Summary of PRUDENTIAL FINANCIAL INC

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") addresses the consolidated financial condition of Prudential Financial as of June 30, 2009, compared with December 31, 2008, and its consolidated results of operations for the three and six months ended June 30, 2009 and 2008. You should read the following analysis of our consolidated financial condition and results of operations in conjunction with the MD&A and the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, as well as the "Risk Factors" section, the statements under "Forward-Looking Statements" and the Unaudited Interim Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Prudential Financial has two classes of common stock outstanding. The Common Stock, which is publicly traded (NYSE:PRU), reflects the performance of the Financial Services Businesses, while the Class B Stock, which was issued through a private placement and does not trade on any exchange, reflects the performance of the Closed Block Business. The Financial Services Businesses and the Closed Block Business are discussed below.

Financial Services Businesses

Our Financial Services Businesses consist of three operating divisions, which together encompass seven segments, and our Corporate and Other operations. The U.S. Retirement Solutions and Investment Management division consists of our Individual Annuities, Retirement and Asset Management segments. The U.S. Individual Life and Group Insurance division consists of our Individual Life and Group Insurance segments. The International Insurance and Investments division consists of our International Insurance and International Investments segments. Our Corporate and Other operations include our real estate and relocation services business, as well as corporate items and initiatives that are not allocated to business segments. Corporate and Other operations also include businesses that have been or will be divested, including our investment in the retail brokerage joint venture with Wachovia Securities, and businesses that we have placed in wind-down status.

We attribute financing costs to each segment based on the amount of financing used by each segment, excluding financing costs associated with corporate debt which costs are reflected in Corporate and Other operations. The net investment income of each segment includes earnings on the amount of capital that management believes is necessary to support the risks of that segment.

We seek growth internally and through acquisitions, joint ventures or other forms of business combinations or investments. Our principal acquisition focus is in our current business lines, both domestic and international.

Closed Block Business

In connection with the demutualization, we ceased offering domestic participating products. The liabilities for our traditional domestic in force participating products were segregated, together with assets, in a regulatory mechanism referred to as the "Closed Block." The Closed Block is designed generally to provide for the reasonable expectations for future policy dividends after demutualization of holders of participating individual life insurance policies and annuities included in the Closed Block by allocating assets that will be used exclusively for payment of benefits, including policyholder dividends, expenses and taxes with respect to these products. See Note 6 to the Consolidated Financial Statements for more information on the Closed Block. At the time of demutualization, we determined the amount of Closed Block assets so that the Closed Block assets initially had a lower book value than the Closed Block liabilities. We expect that the Closed Block assets will generate sufficient cash flow, together with anticipated revenues from the Closed Block policies, over the life of the Closed Block to fund payments of all expenses, taxes, and policyholder benefits to be paid to, and the

reasonable dividend expectations of, holders of the Closed Block policies. We also segregated for accounting purposes the assets that we need to hold outside the Closed Block to meet capital requirements related to the Closed Block policies. No policies sold after demutualization will be added to the Closed Block, and its in force business is expected to ultimately decline as we pay policyholder benefits in full. We also expect the proportion of our business represented by the Closed Block to decline as we grow other businesses.

Concurrently with our demutualization, Prudential Holdings, LLC, a wholly owned subsidiary of Prudential Financial that owns the capital stock of Prudential Insurance, issued $1.75 billion in senior secured notes, which we refer to as the IHC debt. The net proceeds from the issuances of the Class B Stock and IHC debt, except for $72 million used to purchase a guaranteed investment contract to fund a portion of the bond insurance cost associated with that debt, were allocated to the Financial Services Businesses. However, we expect that the IHC debt will be serviced by the net cash flows of the Closed Block Business over time, and we include interest expenses associated with the IHC debt when we report results of the Closed Block Business.

The Closed Block Business consists principally of the Closed Block, assets that we must hold outside the Closed Block to meet capital requirements related to the Closed Block policies, invested assets held outside the Closed Block that represent the difference between the Closed Block assets and Closed Block liabilities and the interest maintenance reserve, deferred policy acquisition costs related to Closed Block policies, the principal amount of the IHC debt and related hedging activities, and certain other related assets and liabilities.

The Closed Block Business is not a separate legal entity from the Financial Services Businesses; however, they are operated as separate entities and are separated for financial reporting purposes. The Financial Services Businesses are not obligated to pay dividends on Closed Block policies. Dividends on Closed Block policies reflect the experience of the Closed Block over time and are subject to adjustment by Prudential Insurance's Board of Directors. Further, our plan of demutualization provides that we are not required to pay dividends on policies within the Closed Block from assets that are not within the Closed Block and that the establishment of the Closed Block does not represent a guarantee that any certain level of dividends will be maintained.

Executive Summary

Prudential Financial, a financial services leader with approximately $580 billion of assets under management as of June 30, 2009, has operations in the United States, Asia, Europe and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. We offer these products and services to individual and institutional customers through one of the largest distribution networks in the financial services industry.

Current Developments

Financial Markets. The global financial markets have experienced extreme stress since the second half of 2007. Volatility and disruption in the global financial markets reached unprecedented levels for the post World War II period. The availability and cost of credit has been materially affected. These factors, combined with recent economic conditions, including depressed home and commercial real estate prices and increasing foreclosures, depressed equity market values, declining business and consumer confidence, and rising unemployment, have precipitated a severe economic recession and concerns of prolonged adverse economic conditions.

Due to the economic environment, the global fixed-income markets have experienced both extreme volatility and limited market liquidity conditions, which has affected a broad range of asset classes and sectors. As a result, the market for fixed income instruments has experienced decreased liquidity, increased price volatility, credit downgrade events, and increased probability of default. These events in the credit markets as well as volatility in equity and real estate markets have had and may continue to have a substantial adverse effect on us.

As further discussed in "-Liquidity and Capital Resources," the U.S. federal government has taken numerous actions to address financial market conditions. These actions include the U.S. Treasury's Capital Purchase Program, which is part of the Troubled Asset Relief Program, or TARP, as well as the Term Asset-Backed Securities Loan Facility, or TALF. The TARP Capital Purchase Program involves the issuance by qualifying institutions of preferred stock and warrants to purchase common stock to the U.S. Treasury. TALF is designed to provide secured financing for certain types of asset-backed securities, including (as of July 2009) certain high-quality commercial mortgage-backed securities issued before January 1, 2009.

We applied in October 2008 to participate in the TARP Capital Purchase Program and on May 14, 2009, we received preliminary approval from the U.S. Treasury to participate in the program. However, on June 1, 2009, we announced that we would not participate in the TARP Capital Purchase Program. In the first quarter of 2009, we began participating in TALF as an eligible borrower. We continue to evaluate other government sponsored programs for which we may be eligible.

As a result of the volatility and disruption in the global financial markets and in order to manage our liquidity and capital resources, we undertook certain actions during 2008 as described in more detail in our 2008 Annual Report on Form 10-K. Due to the continuation of the financial market dislocations into 2009 and in order to continue to manage our liquidity and capital resources, we undertook certain additional actions in the first half of 2009, including the following:

• Issued 36.9 million shares of Prudential Financial Common Stock in a public offering (at a price of $39.00 per share for net proceeds of $1.391 billion) and $1 billion of medium-term notes.

• Provided notice to Wells Fargo, on June 17, 2009, of the exercise of our "lookback" option put rights related to our minority joint venture interest in Wachovia Securities.

• Made capital contributions and capital loans to our international insurance operations in Japan totaling $366 million.

• Borrowed $1.5 billion in the form of collateralized funding agreements from the Federal Home Loan Bank of New York, or FHLBNY, which was subsequently used to replace inter-company funding agreements between Prudential Insurance and Prudential Financial, previously funded through proceeds from the sale of Prudential Financial's retail medium-term notes, making the corresponding proceeds available for general corporate purposes.

• Reduced exposure to short-term financing markets, primarily through planned runoff of commercial paper borrowings.

• Undertook sales of assets held by some of our affiliates to reduce their borrowing needs.

While the above actions have strengthened our liquidity and capital position, certain of them, as well as our decision to maintain higher levels of cash and short-term investments than in prior periods, have prevented us from investing our resources in an economically optimal manner. For additional information on our liquidity and capital resources, and the actions we undertook in the first half of 2009, see "-Liquidity and Capital Resources."

We continue to monitor the liquidity and capital needs of Prudential Financial and its subsidiaries. If the disruption in the credit and capital markets continues or worsens, we will need to take additional capital management actions to maintain capital consistent with our rating objectives, which may include additional internal actions or, if internal resources are insufficient or market conditions continue to deteriorate, further access to external sources of capital, if available.

During the first quarter of 2009, rating agencies downgraded certain ratings of Prudential Financial and its subsidiaries. Downgrades in our claims-paying or credit ratings could potentially, among other things, limit our ability to market products, reduce our competitiveness, increase the number or value of policy surrenders and withdrawals, increase our borrowing costs and potentially make it more difficult to borrow funds, adversely

affect the availability of financial guarantees, such as letters of credit, cause additional collateral requirements or other required payments under certain agreements, allow counterparties to terminate derivative agreements and/or hurt our relationships with creditors or trading counterparties thereby potentially negatively effecting our profitability, liquidity and/or capital. Refer to "-Ratings" for more information.

Our financial condition and results of operations for the first half of 2009 reflect the following:

• Net income of our Financial Services Businesses attributable to Prudential Financial, Inc. for the three and six months ended June 30, 2009 was $538 million and $533 million, respectively, reflecting net realized investment losses and related adjustments in our investment portfolio in both periods and the positive impact of improved financial market conditions during the second quarter of 2009 on reported results of our Individual Annuities segment.

• Pre-tax net realized investment losses and related adjustments of the Financial Services Businesses for the three and six months ended June 30, 2009 were $872 million and $1,582 million, respectively, primarily reflecting decreases in market value of derivatives used in investment duration management and hedging programs of $519 million and $599 million and other-than-temporary impairments of fixed maturity and equity securities of $391 million and $1,068 million, for the three and six months ended June 30, 2009, respectively.

• Net unrealized losses on general account fixed maturity investments of the Financial Services Businesses amounted to $4.352 billion as of June 30, 2009, compared to $6.567 billion as of December 31, 2008. Gross unrealized gains decreased from $4.684 billion as of December 31, 2008 to $3.454 billion as of June 30, 2009 and gross unrealized losses decreased from $11.251 billion to $7.806 billion for the same periods. Net unrealized losses on general account fixed maturity investments of the Closed Block Business amounted to $2.816 billion as of June 30, 2009, compared to $4.035 billion as of December 31, 2008.

• We continued to have positive net flows in our domestic annuity, retirement and asset management businesses, as well as solid sales in our domestic and international insurance businesses, in the second quarter and first six months of 2009.

• Individual Annuity gross sales for the second quarter of 2009 reached a record high of $3.4 billion, an increase from $2.8 billion in the prior year quarter. Individual Annuity net sales for the second quarter of 2009 were $2.0 billion, an increase from $518 million in the prior year quarter, and were $2.7 billion in the first six months of 2009, an increase from $1.1 billion in the prior year.

• As of June 30, 2009, Prudential Financial, the parent holding company, had cash and short-term investments of $4.735 billion after repayment during the second quarter of 2009 of $1.8 billion principal amount of Prudential Financial convertible debt securities.

Results of Operations

We analyze performance of the segments and Corporate and Other operations of the Financial Services Businesses using a measure called adjusted operating income. See "-Consolidated Results of Operations" for a definition of adjusted operating income and a discussion of its use as a measure of segment operating performance.

Shown below are the contributions of each segment and Corporate and Other operations to our adjusted operating income for the three and six months ended June 30, 2009 and 2008 and a reconciliation of adjusted operating income of our segments and Corporate and Other operations to income from continuing operations before income taxes and equity in earnings of operating joint ventures.

                                                 Three Months Ended                  Six Months Ended
                                                      June 30,                           June 30,
                                              2009               2008             2009             2008
                                                                    (in millions)
Adjusted operating income before income
taxes for segments of the Financial
Services Businesses:
Individual Annuities                        $     432         $      154        $     449        $     269
Retirement                                         99                141              258              265
Asset Management                                   33                190               32              309
Individual Life                                   138                103              178              199
Group Insurance                                   105                 80              198              170
International Insurance                           465                453              890              866
International Investments                          16                 26               26               51
Corporate and Other                              (162 )              (20 )           (328 )            (71 )
Reconciling Items:
Realized investment gains (losses),
net, and related adjustments                     (872 )             (527 )         (1,582 )         (1,192 )
Charges related to realized investment
gains (losses), net                                (5 )               41               39               28
Investment gains (losses) on trading
account assets supporting insurance
liabilities, net                                  686               (123 )            831             (385 )
Change in experience-rated
contractholder liabilities due to asset
value changes                                    (347 )               94             (392 )            294
Divested businesses                               (24 )               10              (56 )            (57 )
Equity in earnings of operating joint
ventures and earnings attributable to
noncontrolling interests                           14                (32 )             17              (68 )

Income from continuing operations
before income taxes and equity in
earnings of operating joint ventures
for Financial Services Businesses                 578                590              560              678
Income (loss) from continuing
operations before income taxes for
Closed Block Business                            (586 )               38             (556 )             12

Consolidated income (loss) from
continuing operations before income
taxes and equity in earnings of
operating joint ventures                    $      (8 )       $      628        $       4        $     690

Results for the three and six months ended June 30, 2009 presented above reflect the following:

• Individual Annuities segment results for the second quarter and first six months of 2009 increased in comparison to the prior year periods, primarily reflecting the impact of improved market conditions. Results for the second quarter and first six months of 2009 included $416 million and $89 million, respectively, of benefits related to both reserve releases and decreases in the amortization of deferred policy acquisition and other costs, due to market appreciation. Also impacting results was a $468

million unfavorable variance in the three month period and a $890 million favorable variance in the six month period, related to the mark-to-market of embedded derivatives and related hedge positions associated with our living benefit features. These variances were largely driven by changes in our adjustment to the embedded derivative liabilities for market-perceived non-performance risk, and resulted in a corresponding $416 million decrease in the three month period, and $664 million increase in the six month period, in the amortization of deferred policy acquisition and other costs. Also contributing to results in both periods was a decrease in fee income, driven by lower average variable annuity asset balances invested in separate accounts.

• Retirement segment results for the second quarter and first six months of 2009 decreased in comparison to the corresponding prior year periods, primarily driven by a decline in asset management fees, due to a decrease in average full service fee-based retirement account values, primarily resulting from equity market depreciation. Partially offsetting the decline in the six month period was improved investment results in our full service business.

• Asset Management segment results for the second quarter of 2009 decreased in comparison to the second quarter of 2008, largely attributable to unfavorable results from the segment's proprietary investing activities and commercial mortgage origination and servicing activities, as well as lower asset management and transaction fees. These items were partially offset by a decrease in compensation costs. Results for the first six months of 2009 decreased due to less favorable results from the segment's proprietary investing activities and commercial mortgage origination and servicing activities, as well as lower asset management fees, performance based incentive fees and transaction fees, partially offset by lower compensation costs.

• Individual Life segment results for the second quarter of 2009 improved from the second quarter of 2008 primarily due to a decrease in amortization of deferred policy acquisition costs, net of related amortization of unearned revenue reserves, primarily reflecting favorable separate account fund performance. Favorable mortality experience, net of reinsurance, also contributed to the improvement in adjusted operating income partially offset by a decrease in asset based fees. Results for the first six months of 2009 declined from the first six months of 2008 primarily due to a decrease in asset based fees due to lower separate account asset balances resulting from the unfavorable impact of equity market performance in late 2008 and early 2009.

• Group Insurance segment results improved in both the second quarter of 2009 and the first six months of 2009, reflecting more favorable claims experience in both our group life and group disability businesses.

• The International Insurance segment is comprised of its Life Planner and Gibraltar Life operations. Results from the segment's Life Planner operations improved in both the second quarter of 2009 and the first six months of 2009, reflecting a $25 million benefit from the migration to a new policy valuation system and from the continued growth of our Japanese Life Planner operation. Results from the segment's Gibraltar Life operation declined in both the second quarter of 2009 and the first six months of 2009, reflecting a $7 million detriment from the migration to a new policy valuation system and higher general and administrative expenses.

• International Investments segment results declined in both the second quarter of 2009 and the first six months of 2009, reflecting lower results from the segment's Korean asset management operation and global commodities group.

• Corporate and Other results for the second quarter of 2009 declined from the second quarter of 2008 primarily due to increased interest expense on a higher level of capital debt and lower investment earnings. Results for the first six months of 2009 declined from the first six months of 2008 primarily due to lower investment earnings, increased interest expense on capital debt and greater losses in our real estate and relocation services business.

• Realized investment gains (losses), net, and related adjustments for the Financial Services Businesses in the second quarter and first six months of 2009 amounted to a loss of $872 million and $1,582 million,

respectively, primarily reflecting other-than-temporary impairments of fixed maturity and equity securities of $391 million and $1,068 million, respectively, as well as decreases in the fair value of derivative used in investment duration management and hedging programs of $519 million and $599 million, respectively.

• Income (loss) from continuing operations before income taxes in the Closed Block Business decreased $624 million in the second quarter of 2009 compared to the second quarter of 2008, and $568 million for the first six months of 2009 compared to the first six months of 2008. Results in both periods of 2009 reflect higher net realized investment losses and a decrease in net investment income, which were partially offset by the cumulative earnings policyholder dividend obligation which was reduced to zero.

Accounting Policies & Pronouncements

Application of Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, results of operations and financial position as reported in the Consolidated Financial Statements could change significantly.

Management believes the accounting policies relating to the following areas are most dependent on the application of estimates and assumptions:

• Valuation of investments, including the recognition of other-than-temporary impairments;

• Policyholder liabilities;

• Deferred policy acquisition costs;

• Goodwill;

• Pension and other postretirement benefits;

• Taxes on income; and

• Reserves for contingencies, including reserves for losses in connection with unresolved legal matters.

See below for an updated discussion of the application of estimates and assumptions around Goodwill. For an updated discussion of the application of estimates and assumptions around the valuation of investments, see "-Valuation of Assets and Liabilities-Fair Value of Assets and Liabilities." For an updated discussion of the application of estimates and assumptions around the recognition of other-than-temporary impairments, see "Realized Investment Gains and Losses and General Account Investments-General Account Investments-Fixed Maturity Securities-Other-than-Temporary Impairments of Fixed Maturity Securities."

A discussion of each of the remaining critical accounting estimates may be found in our Annual Report on Form 10-K for the year ended December 31, 2008, under "Management's Discussion and Analysis of Financial Condition and Results of Operations-Accounting Policies & Pronouncements-Application of Critical Accounting Estimates."

Goodwill

Goodwill is tested for impairment on an annual basis as of December 31 of each year and more frequently if events occur or circumstances change that would indicate a potential for impairment. The test is performed at the

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