PRUDENTIAL FINANCIAL INC

Retirement Strategies serves the retirement needs of both our institutional and individual customers. Our Institutional Retirement Strategies business develops and distributes retirement investment and income products and services to retirement plan sponsors in the public, private, and not-for-profit sectors, both domestically and internationally, primarily within the United Kingdom. Our Individual Retirement Strategies business develops and distributes individual variable and fixed annuity products in the U.S., primarily to mass affluent (households with investable assets or annual income in excess of $100,000) and affluent (households with investable assets in excess of $250,000) customers with a focus on innovative product design and risk management strategies.

Institutional Retirement Strategies. We primarily distribute products through the following channels:

•Pension risk transfer group annuities and longevity reinsurance contracts through actuarial consultants and third-party brokers.

•Investment-only stable value wrap products and guaranteed investment contracts through our internal sales force and third-party intermediaries.

•Structured settlements are offered through third-party specialized brokers.

•Funding agreements mainly through third-party intermediaries.

Individual Retirement Strategies. Our distribution efforts, which are supported by a network of internal and external wholesalers, are executed through a diverse group of distributors, including:

•Third-party distribution through broker-dealers, banks, wirehouses, independent financial planners, and marketing organizations; and

•Financial professionals associated with Prudential Advisors, Prudential’s proprietary nationwide advice organization.

Institutional Retirement Strategies. Our revenues primarily come in the form of premiums associated with insurance and reinsurance contracts and payout annuities, policy charges and fee income based on account values of fee-based stable value and longevity reinsurance products, and investment income from assets supporting customer liabilities and required capital.

Our profitability is substantially impacted by our ability to appropriately price our products. We price our products based on pricing models that consider the investment environment and our risk, fees, expenses, profitability targets, and assumptions for mortality and potential for early retirement. These assumptions may be less predictable in certain markets.

Individual Retirement Strategies. Our revenues primarily come in the form of investment income from assets supporting customer liabilities and required capital, as well asinterest income from collateral posted to counterparties; fee income from asset management fees and service fees, which represent administrative service and distribution fees; and policy charges and fee income representing mortality, expense and other fees for various insurance-related options.

Our profitability is substantially impacted by our ability to appropriately price our products. We price our products based on an evaluation of the risks assumed and consideration of applicable risk management strategies, including hedging and reinsurance costs, and assumptions regarding investment returns and contractholder behavior, including persistency, benefit utilization, and the timing and efficiency of withdrawals for contracts with living benefit features, as well as other assumptions.

Institutional Retirement Strategies. We compete with other large, well-established insurance companies, asset managers and diversified financial institutions primarily based on pricing, structuring capabilities, and our ability to offer innovative product solutions and successfully execute large-scale transactions. We are a leader in providing innovative pension risk management solutions to plan sponsors, and we believe the pension risk transfer market continues to offer attractive opportunities that are aligned with our expertise.

Individual Retirement Strategies. We compete with other providers of retirement savings and accumulation products, including large, well-established insurance and financial services companies and private equity firms. We believe our competitive advantage lies primarily in our innovative product features and our risk management strategies as well as brand recognition, financial strength, the breadth of our distribution platform, and our customer service capabilities. We periodically adjust product offerings, prices, and features based on the market and our strategy, with a goal of achieving customer and enterprise value.

Institutional Retirement Strategies. We use ceded reinsurance on certain structured settlement contracts and assumed reinsurance as part of our international reinsurance pension risk transfer products. See Note 15 to the Consolidated Financial Statements for additional details regarding the Company’s material reinsurance transactions.

Individual Retirement Strategies. We use ceded reinsurance on certain annuity contracts to (1) reduce market sensitivity and (2) mitigate mortality and longevity risks. We also use assumed reinsurance in connection with our 2006 acquisition of The Allstate Corporation (“Allstate”) variable annuity business and the reinsurance of certain annuity products retained in connection with the sale of Prudential Annuities Life Assurance Corporation (“PALAC”). See Note 15 to the Consolidated Financial Statements for additional details regarding these agreements.