Prudential Financial Inc.

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"I wouldn't say they are as lean and mean as John Hancock was when it went public, but they have come a tremendous way. I think in terms of corporate culture, Prudential needs to get organized to decide with whom it competes - other financial services such as Merrill Lynch and [Charles] Schwab, not just MetLife, New York Life and other insurance companies."

- Colin W. Devine, vice-president of Salomon Smith Barney, New York (January 2001).

"Prudential remains a highly respected name in insurance. The company's biggest challenge now is to change its corporate culture to one that reports to shareholders every 90 days."

- Thomas Upton, Analyst, Standard & Poor's (January 2001).

Introduction

With revenues of $27.18 billion in 2001, Prudential Financial Incorporation (Prudential) was the second largest individual life insurance company in the US. Founded in 1875, Prudential had emerged as the leading life insurance company in the US and one of the largest providers of financial services in the world.

The company had more than 15 million individual and institutional customers across the globe, in more than 30 countries. In the Fortune 2002 Survey,1 Prudential was ranked 62, up from its rank of 80, in the Fortune 2001 Survey. Prudential offered a variety of products and services, such as life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement-related services. Prudential also offered administration services,2 asset management, securities brokerage, banking services, real estate brokerage franchises,3 and relocation services.4

Before December 2001, Prudential was known as Prudential Insurance Company of America. In December 2001, Prudential embarked on a demutualization⁵ program, with an initial public offering (IPO) worth $3.48 billion.

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1] The survey ranked US 500 largest organizations based on their revenues.

2] For corporates, which bought its group life policies, Prudential offered administration services to reduce the burden for the employer. The services included processing enrollments, screening for medical evidence, handling withdrawal and loan requests, handling customer service inquiries and various other services.

3] The real estate brokerage group helped its customers to buy/sell primary residence, buy/sell second homes or relocate to a new neighborhood. The real estate brokerage franchise group marketed its franchises to the existing real estate companies, all of which were independently owned and operated.

4] The relocation service of the company offered institutional clients, service in connection with the relocation of their employees. These services included coordination of appraisal, inspection and sale of relocating employees' homes, equity advances to relocating employees, assistance in locating a home at the relocating employee's destination, moving services and client cost-tracking and a variety of relocation policy and consulting services.

5] The process in which a mutual life insurance company that is owned by its policyholders becomes a public company owned by shareholders.

6] WorldCom's share price fell by 89% in June 2002 to 9 cents a share from about $64 in 2001. WorldCom lost investor confidence following reports of corporate misconduct at the company. The company did not conform to Generally Accepted Accounting Practices.