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Prudential AR2013

Jun 02, 2018

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    P R U D E N T I A L F I N A N C I A L , I N C . A N N U A L R E P O R T

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    WHO WE ARE

    For more than 135 years, Prudential Financial, Inc. has

    helped people grow and protect their wealth. We offer

    individual and institutional clients a wide array of financial

    products and services. Today, we are one of the worlds largest

    financial services institutions. We have more than $1.1 trillion

    in assets under management and approximately $3.5 trillion

    of gross life insurance in force worldwide as of December 31,

    2013. We have operations in the United States, Asia, Europeand Latin America. We also have one of the most recognized

    and trusted brand symbols: The Rock, an icon of strength,

    stability, expertise and innovation. We measure our long-

    term success by our ability to deliver value for shareholders,

    meet customer needs, attract and develop the best talent

    in our industry, offer an inclusive work environment where

    employees can develop to their full potential and support the

    communities where we live and work.

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    Prudential Financial, Inc. 2013 Annual Report

    Dear fellow shareholders:

    I am pleased to report that Prudential Financial delivered another strong performance in 2013

    Our outstanding results for the year were broadly based, reflecting strong growth across our

    businesses, coupled with effective pricing discipline and risk management. We also benefited

    from meaningful contributions from the significant transactions we have completed over the

    past three years: our acquisition of Star Life and Edison Life from AIG in 2011, the completion

    in late 2012 of two landmark pension risk transfer transactions, and our acquisition in early2013 of the U.S. individual life insurance business from The Hartford.

    The strength of our operations was proven by the achievement of our objective to deliver a

    return on equity in 2013 of 13 to 14 percent. In fact, we exceeded the top end of that goal.

    In addition, in 2013 we altered our schedule of dividend payments to shareholders from

    annual to quarterly, ultimately delivering more than $800 million in Common Stock dividends

    during the year.

    The achievement of our earnings objectives and other actions throughout the year

    demonstrate our ongoing commitment to maintaining a strategic mix of high-quality

    businesses, managing risk appropriately, deploying capital effectively, and pursuing profitable

    growth for the long term.

    We continue to adhere to four key characteristics that drive our companys success:

    1. Our unique business mix,which we have developed by deliberately focusing on our core

    strengths and on markets in which we see opportunities. The complementary nature of our

    portfolio of operations provides a mix of growth and stability, helping balance risk across

    the company.

    2. Our high-quality businesses,which have outstanding leadership, robust fundamentals and

    strong positioning in the markets in which we operate.

    3. Our financial strength,which enables us to continue delivering on our promises to our

    stakeholders, while also seizing opportunities to innovate and grow.

    4. The talent and integrity of our people,who remain our most important point of

    differentiation in the market. Our commitment to nurturing a diverse and inclusive culture

    helps us attract, develop and retain high-quality employees.

    In short, 2013 was a year of major progress and accomplishments for the company on

    many fronts. We maintained strong momentum in our businesses and further enhanced our

    long-term positioning.

    For 2013, on an after-tax adjusted operating income basis,* our Financial Services Businesses

    earned $4.586 billion, or $9.67 per share of Common Stock, compared to $3.019 billion, or

    $6.40 per share of Common Stock in 2012. On this basis, our earnings per share represent a

    20 percent compound growth rate over the past three years.

    Based on U.S. generally accepted accounting principles, our Financial Services Businesses

    reported a net loss of $713 million, or $1.55 per share of Common Stock, in 2013, compared

    to net income of $479 million, or $1.05 per share of Common Stock, in 2012. The 2013 net

    loss was mainly driven by volatility in the currency markets and remeasurement of non-yenproduct reserves in our Japanese insurance operations, which we consider non-economic since

    we support these reserves with investments in appropriate currencies. Changes in the market

    value of derivatives we use to manage our interest rate exposure were also a factor, largely due

    to rising U.S. interest rates.

    Our worldwide assets under management continued to increase, reaching more than

    $1.1 trillion by year-end 2013. This growth is an important indicator of the confidence

    our clients continue to have in Prudential.

    MESSAGE FROM THE CHAIRMAN

    *Adjusted operating income is not calculated under U.S. generally accepted accounting principles (GAAP) and is afinancial measure we use to analyze the operating performance of our Financial Services Businesses. See footnote (1)on page 5 and footnote (A) on page 7 for a further description of adjusted operating income.

    2013 was a year of

    major progress and

    accomplishments for

    the company on many

    fronts. We maintained

    strong momentum in

    our businesses and

    further enhanced our

    long-term positioning.John Strangfeld

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    2 Prudential Financial, Inc. 2013 Annual Report

    Our strong operating results for the year were driven by

    solid underlying performance across our businesses. Based

    on our excellent performance, our solid positioning in the

    marketplace and the talent of our people, we remain confident

    in our long-term prospects and excited about our potential

    as a company.

    Achieving our 2013 ROE objectiveIn 2010, we announced our objective to achieve an ROE of

    13 to 14 percent in 2013. We believed then, as we do now,

    that achieving and sustaining that level of performance would

    demonstrate our superior performance relative to our peers.

    Our ability to achieve and exceed that goal in 2013

    confirms our belief in our earnings power. Yet we never saw

    that objective as a one-year, once and done objective.

    Looking ahead, we remain confident in our ability to sustain an

    ROE of 13 to 14 percent over the long term.

    Building on our momentumIn 2013, we benefited from the contributions of several

    targeted acquisitions and transactions we have completed

    since 2011 in key markets and segments that complement our

    strategic business mix.

    We have substantially completed the integration of the

    Star Life and Edison Life companies with our Gibraltar Life

    operation in Japan. This acquisition is delivering what we

    expected in terms of both synergies and business results. We

    are benefiting from expanded distribution capabilities from

    this acquisition, including new sales professionals and third-

    party distributors, as well as the addition of a large force of

    independent agents to our existing channel.

    The integration of the U.S. individual life insurance operations

    we acquired from The Hartford in 2013 is also well on track.

    Through this acquisition, our U.S. life insurance operations

    achieved greater scale, expanded product offerings andbroader distribution capabilities. Our domestic individual

    life insurance business is already benefiting from a unified

    distribution system, strong connections with financial

    institutions, and our solid positioning in the brokerage general

    agency channel.

    The two landmark pension risk transfer transactions we

    completed in 2012 contributed to the achievement of record

    earnings in 2013 in our Retirement unit. We are confident

    that the pension risk transfer market will continue to offer

    exciting opportunities to our company, for which we are

    uniquely suited.

    In addition to producing significant contributions to our

    earnings, these acquisitions and transactions have brought

    more diversity to our stream of earnings and, thus, morebalance to our operations as a whole. Their successful

    execution has further distinguished our company within our

    industry and positioned us for further growth.

    In 2013, we continued to invest in and expand our operations

    in pursuit of other promising opportunities, particularly on the

    international front. In August, we announced an agreement to

    purchase Uni.Asia Life Assurance Berhad (UAL), a mid-sized

    life insurer in Malaysia, through a new joint venture with Bank

    Simpanan Nasional, a government-owned bank. We closed

    this transaction in January 2014, and hold 70 percent of

    UAL. Malaysia is an attractive market, with low life insurance

    penetration, a well-developed regulatory environment and

    long-term growth potential. This transaction is aligned with ourstrategy to build upon our success in Japan, South Korea and

    Taiwan, and expand our footprint in growth markets in Asia.

    Our success with all of these transactions demonstrates our

    ability to identify, seize and execute on opportunities that

    offer the potential for significant earnings and that further

    differentiate Prudential in the marketplace.

    Operating high-performing businessesW

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