taxes of $123 million for the year-ago quarter.

The Closed Block Business reported a net loss attributable to Prudential Financial, Inc. of $18 million for the fourth quarter of 2012, compared to net income of $82 million for the year-ago quarter.

For the year ended December 31, 2012, the Closed Block Business reported income from continuing operations before income taxes of $64 million, compared to $214 million for 2011. The Closed Block Business reported net income attributable to Prudential Financial, Inc. of $41 million for 2012, compared to $146 million for 2011.

Consolidated Results

There is no legal separation of the Financial Services Businesses and the Closed Block Business, and holders of the Common Stock and the Class B Stock are both common stockholders of Prudential Financial, Inc.

On a consolidated basis, which includes the results of both the Financial Services Businesses and the Closed Block Business, Prudential Financial, Inc. reported a net loss attributable to Prudential Financial, Inc. of $232 million for the fourth quarter of 2012 compared to net income of $604 million for the year-ago quarter, and reported net income attributable to Prudential Financial, Inc. of $469 million for 2012 and $3.566 billion for 2011.

Change in Accounting Principle

During the fourth quarter of 2012, with retrospective application for earlier periods, the Company implemented a discretionary change in accounting principle related to its pension plans. Under the revised accounting principle, the market related value of a plan’s fixed income assets used to calculate periodic benefit cost is now reflected annually at fair value. The prior method calculated the market related value by recognizing changes in the fair value of a plan’s fixed income assets in a systematic and rational manner over five years. For the year ended December 31, 2011, the retrospective application of the revised accounting principle resulted in increases of $37 million and $24 million to pre-tax adjusted operating income and net income of the Financial Services Businesses attributable to Prudential Financial, Inc. respectively; had no impact on results of the Closed Block Business; and resulted in an increase of $24 million to net income attributable to Prudential Financial, Inc. on a consolidated basis. For the fourth quarter of 2011, the retrospective application of the revised accounting principle resulted in increases of $9 million and $6 million to pre-tax adjusted operating income and net income of the Financial Services Businesses attributable to Prudential Financial, Inc. respectively; had no impact on results of the Closed Block Business; and resulted in an increase of $6 million to net income attributable to Prudential Financial, Inc. on a consolidated basis. As a result of the retrospective application of the revised accounting principle, attributed equity excluding accumulated other comprehensive income as of December 31, 2011 for the Financial Services Businesses was increased by $173 million, or 37 cents per Common share, and there was no impact on attributed equity including accumulated other comprehensive income as of that date.

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