Financial Services Businesses

Prudential Financial’s Common Stock (NYSE:PRU) reflects the performance of its Financial Services Businesses, which consist of its U.S. Retirement Solutions and Investment Management, U.S. Individual Life and Group Insurance, and International Insurance divisions and its Corporate and Other operations.

In the following business-level discussion, adjusted operating income refers to pre-tax results.

The U.S. Retirement Solutions and Investment Management division reported adjusted operating income of $504 million for the third quarter of 2012, compared to $42 million in the year-ago quarter.

The Individual Annuities segment reported adjusted operating income of $207 million in the current quarter, compared to a loss of $192 million in the year-ago quarter. Current quarter results include a net charge of $48 million to reflect an updated estimate of profitability for this business including updates of economic and other actuarial assumptions based on an annual review and refinements which resulted in a $106 million charge, and the impact of favorable current quarter market performance on customer accounts relative to our assumptions which resulted in a $58 million benefit. Results for the year-ago quarter included a net charge of $421 million to reflect an update of estimated profitability, primarily driven by the impact of unfavorable market performance on customer account values relative to our assumptions while also including updates of actuarial assumptions based on an annual review. Excluding the effect of the foregoing items, adjusted operating income for the Individual Annuities segment increased $26 million from the year-ago quarter, primarily reflecting higher asset-based fees due to growth in variable annuity account values.

The Retirement segment reported adjusted operating income of $110 million for the current quarter, compared to $111 million in the year-ago quarter. Current quarter results include a $29 million charge to write off intangible assets relating to an acquired business, and a $13 million charge from a net increase in amortization of deferred policy acquisition and other costs primarily reflecting an annual review of actuarial assumptions. Results for the year-ago quarter included a $24 million charge based on an annual review. Excluding these items, adjusted operating income of the Retirement segment increased $17 million from the year-ago quarter, as a greater contribution from investment results and higher fees associated with growth in retirement account values were partly offset by less favorable case experience on traditional retirement business in the current quarter.

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