UPDATE 5-Prudential to sell brokerage stake to Wells Fargo

(Adds CFO, Wells Fargo comments, updates stock price)

By Lilla Zuill and Jonathan Stempel

NEW YORK, Dec 4 (Reuters) - Prudential Financial Inc (PRU.N) plans to sell its minority stake in the Wachovia Securities brokerage to Wells Fargo & Co (WFC.N) for $5 billion, and will seek capital from the U.S. Treasury Department's rescue program to bolster its finances.

Prudential, the second-largest U.S. life insurer, on Thursday also projected a fourth-quarter loss of $1.10 to $1.30 per share, its second straight quarterly loss, and forecast earnings below analyst estimates for both full-year 2008 and 2009.

Prudential's outlook reflects expected credit losses as well as writedowns tied to falling stock markets that are "straining capital further," Chief Financial Officer Rich Carbone said at an investor conference.

Newark, New Jersey-based Prudential is trying to strengthen its balance sheet in the wake of heavy investment losses that have also hurt other insurers. Prudential said Treasury officials have not made a decision on its request.

American International Group Inc (AIG.N) received $40 billion from the program, and Hartford Financial Services Group Inc (HIG.N) and Principal Financial Group Inc (PFG.N) are trying to participate. MetLife Inc (MET.N), the largest U.S. life insurer, has declined to say whether it will seek funds.

Prudential and Wachovia Corp WB.N combined their retail brokerages in July 2003, with Wachovia taking a 62 percent stake in the joint venture and Prudential the rest. In selling its stake, Prudential is exercising an option it received when Wachovia bought the A.G. Edwards Inc brokerage last year.

The sale is expected to close around Jan. 1, 2010, assuming Wells Fargo completes its purchase of Wachovia by year-end. The deal could result in in aftertax proceeds of $3.7 billion, and a $1.7 billion aftertax gain, Prudential said.

Wachovia Securities is one of the three largest U.S. retail brokerages, along with Merrill Lynch & Co Inc MER.N and Citigroup Inc's (C.N) Smith Barney unit.

It ended September with 14,635 brokers and $1 trillion in client assets, down from $1.17 trillion at the end of 2007, according to Wachovia.

Wells Fargo spokeswoman Julia Tunis Bernard said the San Francisco-based bank had "assumed all along" that Prudential would sell the brokerage stake. Wells Fargo's acquisition of Wachovia would create the fourth-largest U.S. bank.

In afternoon trading, Prudential shares slipped 11 cents at $20.43 on the New York Stock Exchange. They began the year at $93.04.

BID FOR AIG UNITS

The fourth-quarter loss at Prudential assumes a pretax charge of $1.4 billion or $1.80 per share, in its individual annuities unit.

Credit losses and writedowns for equity investments might each total as much as $400 million in the quarter, Prudential said. The insurer lost $108 million, or 23 cents per share, in the third quarter.