On January 2, 2013, the Company acquired The Hartford's individual life insurance business through a reinsurance transaction. Under the agreement, the Company paid The Hartford cash consideration of $615 million, primarily in the form of a ceding commission to provide reinsurance for approximately 700,000 life insurance policies with a net retained face amount in force of approximately $135 billion. This acquisition increases the Company's scale in the U.S. individual life insurance market, particularly universal life products, and provides complementary distribution opportunities through expanded wirehouse and bank distribution channels.

Acquisition of AIG Star Life Insurance Co., Ltd., AIG Edison Life Insurance Company and Related Entities from AIG

On February 1, 2011, Prudential Financial completed the acquisition from American International Group, Inc. (“AIG”) of AIG Star Life Insurance Co., Ltd. (“Star”), AIG Edison Life Insurance Company (“Edison”), AIG Financial Assurance Japan K.K., and AIG Edison Service Co., Ltd. (collectively, the “Star and Edison Businesses”) pursuant to the stock purchase agreement dated September 30, 2010 between Prudential Financial and AIG. The total purchase price was $4,709 million, comprised of $4,213 million in cash and $496 million in assumed third party debt, substantially all of which is expected to be repaid, over time, with excess capital of the acquired entities. The acquisition of these businesses included the purchase by the Company of all of the shares of these entities, which became indirect wholly-owned subsidiaries of the Company. All acquired entities were Japanese corporations and their businesses were in Japan, increasing the Company's scale in the Japanese insurance market. On January 1, 2012, Star and Edison were merged into the Gibraltar Life Insurance Company, Ltd.

Prudential Financial made a Section 338(g) election under the Internal Revenue Code with respect to the acquisition resulting in the acquired entities being treated for U.S. tax purposes as newly-incorporated companies. Under such election, the U.S. tax basis of the assets acquired and liabilities assumed of the Star and Edison Businesses were adjusted as of February 1, 2011 to reflect the consequences of the Section 338(g) election.

Although the acquisition of the Star and Edison Businesses included the acquisition of multiple entities, the Company views this as a single acquisition and reports it as such in the following disclosures.

The following table presents an allocation of the purchase price to assets acquired and liabilities assumed at February 1, 2011 (the “Acquisition Date”):

			(in millions)

Total invested assets at fair value(1)			$	43,103
Cash and cash equivalents				1,813
Accrued investment income				348
Value of business acquired ("VOBA")				3,769
Goodwill				173
Other assets(1)				880
	Total assets acquired			50,086
Future policy benefits				22,202
Policyholders' account balances(2)				22,785
Long-term debt				496
Other liabilities				390
	Total liabilities assumed			45,873
		Net assets acquired	$	4,213

Value of business acquired (“VOBA”), which is established in accordance with purchase accounting guidance, is an intangible asset associated with the acquired in force insurance contracts representing the difference between the fair value and carrying value of the liabilities, determined as of the acquisition date. The fair value of the liabilities, and hence VOBA, reflects the cost of the capital attributable to the acquired insurance contracts. VOBA is amortized over the expected life of the contracts in proportion to either gross premiums or gross profits, depending on the type of contract. Total gross profits include both actual experience as it arises and estimates of gross profits for future periods. The Company regularly evaluates and adjusts the VOBA balance with a corresponding charge or credit to earnings for the effects of actual gross profits and changes in assumptions regarding estimated future gross profits. VOBA is reported as a component of “Other assets” and the amortization of VOBA is reported in “General and administrative expenses.” The proportion of the VOBA balance attributable to each of the product groups, as of the acquisition date, was as follows: 48% related to accident and health insurance products, 45% related to individual life insurance, and 7% related to fixed annuities.

The following table provides estimated future amortization of VOBA, net of interest, assuming December 31, 2012 end of period foreign currency exchange rates remain constant, relating to the Star and Edison Businesses for the periods indicated.

	(in millions)

Balance as of Acquisition Date	$	3,769
Amortization		(491)
Interest		41
Foreign currency translation		171
Balance as of December 31, 2011	$	3,490
Amortization		(483)
Interest		42
Foreign currency translation		(184)
Balance as of December 31, 2012	$	2,865

As a result of the acquisition of the Star and Edison Businesses, the Company recognized an asset for goodwill representing the excess of the acquisition cost over the net fair value of the assets acquired and liabilities assumed. Goodwill resulting from the acquisition of the Star and Edison Businesses amounted to $173 million. Based on the Company's final calculation of the 338(g) election the Company determined that none of the goodwill is tax deductible. In accordance with U.S. GAAP, goodwill is not amortized but rather is tested at least annually for impairment. The test is performed at the reporting unit level which for this acquisition is the International Insurance segment's Gibraltar Life and Other operations.

The following table presents selected financial information reflecting results for the Star and Edison Businesses, prior to merging into the Gibraltar Life Insurance Company, Ltd. on January 1, 2012, that are included in the Company's Consolidated Statements of Operations for the year ended December 31, 2011:

The results of the Star and Edison Businesses in the table above include a pre-tax charge of $27 million for estimated claims and expenses arising from the 2011 earthquake in Japan. The results of the Star and Edison Businesses in the table above do not reflect the impact of transaction and integration costs on the Company's results. Transaction costs represent costs directly related to effecting the acquisition. Integration costs are costs associated with the integration of the core operations of the Star and Edison Businesses with the Gibraltar Life operations. Both transaction and integration costs are expensed as incurred and are included in “General and administrative expenses.” For the years ended December 31, 2012 and 2011, the Company incurred $138 million and $213 million, respectively, of transaction and integration costs reflected in the International Insurance segment.

The following supplemental information presents selected unaudited pro forma information for the Company assuming the acquisition had occurred as of January 1, 2010. This pro forma information does not purport to represent what the Company's actual results of operations would have been if the acquisition had occurred as of the date indicated or what such results would be for any future periods. The pro forma information does not reflect the impact of future events that may occur, including but not limited to, expense efficiencies arising from the acquisition and also does not give effect to certain one-time charges that the Company expects to incur, such as restructuring and integration costs.

					Year Ended December 31,
						2011		2010

				(in millions, except per share amount)
Total revenues					$	50,350	$	42,613
Income from continuing operations					$	3,768	$	3,033
Net income attributable to Prudential Financial, Inc.					$	3,731	$	3,054

Earnings per share
	Financial Services Businesses
		Basic earnings per share - Common Stock:
			Income from continuing operations attributable to Prudential Financial, Inc.		$	7.35	$	5.25
			Net income attributable to Prudential Financial, Inc.		$	7.42	$	5.31

		Diluted earnings per share - Common Stock:
			Income from continuing operations attributable to Prudential Financial, Inc.		$	7.26	$	5.19
			Net income attributable to Prudential Financial, Inc.		$	7.33	$	5.25

	Closed Block Business
		Basic and Diluted earnings per share - Class B Stock:
			Income from continuing operations attributable to Prudential Financial, Inc.		$	61.00	$	229.00
			Net income attributable to Prudential Financial, Inc.		$	61.00	$	229.50

On December 6, 2011, the Company sold its real estate brokerage franchise and relocation services business (“PRERS”) to Brookfield Asset Management, Inc. The Prudential Real Estate Financial Services Company of America Inc. (“PREFSA”), a finance subsidiary of the Company with investments in a limited number of real estate brokerage franchises, was excluded from the transaction. The proceeds from the sale, before transaction related expenses, were $108 million and resulted in a pre-tax gain of $49 million and an after tax gain of $62 million.

Under the sale agreement, the real estate brokerage franchisees may continue to use the Company's trademark, based on the terms of their respective franchise agreements. In addition, the Company had agreed to provide certain Brookfield affiliates with transitional financing for the transferred relocation services business. This transitional financing was terminated on October 26, 2012.

PRERS did not qualify as a Discontinued Operation due to the continuing involvement through the financing provided to Brookfield and the retained equity in PREFSA. Results related to PRERS and PREFSA are included in Corporate and Other operations as a divested business.

In 2004, the Company acquired an 80 percent interest in Hyundai Investment and Securities Co., Ltd., a Korean asset management firm, from an agency of the Korean government. In January, 2008, the Company acquired the remaining 20 percent. In February 2010, the Company signed a definitive agreement to sell Prudential Investment & Securities Co., Ltd. and Prudential Asset Management Co., Ltd, which together comprise its Korean asset management operations. This transaction closed on June 1, 2010 and the results of these operations are now reflected in discontinued operations. See below for a further discussion of the sale of these operations.

Income (loss) from discontinued businesses, including charges upon disposition, for the years ended December 31, are as follows:

			2012		2011		2010

			(in millions)
Real estate investments sold or held for sale(1)			$	22	$	37	$	7
Global commodities business (2)				-		16		30
Korean asset management operations (3)				-		-		37
Mexican asset management operations(4)				-		-		6
Other				1		-		1
	Income from discontinued operations before income taxes			23		53		81
		Income tax expense		8		18		48
	Income from discontinued operations, net of taxes		$	15	$	35	$	33

The Company's Consolidated Statements of Financial Position include total assets and total liabilities related to discontinued businesses of $13 million and $0 million, respectively, at December 31, 2012 and $464 million and $7 million, respectively, at December 31, 2011.

Charges recorded in connection with the disposals of businesses include estimates that are subject to subsequent adjustment.