A.M. Best Revises Outlook to Negative for Prudential Financial and Its Subsidiaries

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has revised the outlook to negative from stable and affirmed the
financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR)
of "aa-" of Prudential Financial, Inc.`s (PFI) (Newark, NJ) (NYSE: PRU) domestic
life/health insurance companies. Concurrently, A.M. Best has revised the outlook
to negative from stable and affirmed the ICR of "a-" of PFI and all existing
debt ratings. (See link below for a detailed list of the companies and ratings.)

The revised outlook is a reflection of unfavorable capital markets that have
diminished absolute and risk-adjusted capitalization levels at the operating
subsidiaries due to higher reserve and capital requirements on PFI`s domestic
individual annuity business as well as the potential for significant credit
losses within the group`s general account investment portfolio. Specifically,
A.M. Best notes that PFI`s domestic insurance subsidiaries have moderately
higher investment risk relative to peers (as percentage of capital) due to
considerable holdings in below investment grade bonds, commercial mortgage loans
and subprime mortgage-backed securities. PFI`s GAAP balance sheet has roughly
one-fourth of its assets invested in structured securities (subprime and other
asset-backed securities), commercial mortgage-backed securities and commercial
mortgage loans. A.M. Best expects rising defaults industry wide as the United
States navigates through the current economic climate.

Despite recent improvement in the equity markets, A.M. Best notes the potential
for continued operating and capital volatility within the company`s individual
annuity and asset management businesses, specifically negative trends in asset
management fees and additional reserves/capital to support variable annuities
with secondary guarantees, mainly GMDB and GMIB. However, A.M. Best notes that
management has identified a number of strategies, which may partially mitigate
these trends. Additionally, while the economy may begin to stabilize in the near
to medium term, A.M. Best expects significant credit-related losses within PFI`s
subprime portfolio and increased credit loses in high-yield corporate bonds and
commercial mortgages, all of which are likely to be substantially offset by
capital management initiatives.

Going forward, A.M. Best will continue to monitor operating and capital trends
and will consider revising the outlook to stable if credit losses within PFI`s
financial services businesses are substantially offset by strategic initiatives
that bolster U.S. capitalization levels on a permanent basis. Other factors in
which A.M. Best would consider revising the outlook would include monetization
of the gain of PFI`s interest in the Wachovia joint venture (now held by Wells
Fargo), continued reductions in operating leverage, maintenance of holding
company liquidity at present levels (net of anticipated June 2009 repurchase of
convertible debt issued December 2007) and the funding of any potential
acquisitions through common equity raises. Additionally, A.M. Best will review
credit losses within PFI`s closed block, along with management actions to
maintain asset/liability ratios consistent with the glide path established at
demutualization.

Conversely, realization of credit losses exceeding $3.0 billion in 2009, further
reductions in U.S. statutory capitalization levels and increased use of leverage
(operating and financial) or redeployment of capital to support future
acquisitions may result in a downgrade to PFI`s ratings.

The ratings reflect PFI`s highly diversified operating profile, sound liquidity
and solid overall results in domestic life (individual life and group life),
institutional products and international operations. Additionally, A.M. Best
notes strong net flows within PFI`s group retirement business, which A.M. Best
believes is an increasingly important component to PFI`s overall U.S. business
strategy. The ratings also recognize the considerable diversity in PFI`s
business mix within its insurance, investment and international divisions, and
strong global market presence. PFI and its operating subsidiaries have strong
liquidity including access to commercial paper programs, committed credit lines,
membership in the Federal Home Loan Bank of New York and access to the Federal
Reserve`s Commercial Paper Funding Facility, which is available through October
2009.

For a complete list of Prudential Financial, Inc.`s ICRs, FSRs and debt ratings
please visit www.ambest.com/press/052710prudential.pdf.

The principal methodologies used in determining these ratings, including any
additional methodologies and factors that may have been considered, can be found
at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating
organization dedicated to serving the financial and health care service
industries, including insurance companies, banks, hospitals and health care
system providers. For more information, visit www.ambest.com.

A.M. Best Co.
Analysts:
Rosemarie Mirabella, 908-439-2200, ext. 5892
rosemarie.mirabella@ambest.com
or
Andrew Edelsberg, 908-439-2200, ext. 5182
andrew.edelsberg@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2009