Fitch Affirms Prudential Financial, Inc.'s Rtgs; Assigns New Ratings.

Business Editors

CHICAGO--(BUSINESS WIRE)--Feb. 11, 2004

Fitch Ratings has affirmed its ratings on Prudential Financial, Inc. (PFI) and its primary domestic life subsidiary, Prudential Insurance Company of America's (POA). Fitch has assigned a 'AA-' insurer financial strength rating to PRUCO Life Insurance Company (PRUCO Life) and upgraded the insurer financial strength rating of American Skandia Life Assurance Corporation (ASLAC) to 'AA-' from 'A+'. In addition, Fitch has assigned an 'A+' senior debt rating and a 'F1' commercial paper rating to Prudential Funding, LLC. The Rating Outlook is Stable.

Today's rating actions follow Fitch's annual review of the company. PFI's ratings are supported by the company's strong balance sheet, broad business diversification and improving operating performance, albeit from modest levels. Fitch Ratings favorably considers the organization's leading market position in multiple product segments, including its highly successful international life insurance business.

The ratings reflect the recent past's low profitability influenced by non-operating costs that are not expected to recur going forward beginning in 2004 and an overall product mix that exposes earnings to general financial market conditions. From a credit perspective, Fitch believes current challenges include improving operating results while redeploying capital judiciously in a manner that will not impact credit ratings, which would lead to improved returns for the organization's shareholders. Fitch sees the current transition as a colossal shift for the organization as management's focus moves from defensive to offensive in its attempt to enhance PFI's financial profile.

The organization has undergone significant changes over the past decade. The exit of non-core operations and recent acquisition of strategic insurance operations have positioned the company for improved operating results. While PFI is a much different organization than it was five or ten years ago, Fitch believes that many of the company's core strengths, such as its brand name, remain. The sum of these events, a strong balance sheet and improved earnings position has solidified PFI's credit quality.

Rating expectations include that balance sheet quality will remain strong, including sound asset quality and stable absolute capital levels. Fitch's own risk-based capital analysis includes adding a 25 basis point charge for variable annuity assets (which Fitch applies to all variable annuity writers) to the NAIC risk-based capital ratio, an adjustment that Fitch believes better accounts for risks associated with the variable annuity business that are not captured in the current risk-based capital results. The consolidated Fitch adjusted risk-based capital ratio for all domestic insurance subsidiaries is expected to remain at or above the 280%-290% range following the CIGNA transaction. Fitch believes that PFI's risk-based capital results benefit from a small amount of modified coinsurance and are penalized for its large book of participating individual life. International insurance operations are expected to maintain strong solvency margins, as the Japanese subsidiaries are in excess of 1000% reported solvency margins. The ratings consider PFI's conservative financial leverage targets of below 20% corporate debt to total capital and expect that non-corporate leverage risk will not deviate from current levels.

Fitch anticipates improved profitability, particularly in the domestic insurance operations. While some positive signs have been evident in recent years, stable improvement across all business units and a smooth integration of recent acquisitions are important operational goals. Pension credit contributions to earnings are expected to remain stable or decline, and not drive earnings improvements.

The assignment of the PRUCO Life rating and the upgrade of the ASLAC rating reflect Fitch's opinion that both subsidiaries along with POA comprise the primary domestic insurance operating subsidiaries of PFI. As such, the companies are considered to be a core operation to PFI. The surplus note rating assigned to outstanding surplus notes of POA align with Fitch's standard notching and consider the company's reasonable leverage profile. Prudential Funding, LLC's rating assignment is based on a net worth agreement provided by POA.

Entity/Issue/Type Action Rating/Outlook

Prudential Financial, Inc.

-- Long-term issuer Affirm 'A'/Stable;

-- Short-term issuer Affirm 'F1';

-- Senior debt Affirm 'A'/Stable;

-- Commercial paper Affirm 'F1'.

Prudential Financial Capital Trust I

-- Capital securities Affirm 'A'/Stable.

Prudential Funding, LLC

-- Senior debt Assign 'A+'/Stable;

-- Commercial paper Assign 'F1'.

Prudential Insurance Company of America

-- Insurer financial strength Affirm 'AA-'/Stable;

-- Surplus notes Assign 'A'/Stable.

PRUCO Life Insurance Company

-- Insurer financial strength Assign 'AA-'/Stable.

American Skandia Life Assurance Corporation

-- Insurer financial strength Upgrade 'AA-'/Stable.