Prudential Financial, Inc. Announces Second Quarter 2006 Results

Prudential Financial, Inc. (NYSE:PRU) today reported netincome for its Financial Services Businesses of $424 million (89 centsper Common share) for the second quarter of 2006, compared to $754million ($1.48 per Common share) for the year-ago quarter. After-taxadjusted operating income for the Financial Services Businesses forthe second quarter of 2006 was $682 million ($1.40 per Common share),compared to $568 million ($1.12 per Common share) for the secondquarter of 2005, a 25 percent increase per Common share. Adjustedoperating income is a non-GAAP measure as discussed below.

For the first half of 2006, net income for the Financial ServicesBusinesses amounted to $1.099 billion ($2.27 per Common share)compared to $1.520 billion ($2.96 per Common share) for the first halfof 2005. First half 2006 after-tax adjusted operating income for theFinancial Services Businesses amounted to $1.351 billion ($2.77 perCommon share) compared to $1.169 billion ($2.30 per Common share) forthe first half of 2005.

"Second quarter results and return on equity for the first halfare on track with our objectives for the year. We continue to benefitfrom growth in the broad retirement and savings market, most recentlythrough our acquisition of Allstate's variable annuity business onJune 1. With integration of the business we acquired from CIGNA nowbehind us, our Retirement business is focusing on expansion of itsfull service retirement operations. Our Asset Management businesscontributed to earnings growth this quarter, as greater assetmanagement fees and proprietary income bolstered results. OurInternational businesses also continue to perform well," said Chairmanand CEO Arthur F. Ryan.

"We believe that Prudential Financial will achieve Common Stockearnings per share in the range of $5.50 to $5.70 for the year 2006,based on after-tax adjusted operating income of the Financial ServicesBusinesses. This expectation assumes appreciation in the S&P 500 indexof 2 percent per quarter for the balance of the year," Ryan said. The2006 expectation is subject to change if this assumption is notrealized and as discussed under "Forward-Looking Statements andNon-GAAP Measures" below.

Adjusted operating income is not calculated under generallyaccepted accounting principles (GAAP). Information regarding adjustedoperating income, a non-GAAP measure, is discussed later in this pressrelease under "Forward-Looking Statements and Non-GAAP Measures," anda reconciliation of adjusted operating income to the most comparableGAAP measure is provided in the tables that accompany this release.

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.

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

The Insurance division reported adjusted operating income of $247million for the second quarter of 2006, compared to $266 million inthe year-ago quarter. Our Individual Life and Annuities segmentreported adjusted operating income of $218 million for the currentquarter, compared to $220 million in the year-ago quarter. Thesegment's individual life insurance business reported adjustedoperating income of $96 million in the current quarter, compared to$119 million in the year-ago quarter. Current quarter resultsreflected less favorable mortality experience than that of theyear-ago quarter, as well as greater net amortization of deferredpolicy acquisition costs and related items, which more than offsetincreased net investment spread on general account business. Thesegment's individual annuity business reported adjusted operatingincome of $122 million in the current quarter, a $21 million increasefrom the year-ago quarter. Adjusted operating income for the year-agoquarter benefited $6 million from refinements to our reserve forguaranteed minimum income benefits. Excluding the effect of this item,adjusted operating income for the segment's individual annuitybusiness increased $27 million from the year-ago quarter, including an$8 million contribution to current quarter results from the initialmonth of operations of the variable annuity business we acquired fromAllstate. The remainder of the increase reflected higher asset-basedfees due to growth in variable annuity account values. Our GroupInsurance segment reported adjusted operating income of $29 million inthe current quarter, a $17 million decrease from the year-ago quarter.The decrease came from less favorable group life claims experience,which more than offset improved disability claims experience comparedto the year-ago quarter and a greater contribution from investmentresults in the current quarter.

The Investment division reported adjusted operating income of $316million for the second quarter of 2006, compared to $150 million inthe year-ago quarter. The Retirement segment reported adjustedoperating income of $142 million for the current quarter, unchangedfrom the year-ago quarter. Current quarter Retirement segment resultsbenefited $10 million from mortgage prepayment income and $9 millionfrom reserve releases based on updates of client census data, whileresults for the year-ago quarter included similar benefits totaling$35 million and transition costs of $8 million relating to integrationof the business acquired from CIGNA. Excluding the effect of theseitems, adjusted operating income for the Retirement segment increased$8 million from the year-ago quarter, reflecting a greatercontribution from net investment spread. The Asset Management segmentreported adjusted operating income of $137 million for the currentquarter, an increase of $32 million from the year-ago quarter. AssetManagement segment results for the current quarter included income of$23 million from principal investing and performance-based fees froman individual transaction, and the year-ago quarter included $23million of income from an individual transaction in the principalinvesting business. The $32 million increase in adjusted operatingincome reflected greater asset management fees in our investmentmanagement and advisory services operation and increased income fromthe segment's commercial mortgage operations. Our Financial Advisorysegment, which reflects our retail securities brokerage joint venturewith Wachovia, reported adjusted operating income of $37 million forthe current quarter compared to a loss of $97 million in the year-agoquarter. Our 38% share of the venture resulted in adjusted operatingincome of $60 million for the current quarter, compared to $47 millionin the year-ago quarter before transition costs, reflecting increasedfee income. Current quarter results also include expenses of $30million related to obligations and costs we retained in connectionwith the contributed businesses primarily for litigation andregulatory matters. Results for the year-ago quarter included similarexpenses of $136 million, primarily to increase a reserve forestimated settlement costs related to market timing issues, as well as$9 million of transition costs relating to the business integrationwhich was completed in 2005.

The International Insurance and Investments division reportedadjusted operating income of $358 million for the second quarter of2006, compared to $346 million in the year-ago quarter. TheInternational Insurance segment reported adjusted operating income of$324 million for the current quarter, compared to $327 million for theyear-ago quarter. Adjusted operating income from our Life Plannerinsurance operations increased $39 million to $222 million in thecurrent quarter. Adjusted operating income benefited from continuedbusiness growth and a favorable impact of $12 million, versus theyear-ago quarter, from foreign currency exchange rates. The segment'sGibraltar Life operations reported adjusted operating income of $102million for the current quarter, compared to $144 million in theyear-ago quarter. Refinements of policy liabilities resulted in a $17million reduction of current quarter adjusted operating income, whileresults for the year-ago quarter benefited $9 million from refinementsin reserves for a block of business. Excluding the effect of theseitems, Gibraltar Life's adjusted operating income decreased $16million from the year-ago quarter. The decrease reflected a lessfavorable level of policy benefits and expenses, including mortalityless favorable than our average expectations, which more than offset afavorable impact of $4 million from foreign currency exchange ratesversus the year-ago quarter. The International Investments segmentreported adjusted operating income of $34 million for the currentquarter, compared to $19 million in the year-ago quarter. The increasereflected more favorable results from sales and trading operations andthe segment's asset management businesses.

Corporate and Other operations resulted in adjusted operatingincome of $37 million in the second quarter of 2006, compared to $59million in the year-ago quarter, reflecting a lower contribution frominvestment income, net of interest expense. The company's real estateand relocation business contributed $29 million to current quarterresults, essentially unchanged from the year-ago quarter.

Assets under management amounted to $568 billion at June 30, 2006,compared to $511 billion a year earlier and $532 billion at December31, 2005.

Net income of the Financial Services Businesses for the secondquarter of 2006 amounted to $424 million, compared to $754 million inthe year-ago quarter. Current quarter net income includes $311 millionof net realized investment losses and related charges and adjustments,and losses of $6 million from divested businesses, in each case beforeincome taxes. The net realized investment losses reflect sales offixed income securities and fluctuations in value of hedginginstruments covering our foreign currency risk. Net income for thecurrent quarter also reflects pre-tax decreases of $151 million inrecorded asset values and $130 million in recorded liabilitiesrepresenting changes in value which will ultimately accrue tocontractholders. These changes primarily represent interest-raterelated mark-to-market adjustments. Current quarter net income alsoincludes a $15 million loss (net of related taxes) from discontinuedoperations.

Net realized investment losses in the current quarter include $22million of losses from impairments and sales of credit-impairedsecurities. At June 30, 2006, gross unrealized losses on generalaccount fixed maturity investments of the Financial ServicesBusinesses amounted to $1.872 billion, including $1.696 billion oninvestment-grade securities, which are substantially all interest raterelated. Gross unrealized losses on general account fixed maturityinvestments of the Financial Services Businesses amounted to $611million at year-end 2005.

Net income of the Financial Services Businesses for the year-agoquarter included $249 million of net realized investment gains andrelated charges and adjustments, before income taxes. Net income forthe year-ago quarter also reflected increases of $190 million inrecorded asset values and $145 million in recorded liabilities forwhich changes in value will ultimately accrue to contractholders. Inaddition, net income for the year-ago quarter included a loss fromdiscontinued operations of $44 million (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 $38 million for the second quarter of 2006 and $198million for the year-ago quarter. Closed Block Business resultsincluded net realized investment losses of $28 million in the currentquarter and net realized investment gains of $210 million in theyear-ago quarter. The Closed Block Business reported net income forthe second quarter of 2006 of $29 million, compared to $129 millionfor the year-ago quarter.

For the first half of 2006, the Closed Block Business reportedincome from operations before income taxes of $122 million, comparedto $443 million for the first half of 2005. The Closed Block Businessreported net income of $87 million for the first half of 2006 and $292million for the first half of 2005.

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 $453 million for thesecond quarter of 2006 and $883 million for the year-ago quarter, andreported net income of $1.186 billion for the first half of 2006 and$1.812 billion for the first half of 2005.

Share Repurchases and Issuance

During the second quarter of 2006, the company acquired 8.2million shares of its Common Stock, at a total cost of $625 million.From the commencement of share repurchases in May 2002, through June30, 2006, the company has acquired 136.4 million shares of its CommonStock at a total cost of $6.637 billion. This included 1.7 millionshares repurchased and reissued directly to a company deferredcompensation plan during 2002.

Forward-Looking Statements and Non-GAAP Measures

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 and fluctuations of stock, real estate, andother financial markets; (2) interest rate fluctuations; (3)reestimates of our reserves for future policy benefits and claims; (4)differences between actual experience regarding mortality, morbidity,persistency, surrender experience, interest rates or market returnsand the assumptions we use in pricing our products, establishingliabilities and reserves or for other purposes; (5) changes in ourassumptions related to deferred policy acquisition costs, valuation ofbusiness acquired or goodwill; (6) changes in our claims-paying orcredit ratings; (7) investment losses and defaults; (8) competition inour product lines and for personnel; (9) changes in tax law; (10)economic, political, currency and other risks relating to ourinternational operations; (11) fluctuations in foreign currencyexchange rates and foreign securities markets; (12) regulatory orlegislative changes; (13) adverse determinations in litigation orregulatory matters and our exposure to contingent liabilities,including in connection with our divestiture or winding down ofbusinesses; (14) domestic or international military actions, naturalor man-made disasters including terrorist activities or pandemicdisease, or other events resulting in catastrophic loss of life; (15)ineffectiveness of risk management policies and procedures inidentifying, monitoring and managing risks; (16) effects ofacquisitions, divestitures and restructurings, including possibledifficulties in integrating and realizing the projected results ofacquisitions; (17) changes in statutory or U.S. GAAP accountingprinciples, practices or policies; (18) changes in assumptions forretirement expense; (19) Prudential Financial, Inc.'s primaryreliance, as a holding company, on dividends or distributions from itssubsidiaries to meet debt payment obligations and continue sharerepurchases, and the applicable regulatory restrictions on the abilityof the subsidiaries to pay such dividends or distributions; and (20)risks due to the lack of legal separation between our FinancialServices Businesses and our Closed Block Business. PrudentialFinancial, Inc. does not intend, and is under no obligation, to updateany particular forward-looking statement included in this document.

Adjusted operating income is a non-GAAP measure of performance ofour Financial Services Businesses. Adjusted operating income excludes"Realized investment gains (losses), net," as adjusted, and relatedcharges and adjustments. A significant element of realized losses isimpairments and losses from sales of credit-impaired securities, thetiming of which depends largely on market credit cycles and can varyconsiderably across periods. The timing of other sales that wouldresult in gains or losses is largely subject to our discretion andinfluenced by market opportunities. Realized investment gains (losses)representing profit or loss of certain of our businesses whichprimarily originate investments for sale or syndication to unrelatedinvestors, and those associated with terminating hedges of foreigncurrency earnings and current period yield adjustments are included inadjusted operating income. Adjusted operating income also excludesinvestment gains and losses on trading account assets supportinginsurance liabilities and changes in experience-rated contractholderliabilities due to asset value changes, because these recorded changesin asset and liability values will ultimately accrue tocontractholders. Trends in the underlying profitability of ourbusinesses can be more clearly identified without the fluctuatingeffects of these transactions. In addition, adjusted operating incomeexcludes the results of divested businesses, which are not relevant toour ongoing operations. Discontinued operations, which is presented asa separate component of net income under GAAP, is also excluded fromadjusted operating income.

We believe that the presentation of adjusted operating income aswe 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. However, adjusted operating income isnot a substitute for income determined in accordance with GAAP, andthe excluded items are important to an understanding of our overallresults of operations. The schedules accompanying this release providea reconciliation of adjusted operating income for the FinancialServices Businesses to income from continuing operations in accordancewith GAAP.

Our expectation of Common Stock earnings per share is based onafter-tax adjusted operating income. Because we do not predict futurerealized investment gains / losses or recorded changes in asset andliability values that will ultimately accrue 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, 2005, 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, August 3, 2006 at 11 a.m. ET, to discuss with theinvestment community the company's second 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 August 18. Institutional investors, analysts, andother members of the professional financial community are invited tolisten to the call and participate in Q&A by dialing (877) 777-1971(domestic callers) or (612) 332-0226 (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 August 3, through August 10, dial (800)475-6701 (domestic callers) or (320) 365-3844 (international callers).The access code for the replay is 821370.

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, banking and trustservices, real estate brokerage franchises, relocation services and,through a joint venture, retail securities brokerage services. Formore information, visit www.prudential.com.

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


Three Months Six Months
Ended Ended
June 30 June 30
--------------- ---------------
2006 2005 2006 2005
------- ------- ------- -------
Financial Services Businesses Income
Statement Data:
Adjusted Operating Income (1):
Revenues:
Premiums $2,542 $2,585 $5,146 $5,104
Policy charges and fee income 667 615 1,329 1,232
Net investment income 1,865 1,644 3,666 3,269
Asset management fees,
commissions and other income 966 852 2,020 1,700
------- ------- ------- -------
Total revenues 6,040 5,696 12,161 11,305
------- ------- ------- -------
Benefits and expenses:
Insurance and annuity benefits 2,591 2,519 5,168 5,055
Interest credited to
policyholders' account balances 677 626 1,329 1,231
Interest expense 223 134 424 245
Other expenses 1,591 1,596 3,336 3,067
------- ------- ------- -------
Total benefits and expenses 5,082 4,875 10,257 9,598
------- ------- ------- -------
Adjusted operating income
before income taxes 958 821 1,904 1,707
Income taxes, applicable to
adjusted operating income 276 253 553 538
------- ------- ------- -------
Financial Services Businesses
after-tax adjusted operating
income (1) 682 568 1,351 1,169
------- ------- ------- -------
Items excluded from adjusted
operating income:
Realized investment gains
(losses), net, and related
charges and adjustments (311) 249 (260) 485
Investment gains (losses) on
trading account assets
supporting insurance liabilities,
net (151) 190 (265) 58
Change in experience-rated
contractholder liabilities due to
asset value changes 130 (145) 196 (57)
Divested businesses (6) 3 2 (2)
------- ------- ------- -------
Total items excluded from
adjusted operating income
before income taxes (338) 297 (327) 484
Income taxes, not applicable to
adjusted operating income (95) 67 (93) 88
------- ------- ------- -------
Total items excluded from
adjusted operating income, after
income taxes (243) 230 (234) 396
------- ------- ------- -------
Income from continuing operations
(after-tax) of Financial Services
Businesses 439 798 1,117 1,565
Loss from discontinued operations,
net of taxes (15) (44) (18) (45)
------- ------- ------- -------
Net income of Financial Services
Businesses $ 424 $ 754 $1,099 $1,520
======= ======= ======= =======

Direct equity adjustment for earnings
per share calculation (2) 16 22 35 44
------- ------- ------- -------
Earnings available to holders of
Common Stock after direct equity
adjustment:

Based on net income $ 440 $ 776 $1,134 $1,564
======= ======= ======= =======
Based on after-tax adjusted
operating income $ 698 $ 590 $1,386 $1,213
======= ======= ======= =======

See footnotes on last page.


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

Three Months Six Months
Ended Ended
June 30 June 30
--------------- ---------------
2006 2005 2006 2005
------- ------- ------- -------
Earnings per share of Common Stock
(diluted) (2):

Financial Services Businesses
after-tax adjusted operating
income $ 1.40 $ 1.12 $ 2.77 $ 2.30
Items excluded from adjusted
operating income:
Realized investment gains
(losses), net, and related
charges and adjustments (0.63) 0.47 (0.52) 0.92
Investment gains (losses) on
trading account assets
supporting insurance
liabilities, net (0.30) 0.37 (0.53) 0.11
Change in experience-rated
contractholder liabilities
due to asset value changes 0.26 (0.28) 0.39 (0.11)
Divested businesses (0.01) 0.01 0.01 (0.01)
------- ------- ------- -------
Total items excluded from adjusted
operating income, before income
taxes (0.68) 0.57 (0.65) 0.91
Income taxes, not applicable to
adjusted operating income (0.20) 0.13 (0.18) 0.17
------- ------- ------- -------
Total items excluded from adjusted
operating income, after income
taxes (0.48) 0.44 (0.47) 0.74
------- ------- ------- -------
Income from continuing operations
(after-tax) of Financial Services
Businesses 0.92 1.56 2.30 3.04
Loss from discontinued operations,
net of taxes (0.03) (0.08) (0.03) (0.08)
------- ------- ------- -------
Net income of Financial Services
Businesses $ 0.89 $ 1.48 $ 2.27 $ 2.96
======= ======= ======= =======
Weighted average number of
outstanding Common shares (diluted
basis) 497.1 525.2 500.6 527.6
======= ======= ======= =======

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

Total attributed equity $20,424 $22,375
Per share of Common Stock
- diluted 41.41 42.82

Attributed equity excluding
unrealized gains and losses
on investments $20,444 $20,311
Per share of Common Stock
- diluted 41.45 38.87

Number of diluted shares at
end of period 493.2 522.5
======= =======

Adjusted operating income before
income taxes, by Segment (1):
Individual Life and Annuities $ 218 $ 220 $ 469 $ 437
Group Insurance 29 46 76 84
------- ------- ------- -------
Total Insurance Division 247 266 545 521
------- ------- ------- -------
Asset Management 137 105 306 239
Financial Advisory 37 (97) (29) (82)
Retirement 142 142 279 297
------- ------- ------- -------
Total Investment Division 316 150 556 454
------- ------- ------- -------
International Insurance 324 327 662 612
International Investments 34 19 78 44
------- ------- ------- -------
Total International Insurance
and Investments Division 358 346 740 656
------- ------- ------- -------
Corporate and other operations 37 59 63 76
------- ------- ------- -------
Financial Services Businesses
adjusted operating income before
income taxes 958 821 1,904 1,707
------- ------- ------- -------
Items excluded from adjusted
operating income:
Realized investment gains
(losses), net, and related
charges and adjustments (311) 249 (260) 485
Investment gains (losses) on
trading account assets
supporting insurance
liabilities, net (151) 190 (265) 58
Change in experience-rated
contractholder liabilities due
to asset value changes 130 (145) 196 (57)
Divested businesses (6) 3 2 (2)
------- ------- ------- -------
Total items excluded from adjusted
operating income before income
taxes (338) 297 (327) 484
------- ------- ------- -------
Income from continuing operations
before income taxes - Financial
Services Businesses $ 620 $1,118 $1,577 $2,191
======= ======= ======= =======

See footnotes on last page.


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


Three Months Six Months
Ended Ended
June 30 June 30
--------------- ---------------
2006 2005 2006 2005
------- ------- ------- -------
Insurance Division:

Individual Life Insurance Sales(3):
Excluding corporate-owned life
insurance
Variable life $ 24 $ 18 $ 45 $ 37
Universal life 43 53 83 104
Term life 34 30 65 59
------- ------- ------- -------
Total excluding
corporate-owned life
insurance 101 101 193 200
Corporate-owned life insurance 4 1 5 2
------- ------- ------- -------
Total $ 105 $ 102 $ 198 $ 202
======= ======= ======= =======

Fixed and Variable Annuity Sales and
Account Values:
Gross sales $2,532 $2,022 $4,689 $3,507
======= ======= ======= =======

Net sales $ 683 $ 499 $1,186 $ 540
======= ======= ======= =======

Total account value at end of
period $72,678 $51,466
======= =======

Group Insurance New Annualized
Premiums (4):
Group life $ 25 $ 30 $ 231 $ 304
Group disability 18 46 92 122
------- ------- ------- -------
Total $ 43 $ 76 $ 323 $ 426
======= ======= ======= =======
Investment Division:

Asset Management Segment:
Assets managed by Investment
Management and Advisory Services
(in billions, as of end of period):
Retail customers $ 75.1 $ 65.7
Institutional customers 138.5 125.3
General account 159.7 157.6
------- -------
Total Investment Management
and Advisory Services $373.3 $348.6
======= =======

Mutual Funds and Wrap-Fee Products:

Mutual Funds and Wrap-Fee
Products Sales:

Gross sales, other than money
market $8,835 $6,911 $17,422 $13,457
======= ======= ======= =======
Net sales, other than money
market $3,364 $2,594 $6,006 $4,711
======= ======= ======= =======

Assets at end of period:
Mutual funds, excluding money
markets $28,402 $26,610
Money markets 5,050 3,836
Wrap-fee products 62,469 46,621
------- -------
Total $95,921 $77,067
======= =======

Retirement Segment Sales:

Full Service:

Gross sales $4,138 $2,667 $9,519 $6,451
======= ======= ======= =======

Net sales (withdrawals) $ 726 $ (170) $ 636 $ 265
======= ======= ======= =======

Institutional Investment
Products:

Gross sales $1,088 $1,235 $2,624 $2,478
======= ======= ======= =======

Net sales (withdrawals) $ (341) $ 13 $(1,257)$ 75
======= ======= ======= =======

International Insurance and
Investments Division:

International Insurance New
Annualized Premiums (5):

Actual exchange rate basis $ 319 $ 343 $ 608 $ 651
======= ======= ======= =======

Constant exchange rate basis $ 322 $ 337 $ 617 $ 637
======= ======= ======= =======

See footnotes on last page.


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

Three Months Six Months
Ended Ended
June 30 June 30
--------------- ---------------
2006 2005 2006 2005
------- ------- ------- -------
Closed Block Business Data:

Income Statement Data:
Revenues $1,849 $2,117 $3,700 $4,098
Benefits and expenses 1,811 1,919 3,578 3,655
------- ------- ------- -------
Income from operations before
income taxes 38 198 122 443
Income taxes 9 69 35 151
------- ------- ------- -------
Closed Block Business net income $ 29 $ 129 $ 87 $ 292
======= ======= ======= =======

Direct equity adjustment for earnings
per share calculation (2) (16) (22) (35) (44)
------- ------- ------- -------
Earnings available to holders of
Class B Stock after direct equity
adjustment $ 13 $ 107 $ 52 $ 248
======= ======= ======= =======
Net income per share of Class B
Stock $ 6.50 $53.50 $26.00 $124.00
======= ======= ======= =======

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 $1,070 $1,199
Per Share of Class B Stock 535.00 599.50

Attributed equity excluding
unrealized gains and losses on
investments $1,046 $1,011
Per Share of Class B Stock 523.00 505.50

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

Consolidated Data:

Consolidated Income Statement Data:
Revenues $7,432 $8,335 $15,353 $16,064
Benefits and expenses 6,774 7,019 13,654 13,430
------- ------- ------- -------
Income from continuing operations
before income taxes 658 1,316 1,699 2,634
Income tax expense 190 389 495 777
------- ------- ------- -------
Income from continuing operations 468 927 1,204 1,857
Loss from discontinued operations,
net of taxes (15) (44) (18) (45)
------- ------- ------- -------
Consolidated net income $ 453 $ 883 $1,186 $1,812
======= ======= ======= =======
Net income:
Financial Services Businesses $ 424 $ 754 $1,099 $1,520
Closed Block Business 29 129 87 292
------- ------- ------- -------
Consolidated net income $ 453 $ 883 $1,186 $1,812
======= ======= ======= =======

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

Total assets $440.7 $409.3

Assets under management (at fair
market value):
Managed by Investment
Division:
Asset Management Segment -
Investment Management and
Advisory Services $373.3 $348.6
Non-proprietary assets
under management 49.6 46.5
------- -------
Total managed by Investment
Division 422.9 395.1
Managed by International
Insurance and Investments
Division 82.6 74.1
Managed by Insurance Division 62.9 41.8
------- -------
Total assets under management 568.4 511.0
Client assets under administration 101.6 90.0
------- -------
Total assets under management
and administration $670.0 $601.0
======= =======

See footnotes on last page.


(1) Adjusted operating income is a non-GAAP measure that excludes
Realized investment gains (losses), net, as adjusted, 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; and the related tax effects thereof. Realized
investment gains (losses) representing profit or loss of certain
of our businesses which primarily originate investments for sale
or syndication to unrelated investors, and those associated with
terminating hedges of foreign currency earnings and current period
yield adjustments are included in adjusted operating income.
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" as determined in
accordance with GAAP but is the measure of profit or loss we use
to evaluate segment performance. Adjusted operating income is not
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.
Group disability amounts include long-term care products.

(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, 2005. Single premium business for the Company's
international insurance operations is included in annualized new
business premiums based on a 10% credit.