[November 15, 2012]

A.M. Best Assigns Debt Rating to Prudential Financial, Inc.'s New Junior Subordinated Notes

A.M. Best Co. has assigned a debt rating of "bbb" to the recently issued $1.5 billion 5.625% fixed-to-floating rate junior subordinated notes maturing June 15, 2043 of Prudential Financial, Inc. (PFI) (Newark, NJ) [NYSE: PRU]. The assigned outlook is stable. The financial strength, issuer credit and existing debt ratings of PFI and its domestic life/health insurance companies are unchanged.

The assigned rating reflects the notes' deeply subordinated status within PFI's capital structure. Specifically, these securities will rank junior to PFI's existing and future senior indebtedness and pari passu with PFI's existing junior subordinated notes.

A.M. Best notes that the newly issued junior subordinated notes mirror the key terms of the company's most recent issuance. (See A.M. Best's press release dated August 8, 2012 for further information.) Similarly, these notes differ from the other existing junior subordinated debt in that PFI may redeem the new notes on or after June 15, 2023 or at any time within 90 days after the occurrence of a "tax event," a rating agency event" or a regulatory capital event." The net proceeds of the hybrid offering are expected to be used for general corporate purposes including the redemption of PFI's outstanding retail medium-term notes.

The rating recognizes PFI's very strong liquidity at the holding company in addition to the strong operating performance of its various business segments. PFI has repeatedly demonstrated its access to the capital markets, particularly over the past two years. However, A.M. Best notes that PFI, although consistent with its scale and business mix, continues to utilize significant amounts of total leverage. A.M. Best notes that this most recent issuance somewhat reduces PFI's overall financial flexibility. However, incorporating partial equity credit for the new notes, financial leverage remains within the guidelines for the company's current rating level. Based on A.M. Best's methodology, interest coverage is below guidelines for the current rating but is more than mitigated by the strong reported adjusted operating income and excess cash at the holding company.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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