Prudential Financial, Inc. Announces Third Quarter 2005 Results

For the first nine months of 2005, net income for the FinancialServices Businesses amounted to $2.842 billion ($5.54 per Commonshare) compared to $1.357 billion ($2.67 per Common share) for thefirst nine months of 2004. After-tax adjusted operating income for theFinancial Services Businesses for the first nine months of 2005amounted to $1.908 billion ($3.76 per Common share) compared to $1.347billion ($2.65 per Common share) for the first nine months of 2004.

"We are pleased with the earnings growth in each of our Divisionsthis quarter, and remain confident that we are on track to achieve ourgoals for the year 2005 and beyond. In the Insurance Division, we arebenefiting from strong sales of our expanded product offerings in theannuity business. The Division's protection businesses are performingwell, and recent actions we've taken to reduce the cost structure inIndividual Life contributed to the current quarter's earnings growth.In the Investment Division, the integration of the retirement businesswe acquired from CIGNA is progressing well and nearing completion,with client retention remaining consistent with our expectations. Inour Asset Management business, improved results from commercialmortgage operations, along with greater asset-based fees, contributedto earnings growth this quarter, with results continuing to benefitfrom a strong commercial real estate market. The Financial Advisorysegment's investment in the retail securities brokerage joint venturewith Wachovia also contributed to the Division's earnings growth, withthe business integration completed earlier this year. OurInternational businesses are continuing to benefit from strongbusiness growth, with results bolstered by the contribution from ouracquisition of Aoba Life late last year. In addition, earnings resultsare benefiting from our recent actions to enhance the investmentreturns of our international insurance businesses," said Chairman andCEO Arthur F. Ryan.

"Considering our results for the first nine months of the year,including the effect of items that may be non-recurring, we believethat Prudential Financial will achieve Common Stock earnings per sharein the range of $4.85 to $4.95 for the year 2005, based on after-taxadjusted operating income of the Financial Services Businesses. Thisexpectation assumes stable equity markets over the remainder of theyear," Ryan said. The 2005 expectation is subject to change if thisassumption is not realized and as discussed under "Forward-LookingStatements" below.

Adjusted operating income excludes "Realized investment gains(losses), net" (other than those associated with terminating hedges offoreign currency earnings and current period yield adjustments) andrelated charges and adjustments, and results from divested businesses.In addition, recorded changes in asset values that will ultimatelyinure to contractholders are excluded from adjusted operating income.Similarly, recorded changes in contractholder liabilities resultingfrom changes in related asset values are also excluded from adjustedoperating income. Income taxes applicable to adjusted operatingincome, for the third quarter and first nine months of 2005, do notinclude a benefit of $692 million from reduction of tax liabilities inconnection with the completion of IRS examinations of the company'stax returns for the years 1997 through 2001. Adjusted operating incomealso excludes discontinued operations and a charge in the firstquarter of 2004 for the cumulative effect of an accounting change,which are presented as separate components of net income undergenerally accepted accounting principles (GAAP).

The company acquired the retirement business of CIGNA Corporationon April 1, 2004. Results of the Financial Services Businesses includethe results of this business from the date of acquisition. Results ofthe Financial Services Businesses for the third quarter of 2005benefited from the acquisition, on November 1, 2004, of Aoba Life, aJapanese life insurance company.

Financial Services Businesses

Prudential Financial's Common Stock (NYSE:PRU) reflects theperformance of its Financial Services Businesses, which consist of itsInsurance, Investment, and International Insurance and Investmentsdivisions and its Corporate and Other operations.

Presented below is a discussion of the results of our divisions,based on a non-GAAP financial measure we call adjusted operatingincome. We believe that the presentation of adjusted operating incomeas we measure it for management purposes enhances understanding of theresults of operations of the Financial Services Businesses byhighlighting the results from ongoing operations and the underlyingprofitability of our businesses. The schedules accompanying thisrelease provide a reconciliation of adjusted operating income for theFinancial Services Businesses to income from continuing operations inaccordance with GAAP.

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

The Insurance division reported adjusted operating income of $341million for the third quarter of 2005, an increase of $96 million from$245 million in the year-ago quarter. Our Individual Life andAnnuities segment reported adjusted operating income of $281 millionfor the current quarter, compared to $197 million in the year-agoquarter. The segment's individual life insurance business reportedadjusted operating income of $120 million in the current quarter, a$19 million increase from the year-ago quarter. Current quarterresults benefited from lower expenses, reflecting earlier actions toreduce staffing and occupancy costs. The segment's individual annuitybusiness reported adjusted operating income of $161 million in thecurrent quarter, a $65 million increase from the year-ago quarter.Current quarter results include a net reduction in amortization ofdeferred policy acquisition and other costs, as well as a decrease inour reserve for guaranteed minimum death benefits, reflecting ourincreased estimate of profitability for annuity products. The netbenefit of these items amounted to $57 million. The remainder of theincrease reflected higher asset-based fees due to growth in variableannuity account values. Our Group Insurance segment reported adjustedoperating income of $60 million in the current quarter, a $12 millionincrease from the year-ago quarter, primarily due to more favorablegroup disability results reflecting an updating of reserves based on aperiodic review.

The Investment division reported adjusted operating income of $257million in the third quarter of 2005, an increase of $181 million from$76 million in the year-ago quarter. The Retirement segment reportedadjusted operating income of $110 million for the current quarter,compared to $94 million in the year-ago quarter. Current quartersegment results include a $43 million contribution from the retirementbusiness acquired from CIGNA, essentially unchanged from the year-agoquarter. Results for the current quarter and the year-ago quarter eachabsorbed transition costs of $11 million. The segment's originalretirement business reported adjusted operating income of $67 millionfor the current quarter, an increase of $19 million from the year-agoquarter. Mortgage prepayment income contributed $15 million to currentquarter results and had no significant impact on results for theyear-ago quarter. The Asset Management segment reported adjustedoperating income of $116 million for the current quarter, an increaseof $58 million from the year-ago quarter. Current quarter resultsbenefited from increased income from the segment's commercial mortgageoperations and greater asset-based fees in our investment managementand advisory services operation. Our Financial Advisory segment, whichreflects the combination of our retail securities brokerage businesswith Wachovia Securities, LLC on July 1, 2003, reported adjustedoperating income of $31 million for the current quarter compared to aloss of $76 million in the year-ago quarter. Our 38% share of theventure's results resulted in adjusted operating income of $59 millionfor the current quarter, compared to $28 million in the year-agoquarter before transition costs, reflecting increased fee income and alower level of operating expenses. There were no transition costs inthe current quarter as the business integration is complete. Currentquarter results also include expenses of $22 million related toobligations and costs we retained in connection with the contributedbusinesses primarily for litigation and regulatory matters, while theloss reported for the year-ago quarter included absorption of $59million of transition costs and $39 million related to the obligationsand costs we retained.

The International Insurance and Investments division reportedadjusted operating income of $384 million for the third quarter of2005, an increase of $124 million from $260 million in the year-agoquarter. The International Insurance segment reported adjustedoperating income of $358 million for the current quarter, compared to$239 million for the year-ago quarter. Adjusted operating income fromour international insurance operations other than Gibraltar Lifeincreased $78 million to $217 million in the current quarter. Currentquarter results benefited approximately $10 million from a decrease inthe estimated liability for Japanese guarantee fund assessments andreserve refinements related to recently introduced products. Adjustedoperating income benefited from increased investment income marginsand a favorable impact of $7 million, versus the year-ago quarter,from foreign currency exchange rates. The remainder of the increasereflected continued business growth in our Life Planner operations anda contribution to current quarter results from the business of AobaLife, which was acquired by the company on November 1, 2004 andintegrated with our existing Japanese insurance operations during thefirst quarter. The segment's Gibraltar Life operations reportedadjusted operating income of $141 million for the current quarter, anincrease of $41 million from the year-ago quarter. Current quarterresults benefited approximately $10 million from a decrease in theestimated liability for guaranty fund assessments. The remainder ofthe increase reflected increased investment income margins and afavorable impact of $6 million from foreign currency exchange rates,versus the year-ago quarter. The International Investments segmentreported adjusted operating income of $26 million for the currentquarter, compared to $21 million in the year-ago quarter.

Corporate and Other operations resulted in adjusted operatingincome of $47 million in the third quarter of 2005, compared to $54million in the year-ago quarter. The company's real estate andrelocation services business contributed $43 million to currentquarter results, essentially unchanged from the year-ago quarter.

Assets under management amounted to $522 billion at September 30,2005, compared to $470 billion a year earlier and $500 billion atDecember 31, 2004.

Net income of the Financial Services Businesses for the thirdquarter of 2005 amounted to $1.322 billion, compared to $548 millionin the year-ago quarter. Current quarter net income includes $80million of net realized investment gains and related charges andadjustments, before income taxes. Net income for the third quarteralso reflects pre-tax decreases of $97 million in recorded assetvalues and $45 million in recorded liabilities pertaining tocontracts, primarily in connection with the retirement business weacquired from CIGNA, for which such changes in value will ultimatelyinure to contractholders. These changes primarily representinterest-rate related mark-to-market adjustments.

Additionally, current quarter net income includes a benefit fromreduction of tax liabilities in connection with the completion of IRSexaminations of the company's tax returns for the years 1997 through2001, totaling $720 million, of which $692 million is not applicableto adjusted operating income.

Net income for the current quarter also includes a loss fromdiscontinued operations of $14 million (net of related taxes),primarily related to our discontinued Dryden Wealth Managementbusiness.

Net realized investment gains in the current quarter include $22million of losses from impairments and sales of credit-impairedsecurities. At September 30, 2005, gross unrealized losses on fixedmaturity investments of the Financial Services Businesses amounted to$547 million, including $483 million on investment-grade securities,which are substantially all interest rate related. Gross unrealizedlosses on fixed maturity investments of the Financial ServicesBusinesses amounted to $529 million at year-end 2004.

Net income of the Financial Services Businesses for the year-agoquarter included $38 million of net realized investment gains andrelated charges and adjustments, and losses of $15 million fromdivested businesses, in each case before income taxes. Net income forthe year-ago quarter also reflected increases of $208 million inrecorded asset values and $100 million in recorded liabilities forwhich changes in value will ultimately inure to contractholders. Netincome for the year-ago quarter also included a $15 million loss fromdiscontinued operations, net of related taxes.

Closed Block Business

Prudential's Class B Stock, which is not traded on any exchange,reflects the performance of its Closed Block Business.

The Closed Block Business includes our in-force participating lifeinsurance and annuity policies, and assets that are being used for thepayment of benefits and policyholder dividends on these policies, aswell as other assets and equity that support these policies. We haveceased offering these participating policies.

The Closed Block Business reported income from operations beforeincome taxes of $61 million for the third quarter of 2005 and $305million for the year-ago quarter. Closed Block Business resultsincluded net realized investment gains of $97 million in the currentquarter and $270 million in the year-ago quarter.

The Closed Block Business reported third quarter 2005 net incomeof $42 million, compared to $180 million for the year-ago quarter.

The Closed Block Business reported income from operations beforeincome taxes of $504 million for the first nine months of 2005 and$522 million for the first nine months of 2004.

For the first nine months of 2005, the Closed Block Businessreported net income of $334 million, compared to $321 million for thefirst nine months of 2004.

Consolidated Results

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

On a consolidated basis, which includes the results of both theFinancial Services Businesses and the Closed Block Business,Prudential Financial, Inc. reported net income of $1.364 billion forthe third quarter of 2005 and $728 million for the year-ago quarter,and reported net income of $3.176 billion for the first nine months of2005 and $1.678 billion for the first nine months of 2004.

Share Repurchases and Issuance

During the third quarter of 2005, the company acquired 9.4 millionshares of its Common Stock, at a total cost of $623 million. From thecommencement of share repurchases in May 2002, through September 30,2005, the company has acquired 111.3 million shares of its CommonStock at a total cost of $4.765 billion. This included 1.7 millionshares repurchased and reissued directly to a company deferredcompensation plan during 2002.

Forward-Looking Statements

Certain of the statements included in this release, including (butnot limited to) those in the fourth paragraph hereof, constituteforward-looking statements within the meaning of the U. S. PrivateSecurities Litigation Reform Act of 1995. Words such as "expects,""believes," "anticipates," "includes," "plans," "assumes,""estimates," "projects," "intends," "should," "will," "shall," orvariations of such words are generally part of forward-lookingstatements. Forward-looking statements are made based on management'scurrent expectations and beliefs concerning future developments andtheir potential effects upon Prudential Financial, Inc. and itssubsidiaries. There can be no assurance that future developmentsaffecting Prudential Financial, Inc. and its subsidiaries will bethose anticipated by management. These forward-looking statements arenot a guarantee of future performance and involve risks anduncertainties, and there are certain important factors that couldcause actual results to differ, possibly materially, from expectationsor estimates reflected in such forward-looking statements, including,among others: (1) general economic, market and political conditions,including the performance of financial markets and interest ratefluctuations; (2) domestic or international military or terroristactivities or conflicts; (3) volatility in the securities markets; (4)fluctuations in foreign currency exchange rates and foreign securitiesmarkets; (5) regulatory or legislative changes, including changes intax law; (6) changes in statutory or U.S. GAAP accounting principles,practices or policies; (7) differences between actual experienceregarding mortality, morbidity, persistency, surrender experience,interest rates, or market returns and the assumptions we use inpricing our products, establishing liabilities and reserves or forother purposes; (8) reestimates of our reserves for future policybenefits and claims; (9) changes in our assumptions related todeferred policy acquisition costs; (10) events resulting incatastrophic loss of life; (11) investment losses and defaults; (12)changes in our claims-paying or credit ratings; (13) competition inour product lines and for personnel; (14) economic, political,currency and other risks relating to our international operations;(15) Prudential Financial, Inc.'s primary reliance, as a holdingcompany, on dividends or distributions from its subsidiaries to meetdebt payment obligations and the applicable regulatory restrictions onthe ability of the subsidiaries to pay such dividends ordistributions; (16) risks due to the lack of legal separation betweenour Financial Services Businesses and our Closed Block Business; (17)adverse determinations in litigation or regulatory matters and ourexposure to contingent liabilities; and (18) the effects ofacquisitions, divestitures and restructurings, including possibledifficulties in integrating and realizing the projected results ofacquisitions. Prudential Financial, Inc. does not intend, and is underno obligation, to update any particular forward-looking statementincluded in this document.

As indicated above, our expectation of Common Stock earnings pershare is based on after-tax adjusted operating income. Adjustedoperating income, which is not measured in accordance with GAAP,excludes Realized investment gains (losses), net (other than thoseassociated with terminating hedges of foreign currency earnings andcurrent period yield adjustments). A significant element of realizedlosses is impairments and losses from sales of credit-impairedsecurities, the timing of which depends largely on market creditcycles and can vary considerably across periods. The timing of othersales that would result in gains or losses is largely subject to ourdiscretion and influenced by market opportunities. Similarly, adjustedoperating income excludes investment gains and losses on tradingaccount assets supporting insurance liabilities and changes inexperience-rated contractholder liabilities due to asset valuechanges, because these recorded changes in asset and liability valueswill ultimately inure to contractholders. Trends in the underlyingprofitability of our businesses can be more clearly identified withoutthe fluctuating effects of these transactions. Adjusted operatingincome also excludes the results of divested businesses, which are notrelevant to our ongoing operations. Because we do not predict futurerealized investment gains / losses or recorded changes in asset andliability values that will ultimately inure to contractholders, wecannot provide a measure of our Common Stock earnings per shareexpectation based on income from continuing operations of theFinancial Services Businesses, which is the GAAP measure mostcomparable to adjusted operating income.

The information referred to above, as well as the risks of ourbusinesses described in our Annual Report on Form 10-K for the yearended December 31, 2004, should be considered by readers whenreviewing forward-looking statements contained in this release.Additional historical information relating to our financialperformance is located on our Web site at www.investor.prudential.com.

Earnings Conference Call

Members of Prudential's senior management will host a conferencecall on Thursday, November 3, 2005, at 11 a.m. ET, to discuss with theinvestment community the company's third quarter results. Theconference call will be broadcast live over the company's InvestorRelations Web site at: www.investor.prudential.com. Please log onfifteen minutes early in the event necessary software needs to bedownloaded. The call will remain on the Investor Relations Web sitefor replay through November 17. Institutional investors, analysts, andother members of the professional financial community are invited tolisten to the call and participate in Q&A by dialing (888) 423-3271(domestic callers) or (651) 291-5254 (international callers). Allothers are encouraged to dial into the conference call in listen-onlymode, using the same numbers. To listen to a replay of the conferencecall starting at 4:15 p.m. on November 3, through November 10, dial(800) 475-6701 (domestic callers) or (320) 365-3844 (internationalcallers). The access code for the replay is 765309.

Prudential Financial companies serve individual and institutionalcustomers worldwide and include The Prudential Insurance Company ofAmerica, one of the largest life insurance companies in the U.S. Thesecompanies offer a variety of products and services, including lifeinsurance, mutual funds, annuities, pension and retirement relatedservices and administration, asset management, securities brokerage,banking and trust services, real estate brokerage franchises andrelocation services. For more information, visit www.prudential.com.
Financial Highlights
(in millions, except per share data, unaudited)

Three Months Nine Months
Ended Ended
September 30 September 30
--------------- ---------------
2005 2004 2005 2004
------- ------- ------- -------

Financial Services Businesses Income
Statement Data:
Adjusted Operating Income (1):
Revenues:
Premiums $2,593 $2,183 $7,720 $6,596
Policy charges and fee income 646 615 1,901 1,782
Net investment income 1,587 1,397 4,601 3,971
Commissions, investment
management fees, and other
income 1,104 841 3,063 2,434
------- ------- ------- -------
Total revenues 5,930 5,036 17,285 14,783
------- ------- ------- -------
Benefits and expenses:
Insurance and annuity benefits 2,493 2,246 7,596 6,778
Interest credited to
policyholders' account balances 651 587 1,877 1,608
Interest expense 143 83 388 193
Other expenses 1,614 1,485 4,686 4,376
------- ------- ------- -------
Total benefits and
expenses 4,901 4,401 14,547 12,955
------- ------- ------- -------
Adjusted operating income before
income taxes 1,029 635 2,738 1,828
Income taxes, applicable to adjusted
operating income 292 168 830 481
------- ------- ------- -------
Financial Services Businesses after-tax
adjusted operating income (1) 737 467 1,908 1,347
------- ------- ------- -------
Items excluded from adjusted operating
income:
Realized investment gains
(losses), net, and related
charges and adjustments 80 38 565 182
Investment gains (losses) on
trading account assets
supporting insurance
liabilities, net (97) 208 (34) (64)
Change in experience-rated
contractholder liabilities due
to asset value changes 45 (100) (17) 33
Divested businesses (1) (15) (5) (34)
------- ------- ------- -------
Total items excluded from
adjusted operating income
before income taxes 27 131 509 117
Income taxes, not applicable to
adjusted operating income (572) 36 (484) 16
------- ------- ------- -------
Total items excluded from
adjusted operating income,
after income taxes 599 95 993 101
------- ------- ------- -------
Income from continuing operations
(after-tax) of Financial Services
Businesses before extraordinary gain
on acquisition and cumulative effect
of accounting change 1,336 562 2,901 1,448
Loss from discontinued operations,
net of taxes (14) (15) (59) (33)
Extraordinary gain on acquisition,
net of taxes - 1 - 21
Cumulative effect of accounting
change, net of taxes - - - (79)
------- ------- ------- -------
Net income of Financial Services
Businesses $1,322 $548 $2,842 $1,357
======= ======= ======= =======

Direct equity adjustment for earnings
per share calculation (2) 19 22 63 64
------- ------- ------- -------

Earnings available to holders of
Common Stock after direct equity
adjustment:

Based on net income $1,341 $570 $2,905 $1,421
======= ======= ======= =======

Based on after-tax adjusted
operating income $756 $489 $1,971 $1,411
======= ======= ======= =======

See footnotes on last page.

Financial Highlights
(in millions, except per share data, unaudited)

Three Months Nine Months
Ended Ended
September 30 September 30
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------

Earnings per share of Common Stock
(diluted) (2):

Financial Services Businesses
after-tax adjusted operating
income $1.46 $0.93 $3.76 $2.65
Items excluded from adjusted
operating income:
Realized investment gains
(losses), net, and related
charges and adjustments 0.15 0.07 1.07 0.34
Investment gains (losses) on
trading account assets
supporting insurance
liabilities, net (0.19) 0.40 (0.06) (0.12)
Change in experience-rated
contractholder liabilities
due to asset value changes 0.09 (0.19) (0.03) 0.06
Divested businesses - (0.03) (0.01) (0.06)
-------- -------- -------- --------
Total items excluded from
adjusted operating income,
before income taxes 0.05 0.25 0.97 0.22
Income taxes, not applicable
to adjusted operating
income (1.10) 0.07 (0.92) 0.03
-------- -------- -------- --------
Total items excluded from
adjusted operating income,
after income taxes 1.15 0.18 1.89 0.19
-------- -------- -------- --------
Income from continuing
operations (after-tax) of
Financial Services Businesses
before extraordinary gain on
acquisition and cumulative
effect of accounting change 2.61 1.11 5.65 2.84
Loss from discontinued
operations, net of taxes (0.02) (0.03) (0.11) (0.06)
Extraordinary gain on
acquisition, net of taxes - - - 0.04
Cumulative effect of
accounting change, net of
taxes - - - (0.15)
-------- -------- -------- --------
Net income of Financial Services
Businesses $2.59 $1.08 $5.54 $2.67
======== ======== ======== ========

Weighted average number of
outstanding Common shares
(diluted basis) 518.3 525.7 524.5 532.5
======== ======== ======== ========

Financial Services Businesses
Attributed Equity (as of end of
period):

Total attributed equity $22,493 $20,457
Per share of Common
Stock - diluted 43.79 39.19

Attributed equity excluding
unrealized gains and
losses on investments $21,025 $18,987
Per share of Common
Stock - diluted 40.94 36.37

Number of diluted shares
at end of period 513.6 522.0
======== ========

Adjusted operating income before
income taxes, by Segment (1):
Individual Life and Annuities $281 $197 $718 $574
Group Insurance 60 48 144 120
-------- -------- -------- --------
Total Insurance Division 341 245 862 694
-------- -------- -------- --------
Asset Management 116 58 355 176
Financial Advisory 31 (76) (51) (170)
Retirement 110 94 407 238
-------- -------- -------- --------
Total Investment Division 257 76 711 244
-------- -------- -------- --------
International Insurance 358 239 970 698
International Investments 26 21 72 52
-------- -------- -------- --------
Total International Insurance
and Investments Division 384 260 1,042 750
-------- -------- -------- --------
Corporate and other operations 47 54 123 140
-------- -------- -------- --------
Financial Services Businesses
adjusted operating income before
income taxes 1,029 635 2,738 1,828
-------- -------- -------- --------
Items excluded from adjusted
operating income:
Realized investment gains
(losses), net, and related
charges and adjustments 80 38 565 182
Investment gains (losses) on
trading account assets
supporting insurance
liabilities, net (97) 208 (34) (64)
Change in experience-rated
contractholder liabilities
due to asset value changes 45 (100) (17) 33
Divested businesses (1) (15) (5) (34)
-------- -------- -------- --------
Total items excluded from
adjusted operating income
before income taxes 27 131 509 117
-------- -------- -------- --------
Income from continuing operations
before income taxes, extraordinary
gain on acquisition and cumulative
effect of accounting change -
Financial Services Businesses $1,056 $766 $3,247 $1,945
======== ======== ======== ========

See footnotes on last page.

Financial Highlights
(in millions, except per share data or as otherwise noted, unaudited)

Three Months Nine Months
Ended Ended
September 30 September 30
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------

Insurance Division:

Individual Life Insurance Sales
(3):
Excluding corporate-owned life
insurance
Variable life $19 $25 $56 $78
Universal life 54 48 158 119
Term life 30 28 89 88
-------- -------- -------- --------
Total excluding
corporate-owned life
insurance 103 101 303 285
Corporate-owned life insurance 3 4 5 11
-------- -------- -------- --------
Total $106 $105 $308 $296
======== ======== ======== ========

Fixed and Variable Annuity Sales
and Account Values:
Gross sales $1,969 $1,434 $5,476 $4,981
======== ======== ======== ========

Net sales $516 $124 $1,056 $954
======== ======== ======== ========

Total account value at end
of period $53,517 $48,334
======== ========

Group Insurance New Annualized
Premiums (4):
Group life $32 $34 $336 $195
Group disability 15 38 137 143
-------- -------- -------- --------
Total $47 $72 $473 $338
======== ======== ======== ========

Investment Division:

Asset Management Segment:
Assets managed by Investment
Management and Advisory
Services (in billions, as of
end of period):
Retail customers $70.5 $62.3
Institutional customers 129.8 108.9
General account 156.3 152.3
-------- --------
Total Investment
Management and
Advisory Services $356.6 $323.5
======== ========

Mutual Funds and Wrap-Fee
Products:

Mutual Funds and Wrap-Fee
Products Sales:

Gross sales, other than
money market $6,441 $4,219 $19,898 $9,940
======== ======== ======== ========

Net sales, other than money
market $1,940 $1,117 $6,651 $984
======== ======== ======== ========

Assets at end of period:
Mutual funds, excluding
money markets $27,387 $25,358
Money markets 3,663 4,316
Wrap-fee products 51,752 36,408
-------- --------
Total $82,802 $66,082
======== ========

Retirement Segment Sales:

Defined Contribution:

Gross sales $2,173 $2,791 $7,549 $6,154
======== ======== ======== ========

Net sales (withdrawals) $(197) $(250) $216 $(942)
======== ======== ======== ========

Guaranteed Products:

Gross sales $2,238 $1,676 $5,991 $3,881
======== ======== ======== ========

Net sales (withdrawals) $410 $(437) $337 $(1,395)
======== ======== ======== ========

International Insurance and
Investments Division:

International Insurance New
Annualized Premiums (5):

Actual exchange rate basis $263 $221 $914 $685
======== ======== ======== ========

Constant exchange rate basis $260 $221 $890 $688
======== ======== ======== ========

See footnotes on last page.

Financial Highlights
(in millions, except per share data or as otherwise noted, unaudited)

Three Months Nine Months
Ended Ended
September 30 September 30
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------

Closed Block Business Data:

Income Statement Data:
Revenues $1,865 $2,057 $5,963 $6,035
Benefits and expenses 1,804 1,752 5,459 5,513
-------- -------- -------- --------
Income from operations
before income taxes 61 305 504 522
Income taxes 19 125 170 201
-------- -------- -------- --------
Closed Block Business net income $42 $180 $334 $321
======== ======== ======== ========

Direct equity adjustment for
earnings per share calculation (2) (19) (22) (63) (64)
-------- -------- -------- --------

Earnings available to holders of
Class B Stock after direct equity
adjustment $23 $158 $271 $257
======== ======== ======== ========

Net income per share of Class B
Stock $11.50 $79.00 $135.50 $128.50
======== ======== ======== ========

Weighted average diluted shares
outstanding during period 2.0 2.0 2.0 2.0
======== ======== ======== ========

Closed Block Business Attributed
Equity (as of end of period):

Total attributed equity $1,162 $1,189
Per Share of Class B Stock 581.00 594.50

Attributed equity excluding
unrealized gains and losses on
investments $1,031 $530
Per Share of Class B Stock 515.50 265.00

Number of Class B Shares at end of
period 2.0 2.0
======== ========



Consolidated Data:

Consolidated Income Statement Data:
Revenues $7,791 $7,332 $23,901 $20,942
Benefits and expenses 6,674 6,261 20,150 18,475
-------- -------- -------- --------
Income from continuing
operations before income
taxes, extraordinary gain on
acquisition and cumulative
effect of accounting change 1,117 1,071 3,751 2,467
Income tax expense (benefit) (261) 329 516 698
-------- -------- -------- --------
Income from continuing
operations before
extraordinary gain on
acquisition and cumulative
effect of accounting change 1,378 742 3,235 1,769
Loss from discontinued operations,
net of taxes (14) (15) (59) (33)
Extraordinary gain on acquisition,
net of taxes - 1 - 21
Cumulative effect of accounting
change, net of taxes - - - (79)
-------- -------- -------- --------
Consolidated net income $1,364 $728 $3,176 $1,678
======== ======== ======== ========

Net income:
Financial Services Businesses $1,322 $548 $2,842 $1,357
Closed Block Business 42 180 334 321
-------- -------- -------- --------
Consolidated net income $1,364 $728 $3,176 $1,678
======== ======== ======== ========

Assets and Asset Management
Information (in billions, as of
end of period)

Total assets $413.6 $382.0

Assets under management (at
fair market value):
Managed by Investment
Division:
Asset Management Segment
- Investment Management
and Advisory Services $356.6 $323.5
Non-proprietary assets
under management 48.0 43.5
-------- --------
Total managed by
Investment Division 404.6 367.0
Managed by International
Insurance and Investments
Division 73.0 67.1
Managed by Insurance
Division 44.0 35.9
-------- --------
Total assets under
management 521.6 470.0
Client assets under
administration 96.9 72.9
-------- --------
Total assets under
management and
administration $618.5 $542.9
======== ========

See footnotes on last page.

(1) Adjusted operating income is a non-GAAP measure that excludes
Realized investment gains (losses), net (other than those
associated with terminating hedges of foreign currency earnings
and current period yield adjustments), and related charges and
adjustments; net investment gains and losses on trading account
assets supporting insurance liabilities; change in
experience-rated contractholder liabilities due to asset value
changes; results of divested businesses and discontinued
operations; cumulative effect of accounting change; extraordinary
gain on acquisition; and the related tax effects thereof. Revenues
and benefits and expenses shown as components of adjusted
operating income, are presented on the same basis as pre-tax
adjusted operating income and exclude these items as well.

Adjusted operating income does not equate to "Income from
continuing operations before income taxes, extraordinary gain on
acquisition and cumulative effect of accounting change" as
determined in accordance with GAAP but is the measure of profit or
loss we use to evaluate segment performance. Adjusted operating
income should not be viewed as a substitute for income determined
in accordance with GAAP, and our definition of adjusted operating
income may differ from that used by other companies. The excluded
items are important to an understanding of our overall results of
operations. However, we believe that the presentation of adjusted
operating income as we measure it for management purposes enhances
the understanding of our results of operations by highlighting the
results from ongoing operations and the underlying profitability
factors of our businesses.

(2) Net income for the Financial Services Businesses and the Closed
Block Business is determined in accordance with GAAP and includes
general and administrative expenses charged to each of the
businesses based on the Company's methodology for allocation of
such expenses. Cash flows between the Financial Services
Businesses and the Closed Block Business related to administrative
expenses are determined by a policy servicing fee arrangement that
is based upon insurance and policies in force and statutory cash
premiums. To the extent reported administrative expenses vary from
these cash flow amounts, the differences are recorded, on an
after-tax basis, as direct equity adjustments to the equity
balances of each business. The direct equity adjustments modify
earnings available to holders of Common Stock and Class B Stock
for earnings per share purposes. Earnings per share of Common
Stock based on adjusted operating income of the Financial Services
Businesses reflects these adjustments as well.

(3) Scheduled premiums from new sales on an annualized basis and first
year excess premiums and deposits on a cash-received basis.

(4) Amounts exclude new premiums resulting from rate changes on
existing policies, from additional coverage issued under our
Servicemembers' Group Life Insurance contract, and from excess
premiums on group universal life insurance that build cash value
but do not purchase face amounts. Group insurance new annualized
premiums include premiums from the takeover of claim liabilities.

(5) Annualized new business premiums. Actual amounts reflect the
impact of currency fluctuations. Constant exchange rates amounts
are based on the average exchange rates for the year ended
December 31, 2004. Single premium business for the company's
international insurance operations is included in annualized new
business premiums based on 10% credit.