Ladies and gentlemen thank you for standing by. And welcome to the Fourth Quarter 2008 Earnings call. At this time all participates are in a listen only mode. Later we will conduct the Question and Answer Session. Instructions will be given to you at that time. (Operator instructions). And as a reminder today’s conference call is being recorded. I would now like to turn the conference over to Mr. Eric Durant. Please go ahead.

Thank you Cynthia and thanks to all of you for joining us this morning. We always welcome the opportunity to tell you our story, to hear your questions and we hope to provide responses that are helpful to you. Our presenters today are John Strangfeld, Rich Carbone and Mark Grier. And for the Q and A they will be joined by Ed Baird, Bernard Winograd and Peter Sayre. John?

Thank you, Eric and good morning everyone. We appreciate you joining us and we appreciate your interest in Prudential. First a general comment about the quarter relative to what we said yesterday. The fourth quarter results are largely what we anticipated and presented to you in December. I say largely for two reasons. First, we identified then but did not quantify the goodwill JB write-offs. Outside of the goodwill JB write-offs our results were actually modestly better than we indicated in December. Second, our year end liquidity ended a bit stronger than we had shown. We will talk about this more a little later. Now regarding the fourth quarter earnings, anticipated or not, we’re not satisfied with these results. Yes, the market conditions were horrendous for any business sensitive to the public markets. What we see is unsatisfactory and frankly, frustrating is that the extreme market impact on some of our businesses completely overshadowed the fact that most of our businesses had pretty darn good fundamentals. In fact, businesses representing nearly half of our normalized earnings actually produced record results. Our response to this challenging environment is not to simply ride this out but to actively manage through it. Of course, there’s a lot of judgment involved in this process because on the one hand we do not perceive everything that’s going on as a trend that’ll go on forever. As such we don’t want to manage the short term in a manner that does not – we want to manage the short term in a manner that does not compromise the long term. On the other hand, where we have thought appropriate we have reduced the risk profile of certain products and activities in what we believe a very material ways that will reduce volatility in the future ,…

But before Rich begins, this is Eric Durant. I know Rich Carbone and I am not Rich Carbone. But I forgot to give you a commercial before John’s talk and I’ll do that now. In order to help you to understand Prudential Financial we will make some forward looking statements in the following presentation. It is possible that actual results may differ materially from the predictions we make today. Additional information regarding factors that could cause such a difference appears in the section titled “Forward Looking Statements and Non-GAAP Measures of our Earnings Press Release for the fourth quarter 2008 which can be found on our website at www.investor.Prudential.com. In addition in managing our businesses we use a non-GAAP measure we call Adjusted Operating Income to measure the performance of our financial services businesses. Adjusted operating income excludes net investment gains and losses as adjusted and related charges and adjustments, as well as, results from divested businesses. Adjusted operating income also excludes recorded changes in assets values that will ultimately accrue to contract holders and recorded changes in contract holder liabilities resulting from changes and related asset values. The comparable GAAP presentation and the reconciliation between the two for the fourth quarter are set out in our earnest press release on our Website. Additional historical information relating to the company’s financial performance is also located on our Website. So here’s the real Rich Carbone.

Thanks, Eric. And good morning everyone. I’m going to begin with a fourth quarter adjusted operating income. I’m going to talk about net income. I'll discuss capital and liquidity. I’ll go into some of the Goodwill write-offs and the impairments of of JB’s in some detail. And all of the references that I’m about to make are, of course, related to the financial services businesses. Now as you’ve seen from yesterday’s release we reported a loss of $2.04 for common share for the fourth quarter based on adjusted operating income. This includes a charge of about $1.32 per share for impairments, of goodwill and investments in operating joint ventures. Excluding the impact of these impairments we would have reported a loss of about $0.72 per share. This compares favorably to the guidance that we provided at our investor day in December when we were expecting a loss of between $1.10 and $1.30 per share. Now to be fair that was that was an assumption of an S&P of 800 at year end. But to also be fair it was before impairments of goodwill and investments in operating joint ventures. Adjusted operating income for the fourth quarter of 2007 was $1.74 per share. The operating results of our businesses are once again substantially impacted by various discreet items which are in most cases closely tied to unfavorable financial market conditions. As I just mentioned our guidance range at investor day assumed that the S&P index would close at 800 on December 31st. The actual close of the S&P at year end was 903. Still down 22% for the quarter but less punitive to DAC amortization and other market driven measures in our assumptions. On the other hand, as we pointed out on investor day, and I just mentioned our guidance did…

Thank you, Rich. Good morning, good afternoon, good evening, or good night. As we've stated in the past we've had a cautious view of the U.S. credit markets for several years. And we have managed our portfolio accordingly. As a result we are coming into this difficult environment with a deep offensively positioned diversified portfolio in which we have purposely selected our risks and adhered to risk limits in order to avoid undue concentrations. We continue to believe that today's market values from many classes of investments are in effect a negative bubble with prices disconnected from underlying cash flow prospects. We should all be sensitive to the fact that many financial institutions are reporting evaluations on assets that the Treasury and the Federal Reserve have repeatedly said can't be valued. Volatility and uncertainty remain high. As a long term investor with primary focus on matching the cash flow characteristics of our liabilities these cash flow prospects are much more relevant to us than market value changes during the period of ownership. With that said, I'll start with our fixed maturity portfolio. Gross unrealized losses on fixed maturities in our general account stood at $11.3 billion at year end. About 80% of the total $11.3 billion gross unrealized losses relate to investment grade securities. We have the intent and ability to hold these securities to recovery and the market driven declines and value do not have a negative impact on our statutory capital position. Gross unrealized losses increased by $5.4 billion from September 30th, reflecting the accelerated spread widening that was experienced across virtually all classes of fixed income securities during the fourth quarter. About $3.3 billion of our increase came from corporate securities across virtually all sectors and most pronounced in manufacturing. Another $1.1 billion of the increase came…

(Operator instructions). The first question will come from Suneet Kamath from Sanford Bernstein. Please go ahead.

Thank you and good morning. Two questions please, first on your guidance, if you think back to Investor Day, I think your market average level was a lot lower than what your current assumptions are, I think was $850 back then and I think now it's something closer to $940 on the 2% market appreciation assumption. I'm just wondering what the logic is there. I'm not sure that the market is (inaudible) different from where it was in terms of absolute levels back in early December, but for some reason you decided to change that assumption, so I'm just curious about that. And then second, on the Wachovia put option, I would say there's been some talk in the press about Wachovia securities perhaps combining their retail brokerage business with that of another company. I'm not asking you to predict what's going to happen, but if something like that conceptually does happen, what happens to your put option? In other words, who becomes the counterparty to that? Does it stay with Wells or does it travel with the business? Thanks.

This is Mark. Let me tackle both questions. With respect to the equity market assumption, that assumption is consistent with our past practice. We've taken previous quarters and we have consistently assumed 2% appreciation. So everything is very volatile and very uncertain. We've presented a consistent scenario, and as I said, it's based on our past practice of assuming 2% appreciation from wherever the market ended before. I don't want to speculate on what may or may not be going on with respect to Wells Fargo and any other counterparties, and I think it's probably also too early to think about how the put might move around in the context of any deal. Our contract is public, so anybody who wants to look at what's in our joint venture agreement can find that contract and review it, but I can't speculate on what might happen in the context of a deal.

Can I just quickly follow-up on the guidance? Maybe I'll try it another way. If we went back to your average $850 (ph 0:08:20) assumption that you had at Investor Day, do you think you would still be within the EPS range that you have?

Well we're not forecasting where we come out within the range. The current market would be stressful relative to our scenario, but there are a lot of moving parts in this. But I would say that the current market would be stressful relative to our scenario.

OK, thanks.

Thank you. Our next question will come from Nigel Dally from Morgan Stanley. Please go ahead.

Great. Thanks and good morning, everyone. Just to follow-up on the put option, can you just clarify whether or not you've provided full notification to Wells of your intention to put your stake in a JV? Second for Rich, substantial increase in liquidities; can you discuss what drove the nearly $1 billion increment versus your (inaudible)? And then just last on acquisitions, given it doesn't seem like you have a lot of meaningful excess capital on balance sheet, what does this mean for your acquisition appetite? I'm guessing that given where your stock price, issuing stock would be somewhat unattractive and to the detriment of existing shareholders. Thanks.

Just quickly on the put and then I'll had it over to Rich. We have not provided full notice to Wells yet.

And if you can discuss why not?

Well, contractually we don't have to and we're, as Rich said, considering how we want to think about that right now; although we have made clear our intent to at some point notify them of our exercise of the put.

Yes, Nigel, at Investor Day I was being a bit conservative because I did say that we had the majority of the proceeds from that convert downstream to unregulated (inaudible), and prior to that point in time when the put would be put to us at June, we would be winding down positions as planned and bringing that back up to the holding company. There was a throw way comment in there. I said, if I can get the process begun earlier, I'll get the process done earlier, wound up there were process began earlier, we were able to bring in sooner $900 million, it's just simple as that.

And then Nigel, this is John, just to responding your question about M&A maybe a respond a bit a little more broadly and then come back to particular comment about financing. We do have a pattern of doing acquisitions in choppy markets such as Gibraltar or Skandia or Cigna as examples. So it clearly depends on as moved our way in terms of environment which we tend to be more active although, the term choppy market hardly justice to the environment that we are in today. And I accept that, I think its also fair to say that from our point of view acquisitions are nice to do, not have to do which is different that we found ourselves three or five years ago where we had a number of subscale businesses that we needed either double up or get out. So we view this timeframe is elective and opportunistic, not essential for hitting our long-term objectives. If we added to complication as you identify is the issue of financing number one, as you identify and Richard mentioned, we for anything sizable nature we would require external capital. Number 2, we would finance it very conservatively in this environment, which means a number 3, it need to be highly compelling for be attractive to us in this environment.

That’s great, thank you.

This is Eric, I would like to go back to one of Suneet's questions, well, this is slight elaboration to what Mark said in case it wasn’t clearly. And obviously, as Suneet indicated a market expectation of an average S&P at 940 versus an 850, everything else being the same would have given us all lift in our expectation. So put it another way had our expectations today than the same as those we stated on Inventor Day all else the same they would have been lower than they were at that time.

Thank you. Next we will go to the line of Jimmy Bhullar from JP Morgan. Please go ahead.

Hi, thank you, I have a couple of questions, the first one is Wachovia look back and I have seen the contract but just to clarify how is the final value of your share going to be determined, I think its as of the beginning of ’08, but and also if you can discuss if there any provisions that would allow Wells Fargo to either delay payment or something that allows them to contest what they owe to you? And then secondly if you can talk about Life Planner recruiting it's been sluggish in the past few quarters, you believe that’s trend or do you think its going to pick up specifically talking about Prudential Japan? That’s it.

Yeah, this is Mark on the first part. Yeah, to be clear with respect to the evaluation the reason we used the phrase look back, is that this provision of the contract lets us go back to the environment that assumes that the next big deal, I meaning the AG Edward’s deal hadn’t occurred. So the evaluation would be as of January 1, 2008 and the contract calls for an appraisal process and we expect that appraisal process is what would arise to the number around $5 billion that you heard us talk about several times. We believe we have a solid contract and we would anticipate that exercising and what results would result in things playing out as we have described.

And perhaps, Ed Baird on the Life Planner topic?

Yeah, Jimmy, I would agree with you. The growth in our Life Planner over the last year has been sluggish. To put a number on it, it's about 2% in POJ when you adjust for the transfers. And as a result of that what we have done is over the year, steadily been increasing the numbers in sales managers. On a year-over-year basis its about almost 15% increase and while it takes a little time for that to have an impact as you know sales managers tend to be the key driver in the increase of recruiting. So we are optimistic that in ’09 we will see an improvement, although what has been sluggish '08.

Thank you.

Thank you. Next we’ll go to the line of Andrew Kligerman from UBS. Please go ahead.

Great, good morning, I have a couple questions. The first is on where Suneet was coming on earlier, because I was thinking the same question very simply put. At Investor Day, you gave guidance the same guidance you are giving now at 525 to 565 assuming the S&P ended the year at 800. Now you are giving the same guidance assuming the S&P ended the year at 900 and obviously we are very much in the hole now. Given that the S&P is lower. What’s the difference in earnings that same guidance two different S&Ps where is that chunk of earnings. How much is it, and what was it that, that caused you to change it. I am going to have some follow-up.

Andrew, I can’t exactly qualify, but there is a lot of moving parts. But I know what you guys are driving there. We had a guidance out there 525 to 565 within ending S&P of 900 and now we are saying the S&P is going to end at, if you do the math 2% to 4%, we will land up at 975. That 75 basis points allowed us to stay, that's 7 points, that 75 basis points in the S&P did allow us to stay within the range, but we do believe that is a better assumption for the year. We changed assumption, because we have a different expectation for the S&P for the year. Had we not done that, we probably would have below the 525, the bottom end to the range. I think that’s your question.

Yeah. It generally is, it's just kind of maybe just offline, but its just kind of unusual that, there’s that missing chunk and we could get into later what the exact change was?

Well, I would want to say, though, is our traditional procedures here were we start at the (inaudible) year which was 900 and we accreted 2% a quarter. So go ahead I'm sorry.

I am sorry. I just thought on the Investor Day you said that you are going to end the year at 800 and now you are saying that you are going to end the year at 900. So there is a 100.

We are talking about, let's be clear. We talked about ending 2008 at 800 on Investor Day. Now the actual number was 900 at the end of 2008. And the new assumption is that we will appreciate a 2% per quarter from that actual 900 base, which should get to the Rich's number of 975 at the end of 2009. One significant difference from Investor Day, we didn't know on Inventor Day what our re-projection of gross profit would be. And those businesses like annuities in particular but also under the July. Where you project based on where the market is at the end of the, end of the period. And the key factor to be a little bit technical here. Doesn't go away, so a larger proportion of our earnings for DAC will be absorbed in DAC amortization in 2009 than we would have expected when we gave you our guidance on Investor Day.

Okay and then just. Next question, how did your impairments on statutory capital stack up with what you did on GAAP?

They would have been very similar.

Very similar? Great. In terms of the additional resources to bolster RBC in addition to that 1.7 billion from the Wachovia put, you mentioned other additional resources. What would those be?

We have outstanding PFI medium-term note programs that goes with funding already on balance sheet that goes beyond 2012 to typical meeting terminal program. Today we that program to fund this spread lending, match the spread lending portfolio in Tyco. We've have analyzed the asset liabilities, we analyzed the underlying assets and throughout the year we can wind down that programs, bringing the funds back up to the holding company and hold them as a cushion.

Got it and then in terms of guidance on another area, you were assuming what was it 400 to 600 million in losses versus the $1.2 billion that we saw today, what surprised I know Richard you gave some detail on the areas, but what kind of do you ask there in terms of what actually came in?

Yeah, Andrew I just need re-launching on one thing my guidance, my estimate on Investor Day I am doing this for memory, but I think I'm right. $300 million to $400 million in credit and then a number around $400 million in from equities.

Okay I thought it was.

We had added the 2, so thinking about the upper end of that I was around $800 million.

I see.

And it came in at $1.1 million, and what threw us off, there was one specific large credit that happened and then it was public announcement which we are not going to get into. In December that threw us off on the credit side and then it was further exacerbation of spreads inside these mutual funds that were holding high yield bonds and the two added a couple of $300 million to that estimate.

Got it and one last and I am done. Fixed annuities one of your competitors showed a big tick up in that product area given some of the weaknesses among their competitors. Any interest in picking up the fixed annuity business here in US?

Bernard, will speak to that Andrew.

Andrew, I think the short answer to that is we are participating in that market but we don't see it as a big strategic opportunity given what we see as the margins in that business on an ongoing basis.

Got it, thank you.

Thank you and our next question will come from the line of John Nadal from Sterne Agee, please go ahead.

Hi good afternoon, I have a couple of quick once. So Ed, want to follow-up a little bit on the, on impairments as it related to Moody's and understanding that you won't necessarily step in and comment on behalf of Moody's but and there is a release when they talked about you there sort of put a couple of hurdles in there, 350% RBC ratio looks like you checked that box. But they also talked about impairments in investments loss is not exceeding $1.5 billion. If you had strip out the derivatives and I am not sure that, that’s appropriate but if you strip that our impairments ran pretty close to that level. Any commentary you can provide, with where you stand relative to Moody's and have you discussed the fourth quarter results with them and any idea there?

Well, we really, I really hated to comment about how the rating agencies are taking this. There are a lot of things that they put into their ratings. The general environment for today being one of the biggest things, they have us on negative outlook at those PFI. But we have not had any further conversations with them since that occurred I think back in the fourth quarter. So I can not say any more than that.

Okay, one for John. Thinking about tarp I guess it seems at this point that the insurance industry will never hear from the government as to whether its being invited in or not to participate but nonetheless if you are invited to participate, it appears that the, that its pretty onerous relative to where it may be it was a couple of months ago. Some of the limitations on the compensation and also two other things. Any commentary on whether if you were invited to participate, it actually have any desire to?

John I think the right way to say is, we would evaluate I based on this conditions and circumstances at that time.

Okay.

There is an awful lot going on, there is lot of speculations real hard to know where that all going to come out so you will be. I think just appropriate to evaluate when and if that arises.

Okay last one for you in the, there any change to this statutory capital level that would be associated with your estimate of some where north of, comfortably North of 400% RBC?

No.

Okay and than last once, stick all back to the guidance thing on more time beat a dead horse. Average SMP was at investor day assumed to be aged 50 for 2009. Now looking like 940 is the average. Roughly on 90 point increase on average yet guidance stays intact, some thing else is dragging that is that the way, is it the case factor, is that really what we are talking bout there?

Its actually, it’s possibly the case factor. But it’s pretty arcane so we will go through them it sounds this is several of you have asked this.

I appreciate that, thank you.

Okay and let’s move away from the average for a moment.

Okay.

So we said we end it here. We though we will end the year at 800, we ended the year at 900. we thought we will end 2009 at 900 and lets stick with that example. So if we begin the year at 900 and we ended the year with 900, we would not meet the mean reversion assumptions we had in our DAC calculations. And we have to write off DAC because we did not reach the mean reverse assumptions. So now that we start the year at 900, we are assuming the S&P would appreciate throughout the year at our standard 2% and that 2% would allow us not allow us that 2% when you are working through the calculus would have an amortization at DAC that might not required unlocking. So, we had to do with the higher amortization of DAC if you grow from 900 to 975 spot-to-spot which is our new assumption. The DAC will roll off in normal course of business. If we started 900 and we end at 900 you will have to accelerate the write off to DAC and it's simple or is complicated.

Very helpful. Could you just remind us where yearend '08 after all the charges in the annuity segment where the variable annuity DAC balance ended the year?

I could.

It's $2.3 billion.

Thank you very much.

Okay.

Thank you. Our next question will come from Tom Gallagher with Credit Suisse. Please go ahead.

Hi. First question I guess for Rich. I just want to talk about liquidity, just overall liquidity plan to the company specifically your CP. I noticed most of your CP being rolled to private investors not the government.

Yes, the vast majority.

Okay. Can you talk a bit about what's going on in that market, you hear lot of speculation that it's frozen, really it's not frozen through concerning who is actually purchasing your paper. But you also brought it down at least as relate to PRU funding from $7 billion to $4.4 billion. Is that a conscious decision that something you are looking at, continue to take down and should we assume that PRU over course of the year is looking at term is get out through this FHLB, but borrowing were there reducing CP overall. That's my first question.

Let me address the first part of that and it has to do with robustness of the program. Couple of things it had, we got a 150 investors in our PRU funding program or A1, B1 program. And now I think is up from 63 lower number throughout last year, so our investors are more that's number one. Number two, in the last couple of months we found that we extend and we were staying on a weekly basis, daily basis and now we found that we can roll this paper beyond 30 days. So, in all fairness I think the aggressive paper program at Prudential Insurance Company is stronger than it has been in several quarters. As far as dropping the program down from $7 billion to the $4 billion zone, and there were opportunities to pick up any thread and that extra $3 billion. So with that opportunities we brought the program down to really operating as sort of working capital to some of our businesses.

Just Tom, it's Mark, one more comment. We do want to keep this market warm because we anticipated some point of return to our normal environment, but just to emphasize and aspect of liquidity, that Rich has talked about we don’t factor in this commercial paper balance when we talked about the liquidity picture as Rich as paints it. So, we have presence in the market. We want to keep it warm. We anticipate the return to normal at some point, but right now we are in good shape there as you commented and Rich it's healthy market for us. And we don’t need it even if it won't.

Mark was referencing at the holding company which I don’t count at all. And we are keeping that in place to keep warm and to test out and then to understand how to operate under CP effect. But all of the commercial paper the $2 billion with the holding company completely round down within 10 days. None of that is being used in the operations.

In terms of the FHLB borrowing, I know you have some more capacity to go there. Is that where the borrowing there, how you took the CP down or was the CP unwound through asset sales done on its own?

There is CP assets sales and it bit perhaps, you can't just fund and it did perhaps from the Federal Home Loan Bank but there is more direct line of side between those two.

Okay. And Rich just a final question on that, so bottom line here no plans to really take CP down, where it is today. Are you at a level that you feel good about going forward?

As long it is as it most effective form of funding of working capital, we will use CP. If there is a cheaper form, like securities lending we might use securities lending.

Okay.

Between those years.

Okay last question I have is in your 8-K, you talked about a sort of downgrade scenario collateral posting that if you got downgraded to an A minus level, and I realize you are far away from that, but just curious what this relates as you’ll have to post $1.6 billion collateral.

It’s a matter of credit requirement I don’t know of the top of my head. It has to do with our terms financing term insurance financing around our captive.

That's related to the XXX financing?

Yes

Okay. Thank you.

Thank you. Our next question comes from Ed Spehar from Banc of America. Please go ahead.

Thank you good afternoon. Rich a couple of questions on statutory. Could you tell us roughly where you think total adjusted capital was at the year-end '08 and some comment on statutory operating results in '08 as well, and then I got a quick follow-up.

Hi, Ed.

That's correct. You've had heard this speech before, we haven't yet followed our staff lag. And we would rather not comment on either of those two items until we have done so.

Can you give us a range, we get that from other companies including Met so I'm just curious. I'm sure you guys are looking at these types of numbers closer today than you have maybe in the past?

Here our controller is closer to this and we will talk if he feels comfortable giving a range even at this early stage; I am going to let him to do it.

I think we're expecting a in fact just north of $9 million GFO, gain some operations in Tyco Prudential Insurance of America about $0.5 billion, but remember we have other insurance subsidiaries as well.

And could you remind us of what are the other sources of statutory earnings international I guess it's Cigna and the others. Do you have any guess of the total number maybe in a normal year? And I guess what I'm trying to get at is what’s the statutory operating trend here for all of your companies? If we are trying to think about how much you could absorb on an annual basis the credit loss given just the underlying statutory operating earnings trend?

Ed we simply don’t have that detail this time.

Okay. Just one final question then I think from sort of at the Investor Day and we're trying back into the kind of capital hit that you could see from S&P 700, I believe from the equity market, I thought the number was around $2 billion or something was kind of a hit is that correct and has there anything changed in terms of your view of what the statutory capital hit will be from various levels?

I think you are right. The number that I believe I quoted was that at 700 S&P, we would be at round 370. Today at 700 S&P it will probably around closer to 350, but I think still above 350. And I think you are right about $2 billion, because you want to think of $2 billion is 50 points in RBC that's the roughly the gearing, so a $1 billion is roughly 50 points in RBC, so $2 billion will be a 100 points and 100 points of the 450 would take you down to 350.

Okay, very helpful thank you.

This is Mark. I need to correct up an earlier statement I have some additional information on the Letter of Credit. It relates to the reinsurance structure associated with the all state deal. There is a ratings trigger in that reinsurance contract that would require either some cash collateral or this Letter of Credit structure.

Thank you. Our next question will from Eric Berg at Barclays Capital. Please go ahead.

Thanks very much and good afternoon to everyone. Rich, towards the beginning of your remarks, you listed four different areas in which the goodwill write-downs or write-offs were taken. As well as in the same presentation, you were discussing the write-down in the carrying amount of the JVs I think you mentioned VA in variable annuity business in all states international investments, the relocation business and the joint ventures. So, in effect you mentioned the international investments did this twice in that discussion and I am trying to understand each of the two references and how they differed from each other.

Okay no problem Eric. So let's take goodwill first, the goodwill write-down in the international investment businesses was $123 million and it was 100% of the goodwill in the international investments businesses. So now I am taking care of goodwill. The JVs which I think are all in the international investment businesses. Okay, it was 316 and the carrying value the pre-impairment carrying value our JV investments was 620, we took an impairment on those investments and now we are talking about investments of about 316, we have a remaining carrying value of 304.

Eric, the reason it's mentioned twice is that it has those two flavors, there is a goodwill write-off and there is an equity impairment in the joint venture equity account.

So you have written-off all of the goodwill related to the Allstate acquisition all of the goodwill related to international investments business, all of the goodwill related to real estate. Can you remind that the real estate business in your corporate area, can you remind us of the remaining goodwill of the enterprise the dollar amount?

It’s about $700 million let me give you the pieces, $444 represent the acquisition of CIGNA Retirement. There's a little tiny piece in international for Aoba, a Japanese bank we bought a number of years to go. And the remainder is in asset management and that’s principally representative of an acquisition we made of an outfit called TMW.

Last question. I think to when your comments Rich, you were discouraging us from sort of taking the reported operating EPS figure adding back the goodwill write-offs and the write-downs of the joint venture as well as all the other special items. You seem to want to discourage us from engaging in such an exercise to arrive at a quarterly run rate. My question is assuming that markets stayed, at roughly the levels that they were on average in the December quarter, why wouldn’t that exercise be a prudent thing to do. Why wouldn’t that exercise give a good indication of the quarterly sort of normalized run rate of Prudential Financial?

Well what you are saying Eric and let's use the assumption, you are saying that the average balances on which we earn fees in the fourth quarter had that same average throughout 2009 whether it stands to reason that the fees we would earn in 2009 will be the same, so we wouldn’t take a hit in fees. We just do in that quarter and we can't do the full year. The answer is in the K factor, because the K factor now is up from I think I am about right is going up from about 50% to almost on average above 75% to the three cohorts again the annuity business on which amortized that.

I see that’s a little bit high Rich, that includes based on some other factors. Going back the 10 point spread in the K factor as a result of the unlocking in the fourth quarter. But the point is the continuing impact of the K factor throughout 2009 is why you can't just do the run rate.

And there is second factor to it Eric, this is your namesake, the level of balances on which we earn fees in the fourth quarter did not yet fully reflect the decline in the market that occurred in the fourth quarter. So baked in the cake even if the market would have been flat in 2009 the level of fee income will be all the same lower in 2009 been in the fourth quarter of 2008.

Eric is that because not all of your fees are tied to daily balances but rather to quarters end balances.

If you reverse that, yes because of the vast majority of our fees are tied to daily average. So, the daily average in the fourth quarter did not reflect a 900 S&P 500. They reflected a higher S&P 500 because the average in the four quarter was significantly above 900.

Okay. I got it and I thank you Eric and the rest of the team. Thank you..

Thank you. And we have time for one final question. That will be from the line of Darin Arita of Deutsche Bank. Please go ahead.

Thank you. I just had a couple of questions. That’s okay. The first one is with respect to John, you mentioned that Prudential is reducing the risk profile of the products and in addition to variable annuities, can you talk about other areas where you're thinking about reducing the risk profile?

I would couple of comments. Variable annuities is one and number two, we have some other annuity line products in our retirement business. Some of the same dynamics and so we can feel we are in a process of doing some similar redesign applicable to that. The two other examples of things we've done is as we've also heard from Mark's earlier comments that we also are backing down our magnitude our proprietary investing as a product related strategy and then finally, as an example a year ago, we also discontinued our activities in a mortgage conduit activities. So these are all examples of things we are either in the product design or in the business activity itself. We've chosen to set our risk levels down and I think they will have a material impact on the results. As Mark described earlier, the annuity effect is beginning to flow through because of the continuing sales and the fact that actually some of that product we designed 18 months ago. We're seeing more manifestation of that as we go forward.

Thank you. And with respect, Mark, you mentioned you've on the variable annuities that Prudential has hedging on about $21 billion of the current values, if I supplement there is $30 billion of living benefits of the current value at Prudential. Can you help us understand that difference in $12 billion life Prudential has that unhedged?

No. That is part of it that’s hedged with embedded derivative structure. That’s where that hedge breakage issue shows up.

Okay. so, there is hedge breakage on $21 billion.

Yeah. That’s the underlying portfolio that hedge relates to. The whole portfolio has the mix of HD products in it and the highest daily which are by the embedded derivative products. So, it’s the segment or the piece of the portfolio with that hedge breakage types to it. Doesn’t if it's not hedged.

I see. Great. Thank you.

And thank you very much. Ladies and gentlemen, today's conference call will be available for replay after 1:30 PM today until midnight February 12. You may access the AT&T teleconference replay system by dialing 1-800-475-6701 and entering the access code of 975677. International participants dial 320-365-3844. Those number once again 1-800-475-6701 or 320-365-3844 and enter the access code of 975677. That does conclude your conference call for today. Thank you for you participation and you may now disconnect.