A.M. Best Affirms Ratings of Prudential Financial, Inc. and Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of "aa-" of Prudential Financial, Inc.'s (Prudential) (Newark, NJ) [NYSE: PRU] core insurance subsidiaries. Concurrently, A.M. Best has affirmed Prudential's ICR of "a-" and its debt ratings. The outlook for all ratings is stable. (See link below for a detailed list of ratings.)

The ratings reflect the subsidiaries' sound capital position, diverse business mix, prominent market position, positively trending operating results and strong financial discipline. These strengths are complemented by the significant financial flexibility, strong business profile, diverse sources of revenues and earnings and the global market presence of Prudential. The organization's substantial balance sheet strength is supported by its prudent investment strategy, effective asset/liability management, conservative approach to product pricing and reasonable level of intangibles relative to equity.

While total leverage--both financial and operating leverage--has increased in recent years, Prudential maintains strong fixed charge coverage and an excellent liquidity profile. A.M. Best notes that Prudential's financial leverage and interest coverage ratios remain within expectations for its current ratings.

Partially offsetting these rating strengths is Prudential's challenge to expand revenue growth domestically (particularly in the retirement savings segment); the increased competition within its foreign insurance markets; higher operating leverage relative to peers; assertive capital management; and the need to further enhance and refine its enterprise risk management practices.

Primarily due to its aggressive stock repurchase program, Prudential's statutory capital levels within the United States have declined as a disproportionate percentage of recent buybacks have been funded through its domestic insurance entities. Going forward, A.M. Best expects these capital trends to moderate as shareholder buybacks are funded via enterprise wide cash flows as well as organic earnings growth.

Additionally, A.M. Best believes Prudential's operating leverage is high relative to similarly-rated peers, reflecting both its overall business mix, which requires high levels of working capital, as well as strong growth in its institutional business in recent years. However, Prudential's well-diversified liability profile and ability to generate sustainable earnings and cash flows across its major business segments partially mitigates this concern. A.M. Best notes that Prudential employs elevated levels of operating leverage on an opportunistic basis.

For a complete listing of Prudential Financial, Inc.'s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/050203prudential.pdf.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.