pruvalregtofile.htm

PROSPECTUS

May 1, 2011

THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT

Variable

APPRECIABLE

LIFE®

INSURANCE CONTRACTS

As of November 12, 2001, Prudential no longer offered these Contracts for sale.

This prospectus describes two forms of an individual variable life insurance Contract (the “Contract”) offered by The Prudential Insurance Company of America (“Prudential”, “we”, “us”, or “our”) under the name Variable Appreciable Life® Insurance.

You may choose to invest your Contract's premiums and its earnings in one or more of the following ways:

·	Invest your Contract’s premiums and its earnings in one or more of the available Variable Investment Options of The Prudential Variable Appreciable Account (the “Account”), each of which invests in a corresponding Portfolio of The Prudential Series Fund (the “Series Fund”):

· Conservative Balanced

· Diversified Bond

· Equity

· Flexible Managed

· Global

· Government Income

· High Yield Bond

· Jennison

· Money Market

· Natural Resources

· Small Capitalization Stock

· Stock Index

· Value

·	Invest in the Fixed Rate Option, which pays a guaranteed interest rate.

·	Invest in The Prudential Variable Contract Real Property Account (the “Real Property Account”).

Please Read this Prospectus. Please read this prospectus and keep it for future reference. A current prospectus for the Real Property Account accompanies this prospectus. These prospectuses contain important information about the available Variable Investment Options. Please read these prospectuses and keep them for future reference.

Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or determined that this Contract is a good investment, nor has the SEC determined that this prospectus is complete or accurate. It is a criminal offense to state otherwise.

The Contract may have been purchased through registered representatives located in banks and other financial institutions. Investment in a variable life insurance Contract is subject to risk, including the possible loss of your money. An investment in The Prudential Variable Appreciable Life® is not a bank deposit and is not insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other governmental agency.

The Prudential Insurance Company of America

751 Broad Street

Newark, New Jersey 07102

Telephone: (800) 778-2255

Appreciable Life is a registered mark of Prudential.

TABLE OF CONTENTS

PAGE

SUMMARY OF CHARGES AND EXPENSES	1
Expenses other than Portfolio Expenses	1
Portfolio Expenses	4

SUMMARY OF THE CONTRACT AND CONTRACT BENEFITS	4
Brief Description of the Contract	4
Types of Death Benefit Available Under the Contract	5
Death Benefit Guarantee	5
The Contract Fund	5
Tabular Contract Fund	5
Premium Payments	5
Allocation of Premium Payments	6
Investment Choices	6
Transfers Among Investment Options	6
Increasing or Decreasing the Face Amount	7
Access to Contract Values	7
Contract Loans	7
Canceling the Contract	7

SUMMARY OF CONTRACT RISKS	7
Contract Values are not Guaranteed	7
Limitation of Benefits on Certain Riders for Claims Due to War or Service in the Armed Forces	8
Increase in Charges	8
Contract Lapse	8
Risks of Using the Contract as a Short-Term Savings Vehicle	8
Risks of Taking Withdrawals	8
Limitations on Transfers	9
Charges on Surrender of the Contract	9
Risks of Taking a Contract Loan	9
Potential Tax Consequences	10
Replacement of the Contract	10

SUMMARY OF RISKS ASSOCIATED WITH THE VARIABLE INVESTMENT OPTIONS	10
Risks Associated with the Variable Investment Options	11
Learn More about the Variable Investment Options	11

GENERAL DESCRIPTIONS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, THE REGISTRANT, AND THE SERIES FUND	11
The Prudential Insurance Company of America	11
The Prudential Variable Appreciable Account	11
The Prudential Series Fund	12
Investment Manager	12
Investment Subadvisers	13
Service Fees Payable to Prudential	13
Voting Rights	14
Substitution of Variable Investment Options	14
The Fixed Rate Option	14
The Prudential Variable Contract Real Property Account	14

CHARGES AND EXPENSES	15
Taxes Attributable to Premiums	15
Deduction from Premiums	15
Sales Load Charges	15
Cost of Insurance	16
Monthly Deductions from the Contract Fund	16
Daily Deduction from the Variable Investment Options	17
Surrender Charges	17
Transaction Charges	18
Portfolio Charges	18
Rider Charges	18

PERSONS HAVING RIGHTS UNDER THE CONTRACT	18
Contract Owner	18
Beneficiary	19

OTHER GENERAL CONTRACT PROVISIONS	19
Assignment	19
Incontestability	19
Misstatement of Age or Sex	19
Settlement Options	19
Suicide Exclusion	19

RIDERS	19

REQUIREMENTS FOR ISSUANCE OF A CONTRACT	20

PREMIUMS	21
Allocation of Premiums	22
Transfers/Restrictions on Transfers	22
Dollar Cost Averaging	24

DEATH BENEFITS	24
Contract Date	24
When Proceeds Are Paid	24
Death Claim Settlement Options	24
Types of Death Benefit	25
Increases in the Face Amount	25
Decreases in the Face Amount	26

CONTRACT VALUES	27
Surrender of a Contract	27
How a Contract’s Cash Surrender Value Will Vary	27
Loans	27
Withdrawals	29

LAPSE AND REINSTATEMENT	29
Options on Lapse	30

TAXES	30
Tax Treatment of Contract Benefits	30
Tax-Qualified Pension Plans	32

DISTRIBUTION AND COMPENSATION	32

LEGAL PROCEEDINGS	33

ADDITIONAL INFORMATION	36

DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS	38

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION	39

TABLE OF CONTENTS OF THE FUND PROSPECTUS	40

SUMMARY OF CHARGES AND EXPENSES

Capitalized terms used in this prospectus are defined where first used or in the DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS, which is located at the end of this prospectus.

Expenses other than Portfolio Expenses

The following tables describe the maximum fees and expenses that you could pay when buying, owning, and surrendering the Contract. Generally, our current fees and expenses are lower than the maximum fees and expenses reflected in the following tables. For more information about fees and expenses, see CHARGES AND EXPENSES.

The first table describes maximum fees and expenses that we deduct from each premium payment, and maximum fees we charge for sales of the Contract and transactions.

Transaction and Optional Rider Fees
Charge	When Charge is Deducted	Amount Deducted
Taxes Attributable to Premiums(1) (Varies by state and locality.)	Deducted from premium payments.	0% to 14.85%(3)
Administrative fee	Deducted from premium payments.	$2
Maximum Sales Charge on Premiums (Load)(2) (Charge is a percentage of the primary annual premium.)	Monthly	0.5%
Contingent Deferred Sales Charge (Load)(2) (Charge is a percentage of the primary annual premium.)	Upon lapse, surrender or decrease in the Face Amount.	50%
Surrender fee per $1,000 of Coverage Amount(2)	Upon lapse, surrender or decrease in the Face Amount.	$5
Withdrawal fee (Charge is based on the withdrawal amount.)	Upon withdrawal.	The lesser of $15 and 2%
Face Amount Change fee	When there is a change in the Face Amount.	$15
Living Needs Benefit Rider fee	When the benefit is paid.	$150

(1)	For these purposes, “taxes attributable to premiums” shall include any federal, state or local income, premium, excise, business, or any other type of tax (or component thereof) measured by or based upon the amount of premium received by Prudential.

(2)	Duration of charge is limited. See CHARGES AND EXPENSES.

(3)	The most common charge for taxes attributable to premiums is 3.25%.

The second table describes the maximum Contract fees and expenses that you will pay periodically during the time you own the Contract, not including the Portfolio fees and expenses.

Periodic Contract and Optional Rider Charges Other Than The Series Fund's Operating Expenses
Charge	When Charge is Deducted	Amount Deducted
Cost of Insurance (“COI”) for the Face Amount.(1)(2) Minimum and Maximum Charges per $1,000 of the net amount at risk. _____________ Initial COI for a representative Contract Owner, male age 30 in the Preferred underwriting class, no riders. (Charge per $1,000 of the net amount at risk.)	Monthly	From $0.06 to $83.34 _____________ $0.121(3)
Mortality and Expense Risk fee (Effective annual rate calculated as a percentage of assets in the Variable Investment Options.)	Daily	0.9% (4)
Additional Mortality fee for risk associated with certain occupation, avocation, or aviation risks.	Monthly	From $0.10 to $2.08(7)
Fee for the Face Amount. (Flat fee plus a charge per $1,000 of Face Amount.)	Monthly	$3.00 plus $0.03
Fee for an increase to the Face Amount. (Charge per $1,000 of increase in Face Amount.)	Monthly	$0.03
Net interest on loans(6)	Annually	1.5%
Guaranteed Death Benefit fee for the Face Amount or an increase to the Face Amount. (Charge per $1,000 of the Face Amount or increase in the Face Amount.)	Monthly	$0.01
Level Premium Term Rider(1) Minimum and Maximum Charges per $1,000 of rider coverage. _____________ Level Premium Term Rider fee for a representative Contract Owner, male age 30 in the Preferred underwriting class. (Charge per $1,000 of rider coverage.)	Monthly	From $0.03 to $27.00 _____________ $0.15(3)
Child Level Premium Term Rider(8) (Charge per $1,000 of rider coverage.)	Monthly	$0.45

Renewable Premium Term Rider(1) Minimum and Maximum Charges per $1,000 of coverage. _____________ Renewable Premium Term Rider fee for a representative Contract Owner, male age 30 in the Preferred underwriting class. (Charge per $1,000 of coverage.)	Monthly	From $0.02 to $55.08 _____________ $0.13(3)
Accidental Death Benefit Rider(1) Minimum and Maximum Charges per $1,000 of coverage. _____________ Accidental Death Benefit Rider fee for a representative Contract Owner, male age 30 in the Preferred underwriting class. (Charge per $1,000 of coverage.)	Monthly	From $0.03 to $0.70 _____________ $0.07(3)
Option to Purchase Additional Insurance Rider(1) Minimum and Maximum Charges per $1,000 of additional insurance amount. _____________ Option to Purchase Additional Insurance Rider fee for a representative Contract Owner, male age 30 in the Preferred underwriting class. (Charge per $1,000 of additional insurance amount.)	Monthly	From $0.06 to $0.37 _____________ $0.23(3)
Waiver of Premium Rider(1) Minimum and Maximum Charges per $1,000 of coverage. _____________ Waiver of Premium Rider fee for a representative Contract Owner, male age 30 in the Preferred underwriting class. (Charge per $1,000 of coverage.)	Monthly	From $0.01 to $0.31 _____________ $0.07(3)
Applicant Waiver of Premium Rider(1)(5) Minimum and Maximum Charges (Charge is a percentage of the Contract's annual premium.) _____________ Applicant Waiver of Premium Rider fee for a representative Contract Owner, male age 30 in the Preferred underwriting class. (Charge is a percentage of the Contract's annual premium.)	Monthly	From 0.424% to 3.394% _____________ 0.679%(3)

Unscheduled Premium Benefit Rider(1)(5)

Minimum and Maximum Charges

(Calculated as a percentage of the current unscheduled premium benefit amount.)

_____________

Unscheduled Premium Benefit Rider fee for a representative Contract Owner, male age 30 in the Preferred underwriting class.

(Calculated as a percentage of the current unscheduled premium benefit amount.)

Monthly

From 0.38% to 1.14%

_____________

0.42%(3)

(1)	The charge varies based on the individual characteristics of the insured, including such characteristics as: age, sex, and underwriting class. The charges given are representative for issues after 1997. Other rates may apply to earlier issues.

(2)	For example, the highest COI rate is for an insured who is a male/female age 99.

(3)	You may obtain more information about the particular COI charges that apply to you by contacting your Prudential representative.

(4)	The daily charge is based on the effective annual rate shown.

(5)	The cost of this rider will provide for an additional benefit amount, above the amount for the Waiver of Premium Rider. The percentage varies based on underwriting class. For the Applicant Waiver of Premium Rider, the charge may not be less than $0.15 per $1,000 of Face Amount.

(6)	The maximum loan rate reflects the net difference between a loan with an effective annual interest rate of 5.5% and an effective annual interest credited equal to 4%. A loan with a variable loan interest rate may be charged a lower effective annual interest rate. See Loans.

(7)	The amount and duration of the charge will vary based on individual circumstances including Issue Age, type of risk, and the frequency of exposure to the risk, and is charged per $1,000 of Face Amount.

(8)	Duration of the charge is limited. See CHARGES AND EXPENSES.

Portfolio Expenses

This table shows the minimum and maximum total operating expenses charged by the Series Fund that you will pay periodically during the time you own the Contract. More detail concerning Portfolio fees and expenses is contained in the prospectus for the Series Fund.

Total Annual Fund Operating Expenses(1)	Minimum	Maximum
(expenses that are deducted from the Fund’s assets, including management fees, any distribution [and/or service] (12b-1) fees, and other expenses, but not including reductions for any fee waiver or other reimbursements.)	0.38%	0.87%

(1)	Total Annual operating expense for Real Property Partnership is 9.36%.

SUMMARY OF THE CONTRACT

AND CONTRACT BENEFITS

Brief Description of the Contract

The Contract is a form of variable universal life insurance. Our variable appreciable life insurance policy is a flexible form of variable universal life insurance. It has a Death Benefit and a Contract Fund, the value of which changes every day according to the investment performance of the investment options to which you have allocated your net premiums. You may invest premiums in one or more of the available Variable Investment Options that invest in Portfolios of The Prudential Series Fund, in the Fixed Rate Option, or in the Real Property Account. Although the value of your Contract Fund may increase if there is favorable investment performance in the Portfolios you select, investment returns in the Portfolios are NOT guaranteed. There is a risk that investment performance will be unfavorable and that the value of your Contract Fund will decrease. The risk will be different, depending upon which investment options you choose. You bear the risk of any decrease. Within certain limits, the Contract will provide you with some flexibility in determining the amount and timing of your premium payments. The Contract has a Tabular Contract Fund that is

designed to encourage the payment of premiums and the accumulation of cash value. Some features and/or riders described in this prospectus may not be available in some states.

Types of Death Benefit Available Under the Contract

The Death Benefit is an important feature of the Contract. You may choose one of the following two forms of the Contract. They each have a different Death Benefit amount.

Contract Form A, level Death Benefit: The Death Benefit will generally be equal to the Face Amount of insurance. It can never be less than this amount. However, it is possible, that the Contract Fund may grow to the point where we may increase the Death Benefit to ensure that the Contract will satisfy the Internal Revenue Code's definition of life insurance.

Contract Form B, variable Death Benefit: The Death Benefit will increase and decrease as the amount of the Contract Fund varies with the investment performance of the selected options. However, the Death Benefit under Form B, as is true under Form A, will never be less than the initial Face Amount and it may also be increased to satisfy Internal Revenue Code requirements.

Throughout this prospectus the word “Contract” refers to both Form A and B unless specifically stated otherwise. Under both Form A and B Contracts there is no guaranteed minimum Cash Surrender Value.

Death Benefit Guarantee

The Prudential Variable Appreciable Life Insurance Contract is a form of life insurance that provides much of the flexibility of variable universal life, however, with two important distinctions:

We guarantee that if the Scheduled Premiums are paid when due, or received within 61 days after the Scheduled Premiums are due (or missed premiums are paid later with interest), the Contract will not lapse because of unfavorable investment performance, and the least amount we will pay upon the death of the insured is the Face Amount of insurance.

If all premiums are not paid when due (or not made up later with interest), the Contract will still not lapse as long as the Contract Fund is higher than a stated amount set forth in the Contract. This amount is called the “Tabular Contract Fund”, and it increases each month. In later years it becomes quite high. The Contract lapses when the Contract Fund falls below this stated amount, rather than when it drops to zero. This means that when a Variable Appreciable Life Contract lapses, it may still have considerable value and you may have a substantial incentive to reinstate it. If you choose otherwise, you may take, in one form or another, the Cash Surrender Value. See LAPSE AND REINSTATEMENT.

The Contract Fund

Your Contract Fund value changes daily, reflecting: (1) increases or decreases in the value of your Variable Investment Options; (2) interest credited on any amounts allocated to the Fixed Rate Option; (3) interest credited on any loan; and (4) the daily asset charge for mortality and expense risks assessed against the Variable Investment Options. The Contract Fund value also changes to reflect the receipt of premium payments and the monthly deductions described under CHARGES AND EXPENSES.

Tabular Contract Fund

The Tabular Contract Fund is designed to encourage the payment of premiums and the accumulation of cash value. Even if a Scheduled Premium is not paid, the Contract will remain in-force as long as the Contract Fund on any Monthly Date is equal to or greater than the Tabular Contract Fund Value on the next Monthly Date.

The Tabular Contract Fund is a guideline representing the amount that would be in the Contract Fund if all Scheduled Premiums are paid on their due dates, there are no unscheduled premiums paid, there are no withdrawals, the investment options you have chosen earn exactly a uniform rate of return of 4% per year, and we have deducted the maximum mortality, sales load and expense charges.

Premium Payments

Your Contract sets forth a Scheduled Premium which is payable annually, semi-annually, quarterly or monthly. We guarantee that, if the Scheduled Premiums are paid when due (or if missed premiums are paid later, with interest) and there are no withdrawals, the Contract will not lapse because of unfavorable investment experience. Your Contract may terminate if the Contract Debt exceeds what the Cash Surrender Value would be if there was no Contract Debt.

We will notify you before the Contract is terminated and you may then repay all or enough of the loan to keep the Contract in-force. See Loans.

Your Scheduled Premium consists of two amounts:

·	The initial amount is payable from the time you purchase your Contract until the Contract Anniversary immediately following your 65th birthday or the Contract's seventh anniversary, whichever is later (the “Premium Change Date”);

·	The guaranteed maximum amount payable after the Premium Change Date. See PREMIUMS.

The payment of premiums in excess of Scheduled Premiums may cause the Contract to become a Modified Endowment Contract for federal income tax purposes. See PREMIUMS, and Tax Treatment of Contract Benefits. Prudential will generally accept any premium payment of at least $25. You may be flexible with your premium payments depending on your Contract’s performance. If the performance of the Contract is less favorable and the Contract Fund is less than the Tabular Contract Fund Value the Contract would go into default.

Allocation of Premium Payments

When you apply for the Contract, you tell us how to allocate your premiums. You may change the way in which subsequent premiums are allocated by giving written notice to a Service Office, by our website, provided you are enrolled to use Prudential Online® Account Access, or by telephoning a Service Office, provided you are enrolled to use the Telephone Transfer System. See Allocation of Premiums.

On the Contract Date, we deduct a $2 administrative charge and the charge for taxes attributable to premiums from the initial premium. Then the first monthly charges are deducted. The remainder of the initial premium will be allocated among the Variable Investment Options, the Fixed Rate Option, or the Real Property Account according to the allocations you specified in the application form. The invested portion of any part of the initial premium in excess of the Scheduled Premium is generally placed in the selected investment options on the date of receipt in Good Order at the Payment Office, but not earlier than the Contract Date.

Investment Choices

You may choose to invest your Contract’s premiums and its earnings in one or more of the available Variable Investment Options that invest in Portfolios of The Prudential Series Fund. You may also invest in the Fixed Rate Option and the Real Property Account. See The Prudential Series Fund, The Fixed Rate Option, and The Prudential Variable Contract Real Property Account. Subsequent net premiums are applied to your Contract as of the date of receipt at the Payment Office.

We may add additional Variable Investment Options in the future.

Transfers Among Investment Options

Multiple transfers that occur during the same day, but prior to the end of the Valuation Period for that day, will be counted as a single transfer.

Certain restrictions may apply to transfers from the Fixed Rate Option and the Real Property Account.

We reserve the right to prohibit transfer requests determined to be disruptive to the investment option or to the disadvantage of other Contract Owners.

Transfer restrictions will be applied in a uniform manner and will not be waived.

In addition, you may use our dollar cost averaging feature. See Transfers/Restrictions on Transfers, Dollar Cost Averaging.

Increasing or Decreasing the Face Amount

Subject to our underwriting requirements determined by us, after the first Contract Anniversary you may increase the amount of insurance by increasing the Face Amount of the Contract. An increase in the Face Amount is similar to the purchase of a second Contract and must be at least $25,000. Other conditions must be met before we approve of an increase in the Face Amount. See Increases in the Face Amount.

You also have the additional option of decreasing the Face Amount of your Contract, without withdrawing any surrender value. The minimum permissible decrease is $10,000 and will not be permitted if it causes the Face Amount of the Contract to drop below the minimum Face Amount applicable to the Contract.

We may decline a reduction if we determine it would cause the Contract to fail to qualify as "life insurance" for purposes of Section 7702 of the Internal Revenue Code. In addition, if the Face Amount is decreased or a significant premium is paid in conjunction with an increase, there is a possibility that the Contract will be classified as a Modified Endowment Contract. See Tax Treatment of Contract Benefits.

Access to Contract Values

A Contract may be surrendered for its Cash Surrender Value (the Contract Fund minus any Contract Debt and minus any applicable surrender charges) while the insured is living. To surrender a Contract, we may require you to deliver or mail the Contract with a written request in a form that meets our needs, to a Service Office. The Cash Surrender Value of a surrendered Contract will be determined as of the end of the Valuation Period in which such a request is received in a Service Office. Surrender of a Contract may have tax consequences. See Surrender of a Contract, and Tax Treatment of Contract Benefits.

Under certain circumstances, you may withdraw a part of the Contract's Cash Surrender Value without surrendering the Contract. The amount withdrawn must be at least $2,000 under a Form A Contract and at least $500 under a Form B Contract. There is an administrative processing fee for each withdrawal which is the lesser of: (a) $15 and; (b) 2% of the withdrawal amount. Withdrawal of the Cash Surrender Value may have tax consequences. See Withdrawals, and Tax Treatment of Contract Benefits.

Contract Loans

You may borrow money from us using your Contract as security for the loan. The maximum loan amount is equal to the sum of (1) 90% of the portion of the cash value attributable to the Variable Investment Options and (2) the balance of the cash value. The cash value is equal to the Contract Fund less any surrender charge. The minimum loan amount you may borrow at any one time is $200, unless the loan proceeds are used to pay premiums on your Contract. See Loans.

Canceling the Contract

Generally, you may return the Contract for a refund within 10 days after you receive it. Some states allow a longer period of time during which a Contract may be returned for a refund. In general, you will receive a refund of all premium payments made, less any applicable federal and/or state income tax withholding. However, if applicable law does not require a refund of all premium payments made, you will receive the greater of (1) the Contract Fund plus the amount of any charges that have been deducted or (2) all premium payments made, less any applicable federal and/or state income tax withholding. A Contract returned according to this provision shall be deemed void from the beginning.

SUMMARY OF CONTRACT RISKS

Contract Values are not Guaranteed

Your benefits (including life insurance) are not guaranteed, and may be entirely dependent on the investment performance of the Variable Investment Options you select. The value of your Contract Fund rises and falls with the performance of the investment options you choose and the charges that we deduct. Poor investment performance or loans could cause your Contract to lapse and you could lose your insurance coverage. However, we guarantee that if Scheduled Premiums are paid when due and there are no withdrawals, the Contract will not lapse because of unfavorable investment experience.

The Variable Investment Options you choose may not perform to your expectations. Investing in the Contract involves risks including the possible loss of your entire investment. Only the Fixed Rate Option provides a guaranteed rate of return. See Risks Associated with the Variable Investment Options and The Fixed Rate Option.

Limitation of Benefits on Certain Riders for Claims Due to War or Service in the Armed Forces

We will not pay a benefit on any Accidental Death Benefit type rider or make payments for any disability type rider if the death or injury is caused or contributed to by war or act of war, declared or undeclared, including resistance to armed aggression. This restriction includes service in the armed forces of any country at war.

Increase in Charges

In several instances we will use the terms “maximum charge” and “current charge.” The “maximum charge,” in each instance, is the highest charge that we may make under the Contract. The “current charge,” in each instance, is the amount that we now charge, which may be lower than the maximum charge. If circumstances change, we reserve the right to increase each current charge, up to the maximum charge, without giving any advance notice.

Contract Lapse

If Scheduled Premiums are paid on or before each due date, or received within 61 days after the Scheduled Premiums are due, and there are no withdrawals or outstanding loans, a Contract will remain in-force even if the investment results of that Contract's Variable Investment Option[s] have been so unfavorable that the Contract Fund has decreased to zero or less.

In addition, even if a Scheduled Premium is not paid, the Contract will remain in-force as long as the Contract Fund on any Monthly Date is equal to or greater than the Tabular Contract Fund Value on the following Monthly Date. However, if a Scheduled Premium is not paid, and the Contract Fund is insufficient to keep the Contract in-force, the Contract will go into default. Should this happen, we will notify you of the required payment to prevent your Contract from lapsing. Your payment must be received at the Payment Office within the 61-day grace period after the notice of default is mailed or the Contract will lapse. If your Contract does lapse, it will still provide some benefits. See LAPSE AND REINSTATEMENT. If you have an outstanding loan when your Contract lapses, you may have taxable income as a result. See Tax Treatment of Contract Benefits - Pre-Death Distributions.

Risks of Using the Contract as a Short-Term Savings Vehicle

Because the Contract provides for an accumulation of a Contract Fund as well as a Death Benefit, you may wish to use it for various insurance planning purposes. Purchasing the Contract for such purposes may involve certain risks.

For example, a life insurance policy could play an important role in helping you to meet the future costs of a child’s education. The Contract’s Death Benefit could be used to provide for education costs should something happen to you, and its investment features could help you accumulate savings. However, if the Variable Investment Options you choose perform poorly, or if you do not pay sufficient premiums, your Contract may lapse or you may not accumulate the funds you need. Accessing the values in your Contract through withdrawals and Contract loans may significantly affect current and future Contract values or Death Benefit proceeds and may increase the chance that your Contract will lapse. If you have an outstanding loan when your Contract lapses, you may have taxable income as a result. See Tax Treatment of Contract Benefits - Pre-Death Distributions.

The Contract is designed to provide benefits on a long-term basis. Consequently, you should not use the Contract as a short-term investment or savings vehicle. Because of the long-term nature of the Contract, you should consider whether the Contract is consistent with the purpose for which it is being considered.

Risks of Taking Withdrawals

We may limit you to no more than four withdrawals in a Contract Year. The amount withdrawn must be at least $2,000 under a Form A Contract and at least $500 under a Form B Contract. You may make a withdrawal only to the extent that the Cash Surrender Value plus any Contract loan exceeds the applicable tabular cash value. There is an administrative processing fee for each withdrawal which is the lesser of: (a) $15 and; (b) 2% of the withdrawal amount. Withdrawal of the Cash Surrender Value may have tax consequences. See Tax Treatment of Contract Benefits.

Whenever a withdrawal is made, the Death Benefit will immediately be reduced by at least the amount of the withdrawal. Withdrawals under Form B (variable) Contracts, will not change the Face Amount of insurance. However, under a Type A (fixed) Contract, the withdrawal will cause a reduction in the Face Amount of insurance by no more than the amount of the withdrawal. A surrender charge may be deducted. See CHARGES AND EXPENSES.

It is important to note that, if the Face Amount of insurance is decreased, there is a possibility that the Contract might be classified as a Modified Endowment Contract. Before making any withdrawal that causes a decrease in the Face Amount of insurance, you should consult with your tax adviser and your Prudential representative. See Withdrawals and Tax Treatment of Contract Benefits.

Limitations on Transfers

All or a portion of the amount credited to a Variable Investment Option may be transferred to another Variable Investment Option, the Fixed Rate Option, or the Real Property Account.

If the Contract is not in default, you may, up to four times each Contract Year, transfer amounts among the Variable Investment Options, to the Fixed Rate Option, or to the Real Property Account. Additional transfers may be made only with our consent. Currently, we allow you to make additional transfers. There is no charge. For the first 20 transfers in a calendar year, you may transfer amounts by proper written notice to a Service Office, by our website, provided you are enrolled to use Prudential Online® Account Access, or by telephone, provided you are enrolled to use the Telephone Transfer System. We use reasonable procedures to confirm that instructions given by telephone are genuine. However, we are not liable for following telephone instructions that we reasonably believe to be genuine. In addition, we cannot guarantee that you will be able to get through to complete a telephone transfer during peak periods such as periods of drastic economic or market change.

After you have submitted 20 transfers in a calendar year, we will accept subsequent transfer requests only if they are in a form that meets our needs, bear an original signature in ink, and are sent to us by U.S. regular mail. After you have submitted 20 transfers in a calendar year, a subsequent transfer request by telephone, fax or electronic means will be rejected, even in the event that it is inadvertently processed.

Currently, certain transfers effected systematically under the dollar cost averaging program described in this prospectus do not count towards the limit of 20 transfers. In the future, we may count such transfers towards the limit.

Multiple transfers that occur during the same day, but prior to the end of the Valuation Period for that day, will be counted as a single transfer.

Generally, only one transfer from the Fixed Rate Option is permitted during each Contract Year and only during the 30-day period beginning on the Contract Anniversary. The maximum amount you may transfer out of the Fixed Rate Option each year is the greater of: (a) 25% of the amount in the Fixed Rate Option; and (b) $2,000.

Transfers from the Real Property Account to the other investment options available under the Contract are currently permitted only during the 30-day period beginning on the Contract Anniversary. The maximum amount that may be transferred out of the Real Property Account each year is the greater of: (a) 50% of the amount invested in the Real Property Account; and (b) $10,000. See the attached Real Property Account Prospectus.

We may modify your right to make transfers by restricting the number, timing and/or amount of transfers we find to be disruptive to the investment option or to the disadvantage of other Contract Owners. We also reserve the right to prohibit transfer requests made by an individual acting under a power of attorney on behalf of more than one Contract Owner. We will immediately notify you at the time of a transfer request if we exercise this right.

Transfer restrictions will be applied uniformly and will not be waived. See Transfers/Restrictions on Transfers.

Charges on Surrender of the Contract

You may surrender your Contract at any time for its Cash Surrender Value while the insured is living. We deduct a surrender charge from the surrender proceeds.

We will assess a surrender charge if, during the first 10 Contract Years (or 10 years from an increase in the Face Amount of insurance), the Contract lapses, is surrendered, or the Face Amount of insurance is decreased (including as a result of a withdrawal). The surrender charge is determined by the primary annual premium amount. It is calculated as described in Surrender Charges. While the amount of the surrender charge decreases over time, it may be a substantial portion or even equal to your Contract Fund. In addition, the surrender of your Contract may have tax consequences. See Tax Treatment of Contract Benefits.

Risks of Taking a Contract Loan

Accessing the values in your Contract through Contract loans may significantly affect current and future Contract values or Death Benefit proceeds and may increase the chance that your Contract will lapse. Your Contract will be in default if at any time the Contract Fund (which includes the loan) less any applicable surrender charges is less than the

Tabular Contract Fund. If the Contract lapses or is surrendered, the amount of unpaid Contract Debt will be treated as a distribution and will be immediately taxable to the extent of the gain in the Contract. In addition, if your Contract is a Modified Endowment Contract for tax purposes, taking a Contract loan may have tax consequences. See Tax Treatment of Contract Benefits.

If your Contract Fund is less than your Contract Debt your Contract will terminate 61 days after we notify you.

Potential Tax Consequences

Your Contract is structured to meet the definition of life insurance under Section 7702 of the Internal Revenue Code. Consequently, we reserve the right to refuse to accept a premium payment that would, in our opinion, cause this Contract to fail to qualify as life insurance. We also have the right to refuse to accept any payment that increases the Death Benefit by more than it increases the Contract Fund. Although we believe that the Contract should qualify as life insurance for tax purposes, there are some uncertainties, particularly because the Secretary of Treasury has not yet issued permanent regulations that bear on this question. Accordingly, we reserve the right to make changes -- which will be applied uniformly to all Contract Owners after advance written notice -- that we deem necessary to insure that the Contract will qualify as life insurance.

Current federal tax law generally excludes all Death Benefits from the gross income of the beneficiary of a life insurance Contract. However, your Death Benefit could be subject to estate tax. In addition, you generally are not subject to taxation on any increase in the Contract value until it is withdrawn. Generally, you are taxed on surrender proceeds and the proceeds of any partial withdrawals only if those amounts, when added to all previous distributions, exceed the total premiums paid. Amounts received upon surrender or withdrawal (including any outstanding Contract loans) in excess of premiums paid are treated as ordinary income.

Special rules govern the tax treatment of life insurance policies that meet the federal definition of a Modified Endowment Contract. The Contract could be classified as a Modified Endowment Contract if premiums in amounts that are too large are paid or a decrease in the Face Amount of insurance is made (or a rider removed). The addition of a rider or an increase in the Face Amount of insurance may also cause the Contract to be classified as a Modified Endowment Contract if a significant premium is paid in conjunction with an increase or the addition of a rider. We will notify you if a premium or a reduction in the Face Amount would cause the Contract to become a Modified Endowment Contract, and advise you of your options.

Under current tax law, Death Benefit payments under Modified Endowment Contracts, like Death Benefit payments under other life insurance Contracts, generally are excluded from the gross income of the beneficiary. However, amounts you receive under the Contract before the insured's death, including loans and withdrawals, are included in income to the extent that the Contract Fund before surrender charges exceeds the premiums paid for the Contract increased by the amount of any loans previously included in income and reduced by any untaxed amounts previously received other than the amount of any loans excludible from income. An assignment of a Modified Endowment Contract is taxable in the same way. These rules also apply to pre-death distributions, including loans and assignments, made during the two-year period before the time that the Contract became a Modified Endowment Contract.

All Modified Endowment Contracts issued by us to you during the same calendar year are treated as a single Contract for purposes of applying these rules. See Tax Treatment of Contract Benefits.

Any taxable income on pre-death distributions (including full surrenders) is subject to a penalty of 10% unless the amount is received on or after age 59½, on account of your becoming disabled or as a life annuity. It is presently unclear how the penalty tax provisions apply to Contracts owned by businesses.

Replacement of the Contract

The replacement of life insurance is generally not in your best interest. In most cases, if you require additional life insurance coverage, the benefits of your existing Contract can be protected by increasing the insurance amount of your existing Contract, or by purchasing an additional Contract. If you are considering replacing a Contract, you should compare the benefits and costs of supplementing your existing Contract with the benefits and costs of purchasing a new Contract and you should consult with a tax adviser.

SUMMARY OF RISKS ASSOCIATED WITH

THE VARIABLE INVESTMENT OPTIONS

You may choose to invest your Contract’s premiums and its earnings in one or more of the available Variable Investment Options. You may also invest in the Fixed Rate Option or the Real Property Account. The Fixed Rate

Option is the only investment option that offers a guaranteed rate of return. See The Prudential Series Fund, The Fixed Rate Option, and The Prudential Variable Contract Real Property Account.

Risks Associated with the Variable Investment Options

The Separate Account invests in the shares of one or more open-end management investment companies registered under the Investment Company Act of 1940 other than the Real Property Account, which invests in a Real Property Partnership. See the accompanying prospectus for the Prudential Real Property Account. Each Variable Investment Option has its own investment objective and associated risks, which are described in the accompanying Series Fund prospectus. The income, gains, and losses of one Variable Investment Option have no effect on the investment performance of any other Variable Investment Option.

We do not promise that the Variable Investment Options will meet their investment objectives. Amounts you allocate to the Variable Investment Options may grow in value, decline in value or grow less than you expect, depending on the investment performance of the Variable Investment Options you choose. You bear the investment risk that the Variable Investment Options may not meet their investment objectives. It is possible to lose your entire investment in the Variable Investment Options. Although the Series Fund Money Market Portfolio is designed to be a stable investment option, it is possible to lose money in that Portfolio. For example, when prevailing short-term interest rates are very low, the yield on the Money Market Portfolio may be so low that, when Separate Account and Contract charges are deducted, you experience a negative return. See The Prudential Series Fund.

Learn More about the Variable Investment Options

Before allocating amounts to the Variable Investment Options, you should read the current Series Fund prospectus for detailed information concerning their investment objectives, strategies, and investment risks.

GENERAL DESCRIPTIONS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, THE REGISTRANT, AND THE SERIES FUND

The Prudential Insurance Company of America

The Prudential Insurance Company of America (“Prudential”, “us”, “we”, or “our”), a stock life insurance company, founded on October 13, 1875 under the laws of the state of New Jersey. It is licensed to sell life insurance and annuities in the District of Columbia, Guam, U.S. Virgin Islands, and in all states. Prudential’s principal Executive Office is located at 751 Broad Street, Newark, New Jersey 07102.

The Prudential Variable Appreciable Account

Prudential has established a Separate Account, the Prudential Variable Appreciable Account (the “Account” or the "Registrant"), to hold the assets that are associated with the Contracts. The Account was established on August 11, 1987 under New Jersey law and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940 as a unit investment trust, which is a type of investment company. The Account meets the definition of a "Separate Account" under the federal securities laws. The Account holds assets that are segregated from all of Prudential's other assets.

Prudential is the legal owner of the assets in the Account. Prudential will maintain assets in the Account with a total market value at least equal to the reserve and other liabilities relating to the variable benefits attributable to the Contracts. In addition to these assets, the Account's assets may include funds contributed by Prudential to commence operation of the Account and may include accumulations of the charges we make against the Account. From time to time Prudential will transfer capital contributions and earned fees and charges to its general account. Prudential will consider any possible adverse impact the transfer might have on the Account before making any such transfer.

Income, gains and losses credited to, or charged against, the Account reflect the Account’s own investment experience and not the investment experience of Prudential’s other assets. The assets of the Account may not be charged with liabilities that arise from any other business Prudential conducts.

We are obligated to pay all amounts promised to Contract Owners under the Contract. The obligations to Contract Owners and beneficiaries arising under the Contracts are general corporate obligations of Prudential.

You may invest in one or a combination of the available Variable Investment Options. When you choose a Variable Investment Option, we purchase shares of a Fund or a separate investment series of a Fund which are held as an investment for that option. We hold these shares in the Account. We may remove or add additional Variable

Investment Options in the future. The Account’s financial statements are available in the Statement of Additional Information to this prospectus.

The Prudential Series Fund

The Prudential Series Fund (the “Series Fund”) is registered under the Investment Company Act of 1940 as an open-end diversified management investment company. Its shares are currently sold only to Separate Accounts of Prudential and certain other insurers that offer variable life insurance and variable annuity Contracts.

The Account will purchase and redeem shares from the Series Fund at net asset value. Shares will be redeemed to the extent necessary for us to provide benefits under the Contract and to transfer assets from one Variable Investment Option to another, as requested by Contract Owners. Any dividend or capital gain distribution received from a Portfolio of the Series Fund will be reinvested immediately at net asset value in shares of that Portfolio and retained as assets of the corresponding Variable Investment Option.

The Series Fund has a separate prospectus that is provided with this prospectus. You should read the Series Fund prospectus before you decide to allocate assets to the Portfolios. There is no assurance that the investment objectives of the Portfolios will be met. There may be Portfolios described in the accompanying Fund prospectus that are not available on this product. Please refer to the list below to see which Portfolios you may choose as your Variable Investment Options.

Investment Manager

Prudential Investments LLC (“PI”), a wholly-owned subsidiary of Prudential Financial, Inc., serves as the investment manager of the Series Fund Portfolios.

The Series Fund's Investment Management Agreement, on behalf of each Portfolio, with PI (the “Management Agreement”), provide that PI (the “Investment Manager”) will furnish each applicable Portfolio with investment advice and administrative services subject to the supervision of the Board of Trustees and in conformity with the stated policies of the applicable Portfolio. The Investment Manager must also provide, or obtain and supervise, the executive, administrative, accounting, custody, transfer agent and shareholder servicing services that are deemed advisable by the Board.

The chart below reflects the Portfolios in which the Account invests, their investment objectives, and each Portfolio’s investment subadvisers. The full names of the investment subadvisers are listed immediately following the chart. For Portfolios with multiple subadvisers, each subadviser manages a portion of the assets for that Portfolio.

The Prudential Series Fund - Class 1 Shares
Portfolios	Objectives	Subadvisers
Conservative Balanced	Total investment return consistent with a conservatively managed diversified portfolio.	PIM QMA
Diversified Bond	High level of income over a longer term while providing reasonable safety of capital.	PIM
Equity	Long-term growth of capital.	Jennison
Flexible Managed	Total return consistent with an aggressively managed diversified portfolio.	PIM QMA
Global	Long-term growth of capital.	QMA LSV MCM T. Rowe Price William Blair
Government Income	High level of income over the long term consistent with the preservation of capital.	PIM
High Yield Bond	High total return.	PIM
Jennison	Long-term growth of capital.	Jennison
Money Market	Maximum current income consistent with the stability of capital and the maintenance of liquidity.	PIM

Natural Resources	Long-term growth of capital.	Jennison
Small Capitalization Stock	Long-term growth of capital.	QMA
Stock Index	Investment results that generally correspond to the performance of publicly-traded common stocks.	QMA
Value	Capital appreciation.	Jennison

Investment Subadvisers

·	Jennison Associates LLC (“Jennison”)

·	Prudential Investment Management, Inc. (“PIM”)

·	Quantitative Management Associates LLC (“QMA”)

·	LSV Asset Management (“LSV”)

·	Marsico Capital Management, LLC (“MCM”)

·	T. Rowe Price Associates, Inc. (“T. Rowe Price”)

·	William Blair & Company LLC (“William Blair”)

As an investment adviser, PI charges the Series Fund a daily investment management fee as compensation for its services. PI pays each subadviser out of the fee that PI receives from the Series Fund.

More detailed information is available in the attached Series Fund prospectus.

In the future, it may become disadvantageous for Separate Accounts of variable life insurance and variable annuity Contracts to invest in the same underlying Variable Investment Options. Neither the companies that invest in the Series Fund nor the Series Fund currently foresee any such disadvantage. The Series Fund's Board of Directors intends to monitor events in order to identify any material conflict between variable life insurance and variable annuity Contract Owners and to determine what action, if any, should be taken. Material conflicts could result from such things as:

(1)	changes in state insurance law;

(2)	changes in federal income tax law;

(3)	changes in the investment management of any Variable Investment Option; or

(4)	differences between voting instructions given by variable life insurance and variable annuity Contract Owners.

A Portfolio may have a similar name, investment objective, or investment policy resembling those of a mutual fund managed by the same investment adviser or subadviser that is sold directly to the public. Despite such similarities, there can be no assurance that the investment performance of any such Portfolio will resemble that of the publicly available mutual fund.

Service Fees Payable to Prudential

Prudential has entered into an agreement with the Prudential Series Fund (the "Series Fund"). Under the terms of the agreement, Prudential provides administrative and support services to the Portfolios of the Series Fund for which it receives an annual fee from the investment adviser, distributor and/or the Portfolio based on the average assets allocated to the Portfolio. The agreement, including the fees paid and services provided, can vary for each Portfolio.

Prudential and/or our affiliates may receive substantial and varying administrative service payments from the Series Fund or related parties. These types of payments and fees are sometimes referred to as “revenue sharing” payments. Administrative service payments partially compensate for providing administrative services with respect to Contract Owners invested indirectly in the Series Fund, which include duties such as recordkeeping, shareholder services, and the mailing of periodic reports. The administrative service fees we receive originate from the assets of the Series Fund itself and/or the assets of the Series Fund’s investment adviser. In either case, the existence of administrative service fees may tend to increase the overall cost of investing in the Series Fund. In addition, because these fees are paid to us, allocations you make to the Portfolios may benefit us financially if these fees exceed the costs of the administrative support services.

We collect these payments and fees under agreements between us and the Series Fund’s principal underwriter, transfer agent, investment adviser and/or other entities related to the Series Fund. As of May 1, 2011, the administrative service fee we receive is 0.05% of the average assets allocated to the Series Fund.

In addition to the payments that we receive from the Series Fund and/or their affiliates, the Series Fund and/or their affiliates may make payments to us and/or other insurers within the Prudential Financial group related to the offering of investment options within variable annuities or life insurance offered by different Prudential business units.

Voting Rights

We are the legal owner of the shares of the Series Fund associated with the Variable Investment Options. However, we vote the shares of the Series Fund according to voting instructions we receive from Contract Owners. We will mail you a proxy, which is a form you need to complete and return to us to tell us how you wish us to vote. When we receive those instructions, we will vote all of the shares we own on your behalf in accordance with those instructions. We vote shares for which we do not receive instructions, and any other shares that we own in our own right, in the same proportion as the shares for which instructions are received. We may change the way your voting instructions are calculated if it is required by federal or state regulation. We may also elect to vote shares that we own in our own right if the applicable federal securities laws or regulations, or their current interpretation, change so as to permit us to do so.

We may, if required by state insurance regulations, disregard voting instructions if they would require shares to be voted so as to cause a change in the sub-classification or investment objectives of one or more Variable Investment Options or to approve or disapprove an investment advisory Contract for the Series Fund. In addition, we may disregard voting instructions that would require changes in the investment policy or investment adviser of one or more of the available Variable Investment Options, provided that we reasonably disapprove such changes in accordance with applicable federal or state regulations. If we disregard Contract Owner voting instructions, we will advise Contract Owners of our action and the reasons for such action in the next available annual or semi-annual report.

Substitution of Variable Investment Options

We may substitute one or more of the Variable Investment Options. We may also cease to allow investments in any existing Variable Investment Option. We do this only if events such as investment policy changes or tax law changes make a Variable Investment Option unsuitable. We would not do this without the approval of the Securities and Exchange Commission and any necessary state insurance departments. You will be given specific notice in advance of any substitution we intend to make.

The Fixed Rate Option

You may choose to invest, initially or by transfer, all or part of your Contract Fund to the Fixed Rate Option. This amount becomes part of Prudential's general account. The general account consists of all assets owned by Prudential other than those in the Account and in other Separate Accounts that have been or may be established by Prudential. Subject to applicable law, Prudential has sole discretion over the investment of the general account assets, and Contract Owners do not share in the investment experience of those assets. Instead, Prudential guarantees that the part of the Contract Fund allocated to the Fixed Rate Option will accrue interest daily at an effective annual rate that Prudential declares periodically, but not less than an effective annual rate of 4%. Prudential is not obligated to credit interest at a rate higher than an effective annual rate of 4%, although we may do so.

Transfers out of the Fixed Rate Option are subject to strict limits. See Transfers/Restrictions on Transfers. The payment of any Cash Surrender Value attributable to the Fixed Rate Option may be delayed up to six months. See When Proceeds Are Paid.

Because of exemptive and exclusionary provisions, interests in the Fixed Rate Option under the Contract have not been registered under the Securities Act of 1933 and the general account has not been registered as an investment company under the Investment Company Act of 1940. Accordingly, interests in the Fixed Rate Option are not subject to the provisions of these Acts, and Prudential has been advised that the staff of the SEC has not reviewed the disclosure in this prospectus relating to the Fixed Rate Option. Any inaccurate or misleading disclosure regarding the Fixed Rate Option may, however, be subject to certain generally applicable provisions of federal securities laws.

The Prudential Variable Contract Real Property Account

The Prudential Variable Contract Real Property Account (the "Real Property Account") is a separate account of Prudential. The Real Property Account, through a general partnership formed by Prudential and two of its wholly-owned subsidiaries, Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey, invests primarily in income-producing real property such as office buildings, shopping centers, agricultural land, hotels, apartments or industrial properties. It also invests in mortgage loans and other real estate-related investments, including sale-leaseback transactions. It is not registered as an investment company under the Investment Company Act of 1940 and is therefore not subject to the same regulation as the Series Fund. The objectives of the Real Property Account and the Partnership are to preserve and protect capital, provide for compounding of income as a result of reinvestment of cash flow from investments, and provide for increases over time in the amount of such income through appreciation in asset value.

The Partnership has entered into an investment management agreement with Prudential Investment Management, Inc. (“PIM”), under which PIM selects the properties and other investments held by the Partnership. Prudential charges the Partnership a daily fee for investment management, which amounts to 1.25% per year of the average daily gross assets of the Partnership.

A full description of the Real Property Account, its management, policies, restrictions, charges and expenses, investment risks, the Partnership's investment objectives, and all other aspects of the Real Property Account's and the Partnership's operations is contained in the attached prospectus for the Real Property Account. It should be read together with this prospectus by any Contract Owner considering the real estate investment option. There is no assurance that the investment objectives of the Real Property Account will be met.

CHARGES AND EXPENSES

This section provides a more detailed description of each charge that is described briefly in the SUMMARY OF CHARGES AND EXPENSES, beginning on page 1 of this prospectus.

The total amount invested in the Contract Fund, at any time, consists of the sum of the amount credited to the Variable Investment Options, the amount allocated to the Fixed Rate Option, plus any interest credited on amounts allocated to the Fixed Rate Option, the amount allocated to the Real Property Account, and the principal amount of any Contract loan plus the amount of interest credited to the Contract upon that loan. See Loans. Most charges, although not all, are made by reducing the Contract Fund.

In several instances we use the terms "maximum charge" and "current charge." The "maximum charge", in each instance, is the highest charge that we may make under the Contract. The "current charge", in each instance, is the amount that we now charge, which may be lower than maximum charges. If circumstances change, we reserve the right to increase each current charge, up to the maximum charge, without giving any advance notice.

Current charges deducted from premium payments and the Contract Fund may change from time to time, subject to maximum charges. In deciding whether to change any of these current charges, we will periodically consider factors such as mortality, persistency, expenses, taxes and interest and/or investment experience to see if a change in our assumptions is needed. Charges for taxes attributable to premiums will vary by state and locality. Changes in other charges will be by class. We will not recoup prior losses or distribute prior gains by means of these changes.

Taxes Attributable to Premiums

We deduct a charge for taxes attributable to premiums from each premium payment. That charge is currently made up of two parts.

The first part is a charge for state and local premium taxes. Tax rates vary from jurisdiction to jurisdiction and generally range from 0% to 5% (but may exceed 5% in some instances).

The second part is a charge for federal income taxes measured by premiums. The current amount for this second part is 1.25% of the premium for Contracts issued on or after June 17, 1991, and 0% for Contracts issued prior to June 17, 1991. We believe that this charge is a reasonable estimate of Prudential’s federal income taxes.

Under current law, we may incur state and local taxes (in addition to premium taxes) in several states. Currently, these taxes are not significant and they are not charged against the Account. If there is a material change in the applicable state or local tax laws, we may impose a corresponding charge against the Account.

Deduction from Premiums

We deduct a charge of $2 from each premium payment to cover the cost of collecting and processing premiums. Thus, if you pay premiums annually, this charge will be $2 per year. If you pay premiums monthly, the charge will be $24 per year. If you pay premiums more frequently, for example under a payroll deduction plan with your employer, the charge may be more than $24 per year.

Sales Load Charges

A sales charge, often called a “sales load”, is deducted to compensate us for the costs of selling the Contracts, including commissions, advertising, and the printing and distribution of prospectuses and sales literature. The charge is equal to 0.5% of the "primary annual premium”. The primary annual premium is equal to the Scheduled Premium that would be payable if premiums were being paid annually, less the two deductions from premiums (taxes attributable to premiums and the $2 processing charge, see Taxes Attributable to Premiums, and Deduction from Premiums) and less the $3 part of the monthly deduction. See Monthly Deductions from Contract Fund. The sales load is

charged whether the Contract Owner is paying premiums annually or more frequently. It is lower on Contracts issued on insureds over 60 years of age. At present this sales charge is made only during the first five Contract Years or five years after an increase. However, Prudential reserves the right to make this charge in all Contract Years. To summarize, for most Contracts, this charge is somewhat less than 6% of the annual Scheduled Premium for each of the first five Contract Years and it may, but probably will not, continue to be charged after that.

There is a second sales load, which will be charged only if a Contract lapses or is surrendered before the end of the 10th Contract Year or 10 years from an increase in the Face Amount of insurance. It is often described as a contingent deferred sales load (“CDSL”) and is described under Surrender Charges.

Cost of Insurance

We deduct a monthly COI charge proportionately from the dollar amounts held in each of the chosen investment options. The purpose of this charge is to provide insurance coverage. When an insured dies, the amount payable to the beneficiary (assuming there is no Contract Debt) is larger than the Contract Fund - significantly larger if the insured dies in the early years of a Contract. The COI charges collected from all Contract Owners enables us to pay this larger Death Benefit. The maximum COI charge is determined by multiplying the amount by which the Contract’s Death Benefit exceeds the Contract Fund ("net amount at risk") under a Contract by maximum COI rates.

The net amount at risk is affected by factors such as: investment performance, premium payments, and charges. The maximum COI rates are based upon the 1980 Commissioners Standard Ordinary ("CSO") Mortality Tables and an insured's current Attained Age, sex (except where unisex rates apply), smoker/nonsmoker status, and extra rating class, if any. At most ages, our current COI rates are lower than the maximum rates. Current COI charges range from $0.06 to $83.34 per $1,000 of net amount at risk.

Certain Contracts, for example Contracts issued in connection with tax-qualified pension plans, may be issued on a “guaranteed issue” basis and may have current mortality charges that are different from those mortality charges for Contracts which are individually underwritten. These Contracts with different current mortality charges may be offered to categories of individuals meeting eligibility guidelines determined by Prudential.

Monthly Deductions from the Contract Fund

We deduct the following monthly charges proportionately from the dollar amounts held in each of the chosen investment option[s].

(a)

We deduct an administrative charge based on the Face Amount of insurance. This charge is intended to compensate us for things like processing claims, keeping records, and communicating with Contract Owners. We deduct $3 per Contract and up to $0.03 per $1,000 of the Face Amount of insurance. This charge also applies to increases in the Face Amount of insurance. Thus, for a Contract with a $75,000 Face Amount of insurance, the charge is $3 plus $2.25 for a total of $5.25 per month. The current charge for Contracts with Face Amounts greater than $100,000 is lower. The $0.03 per $1,000 of the Face Amount of insurance is reduced to $0.01 per $1,000 for that portion of the Face Amount that exceeds $100,000 and will not exceed $12.

(b)

We also deduct a charge of $0.01 per $1,000 of the Face Amount of insurance (excluding the automatic increase under Contracts issued on insureds of 14 years of age or less). We deduct this charge for the risk we assume by guaranteeing that, no matter how unfavorable investment experience may be, the Death Benefit will never be less than the guaranteed minimum Death Benefit, so long as Scheduled Premiums are paid on or before the due date or during the grace period. This charge and the administrative charge described in (a) above may be calculated together.

(c)	You may add one or more riders to the Contract. Some riders are charged for separately. If you add such a rider to the basic Contract, additional charges will be deducted. See Riders.

(d)	If an insured is in a substandard risk classification (for example, a person with a health condition), additional charges will be deducted and the Scheduled Premium will be increased.

The earnings of the Account are taxed as part of the operations of Prudential. Currently, no charge is being made to the Account for Prudential’s federal income taxes, other than the 1.25% charge for federal income taxes measured by premiums for Contracts issued on or after June 17, 1991. There is no charge for federal income taxes for Contracts issued prior to June 17, 1991. See Taxes Attributable to Premiums. We periodically review the question of a charge to the Account for Prudential’s federal income taxes. We may charge such a fee in the future for any federal income taxes that would be attributable to the Contracts.

Daily Deduction from the Variable Investment Options

Each day we deduct a charge from the assets of each of the Variable Investment Options in an amount equivalent to an effective annual rate of 0.90%. For Contracts with Face Amounts of $100,000 or more, the current charge is 0.60%. This charge is intended to compensate us for assuming mortality and expense risks under the Contract. The mortality risk we assume is that insureds may live for shorter periods of time than we estimated when mortality charges were determined. The expense risk we assume is that expenses incurred in issuing and administering the Contract will be greater than we estimated in fixing our administrative charges. This charge is not assessed against amounts allocated to the Fixed Rate Option.

Surrender Charges

We assess additional sales load, the contingent deferred sales load (“CDSL”), if the Contract lapses or is surrendered during the first 10 Contract Years or 10 years from an increase in the Face Amount of insurance, or if a withdrawal is made under a Form A Contract during that 10 year period. Subject to the additional limitations described below, for Contracts that lapse or are surrendered during the first five Contract Years the charge will be equal to 50% of the first year's primary annual premium. The primary annual premium is equal to the Scheduled Premium that would be payable if premiums were being paid annually, less the two deductions from premiums (taxes attributable to premiums and the $2 processing charge, see Taxes Attributable to Premiums, and see Deduction from Premiums), and less the $3 part of the monthly administrative charge. See Monthly Deductions from Contract Fund. In the next five Contract Years that percentage is reduced uniformly on a daily basis until it reaches zero on the 10th Contract Anniversary. Thus, for Contracts surrendered at the end of the sixth year, the maximum deferred sales charge will be 40% of the first year's primary annual premium, for Contracts surrendered at the end of year seven, the maximum deferred sales charge will be 30% of the first year's primary annual premium, and so forth.

The contingent deferred sales load is also subject to a further limit at older Issue Ages (approximately above age 67) in order to comply with certain requirements of state law. Specifically, the contingent deferred sales load for such insureds is no more than $32.50 per $1,000 of the Face Amount.

The sales load is subject to a further important limitation that may, particularly for Contracts that lapse or are surrendered within the first five or six years, result in a lower contingent deferred sales load than that described above. (This limitation might also, under unusual circumstances, apply to reduce the monthly sales load deductions described in item (c) under Monthly Deductions from Contract Fund)

The limitation is based on a Guideline Annual Premium (“GAP”) that is associated with every Contract. The GAP is an amount, generally larger than the gross annual Scheduled Premium for the Contract, determined actuarially in accordance with a definition set forth in a regulation of the Securities and Exchange Commission. The maximum aggregate sales load that Prudential will charge (that is, the sum of the monthly sales load deduction and the contingent deferred sales charge) will not be more than 30% of the premiums actually paid until those premiums total one GAP plus no more than 9% of the next premiums paid until total premiums are equal to five GAPS, plus no more than 6% of all subsequent premiums. If the sales charges described above would at any time exceed this maximum amount then the charge, to the extent of any excess, will not be made.

The following table shows the sales loads that would be paid by a 35 year old man under a Form B Contract with $100,000 Face Amount of insurance, both through the monthly deductions from the Contract Fund described above and upon the surrender of the Contract. If the Contract is partially surrendered or the Face Amount is decreased during the first 10 years, a proportionate amount of the contingent deferred sales charge will be deducted from the Contract Fund.

Maximum Percentages for Surrender Charges
Surrender, Last Day of Year No.	Cumulative Scheduled Premiums Paid	Cumulative Sales Load Deducted from Contract Fund	Contingent Deferred Sales Load	Total Sales Load	Cumulative Total Sales Load as Percentage of Scheduled Premiums Paid
1 2 3 4 5 6 7 8 9 10	$ 894.06 1,788.12 2,682.18 3,576.24 4,470.30 5,364.36 6,258.42 7,152.48 8,046.54 8,940.60	$ 49.56 99.12 148.68 198.24 247.80 247.80 247.80 247.80 247.80 247.80	$218.66 367.64 398.55 414.00 414.00 331.00 248.00 166.00 83.00 0.00	$268.22 466.76 547.23 612.24 661.80 578.80 495.80 413.80 330.80 247.80	30.00% 26.10% 20.40% 17.12% 14.80% 10.79% 7.92% 5.79% 4.11% 2.77%

The percentages shown in the last column will not be appreciably different for insureds of different ages.

We deduct a charge of $5 per $1,000 of the Face Amount of insurance upon lapse or surrender to cover the cost of processing applications, conducting medical examinations, determining insurability and the insured's rating class, and establishing records. However, this charge is reduced beginning on the Contract's fifth anniversary and declines daily at a constant rate until it disappears entirely at the end of the 10th Contract Year or 10 years from an increase in the Face Amount of insurance. If the Contract is partially surrendered or the Face Amount is decreased during the first 10 years, we will deduct a proportionate amount of the charge from the Contract Fund. We do not deduct a surrender charge from the Death Benefit if the insured dies during the first 10 Contract Years or 10 years from an increase in the Face Amount of insurance.

Transaction Charges

(a)	We charge a transaction fee equal to the lesser of $15 or 2% of the withdrawal amount in connection with each withdrawal.

(b)	We may charge a transaction fee of up to $15 for any change in the Face Amount of insurance.

(c)	We charge a transaction fee of up to $150 for Living Needs Benefit payments.

Portfolio Charges

We deduct charges from and pay expenses out of the Variable Investment Options as described in the Series Fund prospectus.

Rider Charges

Contract Owners may be able to obtain additional benefits, which may increase the Scheduled Premium. These optional insurance benefits are described in what is known as a “rider” to the Contract. We deduct a monthly charge from the Contract Fund if additional benefits cause an increase to your Scheduled Premium.

PERSONS HAVING RIGHTS UNDER THE CONTRACT

Contract Owner

Generally, the Contract Owner is the insured. There are circumstances when the Contract Owner is not the insured. There may also be more than one Contract Owner. If the Contract Owner is not the insured or there is more than one Contract Owner, they will be named in an endorsement to the Contract. This ownership arrangement will remain in effect unless you ask us to change it.

You may change the ownership of the Contract by sending us a request in a form that meets our needs. We may ask you to send us the Contract to be endorsed. If we receive your request in a form that meets our needs, and the

Contract if we ask for it, we will file and record the change, and it will take effect as of the date the request is received in our Service Office.

While the insured is living, the Contract Owner is entitled to any Contract benefit and value. Only the Contract Owner is entitled to exercise any right and privilege granted by the Contract or granted by us. For example, the Contract Owner is entitled to surrender the Contract, access Contract values through loans or withdrawals, assign the Contract, and to name or change the beneficiary.

Beneficiary

The beneficiary is entitled to receive any benefit payable on the death of the insured. You may designate or change a beneficiary by sending us a request in a form that meets our needs. We may ask you to send us the Contract to be endorsed. If we receive your request in a form that meets our needs, and the Contract if we ask for it, we will file and record the change and it will take effect as of the date you sign the request. However, if we make any payment(s) before we receive the request, we will not have to make the payment(s) again. When we are made aware of an assignment, we will recognize the assignee’s rights before any claim payments are made to the beneficiary. When a beneficiary is designated, any relationship shown is to the insured, unless otherwise stated.

OTHER GENERAL CONTRACT PROVISIONS

Assignment

This Contract may not be assigned if the assignment would violate any federal, state or local law or regulation prohibiting sex distinct rates for insurance. Generally, the Contract may not be assigned to an employee benefit plan or program without our consent. We assume no responsibility for the validity or sufficiency of any assignment. We will not be obligated to comply with any assignment unless we receive a copy at a Service Office.

Incontestability

We will not contest the Contract after it has been in-force during the insured’s lifetime for two years from the issue date, the reinstatement date, or the effective date of any change made to the Contract that requires our approval and would increase our liability.

Misstatement of Age or Sex

If the insured's stated age or sex or both are incorrect in the Contract, we will adjust the Death Benefit payable and any amount to be paid, as required by law, to reflect the correct age and sex. If we learn of the inaccuracy after the insured’s death, any such benefit will be based on what the most recent deductions from the Contract Fund would have provided at the insured's correct age and sex. If we learn of the inaccuracy before the insured’s death, the Face Amount will be adjusted to what the current scheduled premium would have purchased at the correct age and sex.

Settlement Options

The Contract grants to most Contract Owners, or to the beneficiary, a variety of optional ways of receiving Contract proceeds. Under the Contract, the Death Benefit may be paid in a single sum or under one of the optional modes of settlement. A Prudential representative can explain these options upon request.

Suicide Exclusion

Generally, if the insured, whether sane or insane, dies by suicide within two years from the Contract Date, the Contract will end and we will return the premiums paid, less any Contract Debt, and less any withdrawals. Generally, if the insured, whether sane or insane, dies by suicide after two years from the issue date, but within two years of the effective date of an increase in the Face Amount, we will pay, as to the increase in amount, no more than the sum of the premiums paid on and after the effective date of an increase.

RIDERS

Contract Owners may be able to obtain additional benefits, which may increase the Scheduled Premium. If they do cause an increase in the Scheduled Premium, the charge for the additional benefits will be paid by making monthly deductions from the Contract Fund. These optional insurance benefits will be described in what is known as a “rider” to the Contract. One rider pays certain premiums into the Contract if the insured dies in an accident. Others waive certain premiums if the insured is disabled within the meaning of the provision (or, in the case of a Contract issued on an insured under the age of 15, if the applicant dies or becomes disabled within the meaning of the provision). Others pay

certain premiums into the Contract if the insured dies within a stated number of years after issue; similar term insurance riders may be available for the insured's spouse or child. The amounts of these benefits are fully guaranteed at issue and do not depend on the performance of the Account. Certain restrictions may apply; they are clearly described in the applicable rider.

Under other riders, which provide a fixed amount of term insurance in exchange for increasing total scheduled annual premiums, the amount payable upon the death of the insured may be substantially increased for a given total initial annual premium. The rider may be appropriate for Contract Owners who reasonably expect their incomes to increase regularly so that they will be able to afford the increasing scheduled annual premiums or who may be willing to rely upon their future Contract Fund values to prevent the Contract from lapsing in later years.

Any Prudential representative can explain these extra benefits further. Samples of the provisions are available from Prudential upon written request.

Living Needs Benefit Rider - The Living Needs BenefitSM Rider may be available on your Contract. The benefit may vary by state. There is no charge for adding the benefit to a Contract. However, when a claim is paid under this rider, a reduction for early payment is applied and a processing fee of up to $150 per Contract will be deducted.

Subject to state regulatory approval, the Living Needs Benefit allows you to elect to receive an accelerated payment of all or part of the Contract's Death Benefit, adjusted to reflect current value, at a time when certain special needs exist. The adjusted Death Benefit will always be less than the Death Benefit, but will never be lower than the Contract's Cash Surrender Value. One or both of the following options may be available. You should consult with a Prudential representative about whether additional options may be available.

The Terminal Illness Option is available on the Living Needs Benefit Rider when a licensed physician certifies the insured as terminally ill with a life expectancy of six months or less. When that evidence is provided and confirmed by us, we will provide an accelerated payment of the portion of the Death Benefit selected by the Contract Owner as a Living Needs Benefit. The Contract Owner may (1) elect to receive the benefit in a single sum or (2) receive equal monthly payments for six months. If the insured dies before all the payments have been made, the present value of the remaining payments will be paid to the beneficiary designated in the Living Needs Benefit claim form.

The Nursing Home Option is available on the Living Needs Benefit Rider after the insured has been confined to an eligible nursing home for six months or more. When a licensed physician certifies that the insured is expected to remain in an eligible nursing home until death, and that is confirmed by us, we will provide an accelerated payment of the portion of the Death Benefit selected by the Contract Owner as a Living Needs Benefit. The Contract Owner may (1) elect to receive the benefit in a single sum or (2) receive equal monthly payments for a specified number of years (not more than 10 nor less than two), depending upon the age of the insured. If the insured dies before all of the payments have been made, the present value of the remaining payments will be paid to the beneficiary designated in the Living Needs Benefit claim form in a single sum.

Subject to state approval, all or part of the Contract's Death Benefit may be accelerated under the Living Needs Benefit. If the benefit is only partially accelerated, a Death Benefit of at least $25,000 must remain under the Contract. The minimum amount that may be accelerated for a Living Needs Benefit claim is $50,000. However, we currently have an administrative practice to allow a reduced minimum of $25,000. We reserve the right to discontinue this administrative practice in a non-discriminatory manner.

No benefit will be payable if you are required to elect it in order to meet the claims of creditors or to obtain a government benefit. We can furnish details about the amount of Living Needs Benefit that is available to an eligible Contract Owner, and the effect on the Contract if less than the entire Death Benefit is accelerated.

You should consider whether adding this settlement option is appropriate in your given situation. Adding the Living Needs Benefit to the Contract has no adverse consequences; however, electing to use it could. With the exception of certain business-related Contracts, the Living Needs Benefit is excluded from income if the insured is terminally ill or chronically ill as defined in any applicable tax law (although the exclusion in the latter case may be limited). You should consult a tax adviser before electing to receive this benefit. Receipt of a Living Needs Benefit payment may also affect your eligibility for certain government benefits or entitlements.

REQUIREMENTS FOR ISSUANCE OF A CONTRACT

As of November 12, 2001, Prudential no longer offered these Contracts for sale. Generally, the Contract was issued on insureds below the age of 81. You could have applied for a minimum initial guaranteed Death Benefit of $75,000;

however, higher minimums applied to insureds over the age of 75. Insureds 14 years of age or less may have applied for a minimum initial guaranteed Death Benefit of $50,000, which will increase by 50% at age 21. Before issuing any Contract, Prudential required evidence of insurability, which may have included a medical examination. Nonsmokers who met Preferred underwriting requirements were offered the most favorable premium rate. A higher premium is charged if an extra mortality risk is involved. Certain classes of Contracts, for example, a Contract issued in connection with a tax-qualified pension plan, may have been issued on a "guaranteed issue" basis and may have a lower minimum initial Death Benefit than a Contract that was individually underwritten. These are the current underwriting requirements. We reserve the right to change them on a non-discriminatory basis.

PREMIUMS

The Contract will not lapse because of unfavorable investment experience if you pay your Scheduled Premiums when due and take no withdrawals and have no outstanding loans. If you pay premiums other than on a monthly basis, you will receive a notice that a premium is due about three weeks before each due date. If you pay premiums monthly, we will send to you each year a book with 12 coupons that will serve as a reminder. You may change the frequency of premium payments with our consent.

You may elect to have monthly premiums paid automatically under the “Pru-Matic Premium Plan” by pre-authorized transfers from a bank checking account. You may also be eligible to have monthly premiums paid by pre-authorized deductions from an employer's payroll.

Your Contract shows two Scheduled Premium amounts. The first or initial amount is payable from the time you purchase your Contract until the Contract Anniversary immediately following your 65th birthday or the Contract's seventh anniversary, whichever is later (the “Premium Change Date”). The second Scheduled Premium Amount will be lower than the maximum amount stated in your Contract if your Contract Fund, net of any excess premiums, on the Premium Change Date is higher than it would have been had: (1) all Scheduled Premiums been paid when due; (2) maximum contractual charges been deducted; and (3) only a net rate of return of 4% been earned. We will tell you what your second Scheduled Premium amount will be.

A significant feature of this Contract is that it permits you to pay greater than Scheduled Premiums. You may make unscheduled premium payments occasionally or on a periodic basis. If you wish, you may select a higher contemplated premium than the Scheduled Premium. Prudential will then bill you for the chosen premium. In general, the regular payment of higher premiums will result in higher Cash Surrender Values and, at least under Form B, in higher Death Benefits. Conversely, a Scheduled Premium does not need to be made if the Contract Fund is large enough to enable the charges due under the Contract to be made without causing the Contract to lapse. See LAPSE AND REINSTATEMENT. The payment of premiums in excess of Scheduled Premiums may cause the Contract to become a Modified Endowment Contract for federal income tax purposes. If this happens, loans and other distributions, which would otherwise not be taxable events, may be subject to federal income taxation. See Tax Treatment of Contract Benefits.

If you choose to add a “rider” to your Contract that provides additional benefits (see RIDERS), the Scheduled Premium may be increased. Some riders provide additional term insurance in a stated amount that does not vary with investment experience. One of these “term riders” also allows you to choose different insurance amounts in different years. For these riders, you may choose to pay a billed premium higher than your initial Scheduled Premium. Under some circumstances, this could result in a higher Cash Surrender Value and Death Benefit than if the same premium had been paid under a Contract with the same Death Benefit but without the rider. After several years, however, even if the billed premiums are paid on time, the Contract could lose its guarantee against lapse and could also have lower Cash Surrender Values.

You may choose a level premium option. In that case, the Scheduled Premium, (the amount of which can be quoted by your Prudential representative), will be higher and it will not increase at age 65 (or seven years after issue, if later). The Contract will not lapse because of unfavorable investment experience if the level Scheduled Premium is paid within 61 days after the Scheduled Premiums are due (or missed premiums are paid later with interest) and there are no withdrawals.

Prudential will generally accept any premium payment of at least $25. Prudential reserves the right to limit unscheduled premiums to a total of $10,000 in any Contract Year, and to refuse to accept premiums that would immediately result in more than a dollar-for-dollar increase in the Death Benefit. The flexibility of premium payments provides Contract Owners with different opportunities under the two Forms of the Contract. Greater than scheduled payments under a Form A Contract increase the Contract Fund. Greater than scheduled payments under a Form B Contract increase both the Contract Fund and the Death Benefit. Generally, any future increases in the Contract Fund will be less than under a Form A Contract because the monthly mortality charges under the Form B Contract will be higher to compensate for the higher amount of insurance. For all Contracts, the privilege of making large or additional premium payments offers a way of investing amounts, which accumulate without current income taxation.

Unless you elect otherwise, your Contract will include a “waiver of premium” provision under which Prudential will pay your Scheduled Premiums if you incur a disability before age 60 that lasts over six months. If the disability begins after you become 60 and before you are 65, premiums will be paid only until the first Contract Anniversary following your 65th birthday. The waiver of premium provision does not apply if you become disabled after your 65th birthday.

Allocation of Premiums

After the Contract Date, we deduct a $2 administrative charge and the charge for taxes attributable to premiums from each subsequent premium payment. After the deductions from premiums and the monthly charges are made, the remainder of each subsequent premium payment will be invested as of the end of the Valuation Period in which it is received in Good Order at the Payment Office, in accordance with the allocation you previously designated. The “Valuation Period” means the period of time from one determination of the value of the amount invested in a Variable Investment Option to the next. Such determinations are made when the net asset values of the Portfolios of the Series Fund are calculated, which is as of the close of regular trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time.)

You may change the way in which subsequent premiums are allocated by giving written notice to a Service Office, by our website, provided you are enrolled to use Prudential Online® Account Access, or by telephoning a Service Office, provided the Contract is not in default and you are enrolled to use the Telephone Transfer System. There is no charge for reallocating future premiums among the investment options. If any portion of a premium is allocated to a particular Variable Investment Option, to the Fixed Rate Option or to the Real Property Account, that portion must be at least 10% on the date the allocation takes effect. All percentage allocations must be in whole numbers. For example, 33% can be selected but 33⅓% cannot. Of course, the total allocation to all selected investment options must equal 100%.

Transfers/Restrictions on Transfers

If the Contract is not in default, you may, up to four times each Contract Year, transfer amounts from one Variable Investment Option to another Variable Investment Option, to the Fixed Rate Option, or to the Real Property Account, without charge. Additional transfers may be made with our consent. Currently, we will allow you to make additional transfers. For the first 20 transfers in a calendar year, you may transfer amounts by proper written notice to a Service Office, by our website, provided you are enrolled to use Prudential Online® Account Access, or by telephone, provided you are enrolled to use the Telephone Transfer System. You will automatically be enrolled to use the Telephone Transfer System unless the Contract is jointly owned or you elect not to have this privilege. Telephone transfers may not be available on Contracts that are assigned, depending on the terms of the assignment. See Assignment.

Multiple transfers that occur during the same day, but prior to the end of the Valuation Period for that day, will be counted as a single transfer.

Currently, certain transfers effected systematically under the dollar cost averaging program do not count towards the limit of four transfers per Contract Year or the limit of 20 transfers per calendar year. In the future, we may count such transfers towards the limit.

Transfers among investment options will take effect as of the end of the Valuation Period in which a transfer request is received in Good Order at a Service Office. The request may be in terms of dollars, such as a request to transfer $5,000 from one investment option to another, or may be in terms of a percentage reallocation among investment options. In the latter case, as with premium reallocations, the percentages must be in whole numbers.

We will use reasonable procedures, such as asking you to provide certain personal information provided on your application for insurance, to confirm that instructions given by telephone are genuine. We will not be held liable for following telephone instructions that we reasonably believe to be genuine. We cannot guarantee that you will be able to get through to complete a telephone transfer during peak periods such as periods of drastic economic or market change.

Only one transfer from the Fixed Rate Option will be permitted during each Contract Year and only within 30 days following each Contract Anniversary. The maximum amount that may be transferred out of the Fixed Rate Option each year is currently the greater of: (a) 25% of the amount in the Fixed Rate Option; and (b) $2,000. Such transfer requests received prior to the Contract Anniversary will take effect on the Contract Anniversary. Transfer requests received within the 30-day period beginning on the Contract Anniversary will take effect as of the end of the Valuation Period in which a transfer request is received in Good Order at a Service Office. We may change these limits in the future or waive these restrictions for limited periods of time in a non-discriminatory way, (e.g., when interest rates are declining). Transfers to and from the Real Property Account are subject to restrictions described in the attached prospectus for the Real Property Account.

The Contract was not designed for professional market timing organizations, other organizations, or individuals using programmed, large, or frequent transfers. Large or frequent transfers among Variable Investment Options in response to short-term fluctuations in markets, sometimes called “market timing”, can make it very difficult for Fund advisers/sub-advisers to manage the Variable Investment Options. Large or frequent transfers may cause the Fund to hold more cash than otherwise necessary, disrupt management strategies, increase transaction costs, or affect performance to the disadvantage of other Contract Owners. If we (in our own discretion) believe that a pattern of transfers or a specific transfer request, or group of transfer requests, may have a detrimental effect on the performance of the Variable Investment Options, or we are informed by a Fund (e.g., by the Fund’s adviser/sub-adviser) that the purchase or redemption of shares in the Variable Investment Option must be restricted because the Fund believes the transfer activity to which such purchase or redemption relates would have a detrimental effect on performance of the affected Variable Investment Option, we may modify your right to make transfers by restricting the number, timing, and amount of transfers. We reserve the right to prohibit transfer requests made by an individual acting under a power of attorney on behalf of more than one Contract Owner. We will immediately notify you at the time of a transfer request if we exercise this right.

Any restrictions on transfers will be applied in a uniform manner to all persons who own Contracts like this one, and will not be waived, except as described above with respect to transfers from the Fixed Rate Option. However, due to the discretion involved in any decision to exercise our right to restrict transfers, it is possible that some Contract Owners may be able to effect transactions that could affect Fund performance to the disadvantage of other Contract Owners.

In addition, Contract Owners who own variable life insurance or variable annuity Contracts that do not impose the transfer restrictions described above, might make more numerous and frequent transfers than Contract Owners who are subject to such limitations. Contract Owners who are not subject to the same transfer restrictions may have the same underlying Variable Investment Options available to them, and unfavorable consequences associated with such frequent trading within the underlying Variable Investment Option (e.g., greater Portfolio turnover, higher transaction costs, or performance or tax issues) may affect all Contract Owners.

The Series Fund has adopted their own policies and procedures with respect to excessive trading of their respective shares, and we reserve the right to enforce these policies and procedures. The prospectus for the Series Fund describes any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Under SEC rules, we are required to: (1) enter into a written agreement with each Portfolio or its principal underwriter that obligates us to provide to the Fund promptly upon request certain information about the trading activity of individual Contract Owners, and (2) execute instructions from the Fund to restrict or prohibit further purchases or transfers by specific Contract Owners who violate the excessive trading policies established by the Fund. In addition, you should be aware that the Series Fund may receive “omnibus” purchase and redemption orders from other insurance companies or intermediaries such as retirement plans. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance Contracts and/or individual retirement plan participants. The omnibus nature of these orders may limit the Series Fund in their ability to apply their excessive trading policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons, we cannot guarantee that the Series Fund (and thus Contract Owners) will not be harmed by transfer activity relating to other insurance companies and/or retirement plans that may invest in the Series Fund.

The Series Fund may assess a short term trading fee in connection with a transfer out of any available Variable Investment Option if the transfer occurs within a certain number of days following the date of allocation to the Variable Investment Option. The Series Fund determines the amount of the short term trading fee and when the fee is imposed. The fee is retained by or paid to the Series Fund and is not retained by us. The fee will be deducted from your Contract Value to the extent allowed by law. At present, the Series Fund has not adopted a short-term trading fee.

Although our transfer restrictions are designed to prevent excessive transfers, they are not capable of preventing every potential occurrence of excessive transfer activity.

Dollar Cost Averaging

We offer a feature called Dollar Cost Averaging (“DCA”). Upon your request, premiums will be allocated to the portion of the Money Market Subaccount used for this feature (the “DCA account”). Designated dollar amounts will be transferred monthly from the DCA account to other investment options available under the Contract, excluding the Money Market Subaccount and the Fixed Rate Option, but including the Real Property Account. Automatic monthly transfers must be at least 3% of the amount allocated to the DCA account (that is, if you designate $5,000, the minimum monthly transfer is $150), with a minimum of $20 transferred into any one investment option. These amounts are subject to change at our discretion. The minimum transfer amount will only be recalculated if the amount designated for transfer is increased.

When you establish DCA at issue, you must allocate to the DCA account the greater of $2,000 or 10% of the initial premium payment. When you establish DCA after issue, you must allocate to the DCA account at least $2,000. These minimums are subject to change at our discretion. After DCA has been established and as long as the DCA account has a positive balance, you may allocate or transfer amounts to the DCA account, generally subject to the limitations on premium payments and transfers. In addition, if you pay premiums on an annual or semi-annual basis, and you have already established DCA, your premium allocation instructions may include an allocation of all or a portion of all your premium payments to the DCA account.

Each automatic monthly transfer will take effect as of the end of the Valuation Period on the Monthly Date, provided the New York Stock Exchange (“NYSE”) is open on that date. If the NYSE is not open on the Monthly Date, the transfer will take effect as of the end of the Valuation Period on the next day that the NYSE is open. If the Monthly Date does not occur in a particular month (e.g., February 30), the transfer will take effect as of the end of the Valuation Period on the last day of the month that the NYSE is open. Automatic monthly transfers will continue until the balance in the DCA account reaches zero, or until the Contract Owner gives notification of a change in allocation or cancellation of the feature. If you have an outstanding premium allocation to the DCA account, but your DCA option has previously been canceled, premiums allocated to the DCA account will be allocated to the Money Market Subaccount. Currently there is no charge for using the DCA feature.

DEATH BENEFITS

Contract Date

There is no insurance under this Contract until the minimum initial premium is paid. If a medical examination is required, the Contract Date will ordinarily be the date the examination is completed. Under certain circumstances, we may allow the Contract to be backdated up to six months for the purpose of lowering the insured's Issue Age, but only to a date not earlier than six months prior to the application date. This may be advantageous for some Contract Owners as a lower Issue Age may result in lower current charges.

When Proceeds Are Paid

Generally, we will pay any Death Benefit, Cash Surrender Value, loan proceeds or partial withdrawal within seven days after all the documents required for such a payment are received at the Payment Office. Other than the Death Benefit, which is determined as of the date of death, the amount will be determined as of the end of the Valuation Period in which the necessary documents are received at a Service Office. However, we may delay payment of proceeds from the Variable Investment Option[s] and the variable portion of the Death Benefit due under the Contract if the disposal or valuation of the Account's assets is not reasonably practicable because the New York Stock Exchange is closed for other than a regular holiday or weekend, trading is restricted by the SEC, or the SEC declares that an emergency exists.

We have the right to delay payment of the Cash Surrender Value attributable to: (1) the Fixed Rate Option; and (2) Contracts in-force as extended term insurance, for up to six months (or a shorter period if required by applicable law). We will pay interest of at least 3% per year if such a payment is delayed for more than 30 days (or a shorter period if required by applicable law).

Death Claim Settlement Options

	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

	Consolidated Statements of Financial Position
	December 31, 2010 and 2009 (in millions, except share amounts)

				2010		2009
ASSETS
Fixed maturities, available for sale, at fair value (amortized cost: 2010-$111,314; 2009- $105,356)			$	116,558	$	106,208
Trading account assets supporting insurance liabilities, at fair value				16,037		14,639
Other trading account assets, at fair value				5,177		2,865
Equity securities, available for sale, at fair value (cost: 2010-$4,243; 2009-$3,996)				5,432		4,856
Commercial mortgage and other loans				26,647		26,289
Policy loans				8,036		7,907
Other long-term investments				3,485		3,257
Short-term investments and other				3,221		4,785
		Total investments		184,593		170,806
Cash and cash equivalents				3,329		7,139
Accrued investment income				1,615		1,586
Deferred policy acquisition costs				8,267		7,314
Other assets				12,623		11,510
Due from parent and affiliates				4,333		5,841
Separate account assets				159,204		132,476
		Total Assets	$	373,964	$	336,672

LIABILITIES AND EQUITY
LIABILITIES
Future policy benefits			$	78,821	$	77,097
Policyholders' account balances				73,256		71,654
Policyholders' dividends				3,297		1,033
Securities sold under agreements to repurchase				5,885		5,735
Cash collateral for loaned securities				1,929		2,802
Income taxes				3,170		1,354
Short-term debt				1,488		2,931
Long-term debt				8,454		6,929
Other liabilities				10,397		9,680
Due to parent and affiliates				6,781		4,332
Separate account liabilities				159,204		132,476
		Total liabilities		352,682		316,023

COMMITMENTS AND CONTINGENT LIABILITIES (See Note 22)

EQUITY
Common Stock ($5.00 par value; 500,000 shares authorized; issued and outstanding
	at December 31, 2010 and 2009, respectively)			2		2
Additional paid-in capital				18,275		18,372
Accumulated other comprehensive income (loss)				1,244		(447)
Retained earnings				1,738		2,700
	Total Prudential Insurance Company of America's equity			21,259		20,627
Noncontrolling interests				23		22
	Total equity			21,282		20,649
	TOTAL LIABILITIES AND EQUITY		$	373,964	$	336,672

See Notes to Consolidated Financial Statements

B-1

	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

	Consolidated Statements of Operations
	Years Ended December 31, 2010, 2009 and 2008 (in millions)

				2010		2009		2008
REVENUES
Premiums			$	10,229	$	9,633	$	9,473
Policy charges and fee income				2,197		2,090		2,180
Net investment income				8,690		8,593		9,250
Other income				1,775		2,661		(113)
Realized investment gains (losses), net:
		Other-than-temporary impairments on fixed maturity securities		(2,655)		(3,337)		(2,060)
		Other-than-temporary impairments on fixed maturity securities transferred to
		Other Comprehensive Income		2,261		2,004		-
		Other realized investment gains (losses), net		1,657		(1,262)		580
		Total realized investment gains (losses), net		1,263		(2,595)		(1,480)
	Total revenues			24,154		20,382		19,310

BENEFITS AND EXPENSES
Policyholders' benefits				11,918		11,047		11,573
Interest credited to policyholders' account balances				3,314		3,648		2,203
Dividends to policyholders'				2,101		1,257		2,151
Amortization of deferred policy acquisition costs				475		483		654
General and administrative expenses				3,527		3,513		3,521
	Total benefits and expenses			21,335		19,948		20,102

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES				2,819		434		(792)
Income taxes:
	Current			(294)		209		(284)
	Deferred			1,128		(600)		(53)
		Total income tax expense (benefit)		834		(391)		(337)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EQUITY IN EARNINGS
OF OPERATING JOINT VENTURES				1,985		825		(455)
Equity in earnings of operating joint ventures, net of taxes				46		1,487		(218)
INCOME (LOSS) FROM CONTINUING OPERATIONS				2,031		2,312		(673)
Income from discontinued operations, net of taxes				8		-		5
NET INCOME (LOSS)				2,039		2,312		(668)
Less: Income attributable to noncontrolling interests				1		1		2
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL INSURANCE COMPANY OF AMERICA			$	2,038	$	2,311	$	(670)

See Notes to Consolidated Financial Statements

B-2

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

Consolidated Statements of Equity
Years Ended December 31, 2010, 2009 and 2008 (in millions)


											Total
									Accumulated		Prudential
					Additional		Retained		Other		Insurance Company
			Common		Paid-in		Earnings		Comprehensive		of America		Noncontrolling		Total
			Stock		Capital		(Deficit)		Income (Loss)		Equity		Interests		Equity
Balance, December 31, 2007			$	2	$	15,914	$	1,980	$	174	$	18,070	$	20	$	18,090
Dividends to parent				-		-		(1,523)		-		(1,523)		-		(1,523)
Capital contribution from parent				-		785		-		-		785		-		785
Consolidations/deconsolidations of
	noncontrolling interests			-		-		-		-		-		(1)		(1)
Deferred tax asset contributed to parent				-		(9)		-		-		(9)		-		(9)
Assets purchased/transferred from affiliates				-		81		-		(145)		(64)		-		(64)
Long-term stock-based compensation program				-		7		-		-		7		-		7
Impact on Company's investment in Wachovia
	Securities due to addition of
	A.G. Edwards business, net of tax (1)			-		1,041		-		-		1,041		-		1,041
Cummulative effect of changes in
	accounting principles, net of taxes			-		-		27		-		27		-		27
Comprehensive income:
	Net income			-		-		(670)		-		(670)		2		(668)
	Other comprehensive income, net of tax:
		Change in foreign currency translation
		adjustments								(24)		(24)		-		(24)
		Change in net unrealized investment gains (losses)								(5,888)		(5,888)		-		(5,888)
		Change in pension and postretirement
		unrecognized net periodic benefit cost								(707)		(707)		-		(707)
	Other comprehensive income											(6,619)		-		(6,619)
Total comprehensive income												(7,289)		2		(7,287)

Balance, December 31, 2008				2		17,819		(186)		(6,590)		11,045		21		11,066
Capital contribution from parent				-		415		-		-		415		-		415
Assets purchased/transferred from affiliates				-		256		-		-		256		-		256
Long-term stock-based compensation program				-		(9)		-		-		(9)		-		(9)
Impact on Company's investment in Wachovia
	Securities due to addition of
	A.G. Edwards business, net of tax (1)			-		(109)		-		-		(109)		-		(109)
Impact of adoption of guidance for other-than-
	temporary impairments of debt
	securities, net of taxes			-		-		575		(575)		-		-		-
Comprehensive loss:
	Net income (loss)			-		-		2,311		-		2,311		1		2,312
	Other comprehensive income (loss), net of tax:
		Change in foreign currency translation
		adjustments								6		6		-		6
		Change in net unrealized investment gains								7,332		7,332		-		7,332
		Change in pension and postretirement
		unrecognized net periodic benefit cost								(620)		(620)		-		(620)
	Other comprehensive loss											6,718		-		6,718

See Notes to Consolidated Financial Statements

B-3

Total comprehensive income (loss)												9,029		1		9,030

Balance, December 31, 2009				2		18,372		2,700		(447)		20,627		22		20,649
Dividends to parent				-		-		(3,000)		-		(3,000)		-		(3,000)
Assets purchased/transferred from affiliates				-		(96)		-		-		(96)		-		(96)
Long-term stock-based compensation program				-		(1)		-		-		(1)		-		(1)
Comprehensive income:
	Net income			-		-		2,038		-		2,038		1		2,039
	Other comprehensive income, net of tax:
		Change in foreign currency translation
		adjustments								2		2		-		2
		Change in net unrealized investment gains								1,361		1,361		-		1,361
		Change in pension and postretirement
		unrecognized net periodic benefit cost								328		328		-		328
	Other comprehensive income											1,691		-		1,691
Total comprehensive income												3,729		1		3,730
Balance, December 31, 2010			$	2	$	18,275	$	1,738	$	1,244	$	21,259	$	23	$	21,282

(1)	See Note 7

See Notes to Consolidated Financial Statements

B-4

	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

	Consolidated Statements of Cash Flows
	Years Ended December 31, 2010, 2009 and 2008 (in millions)

				2010		2009		2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)			$	2,039	$	2,312	$	(668)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Realized investment (gains) losses, net			(1,263)		2,595		1,480
	Policy charges and fee income			(729)		(824)		(761)
	Interest credited to policyholders' account balances			3,314		3,648		2,203
	Depreciation and amortization			(264)		(53)		620
	(Gains) losses on trading account assets supporting insurance liabilities, net			(468)		(1,533)		1,364
	Gain on sale of joint venture in Wachovia Securities			-		(2,247)		-
	Change in:
		Deferred policy acquisition costs		(1,103)		(569)		(259)
		Future policy benefits and other insurance liabilities		1,790		(218)		2,430
		Other trading account assets		(1,369)		(407)		(2,837)
		Income taxes		(188)		(90)		(779)
		Other, net		(192)		523		3,209
		Cash flows from operating activities		1,567		3,137		6,002
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity/prepayment of:
	Fixed maturities, available for sale			21,002		26,552		60,931
	Equity securities, available for sale			1,676		765		2,500
	Trading account assets supporting insurance liabilities and other trading account assets			37,880		37,183		26,391
	Commercial mortgage and other loans			3,794		3,321		2,594
	Policy loans			897		968		1,345
	Other long-term investments			622		295		1,134
	Short-term investments			12,685		14,604		17,949
Payments for the purchase/origination of:
	Fixed maturities, available for sale			(26,662)		(24,194)		(55,223)
	Equity securities, available for sale			(1,587)		(827)		(2,594)
	Trading account assets supporting insurance liabilities and other trading account assets			(38,796)		(37,522)		(27,176)
	Commercial mortgage and other loans			(4,090)		(2,336)		(4,770)
	Policy loans			(660)		(778)		(968)
	Other long-term investments			(636)		(399)		(904)
	Short-term investments			(11,589)		(15,449)		(17,854)
Proceeds from sale of joint venture in Wachovia Securities				-		4,500		-
Due to/from parent and affiliates				1,401		(982)		(344)
Other, net				62		(461)		(561)
		Cash flows from (used in) investing activities		(4,001)		5,240		2,450
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholders' account deposits				15,542		16,883		19,251
Policyholders' account withdrawals				(16,478)		(19,052)		(18,020)
Net change in securities sold under agreements to repurchase and cash collateral for loaned securities				(724)		(2,257)		(5,944)
Net change in financing arrangements (maturities 90 days or less)				491		(3,327)		(3,410)
Proceeds from the issuance of debt (maturities longer than 90 days)				2,343		1,929		7,534
Repayments of debt (maturities longer than 90 days)				(2,702)		(3,259)		(3,636)
Excess tax benefits from share-based payment arrangements				4		2		9
Capital contribution from parent				-		-		594
Dividends to parent				-		-		(1,523)
Other, net				176		(289)		(54)
		Cash flows used in financing activities		(1,348)		(9,370)		(5,199)
Effect of foreign exchange rate changes on cash balances				(28)		9		-

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				(3,810)		(984)		3,253
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				7,139		8,123		4,870
CASH AND CASH EQUIVALENTS, END OF YEAR			$	3,329	$	7,139	$	8,123

SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid/(received)			$	(56)	$	492	$	379
Interest paid			$	313	$	388	$	631

NON-CASH TRANSACTIONS DURING THE YEAR
Impact on Company's investment in Wachovia Securities due to addition of A.G. Edwards business, net of tax			$	-	$	(109)	$	1,041

See Notes to Consolidated Financial Statements

B-5

1. BUSINESS AND BASIS OF PRESENTATION

The Prudential Insurance Company of America (“Prudential Insurance”), together with its subsidiaries (collectively, the “Company”), is a wholly owned subsidiary of Prudential Holdings, LLC (“Prudential Holdings”), which is a wholly owned subsidiary of Prudential Financial, Inc. (“Prudential Financial”). The Company has organized its operations into the Closed Block Business and the Financial Services Businesses. The Closed Block Business consists principally of the Closed Block (see Note 12); assets held outside the Closed Block that Prudential Insurance needs to hold to meet capital requirements related to the Closed Block policies and invested assets held outside the Closed Block that represent the difference between the Closed Block Assets and Closed Block Liabilities and the interest maintenance reserve (collectively, “Surplus and Related Assets”); deferred policy acquisition costs related to Closed Block policies; and certain other related assets and liabilities. Its Financial Services Businesses consist primarily of non-participating individual life insurance, annuities, group insurance, retirement-related services and global commodities sales and trading. The Company also held an equity method investment in the retail securities brokerage joint venture Wachovia Securities Financial Holdings, LLC (“Wachovia Securities”), which was sold on December 31, 2009. See Note 7 for more details on this transaction.

Demutualization and Destacking

On December 18, 2001 (the “date of demutualization”), the Company converted from a mutual life insurance company to a stock life insurance company and became a direct, wholly owned subsidiary of Prudential Holdings, which became a direct, wholly owned subsidiary of Prudential Financial.

Concurrent with the demutualization, the Company completed a corporate reorganization (the “destacking”) whereby various subsidiaries (and certain related assets and liabilities) of the Company were dividended so that they became wholly owned subsidiaries of Prudential Financial rather than of the Company.

Basis of Presentation

The Consolidated Financial Statements include the accounts of Prudential Insurance, entities over which the Company exercises control, including majority-owned subsidiaries and minority-owned entities such as limited partnerships in which the Company is the general partner, and variable interest entities in which the Company is considered the primary beneficiary. See Note 7 for more information on the Company’s consolidated variable interest entities. The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Intercompany balances and transactions have been eliminated. The Company has evaluated subsequent events through March 31, 2011, the date these financial statements were issued.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining deferred policy acquisition costs and related amortization; valuation of business acquired and its amortization; amortization of sales inducements; measurement of goodwill and any related impairment; valuation of investments including derivatives and the recognition of other-than-temporary impairments; future policy benefits including guarantees; pension and other postretirement benefits; provision for income taxes and valuation of deferred tax assets; and reserves for contingent liabilities, including reserves for losses in connection with unresolved legal matters.

Reclassifications

Certain amounts in prior years have been reclassified to conform to the current year presentation.

B-6

2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS

Investments and Investment-Related Liabilities

The Company’s principal investments are fixed maturities; trading account assets; equity securities; commercial mortgage and other loans; policy loans; other long-term investments, including joint ventures (other than operating joint ventures), limited partnerships, and real estate; and short-term investments. Investments and investment-related liabilities also include securities repurchase and resale agreements and securities lending transactions. The accounting policies related to each are as follows:

Fixed maturities are comprised of bonds, notes and redeemable preferred stock. Fixed maturities classified as “available for sale” are carried at fair value. See Note 19 for additional information regarding the determination of fair value. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity. Interest income, as well as the related amortization of premium and accretion of discount, is included in “Net investment income” under the effective yield method. For mortgage-backed and asset-backed securities, the effective yield is based on estimated cash flows, including prepayment assumptions based on data from widely accepted third-party data sources or internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions regarding the underlying collateral, including default rates and changes in value. These assumptions can significantly impact income recognition and the amount of other-than-temporary impairments recognized in earnings and other comprehensive income. For high credit quality mortgage-backed and asset-backed securities (those rated AA or above), cash flows are provided quarterly, and the amortized cost and effective yield of the security are adjusted as necessary to reflect historical prepayment experience and changes in estimated future prepayments. The adjustments to amortized cost are recorded as a charge or credit to net investment income in accordance with the retrospective method. For asset-backed and mortgage-backed securities rated below AA, the effective yield is adjusted prospectively for any changes in estimated cash flows. See the discussion below on realized investment gains and losses for a description of the accounting for impairments, as well as the impact of the Company’s adoption on January 1, 2009 of new authoritative guidance for the recognition and presentation of other-than-temporary impairments for debt securities. Unrealized gains and losses on fixed maturities classified as “available for sale,” net of tax, and the effect on deferred policy acquisition costs, valuation of business acquired, deferred sales inducements, future policy benefits and policyholders’ dividends that would result from the realization of unrealized gains and losses, are included in “Accumulated other comprehensive income (loss).”

“Trading account assets supporting insurance liabilities, at fair value” includes invested assets that support certain products which are experience rated, meaning that the investment results associated with these products are expected to ultimately accrue to contractholders. Realized and unrealized gains and losses for these investments are reported in “Other income.” Interest and dividend income from these investments is reported in “Net investment income.”

“Other trading account assets, at fair value” consist primarily of investments and certain derivatives, including those used by the Company in its capacity as a broker-dealer and derivative hedging positions used in a non-broker or non-dealer capacity primarily to hedge the risks related to certain products. These instruments are carried at fair value. Realized and unrealized gains and losses on these investments and on derivatives used by the Company in its capacity as a broker-dealer are reported in “Other income.” Interest and dividend income from these investments is reported in “Net investment income.”

Equity securities available for sale are comprised of common stock, mutual fund shares, non-redeemable preferred stock, and perpetual preferred stock, and are carried at fair value. The associated unrealized gains and losses, net of tax, and the effect on deferred policy acquisition costs, valuation of business acquired, deferred sales inducements, future policy benefits and policyholders’ dividends that would result from the realization of unrealized gains and losses, are included in “Accumulated other comprehensive income (loss).” The cost of equity securities is written down to fair value when a decline in value is considered to be other-than-temporary. See the discussion below on realized investment gains and losses for a description of the accounting for impairments. Dividends from these investments are recognized in “Net investment income” when declared.

Commercial mortgage and other loans consist of commercial mortgage loans, agricultural loans, loans backed by residential properties, as well as certain other collateralized and uncollateralized loans. Commercial mortgage loans are broken down by class which is based on property type (industrial properties, retail, office, multi-family/apartment, hospitality, and other).

Commercial mortgage and other loans originated and held for investment are generally carried at unpaid principal balance, net of an allowance for losses. Commercial mortgage and other loans acquired, including those related to the acquisition of a business, are recorded at fair value when purchased, reflecting any premiums or discounts to unpaid principal balances.

B-7

Interest income, as well as prepayment fees and the amortization of the related premiums or discounts, related to commercial mortgage and other loans, are included in “Net investment income.”

Impaired loans include those loans for which it is probable that amounts due according to the contractual terms of the loan agreement will not all be collected. The Company defines “past due” as principal or interest not collected at least 30 days past the scheduled contractual due date. Interest received on impaired loans, including loans that were previously modified in a troubled debt restructuring, is either applied against the principal or reported as net investment income, based on the Company’s assessment as to the collectability of the principal. See Note 4 for additional information about the Company’s past due loans.

The Company discontinues accruing interest on impaired loans after the loans become 90 days delinquent as to principal or interest payments, or earlier when the Company has doubts about collectability. When a loan is deemed to be impaired, any accrued but uncollectible interest on the impaired loan and other loans backed by the same collateral, if any, is charged to interest income in the period the loan is deemed to be impaired. Generally, a loan is restored to accrual status only after all delinquent interest and principal are brought current and, in the case of loans where the payment of interest has been interrupted for a substantial period, a regular payment performance has been established.

The Company reviews the performance and credit quality of the commercial mortgage and other loan portfolio on an on-going basis. Loans are placed on watch list status based on a predefined set of criteria and are assigned one of three categories. Loans are placed on “early warning” status in cases where, based on the Company’s analysis of the loan’s collateral, the financial situation of the borrower or tenants or other market factors, it is believed a loss of principal or interest could occur. Loans are classified as “closely monitored” when it is determined that there is a collateral deficiency or other credit events that may lead to a potential loss of principal or interest. Loans “not in good standing” are those loans where the Company has concluded that there is a high probability of loss of principal, such as when the loan is delinquent or in the process of foreclosure. As described below, in determining our allowance for losses, the Company evaluates each loan on the watch list to determine if it is probable that amounts due according to the contractual terms of the loan agreement will not be collected.

Loan-to-value and debt service coverage ratios are measures commonly used to assess the quality of commercial mortgage loans. The loan-to-value ratio compares the amount of the loan to the fair value of the underlying property collateralizing the loan, and is commonly expressed as a percentage. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. A smaller loan-to-value ratio indicates a greater excess of collateral value over the loan amount. The debt service coverage ratio compares a property’s net operating income to its debt service payments. Debt service coverage ratios less than 1.0 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A larger debt service coverage ratio indicates a greater excess of net operating income over the debt service payments. The values utilized in calculating these ratios are developed as part of the Company’s periodic review of the commercial mortgage loan and agricultural loan portfolio, which includes an internal appraisal of the underlying collateral value. The Company’s periodic review also includes a quality re-rating process, whereby the internal quality rating originally assigned at underwriting is updated based on current loan, property and market information using a proprietary quality rating system. The loan-to-value ratio is the most significant of several inputs used to establish the internal credit rating of a loan which in turn drives the allowance for losses. Other key factors considered in determining the internal credit rating include debt service coverage ratios, amortization, loan term, estimated market value growth rate and volatility for the property type and region. See Note 4 for additional information related to the loan-to-value ratios and debt service coverage ratios related to the Company’s commercial mortgage and agricultural loan portfolios.

Loans backed by residential properties, other collateralized loans, and uncollateralized loans are also reviewed periodically. Each loan is assigned an internal or external credit rating. Internal credit ratings take into consideration various factors including financial ratios and qualitative assessments based on non-financial information. In cases where there are personal or third party guarantors, the credit quality of the guarantor is also reviewed. These factors are used in developing the allowance for losses. Based on the diversity of the loans in these categories and their immateriality, the Company has not disclosed the credit quality indicators related to these loans in Note 4.

For those loans not reported at fair value, the allowance for losses includes a loan specific reserve for each impaired loan that has a specifically identified loss and a portfolio reserve for probable incurred but not specifically identified losses. For impaired commercial mortgage and other loans the allowances for losses are determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or based upon the fair value of the collateral if the loan is collateral dependent. The portfolio reserves for probable incurred but not specifically identified losses in the commercial mortgage and agricultural loan portfolio segments considers the current credit composition of the portfolio based on an internal quality rating, (as

B-8

described above). The portfolio reserves are determined using past loan experience, including historical credit migration, default probability and loss severity factors by property type. Historical credit migration, default and loss severity factors are updated each quarter based on the Company’s actual loan experience, and are considered together with other relevant qualitative factors in making the final portfolio reserve calculations.

The allowance for losses on commercial mortgage and other loans can increase or decrease from period to period based on the factors noted above. “Realized investment gains (losses), net” includes changes in the allowance for losses. “Realized investment gains (losses), net” also includes gains and losses on sales, certain restructurings, and foreclosures.

When a commercial mortgage or other loan is deemed to be uncollectible, any specific valuation allowance associated with the loan is reversed and a direct write down to the carrying amount of the loan is made. The carrying amount of the loan is not adjusted for subsequent recoveries in value.

Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies.

Securities repurchase and resale agreements and securities loaned transactions are used to earn spread income, to borrow funds, or to facilitate trading activity. Securities repurchase and resale agreements are generally short-term in nature, and therefore, the carrying amounts of these instruments approximate fair value. As part of securities repurchase agreements or securities loaned transactions, the Company transfers either corporate debt securities, or U.S. government and government agency securities and receives cash as collateral. As part of securities resale agreements, the Company transfers cash as collateral and receives U.S. government securities. For securities repurchase agreements and securities loaned transactions used to earn spread income, the cash received is typically invested in cash equivalents, short-term investments or fixed maturities.

Securities repurchase and resale agreements that satisfy certain criteria are treated as collateralized financing arrangements. These agreements are carried at the amounts at which the securities will be subsequently resold or reacquired, as specified in the respective agreements. For securities purchased under agreements to resell, the Company’s policy is to take possession or control of the securities and to value the securities daily. Securities to be resold are the same, or substantially the same, as the securities received. For securities sold under agreements to repurchase, the market value of the securities to be repurchased is monitored, and additional collateral is obtained where appropriate, to protect against credit exposure. Securities to be repurchased are the same, or substantially the same, as those sold. Income and expenses related to these transactions executed within the insurance companies and broker-dealer subsidiaries used to earn spread income are reported as “Net investment income;” however, for transactions used to borrow funds, the associated borrowing cost is reported as interest expense (included in “General and administrative expenses”). Income and expenses related to these transactions executed within the Company’s derivative dealer operations are reported in “Other income.”

Securities loaned transactions are treated as financing arrangements and are recorded at the amount of cash received. The Company obtains collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of the Company’s securities loaned transactions are with large brokerage firms. Income and expenses associated with securities loaned transactions used to earn spread income are reported as “Net investment income;” however, for securities loaned transactions used for funding purposes the associated rebate is reported as interest expense (included in “General and administrative expenses”).

Other long-term investments consist of the Company’s investments in joint ventures and limited partnerships, other than operating joint ventures, as well as wholly-owned investment real estate and other investments. Joint venture and partnership interests are generally accounted for using the equity method of accounting. In certain instances in which the Company’s partnership interest is so minor (generally less than 3%) that it exercises virtually no influence over operating and financial policies, the Company applies the cost method of accounting. The Company’s income from investments in joint ventures and partnerships accounted for using the equity method or the cost method, other than the Company’s investment in operating joint ventures, is included in “Net investment income.” The carrying value of these investments is written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. In applying the equity method or the cost method (including assessment for other-than-temporary impairment), the Company uses financial information provided by the investee, which is generally received on a one quarter lag. The Company consolidates joint ventures and limited partnerships in certain other instances where it is deemed to exercise control, or is considered the primary beneficiary of a variable interest entity. The

B-9

Company’s net income from consolidated joint ventures and limited partnerships is included in the respective revenue and expense line items depending on the activity of the consolidated entity.

The Company’s wholly-owned investment real estate consists of real estate which the Company has the intent to hold for the production of income as well as real estate held for sale. Real estate which the Company has the intent to hold for the production of income is carried at depreciated cost less any writedowns to fair value for impairment losses and is reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Real estate held for sale is carried at the lower of depreciated cost or fair value less estimated selling costs and is not further depreciated once classified as such. An impairment loss is recognized when the carrying value of the investment real estate exceeds the estimated undiscounted future cash flows (excluding interest charges) from the investment. At that time, the carrying value of the investment real estate is written down to fair value. Decreases in the carrying value of investment real estate held for the production of income due to other-than-temporary impairments are recorded in “Realized investment gains (losses), net.” Depreciation on real estate held for the production of income is computed using the straight-line method over the estimated lives of the properties, and is included in “Net investment income.” In the period a real estate investment is deemed held for sale and meets all of the discontinued operation criteria, the Company reports all related net investment income and any resulting investment gains and losses as discontinued operations for all periods presented.

Short-term investments primarily consist of highly liquid debt instruments with a maturity of greater than three months and less than twelve months when purchased, other than those debt instruments meeting this definition that are included in “Trading account assets supporting insurance liabilities, at fair value.” These investments are generally carried at fair value and include certain money market investments, short-term debt securities issued by government sponsored entities and other highly liquid debt instruments. Short-term investments held in the Company’s broker-dealer operations are marked-to-market through “Other income.”

Realized investment gains (losses) are computed using the specific identification method. Realized investment gains and losses are generated from numerous sources, including the sale of fixed maturity securities, equity securities, investments in joint ventures and limited partnerships and other types of investments, as well as adjustments to the cost basis of investments for net other-than-temporary impairments recognized in earnings. Realized investment gains and losses are also generated from prepayment premiums received on private fixed maturity securities, recoveries of principal on previously impaired securities, allowance for losses on commercial mortgage and other loans, and fair value changes on embedded derivatives and free-standing derivatives that do not qualify for hedge accounting treatment, except those derivatives used in the Company’s capacity as a broker or dealer.

The Company’s available-for-sale securities with unrealized losses are reviewed quarterly to identify other-than-temporary impairments in value. In evaluating whether a decline in value is other-than-temporary, the Company considers several factors including, but not limited to the following: (1) the extent and the duration of the decline; (2) the reasons for the decline in value (credit event, currency or interest-rate related, including general credit spread widening); and (3) the financial condition of and near-term prospects of the issuer. With regard to available-for-sale equity securities, the Company also considers the ability and intent to hold the investment for a period of time to allow for a recovery of value. When it is determined that a decline in value of an equity security is other-than-temporary, the carrying value of the equity security is reduced to its fair value, with a corresponding charge to earnings.

In addition, in April 2009, the Financial Accounting Standards Board (“FASB”) revised the authoritative guidance for the recognition and presentation of other-than-temporary impairments for debt securities. The Company early adopted this guidance on January 1, 2009. Prior to the adoption of this guidance the Company was required to record an other-than-temporary impairment for a debt security unless it could assert that it had both the intent and ability to hold the security for a period of time sufficient to allow for a recovery in its fair value to its amortized cost basis. The revised guidance indicates that an other-than-temporary impairment must be recognized in earnings for a debt security in an unrealized loss position when an entity either (a) has the intent to sell the debt security or (b) more likely than not will be required to sell the debt security before its anticipated recovery. For all debt securities in unrealized loss positions that do not meet either of these two criteria, the guidance requires that the Company analyze its ability to recover the amortized cost by comparing the net present value of projected future cash flows with the amortized cost of the security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the debt security prior to impairment. The Company may use the estimated fair value of collateral as a proxy for the net present value if it believes that the security is dependent on the liquidation of collateral for recovery of its investment. If the net present value is less than the amortized cost of the investment, an other-than-temporary impairment is recognized.

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Under the authoritative guidance for the recognition and presentation of other-than-temporary impairments, when an other-than-temporary impairment of a debt security has occurred, the amount of the other-than-temporary impairment recognized in earnings depends on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the debt security meets either of these two criteria, the other-than-temporary impairment recognized in earnings is equal to the entire difference between the security’s amortized cost basis and its fair value at the impairment measurement date. For other-than-temporary impairments of debt securities that do not meet these two criteria, the net amount recognized in earnings is equal to the difference between the amortized cost of the debt security and its net present value calculated as described above. Any difference between the fair value and the net present value of the debt security at the impairment measurement date is recorded in “Other comprehensive income (loss).” Unrealized gains or losses on securities for which an other-than-temporary impairment has been recognized in earnings is tracked as a separate component of “Accumulated other comprehensive income (loss).” Prior to the adoption of this guidance in 2009, an other-than-temporary impairment recognized in earnings for debt securities was equal to the total difference between amortized cost and fair value at the time of impairment.

For debt securities, the split between the amount of an other-than-temporary impairment recognized in other comprehensive income and the net amount recognized in earnings is driven principally by assumptions regarding the amount and timing of projected cash flows. For mortgage-backed and asset-backed securities, cash flow estimates consider the payment terms of the underlying assets backing a particular security, including prepayment assumptions, and are based on data from widely accepted third-party data sources or internal estimates. In addition to prepayment assumptions, cash flow estimates include assumptions regarding the underlying collateral including default rates and recoveries, which vary based on the asset type and geographic location, as well as the vintage year of the security. For structured securities, the payment priority within the tranche structure is also considered. For all other debt securities, cash flow estimates are driven by assumptions regarding probability of default and estimates regarding timing and amount of recoveries associated with a default. The Company has developed these estimates using information based on its historical experience as well as using market observable data, such as industry analyst reports and forecasts, sector credit ratings and other data relevant to the collectability of a security, such as the general payment terms of the security and the security’s position within the capital structure of the issuer.

The new cost basis of an impaired security is not adjusted for subsequent increases in estimated fair value. In periods subsequent to the recognition of an other-than-temporary impairment, the impaired security is accounted for as if it had been purchased on the measurement date of the impairment. For debt securities, the discount (or reduced premium) based on the new cost basis may be accreted into net investment income in future periods, including increases in cash flow on a prospective basis.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks, certain money market investments and other debt instruments with maturities of three months or less when purchased, other than cash equivalents that are included in “Trading account assets supporting insurance liabilities, at fair value.”

Deferred Policy Acquisition Costs

Costs that vary with and that are related primarily to the production of new insurance and annuity business are deferred to the extent such costs are deemed recoverable from future profits. Such deferred policy acquisition costs (“DAC”) include commissions, costs of policy issuance and underwriting, and variable field office expenses that are incurred in producing new business. In each reporting period, capitalized DAC is amortized to “General and administrative expense,” net of the accrual of imputed interest on DAC balances. DAC is subject to recoverability testing at the end of each reporting period to ensure that the balance does not exceed the present value of anticipated gross profits, anticipated gross margins, or premiums less benefits and maintenance expenses, as applicable. DAC, for applicable products, is adjusted for the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in “Accumulated other comprehensive income (loss).”

For traditional participating life insurance included in the Closed Block, DAC is amortized over the expected life of the contracts (up to 45 years) in proportion to gross margins based on historical and anticipated future experience, which is evaluated regularly. The effect of changes in estimated gross margins on unamortized deferred acquisition costs is reflected in “General and administrative expenses” in the period such estimated gross margins are revised. Policy acquisition costs related to interest-sensitive and variable life products and fixed and variable deferred annuity products are deferred and amortized over the expected

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life of the contracts (periods ranging from 25 to 99 years) in proportion to gross profits arising principally from investment results, mortality and expense margins, and surrender charges, based on historical and anticipated future experience, which is updated periodically. The Company uses a reversion to the mean approach to derive the future rate of return assumptions. However, if the projected future rate of return calculated using this approach is greater than the maximum future rate of return assumption, the maximum future rate of return is utilized. In addition to the gross profit components previously mentioned, we also include the impact of the embedded derivatives associated with certain optional living benefit features of the Company’s variable annuity contracts and related hedging activities in actual gross profits used as the basis for calculating current period amortization. The effect of changes to estimated gross profits on unamortized deferred acquisition costs is reflected in “General and administrative expenses” in the period such estimated gross profits are revised. DAC related to non-participating traditional individual life insurance is amortized in proportion to gross premiums.

For group annuity contracts, acquisition expenses are deferred and amortized over the expected life of the contracts in proportion to gross profits. For group corporate-, bank- and trust-owned life insurance contracts, acquisition costs are deferred and amortized in proportion to lives insured. For group and individual long-term care contracts, acquisition expenses are deferred and amortized in proportion to gross premiums. For single premium immediate annuities with life contingencies, and single premium group annuities and single premium structured settlements with life contingencies, all acquisition costs are charged to expense immediately because generally all premiums are received at the inception of the contract. For funding agreement notes contracts, single premium structured settlement contracts without life contingencies, and single premium immediate annuities without life contingencies, acquisition expenses are deferred and amortized over the expected life of the contracts using the interest method. For other group life and disability insurance contracts and guaranteed investment contracts, acquisition costs are expensed as incurred.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. If policyholders surrender traditional life insurance policies in exchange for life insurance policies that do not have fixed and guaranteed terms, the Company immediately charges to expense the remaining unamortized DAC on the surrendered policies. For other internal replacement transactions, except those that involve the addition of a nonintegrated contract feature that does not change the existing base contract, the unamortized DAC is immediately charged to expense if the terms of the new policies are not substantially similar to those of the former policies. If the new terms are substantially similar to those of the earlier policies, the DAC is retained with respect to the new policies and amortized over the expected life of the new policies.

Separate Account Assets and Liabilities

Separate account assets are reported at fair value and represent segregated funds that are invested for certain policyholders, pension funds and other customers. The assets consist primarily of equity securities, fixed maturities, real estate related investments, real estate mortgage loans, short-term investments and derivative instruments. The assets of each account are legally segregated and are generally not subject to claims that arise out of any other business of the Company. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities primarily represent the contractholder’s account balance in separate account assets and to a lesser extent borrowings of the separate account. See Note 11 for additional information regarding separate account arrangements with contractual guarantees. The investment income and realized investment gains or losses from separate account assets generally accrue to the policyholders and are not included in the Company’s results of operations. Mortality, policy administration and surrender charges assessed against the accounts are included in “Policy charges and fee income.” Asset management fees charged to the accounts are included in “Other income.” Seed money that the Company invests in separate accounts is reported in the appropriate general account asset line. Investment income and realized investment gains or losses from seed money invested in separate accounts accrues to the Company and is included in the Company’s results of operations.

Other Assets and Other Liabilities

Other assets consist primarily of prepaid pension benefit costs, certain restricted assets, broker-dealer related receivables, trade receivables, valuation of business acquired, goodwill, deferred sales inducements, the Company’s investments in operating joint ventures, which include the Company’s indirect investment in China Pacific Insurance (Group) Co., Ltd. (“China Pacific Group”) and prior to its sale on December 31, 2009 included the Company’s investment in Wachovia Securities Financial Holdings, LLC (“Wachovia Securities”), property and equipment, and reinsurance recoverables. Other liabilities consist primarily

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of trade payables, broker-dealer related payables, pension and other employee benefit liabilities, derivative liabilities, and reinsurance payables.

Property and equipment are carried at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of the related assets, which generally range from 3 to 40 years.

As a result of certain acquisitions and the application of purchase accounting, the Company reports a financial asset representing the valuation of business acquired (“VOBA”). VOBA is determined by estimating the net present value of future cash flows from contracts in force in the acquired business at the date of acquisition. VOBA includes an explicit adjustment to reflect the cost of capital invested in the business. VOBA balances are subject to recoverability testing, in the manner in which it was acquired, at the end of each reporting period to ensure that the balance does not exceed the present value of anticipated gross profits. The Company has established a VOBA asset primarily for its deferred annuity, defined contribution and defined benefit businesses. For acquired annuity contracts, future positive cash flows generally include fees and other charges assessed to the contracts as long as they remain in force as well as fees collected upon surrender, if applicable, while future negative cash flows include costs to administer contracts and benefit payments. In addition, future cash flows with respect to acquired annuity business include the impact of future cash flows expected from the guaranteed minimum death and living benefit provisions, including the performance of hedging programs for embedded derivatives. For acquired defined contribution and defined benefits businesses, contract balances are projected using assumptions for add-on deposits, participant withdrawals, contract surrenders, and investment returns. Gross profits are then determined based on investment spreads and the excess of fees and other charges over the costs to administer the contracts. The Company amortizes VOBA over the effective life of the acquired contracts in “General and administrative expenses.” For acquired annuity contracts, VOBA is amortized in proportion to estimated gross profits arising from the contracts and anticipated future experience, which is evaluated regularly. For acquired defined contribution and defined benefit businesses, the majority of VOBA is amortized in proportion to estimated gross profits arising principally from investment spreads and fees in excess of actual expense based upon historical and estimated future experience, which is updated periodically. The remainder of VOBA is amortized based on estimated gross revenues, fees, or the change in policyholders’ account balances, as applicable. The effect of changes in estimated gross profits on unamortized VOBA is reflected in the period such estimates of expected future profits are revised. See Note 8 for additional information regarding VOBA.

As a result of certain acquisitions, the Company recognizes an asset for goodwill representing the excess of cost over the net fair value of the assets acquired and liabilities assumed. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within the reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.

The Company tests goodwill for impairment annually as of December 31. The Company’s reporting units are the Financial Services Businesses and the Closed Block Business. The goodwill impairment analysis is a two-step test that is performed at the reporting unit level. The first step, used to identify potential impairment, involves comparing each reporting unit’s fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, the applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of a potential impairment and the second step of the test is performed to measure the amount of impairment.

The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill in the “pro forma” business combination accounting as described above exceeds the goodwill assigned to a reporting unit, there is no impairment. If the goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded in “General and administrative expenses” for the excess. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted. Management is required to make significant estimates in determining the fair value of a reporting unit including, but not limited to: projected earnings, comparative market multiples, and the risk rate at which future net cash flows are discounted.

See Note 9 for additional information regarding goodwill.

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The Company offers various types of sales inducements to policyholders related to fixed and variable deferred annuity contracts. The Company defers sales inducements and amortizes them over the anticipated life of the policy using the same methodology and assumptions used to amortize deferred policy acquisition costs. Sales inducements balances are subject to recoverability testing at the end of each reporting period to ensure that the capitalized amounts do not exceed the present value of anticipated gross profits. The Company records amortization of deferred sales inducements in “Interest credited to policyholders’ account balances.” See Note 11 for additional information regarding sales inducements.

The majority of the Company’s reinsurance recoverables and payables are receivables and corresponding payables associated with the reinsurance arrangements used to effect the Company’s acquisition of the retirement businesses of CIGNA. The remaining amounts relate to other reinsurance arrangements entered into by the Company. For each of its reinsurance contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. See Note 13 for additional information about the Company’s reinsurance arrangements.

Investments in operating joint ventures are generally accounted for under the equity method. The carrying value of these investments is written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. The Company held an investment in Wachovia Securities which was sold on December 31, 2009. See Note 7 for additional information on investments in operating joint ventures.

Future Policy Benefits

The Company’s liability for future policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality or morbidity, less the present value of future net premiums. For individual traditional participating life insurance products, the mortality and interest rate assumptions applied are those used to calculate the policies’ guaranteed cash surrender values. For life insurance, other than individual traditional participating life insurance, and annuity and disability products, expected mortality and morbidity is generally based on the Company’s historical experience or standard industry tables including a provision for the risk of adverse deviation. Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although mortality and morbidity and interest rate assumptions are “locked-in” upon the issuance of new insurance or annuity business with fixed and guaranteed terms, significant changes in experience or assumptions may require the Company to provide for expected future losses on a product by establishing premium deficiency reserves. Premium deficiency reserves, if required, are determined based on assumptions at the time the premium deficiency reserve is established and do not include a provision for the risk of adverse deviation. See Note 10 for additional information regarding future policy benefits.

The Company’s liability for future policy benefits also includes a liability for unpaid claims and claim adjustment expenses. The Company does not establish claim liabilities until a loss has occurred. However, unpaid claims and claim adjustment expenses includes estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date. The Company’s liability for future policy benefits also includes net liabilities for guarantee benefits related to certain nontraditional long-duration life and annuity contracts, which are discussed more fully in Note 11, and certain unearned revenues.

Policyholders’ Account Balances

The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is generally equal to the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance. These policyholders’ account balances also include provision for benefits under non-life contingent payout annuities and certain unearned revenues. See Note 10 for additional information regarding policyholders’ account balances.

Policyholders’ Dividends

The Company’s liability for policyholders’ dividends includes its dividends payable to policyholders and its policyholder dividend obligation associated with the participating policies included in the Closed Block. The dividends payable for participating policies included in the Closed Block are determined at the end of each year for the following year by the Board of Directors of Prudential Insurance based on its statutory results, capital position, ratings, and the emerging experience of the Closed Block. The policyholder dividend obligation represents amounts to be paid to Closed Block policyholders as an additional policyholder

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dividend unless otherwise offset by future Closed Block performance that is less favorable than originally expected, the components of which are discussed more fully in Note 12.

Contingent Liabilities

Amounts related to contingent liabilities are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, they are included in the accrual.

Insurance Revenue and Expense Recognition

Premiums from individual life products, other than interest-sensitive life contracts, and health insurance and long-term care products are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium (i.e., the portion of the gross premium required to provide for all expected future benefits and expenses) is deferred and recognized into revenue in a constant relationship to insurance in force. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized using the net level premium method.

Premiums from non-participating group annuities with life contingencies, single premium structured settlements with life contingencies and single premium immediate annuities with life contingencies are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium is deferred and recognized into revenue in a constant relationship to the amount of expected future benefit payments. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized using the net premium method.

Certain individual annuity contracts provide the holder a guarantee that the benefit received upon death or annuitization will be no less than a minimum prescribed amount. These benefits are accounted for as insurance contracts and are discussed in further detail in Note 11. The Company also provides contracts with certain living benefits which are considered embedded derivatives. These contracts are discussed in further detail in Note 11.

Amounts received as payment for interest-sensitive group and individual life contracts, deferred fixed annuities, structured settlements and other contracts without life contingencies, and participating group annuities are reported as deposits to “Policyholders’ account balances.” Revenues from these contracts are reflected in “Policy charges and fee income” consisting primarily of fees assessed during the period against the policyholders’ account balances for mortality charges, policy administration charges and surrender charges. In addition to fees, the Company earns investment income from the investment of policyholders’ deposits in the Company’s general account portfolio. Fees assessed that represent compensation to the Company for services to be provided in future periods and certain other fees are deferred and amortized into revenue over the life of the related contracts in proportion to estimated gross profits. Benefits and expenses for these products include claims in excess of related account balances, expenses of contract administration, interest credited to policyholders’ account balances and amortization of DAC.

For group life, other than interest-sensitive group life contracts, and disability insurance, premiums are recognized over the period to which the premiums relate in proportion to the amount of insurance protection provided. Claim and claim adjustment expenses are recognized when incurred.

Premiums, benefits and expenses are stated net of reinsurance ceded to other companies, except for amounts associated with certain modified coinsurance contracts which are reflected in the Company’s financial statements based on the application of the deposit method of accounting. Estimated reinsurance recoverables and the cost of reinsurance are recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policies.

Other Income

“Other income” includes asset management fees and securities and commodities commission revenues, which are recognized in the period in which the services are performed, interest earned on affiliated notes receivable, realized and unrealized gains and losses from investments classified as “trading” such as “Trading account assets supporting insurance liabilities” and “Other trading account assets,” and short-term investments that are marked-to-market through other income.

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Foreign Currency

Assets and liabilities of foreign operations and subsidiaries reported in currencies other than U.S. dollars are translated at the exchange rate in effect at the end of the period. Revenues, benefits and other expenses are translated at the average rate prevailing during the period. The effects of translating the statements of operations and financial position of non-U.S. entities with functional currencies other than the U.S. dollar are included, net of related qualifying hedge gains and losses and income taxes, in “Accumulated other comprehensive income (loss).” Gains and losses from foreign currency transactions are reported in either “Accumulated other comprehensive income (loss)” or current earnings in “Other income” depending on the nature of the related foreign currency denominated asset or liability.

Derivative Financial Instruments

Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, values of securities or commodities, credit spreads, market volatility, expected returns, and liquidity. Values can also be affected by changes in estimates and assumptions, including those related to counterparty behavior and non-performance risk used in valuation models. Derivative financial instruments generally used by the Company include swaps, futures, forwards and options and may be exchange-traded or contracted in the over-the-counter market. Derivative positions are carried at fair value, generally by obtaining quoted market prices or through the use of valuation models.

Derivatives are used in a non-dealer or non-broker capacity in insurance and treasury operations, to manage the interest rate and currency characteristics of assets or liabilities and to mitigate the risk of a diminution, upon translation to U.S. dollars, of net investments in foreign operations resulting from unfavorable changes in currency exchange rates. Additionally, derivatives may be used to seek to reduce exposure to interest rate, credit, foreign currency and equity risks associated with assets held or expected to be purchased or sold, and liabilities incurred or expected to be incurred. As discussed in detail below and in Note 21, all realized and unrealized changes in fair value of non-dealer or non-broker related derivatives, with the exception of the effective portion of cash flow hedges and effective hedges of net investments in foreign operations, are recorded in current earnings. Cash flows from these derivatives are reported in the operating, investing, or financing activities sections in the Consolidated Statements of Cash Flows.

Derivatives are also used in a derivative dealer or broker capacity in the Company’s global commodities group to meet the needs of clients by structuring transactions that allow clients to manage their exposure to interest rates, foreign exchange rates, indices or prices of securities and commodities. Realized and unrealized changes in fair value of derivatives used in these dealer related operations are included in “Other income” in the periods in which the changes occur. Cash flows from such derivatives are reported in the operating activities section of the Consolidated Statements of Cash Flows.

Derivatives are recorded either as assets, within “Other trading account assets, at fair value” or “Other long-term investments,” or as liabilities, within “Other liabilities,” except for embedded derivatives which are recorded with the associated host contract. The Company nets the fair value of all derivative financial instruments with counterparties for which a master netting arrangement has been executed.

The Company designates derivatives as either (1) a hedge of the fair value of a recognized asset or liability or unrecognized firm commitment (“fair value” hedge); (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge); (3) a foreign-currency fair value or cash flow hedge (“foreign currency” hedge); (4) a hedge of a net investment in a foreign operation; or (5) a derivative that does not qualify for hedge accounting.

To qualify for hedge accounting treatment, a derivative must be highly effective in mitigating the designated risk of the hedged item. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship. Even if a derivative qualifies for hedge accounting treatment, there may be an element of ineffectiveness of the hedge. Under such circumstances, the ineffective portion is recorded in “Realized investment gains (losses), net.”

The Company formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Hedges of a net investment in a foreign operation are linked to the specific foreign operation.

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When a derivative is designated as a fair value hedge and is determined to be highly effective, changes in its fair value, along with changes in the fair value of the hedged asset or liability (including losses or gains on firm commitments), are reported on a net basis in the income statement, generally in “Realized investment gains (losses), net.” When swaps are used in hedge accounting relationships, periodic settlements are recorded in the same income statement line as the related settlements of the hedged items.

When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in its fair value are recorded in “Accumulated other comprehensive income (loss)” until earnings are affected by the variability of cash flows being hedged (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). At that time, the related portion of deferred gains or losses on the derivative instrument is reclassified and reported in the income statement line item associated with the hedged item.

When a derivative is designated as a foreign currency hedge and is determined to be highly effective, changes in its fair value are recorded either in current period earnings if the hedge transaction is a fair value hedge (e.g., a hedge of a recognized foreign currency asset or liability) or in “Accumulated other comprehensive income (loss)” if the hedge transaction is a cash flow hedge (e.g., a foreign currency denominated forecasted transaction). When a derivative is used as a hedge of a net investment in a foreign operation, its change in fair value, to the extent effective as a hedge, is recorded in the cumulative translation adjustment account within “Accumulated other comprehensive income (loss).”

If it is determined that a derivative no longer qualifies as an effective fair value or cash flow hedge or management removes the hedge designation, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net.” The asset or liability under a fair value hedge will no longer be adjusted for changes in fair value and the existing basis adjustment is amortized to the income statement line associated with the asset or liability. The component of “Accumulated other comprehensive income (loss)” related to discontinued cash flow hedges is amortized to the income statement line associated with the hedged cash flows consistent with the earnings impact of the original hedged cash flows.

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, or because it is probable that the forecasted transaction will not occur by the end of the specified time period, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net.” Any asset or liability that was recorded pursuant to recognition of the firm commitment is removed from the balance sheet and recognized currently in “Realized investment gains (losses), net.” Gains and losses that were in “Accumulated other comprehensive income (loss)” pursuant to the hedge of a forecasted transaction are recognized immediately in “Realized investment gains (losses), net.”

If a derivative does not qualify for hedge accounting, all changes in its fair value, including net receipts and payments, are included in “Realized investment gains (losses), net” without considering changes in the fair value of the economically associated assets or liabilities.

The Company is a party to financial instruments that contain derivative instruments that are “embedded” in the financial instruments. At inception, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and changes in its fair value are included in “Realized investment gains (losses), net.” For certain financial instruments that contain an embedded derivative that otherwise would need to be bifurcated and reported at fair value, the Company may elect to classify the entire instrument as a trading account asset and report it within “Other trading account assets, at fair value”.

Short-Term and Long-Term Debt

Liabilities for short-term and long-term debt are primarily carried at an amount equal to unpaid principal balance, net of unamortized discount or premium. Original-issue discount or premium and debt-issue costs are recognized as a component of interest expense over the period the debt is expected to be outstanding, using the interest method of amortization. Short-term debt is debt coming due in the next twelve months, including that portion of debt otherwise classified as long-term. The short-term debt

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caption may exclude short-term items the Company intends to refinance on a long-term basis in the near term. See Note 14 for additional information regarding short-term and long-term debt.

Income Taxes

The Company is a member of the consolidated federal income tax return of Prudential Financial and primarily files separate company state and local tax returns. Pursuant to the tax allocation arrangement with Prudential Financial, total federal income tax expense is determined on a separate company basis. Members with losses record tax benefits to the extent such losses are recognized in the consolidated federal tax provision.

Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes. A valuation allowance is recorded to reduce a deferred tax asset to the amount expected to be realized.

The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest and penalties which relate to tax years still subject to review by the Internal Revenue Service (“IRS”) or other taxing jurisdictions. Audit periods remain open for review until the statute of limitations has passed. Generally, for tax years which produce net operating losses, capital losses or tax credit carryforwards (“tax attributes”), the statute of limitations does not close, to the extent of these tax attributes, until the expiration of the statute of limitations for the tax year in which they are fully utilized. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The Company classifies all interest and penalties related to tax uncertainties as income tax expense. See Note 18 for additional information regarding income taxes.

Adoption of New Accounting Pronouncements

In July 2010, the FASB issued updated guidance that requires enhanced disclosures related to the allowance for credit losses and the credit quality of a company’s financing receivable portfolio. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The Company adopted this guidance effective December 31, 2010. The required disclosures are included above and in Note 4. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning after December 15, 2010. The Company will provide these required disclosures in the interim reporting period ending March 31, 2011. In January 2011, the FASB deferred the disclosures required by this guidance related to troubled debt restructurings. The disclosures will be effective, and the Company will provide these disclosures, concurrent with the effective date of proposed guidance for determining what constitutes a troubled debt restructuring.

In March 2010, the FASB issued updated guidance that amends and clarifies the accounting for credit derivatives embedded in interests in securitized financial assets. This new guidance eliminates the scope exception for embedded credit derivatives (except for those that are created solely by subordination) and provides new guidance on how the evaluation of embedded credit derivatives is to be performed. This new guidance is effective for the first interim reporting period beginning after June 15, 2010. The Company’s adoption of this guidance effective with the interim reporting period ending September 30, 2010 did not have a material effect on the Company’s consolidated financial position, results of operations, and financial statement disclosures.

In January 2010, the FASB issued updated guidance that requires new fair value disclosures about significant transfers between Level 1 and 2 measurement categories and separate presentation of purchases, sales, issuances, and settlements within the roll forward of Level 3 activity. Also, this updated fair value guidance clarifies the disclosure requirements about level of disaggregation and valuation techniques and inputs. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of Level 3 activity, which are effective for interim and annual reporting periods beginning after December 15, 2010. The Company adopted the effective portions of this guidance on January 1, 2010. The required disclosures are provided in Note 19. The Company will provide the required disclosures about purchases, sales, issuances, and settlements in the roll forward of Level 3 activity in the interim reporting period ending March 31, 2011.

In June 2009, the FASB issued authoritative guidance which changes the analysis required to determine whether or not an entity is a variable interest entity (“VIE”). In addition, the guidance changes the determination of the primary beneficiary of a VIE from a quantitative to a qualitative model. Under the new qualitative model, the primary beneficiary must have both the ability to

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direct the activities of the VIE and the obligation to absorb either losses or gains that could be significant to the VIE. This guidance also changes when reassessment is needed, as well as requires enhanced disclosures, including the effects of a company’s involvement with a VIE on its financial statements. This guidance is effective for interim and annual reporting periods beginning after November 15, 2009. In February 2010, the FASB issued updated guidance which defers, except for disclosure requirements, the impact of this guidance for entities that (1) possess the attributes of an investment company, (2) do not require the reporting entity to fund losses, and (3) are not financing vehicles or entities that were formerly classified as qualified special purpose entities (“QSPE’s”). The Company’s adoption of this guidance effective January 1, 2010 did not have a material effect on the Company’s consolidated financial position and results of operations. The disclosures required by this revised guidance are provided in Note 5.

In June 2009, the FASB issued authoritative guidance which changes the accounting for transfers of financial assets, and is effective for transfers of financial assets occurring in interim and annual reporting periods beginning after November 15, 2009. It removes the concept of a QSPE from the guidance for transfers of financial assets and removes the exception from applying the guidance for consolidation of variable interest entities to qualifying special-purpose entities. It changes the criteria for achieving sale accounting when transferring a financial asset and changes the initial recognition of retained beneficial interests. The guidance also defines “participating interest” to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. The Company’s adoption of this guidance effective January 1, 2010 did not have a material effect on the Company’s consolidated financial position, results of operations, and financial statement disclosures.

In January 2010, the FASB issued updated guidance that clarifies existing guidance on accounting and reporting by an entity that experiences a decrease in ownership of a subsidiary that is a business. The updated guidance states that a decrease in ownership applies to a subsidiary or group of assets that is a business, but does not apply to a sale of in-substance real estate even if it involves a business, such as an ownership interest in a partnership whose only asset is operating real estate. This guidance also affects accounting and reporting by an entity that exchanges a group of assets that constitutes a business for an equity interest in another entity. The updated guidance also expands disclosures about fair value measurements relating to retained investments in a deconsolidated subsidiary or a preexisting interest held by an acquirer in a business combination. The updated guidance is effective in the first interim or annual reporting period ending on or after December 15, 2009, and is applied on a retrospective basis to the first period that the Company adopted the existing guidance, which was as of January 1, 2009. The Company’s adoption of this updated guidance effective December 31, 2009 did not have a material effect on the Company’s consolidated financial position, results of operations, or financial statement disclosures.

In September 2009, the FASB issued updated guidance for the fair value measurement of investments in certain entities that calculate net asset value per share including certain alternative investment funds. This guidance allows companies to determine the fair value of such investments using net asset value (“NAV”) if the fair value of the investment is not readily determinable and the investee entity issues financial statements in accordance with measurement principles for investment companies. Use of this practical expedient is prohibited if it is probable the investment will be sold at something other than NAV. This guidance also requires new disclosures for each major category of alternative investments. This guidance does not apply to the Company’s investments in joint ventures and limited partnerships that are generally accounted for under the equity method or cost method. It is effective for the first annual or interim reporting period ending after December 15, 2009. The Company’s adoption of this guidance effective December 31, 2009 did not have a material effect on the Company’s consolidated financial position, results of operations, or financial statement disclosures.

In August 2009, the FASB issued updated guidance for the fair value measurement of liabilities. This guidance provides clarification on how to measure fair value in circumstances in which a quoted price in an active market for the identical liability is not available. This guidance also clarifies that restrictions preventing the transfer of a liability should not be considered as a separate input or adjustment in the measurement of fair value. The Company adopted this guidance effective with the annual reporting period ended December 31, 2009, and the adoption did not have a material impact on the Company’s consolidated financial position, results of operations, and financial statement disclosures.

In June 2009, the FASB issued authoritative guidance for the FASB’s Accounting Standards Codification TM as the source of authoritative U.S. GAAP. The Codification is not intended to change U.S. GAAP but is a new structure which organizes accounting pronouncements by accounting topic. This guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company’s adoption of this guidance effective with the reporting period ending December 31, 2009 impacts the way the Company references U.S. GAAP standards in the financial statements.

In May 2009, the FASB issued authoritative guidance for subsequent events, which addresses the accounting for and disclosure of subsequent events not addressed in other applicable GAAP, including disclosure of the date through which

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subsequent events have been evaluated. This guidance is effective for interim or annual periods ending after June 15, 2009. The Company’s adoption of this guidance effective with the period ending December 31, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations. The required disclosure of the date through which subsequent events have been evaluated is provided in Note 1.

In April 2009, the FASB revised the authoritative guidance for the recognition and presentation of other-than-temporary impairments. This new guidance amends the other-than-temporary impairment guidance for debt securities and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in the financial statements. This guidance also requires that the required annual disclosures for debt and equity securities be made for interim reporting periods. This guidance does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This guidance is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company early adopted this guidance effective January 1, 2009, which resulted in a net after-tax increase to retained earnings and decrease to accumulated other comprehensive income (loss) of $575 million. The disclosures required by this new guidance are provided in Note 4. See “Investments and Investment-Related Liabilities” above for more information.

In April 2009, the FASB revised the authoritative guidance for fair value measurements and disclosures to provide guidance on (1) estimating the fair value of an asset or liability if there was a significant decrease in the volume and level of trading activity for these assets or liabilities, and (2) identifying transactions that are not orderly. Further, this new guidance requires additional disclosures about fair value measurements in interim and annual periods. This guidance is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The Company’s early adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations. The disclosures required by this revised guidance are provided in Note 19.

In April 2009, the FASB revised the authoritative guidance for the accounting for business combinations. This new guidance requires an asset acquired or liability assumed in a business combination that arises from a contingency to be recognized at fair value at the acquisition date, if the acquisition date fair value of that asset or liability can be determined during the measurement period. If the acquisition date fair value of an asset acquired or liability assumed in a business combination that arises from a contingency cannot be determined during the measurement period, the asset or liability shall be recognized at the acquisition date using the authoritative guidance related to accounting for contingencies. This new guidance also amends disclosure requirements. This guidance is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The Company’s adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations.

In December 2008, the FASB revised the authoritative guidance for employers’ disclosures about postretirement benefit plan assets. This new guidance requires additional disclosures about the components of plan assets, investment strategies for plan assets, significant concentrations of risk within plan assets, and requires disclosures regarding the fair value measurement of plan assets. This guidance is effective for fiscal years ending after December 15, 2009. The Company adopted this guidance effective December 31, 2009. The required disclosures are provided in Note 17.

In September 2008, the FASB Emerging Issues Task Force (“EITF”) reached consensus on an issuer’s accounting for liabilities measured at fair value with a third-party credit enhancement. This consensus concluded that (a) the issuer of a liability (including debt) with a third-party credit enhancement that is inseparable from the liability, shall not include the effect of the credit enhancement in the fair value measurement of the liability; (b) the issuer shall disclose the existence of any third-party credit enhancement on such liabilities, and (c) in the period of adoption the issuer shall disclose the valuation techniques used to measure the fair value of such liabilities and disclose any changes from valuation techniques used in prior periods. The Company’s adoption of this guidance on a prospective basis effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations.

In April 2008, the FASB revised the authoritative guidance for the determination of the useful life of intangible assets. This new guidance amends the list of factors an entity should consider in developing renewal or extension assumptions used to determine the useful life of recognized intangible assets. This guidance is effective for fiscal years and interim periods beginning after December 15, 2008, with the guidance for determining the useful life of a recognized intangible asset being applied prospectively to intangible assets acquired after the effective date, and the disclosure requirements being applied prospectively to

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all intangible assets recognized as of, and after, the effective date. The Company’s adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations.

In March 2008, the FASB issued authoritative guidance for derivative instruments and hedging activities which amends and expands the disclosure requirements for derivative instruments and hedging activities by requiring companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Company’s adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations. The required disclosures are provided in Note 21.

In February 2008, the FASB revised the authoritative guidance for the accounting for transfers of financial assets and repurchase financing transactions. The new guidance provides recognition and derecognition guidance for a repurchase financing transaction, which is a repurchase agreement that relates to a previously transferred financial asset between the same counterparties, that is entered into contemporaneously with or in contemplation of, the initial transfer. The guidance is effective for fiscal years beginning after November 15, 2008. The Company’s adoption of this guidance on a prospective basis effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position and results of operations.

In February 2008, the FASB revised the authoritative guidance which delays the effective date related to fair value measurements and disclosures for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company’s adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued authoritative guidance for business combinations which addresses the accounting for business acquisitions, is effective for fiscal years beginning on or after December 15, 2008, with early adoption prohibited, and generally applies to business acquisitions completed after December 31, 2008. Among other things, the new guidance requires that all acquisition-related costs be expensed as incurred, and that all restructuring costs related to acquired operations be expensed as incurred. This new guidance also addresses the current and subsequent accounting for assets and liabilities arising from contingencies acquired or assumed and, for acquisitions both prior and subsequent to December 31, 2008, requires the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. The Company’s adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations, but may have an effect on the accounting for future business combinations.

In December 2007, the FASB issued authoritative guidance for noncontrolling interests in consolidated financial statements. This guidance changes the accounting for minority interests, which are recharacterized as noncontrolling interests and classified by the parent company as a component of equity. Upon adoption, this guidance requires retroactive adoption of the presentation and disclosure requirements for existing noncontrolling interests and prospective adoption for all other requirements. The Company’s adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial position or results of operations, but did affect financial statement presentation and disclosure. Noncontrolling interests, previously reported as a liability, are now required to be reported as a separate component of equity on the statement of financial position. In addition, income attributable to the noncontrolling interests, which was previously reported as an expense in general and administrative expenses and reflected within income from continuing operations is now reported as a separate amount below net income.

In September 2006, the FASB issued authoritative guidance for employers’ accounting for defined benefit pension and other postretirement plans, which amended previous guidance. This revised guidance requires an employer on a prospective basis to recognize the overfunded or underfunded status of its defined benefit pension and postretirement plans as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through other comprehensive income. The Company adopted this guidance, along with the required disclosures, on December 31, 2006. The revised guidance also requires an employer on a prospective basis to measure the funded status of its plans as of its fiscal year-end. This requirement is effective for fiscal years ending after December 15, 2008. The Company adopted this guidance on December 31, 2008 and the impact of changing from a September 30 measurement date to a December 31 measurement date was a net after-tax increase to retained earnings of $27 million.

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Future Adoption of New Accounting Pronouncements

In December 2010, the FASB issued authoritative guidance that modifies the first step of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform the second step of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing authoritative guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This new guidance is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2010. The Company’s adoption of this guidance effective January 1, 2011 is not expected to have a material effect on the Company’s consolidated financial position, results of operations, and financial statement disclosures.

In October 2010, the FASB issued authoritative guidance to address diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. Under the new guidance acquisition costs are to include only those costs that are directly related to the acquisition or renewal of insurance contracts by applying a model similar to the accounting for loan origination costs. An entity may defer incremental direct costs of contract acquisition that are incurred in transactions with independent third parties or employees as well as the portion of employee compensation and other costs directly related to underwriting, policy issuance and processing, medical inspection, and contract selling for successfully negotiated contracts. Additionally, an entity may capitalize as a deferred acquisition cost only those advertising costs meeting the capitalization criteria for direct-response advertising. This change is effective for fiscal years beginning after December 15, 2011 and interim periods within those years. Early adoption as of the beginning of a fiscal year is permitted. The guidance is to be applied prospectively upon the date of adoption, with retrospective application permitted, but not required. The Company will adopt this guidance effective January 1, 2012. The Company is currently assessing the impact of the guidance on the Company’s consolidated financial position, results of operations, and financial statement disclosures.

In April 2010, the FASB issued authoritative guidance clarifying that an insurance entity should not consider any separate account interests in an investment held for the benefit of policyholders to be the insurer’s interests, and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation, unless the separate account interests are held for a related party policyholder, whereby consolidation of such interests must be considered under applicable variable interest guidance. This guidance is effective for interim and annual reporting periods beginning after December 15, 2010 and retrospectively to all prior periods upon the date of adoption, with early adoption permitted. The Company’s adoption of this guidance effective January 1, 2011 is not expected to have a material effect on the Company’s consolidated financial position, results of operations, and financial statement disclosures.

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3. ACQUISITIONS AND DISPOSITIONS

Sale of investment in Wachovia Securities

On December 31, 2009 the Company completed the sale of its minority joint venture interest in Wachovia Securities. See Note 7 for more details on this transaction.

Discontinued Operations

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

				2010		2009		2008

				(in millions)
	Real estate investments sold or held for sale(1)			$	12	$	1	$	2
	International securities operations(2)				(1)		(1)		(1)
	Healthcare operations(3)				1		-		2
		Income from discontinued operations before income taxes			12		-		3
			Income tax benefit		4		-		(2)
		Income from discontinued operations, net of taxes		$	8	$	-	$	5

The Company’s Consolidated Statements of Financial Position include total assets and total liabilities related to discontinued businesses of $15 million and $3 million, respectively, at December 31, 2010 and $18 million and $5 million, respectively, at December 31, 2009.

(1)	Reflects the income or loss from discontinued real estate investments, primarily related to gains recognized on the sale of real estate properties.

(2)	International securities operations include the European retail transaction-oriented stockbrokerage and related activities of Prudential Securities Group, Inc.

(3)

The sale of the Company’s healthcare business to Aetna was completed in 1999. The loss the Company previously recorded upon the disposal of its healthcare business was reduced in each of the years ended December 31, 2010 and 2008. The reductions were primarily the result of favorable resolution of certain legal, regulatory and contractual matters.

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

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4. INVESTMENTS

Fixed Maturities and Equity Securities

The following tables provide information relating to fixed maturities and equity securities (excluding investments classified as trading) at December 31:

		2010

										Other-than-
				Gross		Gross				temporary
		Amortized		Unrealized		Unrealized		Fair		impairments
		Cost		Gains		Losses		Value		in AOCI (3)

		(in millions)
Fixed maturities, available for sale
U.S. Treasury securities and obligations of U.S.
	government authorities and agencies	$	9,467	$	639	$	264	$	9,842	$	-
Obligations of U.S. states and their political									-
	subdivisions		1,792		32		47		1,777		-
Foreign government bonds			1,846		351		9		2,188		1
Corporate securities			69,547		5,581		625		74,503		(30)
Asset-backed securities(1)			11,359		157		1,542		9,974		(1,305)
Commercial mortgage-backed securities			10,525		607		19		11,113		-
Residential mortgage-backed securities(2)			6,778		400		17		7,161		(13)
Total fixed maturities, available for sale		$	111,314	$	7,767	$	2,523	$	116,558	$	(1,347)
Equity securities, available for sale		$	4,243	$	1,240	$	51	$	5,432

(1)	Includes credit tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans, and other asset types.

(2)	Includes publicly traded agency pass-through securities and collateralized mortgage obligations.

(3)

Represents the amount of other-than-temporary impairment losses in “Accumulated other comprehensive income (loss),” or “AOCI,” which were not included in earnings. Amount excludes $540 million of net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

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		2009

										Other-than-
				Gross		Gross				temporary
		Amortized		Unrealized		Unrealized		Fair		impairments
		Cost		Gains		Losses		Value		in AOCI(3)

		(in millions)
Fixed maturities, available for sale
U.S. Treasury securities and obligations of U.S.
	government authorities and agencies	$	6,635	$	383	$	300	$	6,718	$	-
Obligations of U.S. states and their political
	subdivisions		1,304		22		42		1,284		-
Foreign government bonds			1,896		279		11		2,164		1
Corporate securities			65,739		3,622		1,217		68,144		(43)
Asset-backed securities(1)			11,353		117		2,327		9,143		(1,581)
Commercial mortgage-backed securities			9,926		178		151		9,953		-
Residential mortgage-backed securities(2)			8,503		358		59		8,802		(11)
Total fixed maturities, available for sale		$	105,356	$	4,959	$	4,107	$	106,208	$	(1,634)
Equity securities, available for sale		$	3,996	$	940	$	80	$	4,856

(1)	Includes credit tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans, and other asset types.

(2)	Includes publicly traded agency pass-through securities and collateralized mortgage obligations.

(3)

Represents the amount of other-than-temporary impairment losses in “Accumulated other comprehensive income (loss),” or “AOCI,” which were not included in earnings. Amount excludes $482 million of net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

The amortized cost and fair value of fixed maturities by contractual maturities at December 31, 2010, are as follows:

		Available for Sale
		Amortized		Fair
		Cost		Value

		(in millions)
Due in one year or less		$	4,201	$	4,262
Due after one year through five years			22,057		23,387
Due after five years through ten years			24,450		26,542
Due after ten years			31,944		34,119
Asset-backed securities			11,359		9,974
Commercial mortgage-backed securities			10,525		11,113
Residential mortgage-backed securities			6,778		7,161
	Total	$	111,314	$	116,558

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed, and residential mortgage-backed securities are shown separately in the table above, as they are not due at a single maturity date.

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The following table depicts the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on impairments of both fixed maturities and equity securities:

			2010		2009		2008

			(in millions)
Fixed maturities, available for sale
	Proceeds from sales		$	7,807	$	12,133	$	51,029
	Proceeds from maturities/repayments			13,216		14,295		9,753
	Gross investment gains from sales, prepayments, and maturities			580		510		715
	Gross investment losses from sales and maturities			(51)		(303)		(524)

Fixed maturity and equity security impairments
	Net writedowns for other-than-temporary impairment losses on
		fixed maturities recognized in earnings (1)	$	(394)	$	(1,333)	$	(2,060)
	Writedowns for impairments on equity securities			(40)		(724)		(717)

(1)	Excludes the portion of other-than-temporary impairments recorded in “Other comprehensive income (loss),” representing any difference between the fair value of the impaired debt security and the net present value of its projected future cash flows at the time of impairment.

As discussed in Note 2, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities are recognized in “Other comprehensive income (loss)” (“OCI”). For these securities the net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in OCI. The following table sets forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

Credit losses recognized in earnings on fixed maturity securities held by the Company for which a portion of
	the OTTI loss was recognized in OCI
		Year Ended December 31,
		2010		2009

		(in millions)

Balance, beginning of period		$	1,520	$	-
Credit losses remaining in retained earnings related to adoption of new
	authoritative guidance on January 1, 2009		-		580
Credit loss impairments previously recognized on securities which matured, paid down,
	prepaid or were sold during the period		(280)		(240)
Credit loss impairments previously recognized on securities impaired to fair value during
	the period(1)		(329)		(7)
Credit loss impairment recognized in the current period on securities not previously impaired			17		570
Additional credit loss impairments recognized in the current period on securities
	previously impaired		190		623
Increases due to the passage of time on previously recorded credit losses			88		35
Accretion of credit loss impairments previously recognized due to an increase in
	cash flows expected to be collected		(52)		(41)
Balance, end of period		$	1,154	$	1,520

(1)	Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.

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Trading Account Assets Supporting Insurance Liabilities

The following table sets forth the composition of “Trading account assets supporting insurance liabilities” at December 31:

			2010				2009

			Amortized		Fair		Amortized		Fair
			Cost		Value		Cost		Value

			(in millions)
Short-term investments and cash equivalents			$	697	$	697	$	725	$	725
Fixed maturities:
	Corporate securities			9,472		10,006		9,117		9,418
	Commercial mortgage-backed securities			2,352		2,407		1,899		1,893
	Residential mortgage-backed securities(1)			1,350		1,363		1,434		1,432
	Asset-backed securities(2)			1,158		1,030		1,022		857
	Foreign government bonds			97		101		104		106
	U.S. government authorities and agencies and obligations of U.S.
		states		366		360		91		87
Total fixed maturities				14,795		15,267		13,667		13,793
Equity securities				90		73		164		121
		Total trading account assets supporting insurance liabilities	$	15,582	$	16,037	$	14,556	$	14,639

(1)	Includes publicly traded agency pass-through securities and collateralized mortgage obligations.

(2)	Includes credit tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans and other asset types.

The net change in unrealized gains (losses) from trading account assets supporting insurance liabilities still held at period end, recorded within “Other income” was $372 million, $1,564 million and $(1,362) million during the years ended December 31, 2010, 2009 and 2008, respectively.

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Other Trading Account Assets

The following table sets forth the composition of the “Other trading account assets” at December 31:

				2010				2009
				Amortized		Fair		Amortized		Fair
				Cost		Value		Cost		Value

			(in millions)
Fixed Maturities:
	Asset-backed securities				168		175		178		183
	Corporate securities				151		164		152		169
	Commercial mortgage-backed securities				50		52		50		52
	U.S. government authorities and agencies and obligations
		of U.S. states			200		202		67		71
Total fixed maturities					569		593		447		475
Equity securities					209		226		209		215
	Subtotal			$	778	$	819	$	656	$	690

Derivative instruments							4,358				2,175
Total other trading account assets				$	778	$	5,177	$	656	$	2,865

The net change in unrealized gains (losses) from other trading account assets, excluding derivative instruments, still held at period end, recorded within “Other income” was $7 million, $78 million and $(48) million during the years ended December 31, 2010, 2009 and 2008, respectively.

B-28

Commercial Mortgage and Other Loans

The Company’s commercial mortgage and other loans are comprised as follows at December 31:

	2010					2009
	Amount		% of			Amount		% of
	(in millions)		Total			(in millions)		Total

Commercial and Agricultural mortgage loans by property type:
Office buildings	$	5,259		19.6	%	$	5,641		21.2	%
Retail stores		5,900		22.0			5,536		20.8
Apartments/Multi-Family		4,071		15.1			4,043		15.2
Industrial buildings		6,079		22.6			5,824		21.8
Hospitality		1,511		5.6			1,567		5.9
Other		2,235		8.3			2,267		8.5

Total commercial mortgage loans		25,055		93.2			24,878		93.4

Agricultural property loans		1,837		6.8			1,759		6.6
Total commercial mortgage and agricultural loans		26,892		100.0	%		26,637		100.0	%
Valuation allowance		(374)					(478)

Total net commercial mortgage and agricultural loans		26,518					26,159

Other loans
Uncollateralized loans		121					121
Residential property loans		8					10
Other collateralized loans		-					-

Total other loans		129					131
Valuation allowance		-					(1)

Total net other loans		129					130

Total commercial mortgage and other loans	$	26,647				$	26,289

The commercial mortgage and agricultural property loans are geographically dispersed throughout the United States, Canada and Asia with the largest concentrations in California (25%), New York (11%) and Texas (7%) at December 31, 2010.

Activity in the allowance for losses for all commercial mortgage and other loans, for the years ended December 31, is as follows:

		2010		2009		2008

		(in millions)
Allowance for losses, beginning of year	$	479	$	168	$	84
Addition to / (release of) allowance for losses		(105)		411		84
Charge-offs, net of recoveries		-		(100)		-
Change in foreign exchange		-		-		-

Allowance for losses, end of year	$	374	$	479	$	168

B-29

The following table sets forth the allowance for credit losses and the recorded investment in commercial mortgage and other loans as of December 31, 2010:

		Commercial		Agricultural		Residential		Other
		Mortgage		Property		Property		Collateralized		Uncollateralized
		Loans		Loans		Loans		Loans		Loans		Total

Allowance for Credit Losses:		(in millions)
Ending Balance: individually evaluated
	for impairment	$	141	$	-	$	-	$	-	$	-	$	141
Ending Balance: collectively evaluated
	for impairment		225		8		-		-		-		233
Ending Balance: loans acquired with
	deteriorated credit quality		-		-		-		-		-		-
Total Ending Balance		$	366	$	8	$	-	$	-	$	-	$	374

Recorded Investment:(1)
Ending balance gross of reserves:
	individually evaluated for impairment	$	845	$	31	$	-	$	-	$	-	$	876
Ending balance gross of reserves:
	collectively evaluated for impairment		24,210		1,806		8		-		121		26,145
Ending balance gross of reserves: loans
	acquired with deteriorated credit
	quality		-		-		-		-		-		-
Total Ending Balance, gross of reserves		$	25,055	$	1,837	$	8	$	-	$	121	$	27,021

(1)	Recorded investment reflects the balance sheet carrying value gross of related allowance.

B-30

Impaired loans include those loans for which it is probable that amounts due according to the contractual terms of the loan agreement will not all be collected. Impaired commercial mortgage and other loans identified in management’s specific review of probable loan losses and the related allowance for losses at December 31, 2010 are as follows:

Impaired Commercial Mortgage and Other Loans
		Year Ended December 31, 2010

				Unpaid
		Recorded		Principal		Related
		Investment (1)		Balance		Allowance

		(in millions)
With no related allowance recorded:
Commercial mortgage loans:
	Industrial	$	-	$	-	$	-
	Retail		-		-		-
	Office		-		-		-
	Apartments/Multi-Family		-		-		-
	Hospitality		64		64		-
	Other		-		-		-
Total commercial mortgage loans		$	64	$	64	$	-

Agricultural property loans		$	1	$	1	$	-
Residential property loans			-		-		-
Other collateralized loans			-		-		-
Uncollateralized loans			-		-		-

With an allowance recorded:
Commercial mortgage loans:
	Industrial	$	18	$	18	$	18
	Retail		102		102		16
	Office		28		28		7
	Apartments/Multi-Family		47		47		6
	Hospitality		194		194		76
	Other		60		60		18
Total commercial mortgage loans		$	449	$	449	$	141

Agricultural property loans		$	-	$	-	$	-
Residential property loans			-		-		-
Other collateralized loans			-		-		-
Uncollateralized loans			-		-		-

Total:
	Commercial mortgage loans	$	513	$	513	$	141
	Agricultural property loans		1		1		-
	Residential property loans		-		-		-
	Other collateralized loans		-		-		-
	Uncollateralized loans		-		-		-

(1)	Recorded investment reflects the balance sheet carrying value gross of related allowance.

B-31

Non-performing loans include those loans for which it is probable that amounts due according to the contractual terms of the loan agreement will not all be collected. Non-performing commercial mortgage and other loans identified in management’s specific review of probable loan losses and the related allowance for losses at December 31, are as follows:

	2009


Non-performing commercial mortgage and other loans with allowance for losses	$	568
Non-performing commercial mortgage and other loans with no allowance for losses		-
Allowance for losses, end of year		(151)

Net carrying value of non-performing commercial mortgage and other loans	$	417

Impaired commercial mortgage and other loans with no allowance for losses are loans in which the fair value of the collateral or the net present value of the loans’ expected future cash flows equals or exceeds the recorded investment. The average recorded investment in impaired loans before allowance for losses was $271 million for 2010. Net investment income recognized on these loans totaled $20 million for the year ended December 31, 2010. See Note 2 for information regarding the Company’s accounting policies for commercial mortgage and other loans.

Non-performing commercial mortgage and other loans with no allowance for losses are loans in which the fair value of the collateral or the net present value of the loans’ expected future cash flows equals or exceeds the recorded investment. The average recorded investment in non-performing loans before allowance for losses was $460 million for 2009. Net investment income recognized on these loans totaled $24 million for 2009. See Note 2 for information regarding the Company’s accounting policies for commercial mortgage and other loans.

B-32

The following tables set forth the credit quality indicators as of December 31, 2010, based upon the recorded investment gross of allowance for credit losses.

Commercial Mortgage Loans - Industrial
	Buildings
		Debt Service Coverage Ratio
		Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio		(in millions)
0%-49.99%		$	616	$	307	$	184	$	190	$	15	$	23	$	1,335
50%-59.99%			304		59		145		178		45		49		780
60%-69.99%			355		89		485		366		180		113		1,588
70%-79.99%			71		76		528		504		193		200		1,572
80%-89.99%			-		-		17		136		88		255		496
90%-100%			-		-		-		-		46		131		177
Greater than 100%			16		-		-		7		-		108		131

Total Industrial		$	1,362	$	531	$	1,359	$	1,381	$	567	$	879	$	6,079

Commercial Mortgage Loans - Retail
		Debt Service Coverage Ratio
		Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio		(in millions)
0%-49.99%		$	604	$	328	$	390	$	87	$	28	$	4	$	1,441
50%-59.99%			551		158		387		52		153		1		1,302
60%-69.99%			316		382		436		326		37		4		1,501
70%-79.99%			65		47		388		552		131		-		1,183
80%-89.99%			-		-		65		93		83		-		241
90%-100%			-		-		-		9		29		21		59
Greater than 100%			-		-		-		6		125		42		173
Total Retail		$	1,536	$	915	$	1,666	$	1,125	$	586	$	72	$	5,900

Commercial Mortgage Loans - Office
		Debt Service Coverage Ratio
		Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio		(in millions)
0%-49.99%		$	1,743	$	49	$	310	$	137	$	17	$	7	$	2,263
50%-59.99%			182		197		192		106		46		17		740
60%-69.99%			136		222		103		156		16		46		679
70%-79.99%			16		-		79		172		589		1		857
80%-89.99%			-		-		-		371		39		25		435
90%-100%			-		-		-		-		174		48		222
Greater than 100%			-		-		-		28		17		18		63

Total Office		$	2,077	$	468	$	684	$	970	$	898	$	162	$	5,259

B-33

Commercial Mortgage Loans - Apartments/Multi-Family
	Debt Service Coverage Ratio
	Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio	(in millions)
0%-49.99%	$	701	$	184	$	326	$	178	$	199	$	56	$	1,644
50%-59.99%		16		-		108		162		57		9		352
60%-69.99%		96		17		170		225		101		27		636
70%-79.99%		62		47		113		186		107		45		560
80%-89.99%		-		-		44		43		254		100		441
90%-100%		20		-		-		-		10		120		150
Greater than 100%		-		-		-		-		-		288		288
Total Multi Family/Apartment	$	895	$	248	$	761	$	794	$	728	$	645	$	4,071

Commercial Mortgage Loans - Hospitality
	Debt Service Coverage Ratio
	Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio	(in millions)
0%-49.99%	$	143	$	-	$	128	$	121	$	-	$	27	$	419
50%-59.99%		21		-		-		-		-		-		21
60%-69.99%		-		36		52		156		59		11		314
70%-79.99%		-		-		6		243		-		-		249
80%-89.99%		-		-		72		-		71		101		244
90%-100%		-		-		-		-		-		87		87
Greater than 100%		-		-		-		46		32		99		177

Total Hospitality	$	164	$	36	$	258	$	566	$	162	$	325	$	1,511

Commercial Mortgage Loans - Other
	Debt Service Coverage Ratio
	Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio	(in millions)
0%-49.99%	$	338	$	-	$	10	$	18	$	1	$	1	$	368
50%-59.99%		40		14		25		59		-		-		138
60%-69.99%		57		193		37		424		123		7		841
70%-79.99%		3		67		188		72		74		-		404
80%-89.99%		133		-		45		136		10		6		330
90%-100%		-		-		-		-		-		-		-
Greater than 100%		-		-		-		38		24		92		154

Total Other	$	571	$	274	$	305	$	747	$	232	$	106	$	2,235

B-34

Agricultural Property Loans
		Debt Service Coverage Ratio
		Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio		(in millions)
0%-49.99%		$	397	$	107	$	349	$	477	$	108	$	6	$	1,444
50%-59.99%			38		124		15		26		-		-		203
60%-69.99%			161		-		-		-		29		-		190
70%-79.99%			-		-		-		-		-		-		-
80%-89.99%			-		-		-		-		-		-		-
90%-100%			-		-		-		-		-		-		-
Greater than 100%			-		-		-		-		-		-		-

Total Agricultural Property Loans		$	596	$	231	$	364	$	503	$	137	$	6	$	1,837

Total Commercial Mortgage and Agricultural Loans
		Debt Service Coverage Ratio
		Greater than 2.0X		1.8X to 2.0X		1.5X to <1.8X		1.2X to <1.5X		1.0X to <1.2X		Less than 1.0X		Grand Total

Loan-to-Value Ratio		(in millions)
0%-49.99%		$	4,542	$	975	$	1,697	$	1,208	$	368	$	124	$	8,914
50%-59.99%			1,152		552		872		583		301		76		3,536
60%-69.99%			1,121		939		1,283		1,653		545		208		5,749
70%-79.99%			217		237		1,302		1,729		1,094		246		4,825
80%-89.99%			133		-		243		779		545		487		2,187
90%-100%			20		-		-		9		259		407		695
Greater than 100%			16		-		-		125		198		647		986

Total Commercial Mortgage and
	Agricultural	$	7,201	$	2,703	$	5,397	$	6,086	$	3,310	$	2,195	$	26,892

See Note 2 for further discussion regarding the credit quality of other loans.

B-35

The following table provides an aging of past due commercial mortgage and other loans as of December 31, 2010, based upon the recorded investment gross of allowance for credit losses.

		As of December 31, 2010
														Total
								Greater		Greater				Commercial
								Than 90		Than 90				Mortgage
				30-59 Days		60-89 Days		Day -		Day - Not		Total Past Due		and other
		Current		Past Due		Past Due		Accruing		Accruing		Due		Loans

		(in millions)
Commercial mortgage loans:
	Industrial	$	6,079	$	-	$	-	$	-	$	-	$	-	$	6,079
	Retail		5,834		61		-		-		5		66		5,900
	Office		5,237		22		-		-		-		22		5,259
	Multi-Family/Apartment		4,070		-		-		-		1		1		4,071
	Hospitality		1,405		11		10		-		85		106		1,511
	Other		2,165		17		-		-		53		70		2,235
Total commercial mortgage loans		$	24,790	$	111	$	10	$	-	$	144	$	265	$	25,055

Agricultural property loans		$	1,805	$	2	$	-	$	-	$	30	$	32	$	1,837
Residential property loans			3		4		-		-		1		5		8
Other collateralized loans			-		-		-		-		-		-		-
Uncollateralized loans			121		-		-		-		-		-		121
Total		$	26,719	$	117	$	10	$	-	$	175	$	302	$	27,021

See Note 2 for further discussion regarding nonaccrual status loans. The following table sets forth commercial mortgage and other loans on nonaccrual status at December 31.

		2010

		(in millions)
Commercial mortgage loans:
	Industrial	$	43
	Retail		102
	Office		44
	Multi-Family/Apartment		49
	Hospitality		258
	Other		77
Total commercial mortgage loans		$	573

Agricultural property loans		$	30
Residential property loans			1
Other collateralized loans			-
Uncollateralized loans			-

Total		$	604

Other Long-term Investments

B-36

“Other long-term investments” are comprised as follows at December 31:

			2010		2009

			(in millions)
Joint ventures and limited partnerships:
		Real estate related	$	421	$	562
		Non-real estate related		2,261		1,899
	Total joint ventures and limited partnerships			2,682		2,461
Real estate held through direct ownership				15		-
Other				788		796
		Total other long-term investments	$	3,485	$	3,257

Equity Method Investments

The following tables set forth summarized combined financial information for significant joint ventures and limited partnership interests accounted for under the equity method, including the Company’s investments in operating joint ventures that are disclosed in more detail in Note 7. Changes between periods in the tables below reflect changes in the activities within the joint ventures and limited partnerships, as well as changes in the Company’s level of investment in such entities.

	At December 31,
	2010		2009

	(in millions)

STATEMENT OF FINANCIAL POSITION
Investments in real estate	$	4,136	$	3,848
Investments in securities		10,454		8,528
Cash and cash equivalents		369		446
Receivables		192		693
Property and equipment		-		43
Other assets(1)		684		825

Total assets	$	15,835	$	14,383

Borrowed funds-third party	$	1,868	$	2,940
Borrowed funds-Prudential		49		179
Payables		275		833
Other liabilities(2)		1,606		561

Total liabilities		3,798		4,513
Partners' capital		12,037		9,870

Total liabilities and partners' capital	$	15,835	$	14,383

Total liabilities and partners' capital included above	$	2,208	$	2,219
Equity in limited partnership interests not included above		197		185
Carrying value	$	2,405	$	2,404

(1)	Other assets consist of goodwill, intangible assets and other miscellaneous assets.

(2)	Other liabilities consist of securities repurchase agreements and other miscellaneous liabilities.

B-37

	Years ended December 31,
	2010		2009		2008

	(in millions)
STATEMENTS OF OPERATIONS
Income from real estate investments	$	353	$	(325)	$	54
Income from securities investments		1,104		9,529		2,980
Income from other		21		78		12
Interest expense		(108)		(460)		(510)
Depreciation		(4)		(7)		(10)
Management fees/salary expense		(95)		(4,409)		(2,790)
Other expenses		(533)		(4,563)		(1,699)
Net earnings(losses)	$	738	$	(157)	$	(1,963)

Equity in net earnings (losses) included above(1)	$	89	$	2,194	$	(398)
Equity in net earnings (losses) of limited partnership interests not included above		73		(28)		(18)
Total equity in net earnings(losses)	$	162	$	2,166	$	(416)

(1)	The year ended December 31, 2009 includes a $2.247 billion pre-tax gain related to the sale of the Company’s minority joint venture interest in Wachovia Securities, not included in the detailed financial lines above. See Note 7 for additional information regarding this sale.

Net Investment Income

Net investment income for the years ended December 31 was from the following sources:

		2010		2009		2008
			(in millions)
Fixed maturities, available for sale		$	5,945	$	6,039	$	6,600
Equity securities, available for sale			215		216		227
Trading account assets			741		738		741
Commercial mortgage and other loans			1,644		1,653		1,670
Policy loans			469		479		464
Short-term investments and cash equivalents			22		76		277
Other long-term investments			33		(215)		(10)
	Gross investment income		9,069		8,986		9,969
Less investment expenses			(379)		(393)		(719)
	Net investment income	$	8,690	$	8,593	$	9,250

Carrying value for non-income producing assets included in fixed maturities and commercial mortgage and other loans totaled $197 million and $12 million, respectively, as of December 31, 2010. Non-income producing assets represent investments that have not produced income for the twelve months preceding December 31, 2010.

B-38

Realized Investment Gains (Losses), Net

Realized investment gains (losses), net, for years ended December 31 were from the following sources:

		2010		2009		2008

		(in millions)
Fixed maturities		$	135	$	(1,126)	$	(1,869)
Equity securities			228		(574)		(754)
Commercial mortgage and other loans			78		(358)		(85)
Investment real-estate			-		-		-
Joint ventures and limited partnerships			(31)		(39)		(45)
Derivatives(1)			848		(501)		1,262
Other			5		3		11
	Realized investment gains (losses), net	$	1,263	$	(2,595)	$	(1,480)

(1) Includes the offset of hedged items in qualifying effective hedge relationships prior to maturity or termination.

Net Unrealized Investment Gains (Losses)

Net unrealized investment gains and losses on securities classified as “available for sale” and certain other long-term investments and other assets are included in the Consolidated Statements of Financial Position as a component of “Accumulated other comprehensive income (loss),” or “AOCI.” Changes in these amounts include reclassification adjustments to exclude from “Other comprehensive income (loss)” those items that are included as part of “Net income” for a period that had been part of “Other comprehensive income (loss)” in earlier periods. The amounts for the periods indicated below, split between amounts related to fixed maturity securities on which an OTTI loss has been recognized, and all other net unrealized investment gains and losses, are as follows:

B-39

Net Unrealized Investment Gains and Losses on Fixed Maturity Securities on which an OTTI loss has been recognized


				Deferred
				Policy
				Acquisition								Accumulated
				Costs,								Other
				Deferred								Comprehensive
		Net		Sales								Income (Loss)
		Unrealized		Inducements,						Deferred		Related To Net
		Gains (Losses)		and Valuation		Future				Income Tax		Unrealized
		on		of Business		Policy		Policyholders'		(Liability)		Investment
		Investments		Acquired		Benefits		Dividends		Benefit		Gains (Losses)

		(in millions)
Balance, December 31, 2008		$	-	$	-	$	-	$	-	$	-	$	-
Cumulative impact of the adoption
	of new authoritative guidance on
	January 1, 2009		(1,012)		9		1				343		(659)
Net investment gains (losses) on
	investments arising during the
	period		565								(203)		362
Reclassification adjustment for (gains)
	losses included in net income		925								(333)		592
Reclassification adjustment for OTTI
	losses excluded from net income(1)		(1,630)								587		(1,043)
Impact of net unrealized investment
	(gains) losses on deferred policy
	acquisition costs, deferred sales
	inducements and valuation of
	business acquired				156						(56)		100
Impact of net unrealized investment
	(gains) losses on future policy
	benefits						1				-		1
Impact of net unrealized investment
	(gains) losses on policyholders'
	dividends								-		-		-
Balance, December 31, 2009		$	(1,152)	$	165	$	2	$	-	$	338	$	(647)

B-40

Net investment gains (losses) on
	investments arising during the
	period		3								(1)		2
Reclassification adjustment for (gains)
	losses included in net income		393								(138)		255
Reclassification adjustment for OTTI
	losses excluded from net income(1)		(51)								18		(33)
Impact of net unrealized investment
	(gains) losses on deferred policy
	acquisition costs, deferred sales
	inducements and valuation of
	business acquired				(158)						55		(103)
Impact of net unrealized investment
	(gains) losses on future policy
	benefits						(7)				2		(5)
Impact of net unrealized investment
	(gains) losses on policyholders'
	dividends								334		(117)		217
Balance, December 31, 2010		$	(807)	$	7	$	(5)	$	334	$	157	$	(314)

(1)	Represents “transfers in” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

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All Other Net Unrealized Investment Gains and Losses in AOCI

				Deferred
				Policy
				Acquisition								Accumulated
				Costs,								Other
				Deferred								Comprehensive
		Net		Sales								Income (Loss)
		Unrealized		Inducements,						Deferred		Related To Net
		Gains (Losses)		and Valuation		Future				Income Tax		Unrealized
		on		of Business		Policy		Policyholders'		(Liability)		Investment
		Investments(1)		Acquired		Benefits		Dividends		Benefit		Gains (Losses)

		(in millions)
Balance, December 31, 2007		$	2,749	$	(104)	$	(1,250)	$	(1,048)	$	(135)	$	212
Net investment gains (losses) on
	investments arising during the
	period		(15,572)								5,427		(10,145)
Reclassification adjustment for (gains)
	losses included in net income		2,574								(897)		1,677
Impact of net unrealized investment
	(gains) losses on deferred policy
	acquisition costs, deferred sales
	inducements and valuation of
	business acquired				1,591						(557)		1,034
Impact of net unrealized investment
	(gains) losses on future policy
	benefits						899				(315)		584
Impact of net unrealized investment
	(gains) losses on policyholders'
	dividends								1,480		(518)		962
Purchase of fixed maturities from an
	affiliate		(222)								77		(145)
Balance, December 31, 2008		$	(10,471)	$	1,487	$	(351)	$	432	$	3,082	$	(5,821)
Cumulative impact of the adoption
	of new authoritative guidance
	on January 1, 2009		(320)		15		4		418		(33)		84

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Net investment gains (losses) on
	investments arising during the
	period		11,564								(3,876)		7,688
Reclassification adjustment for (gains)
	losses included in net income		797								(279)		518
Reclassification adjustment for OTTI
	losses excluded from net income(2)		1,630								(587)		1,043
Impact of net unrealized investment
	(gains) losses on deferred policy
	acquisition costs, deferred sales
	inducements and valuation of
	business acquired				(1,943)						681		(1,262)
Impact of net unrealized investment
	(gains) losses on future policy
	benefits						(177)				62		(115)
Impact of net unrealized investment
	(gains) losses on policyholders'
	dividends								(850)		298		(552)
Balance, December 31, 2009		$	3,200	$	(441)	$	(524)	$	-	$	(652)	$	1,583
Net investment gains (losses) on
	investments arising during the
	period		5,089								(1,753)		3,336
Reclassification adjustment for (gains)
	losses included in net income		(750)								262		(488)
Reclassification adjustment for OTTI
	losses excluded from net income(2)		51								(18)		33
Impact of net unrealized investment
	(gains) losses on deferred policy
	acquisition costs, deferred sales
	inducements and valuation of
	business acquired				10						(4)		6
Impact of net unrealized investment
	(gains) losses on future policy
	benefits						(411)				144		(267)
Impact of net unrealized investment
	(gains) losses on policyholders'
	dividends								(2,450)		858		(1,592)
Balance, December 31, 2010		$	7,590	$	(431)	$	(935)	$	(2,450)	$	(1,163)	$	2,611

(1)	Includes cash flow hedges. See Note 21 for information on cash flow hedges.

(2)	Represents “transfers out” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

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The table below presents net unrealized gains (losses) on investments by asset class at December 31:

	2010		2009		2008

	(in millions)
Fixed maturity securities on which an OTTI loss has been recognized	$	(807)	$	(1,152)	$	-
Fixed maturity securities, available for sale - all other		6,052		2,004		(9,811)
Equity securities, available for sale		1,189		860		(748)
Derivatives designated as cash flow hedges (1)		(174)		(242)		(115)
Other investments (2)		523		578		203
Net unrealized gains (losses) on investments	$	6,783	$	2,048	$	(10,471)

(1)	See Note 21 for more information on cash flow hedges.

(2)	Includes net unrealized gains on certain joint ventures that are strategic in nature and are included in “Other Assets.”

Duration of Gross Unrealized Loss Positions for Fixed Maturities

The following table shows the fair value and gross unrealized losses aggregated by investment category and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, at December 31:

			2010
			Less than twelve months				Twelve months or more				Total

			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

			(in millions)
Fixed maturities
U.S. Treasury securities and obligations of
	U.S. government authorities and agencies		$	3,275	$	196	$	294	$	68	$	3,569	$	264
Obligations of U.S. states and their political
	subdivisions			989		41		53		6		1,042		47
Foreign government bonds				50		3		37		6		87		9
Corporate securities				7,585		253		4,279		372		11,864		625
Commercial mortgage-backed securities				503		7		101		12		604		19
Asset-backed securities				1,247		15		5,073		1,527		6,320		1,542
Residential mortgage-backed securities				583		9		235		8		818		17
		Total	$	14,232	$	524	$	10,072	$	1,999	$	24,304	$	2,523

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			2009
			Less than twelve months				Twelve months or more				Total

			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

			(in millions)
Fixed maturities
U.S. Treasury securities and obligations of
	U.S. government authorities and agencies		$	2,676	$	200	$	403	$	100	$	3,079	$	300
Obligations of U.S. states and their political
	subdivisions			881		42		8		-		889		42
Foreign government bonds				254		4		42		7		296		11
Corporate securities				7,867		251		9,830		966		17,697		1,217
Commercial mortgage-backed securities				1,279		18		2,809		133		4,088		151
Asset-backed securities				1,329		553		5,621		1,774		6,950		2,327
Residential mortgage-backed securities				1,309		17		394		42		1,703		59
		Total	$	15,595	$	1,085	$	19,107	$	3,022	$	34,702	$	4,107

The gross unrealized losses at December 31, 2010 and 2009 are composed of $1,441 million and $2,523 million related to high or highest quality securities based on NAIC or equivalent rating and $1,082 million and $1,584 million related to other than high or highest quality securities based on NAIC or equivalent rating. At December 31, 2010, $1,383 million of the gross unrealized losses represented declines in value of greater than 20%, $97 million of which had been in that position for less than six months, as compared to $2,386 million at December 31, 2009, that represented declines in value of greater than 20%, $202 million of which had been in that position for less than six months. At December 31, 2010, the $1,999 million of gross unrealized losses of twelve months or more were concentrated in asset-backed securities, and in the manufacturing and public utilities sectors of the Company’s corporate securities. At December 31, 2009, the $3,022 million of gross unrealized losses of twelve months or more were concentrated in asset backed securities, and in the manufacturing and services sectors of the Company’s corporate securities. In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for other-than-temporary impairments for these securities was not warranted at December 31, 2010 and 2009. These conclusions are based on a detailed analysis of the underlying credit and cash flows on each security. The gross unrealized losses are primarily attributable to credit spread widening and increased liquidity discounts. At December 31, 2010, the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before the anticipated recovery of its remaining amortized cost basis.

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Duration of Gross Unrealized Loss Positions for Equity Securities

The following table shows the fair value and gross unrealized losses aggregated by length of time that individual equity securities have been in a continuous unrealized loss position, at December 31:

	2010
	Less than twelve months				Twelve months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(in millions)
Equity securities, available for sale	$	505	$	44	$	56	$	7	$	561	$	51

	2009
	Less than twelve months				Twelve months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(in millions)
Equity securities, available for sale	$	535	$	60	$	144	$	20	$	679	$	80

At December 31, 2010, $17 million of the gross unrealized losses represented declines of greater than 20%, $12 million of which had been in that position for less than six months. At December 31, 2009, $22 million of the gross unrealized losses represented declines of greater than 20%, $20 million of which had been in that position for less than six months. Perpetual preferred securities have characteristics of both debt and equity securities. Since an impairment model similar to fixed maturity securities is applied to these securities, an other-than-temporary impairment has not been recognized on certain perpetual preferred securities that have been in a continuous unrealized loss position for twelve months or more as of December 31, 2010 and 2009. In accordance with its policy described in Note 2, the Company concluded that an adjustment for other-than-temporary impairments for these equity securities was not warranted at December 31, 2010 and 2009.

Securities Pledged, Restricted Assets and Special Deposits

The Company pledges as collateral investment securities it owns to unaffiliated parties through certain transactions, including securities lending, securities sold under agreements to repurchase, collateralized borrowings and postings of collateral with derivative counterparties. At December 31, the carrying value of investments pledged to third parties as reported in the Consolidated Statements of Financial Position included the following:

	2010		2009

	(in millions)
Fixed maturities, available for sale(1)	$	10,010	$	12,228
Trading account assets supporting insurance liabilities		276		388
Other trading account assets		321		340
Separate account assets		4,082		3,908
Equity securities		334		221
Total securities pledged	$	15,023	$	17,085

(1)	Includes $132 million and $838 million of fixed maturity securities classified as short-term investments at December 31, 2010 and 2009, respectively.

As of December 31, 2010, the carrying amount of the associated liabilities supported by the pledged collateral was $14,565 million. Of this amount, $5,885 million was “Securities sold under agreements to repurchase,” $4,082 million was “Separate account liabilities,” $1,929 million was “Cash collateral for loaned securities,” $725 million was “Long-term debt,” $275 million was “Short-term debt,” $1,500 million was “Policyholders’ account balances,” and $169 million was “Other Liabilities.” As of

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December 31, 2009, the carrying amount of the associated liabilities supported by the pledged collateral was $16,752 million. Of this amount, $5,735 million was “Securities sold under agreements to repurchase,” $4,028 million was “Separate account liabilities,” $2,802 million was “Cash collateral for loaned securities,” $2,000 million was “Short-term debt,” $1,500 million was “Policyholders’ account balances,” and $687 million was “Other liabilities.”

In the normal course of its business activities, the Company accepts collateral that can be sold or repledged. The primary sources of this collateral are securities in customer accounts and securities purchased under agreements to resell. The fair value of this collateral was approximately $1,622 million and $1,102 million at December 31, 2010 and 2009, respectively, all of which, for both periods, had either been sold or repledged.

Assets of $58 million and $46 million at December 31, 2010 and 2009, respectively, were on deposit with governmental authorities or trustees. Additionally, assets carried at $694 million and $693 million at December 31, 2010 and 2009, respectively, were held in voluntary trusts established primarily to fund guaranteed dividends to certain policyholders and to fund certain employee benefits. Securities restricted as to sale amounted to $630 million and $530 million at December 31, 2010 and 2009, respectively. These amounts include member and activity based stock associated with memberships in the Federal Home Loan Bank of New York and Boston. Restricted cash and securities of $2,900 million and $2,620 million at December 31, 2010 and 2009, respectively, were included in “Other assets.” The restricted cash and securities primarily represent funds deposited by clients and funds accruing to clients as a result of trades or contracts.

5. VARIABLE INTEREST ENTITIES

In the normal course of its activities, the Company enters into relationships with various special purpose entities and other entities that are deemed to be variable interest entities (“VIEs”). A VIE is an entity that either (1) has equity investors that lack certain essential characteristics of a controlling financial interest (including the ability to control activities of the entity, the obligation to absorb the entity’s expected losses and the right to receive the entity’s expected residual returns) or (2) lacks sufficient equity to finance its own activities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the VIE.

If the Company determines that it is the VIE’s “primary beneficiary” it consolidates the VIE. There are currently two models for determining whether or not the Company is the “primary beneficiary” of a VIE. The first relates to those VIE’s that have the characteristics of an investment company and for which certain other conditions are true. These conditions are that (1) the Company does not have the implicit or explicit obligation to fund losses of the VIE and (2) the VIE is not a securitization entity, asset-backed financing entity or an entity that was formerly considered a qualified special-purpose entity. In this model the Company is the primary beneficiary if it stands to absorb a majority of the VIE’s expected losses or to receive a majority of the VIE’s expected residual returns and would be required to consolidate the VIE.

For all other VIE’s, the Company is the primary beneficiary if the Company has (1) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (2) the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. If both conditions are present the Company would be required to consolidate the VIE.

Consolidated Variable Interest Entities

The Company is the primary beneficiary of certain VIEs in which the Company has invested, as part of its investment activities, but over which the Company does not exercise control. The Company’s position in the capital structure and/or relative size indicates that the Company is the primary beneficiary. The Company is not required to provide, and has not provided material financial or other support to these VIEs. The table below reflects the carrying amount and balance sheet caption in which the assets and liabilities of these consolidated VIEs are reported. The creditors of each consolidated VIE have recourse only to the assets of that VIE.

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		December 31,
		2010		2009

		(in millions)
Fixed maturities, available for sale		$	14	$	41
Trading account assets supporting insurance liabilities			9		7
Other long-term investments			6		9
Cash and cash equivalents			(2)		-
Separate account assets			4		38
	Total assets of consolidated VIEs	$	31	$	95

Separate account liabilities		$	4	$	38

	Total liabilities of consolidated VIEs	$	4	$	38

In addition, not reflected in the table above, the Company has created a trust that is a VIE, to facilitate Prudential Insurance’s Funding Agreement Notes Issuance Program (“FANIP”). The trust issues medium-term notes secured by funding agreements issued to the trust by Prudential Insurance with the proceeds of such notes. The trust is the beneficiary of an indemnity agreement with the Company that provides that the Company is responsible for costs related to the notes issued with limited exception. As a result, the Company has determined that it is the primary beneficiary of the trust, which is therefore consolidated.

The funding agreements represent an intercompany transaction that is eliminated upon consolidation. However, in recognition of the security interest in such funding agreements, the trust’s medium-term note liability of $3,509 million and $4,927 million at December 31, 2010 and 2009, respectively, is classified within “Policyholders’ account balances.” Creditors of the trust have recourse to Prudential Insurance if the trust fails to make contractual payments on the medium-term notes. The Company has not provided material financial or other support that was not contractually required to the trust.

Unconsolidated Variable Interest Entities

The Company may invest in debt or equity securities issued by certain asset-backed investment vehicles (commonly referred to as collateralized debt obligations, or “CDOs”) that are managed by an affiliated company. CDOs raise capital by issuing debt securities, and use the proceeds to purchase investments, typically interest-bearing financial instruments. The Company’s maximum exposure to loss resulting from its relationship with unconsolidated CDOs managed by affiliates is limited to its investment in the CDOs, which was $389 million and $380 million at December 31, 2010 and 2009, respectively. These investments are reflected in “Fixed maturities, available for sale.” The fair value of assets held within these unconsolidated VIEs was $3,813 million and $3,421 million as of December 31, 2010 and 2009, respectively. There are no liabilities associated with these unconsolidated VIEs on the Company’s balance sheet.

The Company has an investment in a note receivable issued by an affiliated VIE. This VIE issued notes to the Company in consideration for certain fixed maturity assets sold by the Company in December 2009. The total assets of this VIE at December 31, 2010 and 2009 were approximately $1.5 billion and $1.9 billion, respectively, and primarily consisted of fixed maturity securities. The market value and book value of the notes issued by the VIE and held by the Company at December 31, 2010 and 2009 was $1.1 billion and $1.4 billion, respectively. The Company’s maximum exposure to loss was $1.1 billion and $1.4 billion as of December 31, 2010 and 2009, respectively.

In the normal course of its activities, the Company will invest in joint ventures and limited partnerships. These ventures include hedge funds, private equity funds and real estate related funds and may or may not be VIEs. The Company’s maximum exposure to loss on these investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company has determined that it is not required to consolidate these entities because either (1) it does not control them or (2) it does not have the obligation to absorb losses of the entities that could be potentially significant to the entities or the right to receive benefits from the entities that could be potentially significant. The Company classifies these investments as “Other long-term investments” and its maximum exposure to loss associated with these entities was $2,683 million and $2,461 million as of December 30, 2010 and 2009, respectively.

In addition, in the normal course of its activities, the Company will invest in structured investments including VIEs. These structured investments typically invest in fixed income investments and are managed by third parties and include asset-backed

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securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Company’s maximum exposure to loss on these structured investments, both VIEs and non-VIEs, is limited to the amount of its investment. See Note 4 for details regarding the carrying amounts and classification of these assets. The Company has not provided material financial or other support that was not contractually required to these structures. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not control these entities.

Included among these structured investments are asset-backed securities issued by VIEs that manage investments in the European market. In addition to a stated coupon, each investment provides a return based on the VIE’s portfolio of assets and related investment activity. The market value of these VIEs was approximately $5.0 billion and $6.0 billion as of December 31, 2010 and 2009, respectively, and these VIEs were financed primarily through the issuance of notes similar to those purchased by the Company. The Company generally accounts for these investments as available for sale fixed maturities containing embedded derivatives that are bifurcated and marked-to-market through “Realized investment gains (losses), net,” based upon the change in value of the underlying portfolio. The Company’s variable interest in each of these VIEs represents less than 50% of the only class of variable interests issued by the VIE. The Company’s maximum exposure to loss from these interests was $746 million and $696 million at December 31, 2010 and 2009, respectively, which includes the fair value of the embedded derivatives.


6. DEFERRED POLICY ACQUISITION COSTS

	The balances of and changes in deferred policy acquisition costs as of and for the years ended December 31, are as follows:

		2010		2009		2008

			(in millions)
	Balance, beginning of year	$	7,314	$	8,538	$	6,687
	Capitalization of commissions, sales and issue expenses		1,578		1,053		914
	Amortization		(475)		(483)		(654)
	Change in unrealized investment gains and losses		(150)		(1,760)		1,591
	Other (1)		-		(34)		-
	Balance, end of year	$	8,267	$	7,314	$	8,538

(1)	Other represents DAC written off against additional paid in capital under Funding Agreement termination. See Note 20 for additional discussion.

7. INVESTMENTS IN OPERATING JOINT VENTURES

The Company has made investments in certain joint ventures that are strategic in nature and made other than for the sole purpose of generating investment income. These investments are accounted for under the equity method of accounting and are included in “Other assets” in the Company’s Consolidated Statements of Financial Position. The earnings from these investments are included on an after-tax basis in “Equity in earnings of operating joint ventures, net of taxes” in the Company’s Consolidated Statements of Operations. Investments in operating joint ventures include an indirect investment in China Pacific Group, and prior to its sale on December 31, 2009, also included the Company’s investment in Wachovia Securities. The summarized financial information for the Company’s operating joint ventures has been included in the summarized combined financial information for all significant equity method investments shown in Note 4.

Investment in China Pacific Group

The Company has made an indirect investment in China Pacific Group, a Chinese insurance operation. The carrying value of this operating joint venture was $459 million and $528 million, as of December 31, 2010 and 2009, respectively. The indirect investment in China Pacific Group includes unrealized changes in market value, which are included in accumulated other comprehensive income and relate to the market price of China Pacific Group’s publicly traded shares, which began trading on the Shanghai Exchange in 2007 and since the fourth quarter of 2009 are trading on the Hong Kong exchange. The Company recognized combined after-tax equity earnings from this operating joint venture of $46 million, $3 million and $3 million for the years ended December 31, 2010, 2009 and 2008, respectively. Dividends received from this investment were $5 million, $5 million and $4 million for the years ended December 31, 2010, 2009 and 2008, respectively. In December 2010, a consortium of

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investors including the Company sold approximately 16% of its holdings, resulting in a pre-tax gain of $66 million to the Company, and sold approximately 40% of its remaining holdings in the first quarter of 2011, resulting in a pre-tax gain of $153 million to the Company.

Former Investment in Wachovia Securities

On December 31, 2009, the Company completed the sale of its minority joint venture interest in Wachovia Securities (including Wells Fargo Advisors) to Wells Fargo. At the closing, the Company received $4.5 billion in cash as the purchase price of its joint venture interest and de-recognized the carrying value of its investment in the joint venture and the carrying value of the “lookback” option described below. For the year ended December 31, 2009, “Equity in earnings of operating joint ventures, net of taxes” includes the associated pre-tax gain on the sale of $2.247 billion. In addition, “General and administrative expenses” includes certain one-time costs related to the sale of the joint venture interest of $89 million, for pre-tax compensation costs and costs related to increased contributions to the Company’s charitable foundation.

In addition, the Company received $418 million in payment of the principal of and accrued interest on the subordinated promissory note in the principal amount of $417 million that had been issued by Wachovia Securities in connection with the establishment of the joint venture.

Wachovia Corporation’s (“Wachovia”) contribution to the joint venture of the A.G. Edwards retail securities brokerage business on January 1, 2008 entitled the Company to elect a “lookback” option (which the Company exercised) permitting the Company to delay for a period of two years ending on January 1, 2010, the decision on whether or not to make payments to avoid or limit dilution of its 38% ownership interest in the joint venture or, alternatively, to “put” its joint venture interests to Wachovia based on the appraised value of the joint venture, excluding the A.G. Edwards business, as of January 1, 2008. During this “lookback” period, the Company’s share in the earnings of the joint venture and one-time costs associated with the combination of the A.G. Edwards business with Wachovia Securities was based on the Company’s diluted ownership level. The Company adjusted the carrying value of its ownership interest in the joint venture effective as of January 1, 2008 to reflect the addition of the A.G. Edwards business and the dilution of the Company’s 38% ownership interest and to record the value of the above described rights under the “lookback” option. The Company accordingly recognized a corresponding increase to “Additional paid-in capital” of $1.041 billion, net of tax, which represented the excess of the estimated value of the Company’s share of the A.G. Edwards business received (of approximately $1.444 billion) and the estimated value of the “lookback” option acquired (of approximately $580 million) over the carrying value of the portion of the Company’s ownership interest in Wachovia Securities that was diluted (of approximately $422 million), net of taxes (of approximately $561 million). In connection with the sale of the Company’s interest in the joint venture to Wells Fargo on December 31, 2009, the Company’s final diluted ownership percentage in the joint venture for 2008 and 2009 was established as 23%. On December 31, 2009, the Company recognized a decrease to “Additional paid-in capital” of $109 million, net of tax, and a true-up to the Company’s 2008 and 2009 earnings from the joint venture of $15 million, net of tax based on the difference between the diluted ownership percentage previously used to record earnings and the final diluted ownership percentage.

On August 15, 2008, Wachovia announced that it had reached an agreement in principle for a global settlement of investigations concerning the underwriting, sale and subsequent auction of certain auction rate securities by subsidiaries of Wachovia Securities and had recorded an increase to legal reserves. The Company’s recorded share of pre-tax losses from the joint venture for the year ended December 31, 2008 included $355 million related to the impact of this item on our share of the equity earnings of the joint venture.

The Company’s investment in Wachovia Securities, excluding the value of the “lookback” option, was $1.812 billion as of December 31, 2008. The Company recognized pre-tax equity earnings (losses) from Wachovia Securities of $2.288 billion for the year ended December 31, 2009, including the gain on the sale of $2.247 billion, and $(331) million for the year ended December 31, 2008. The income tax expense (benefit) associated with these equity earnings was $805 million for the year ended December 31, 2009, including $790 million associated with the gain on the sale, and $(110) million for the year ended December 31, 2008. Dividends received from the investment in Wachovia Securities were $23 million and $104 million for the years ended December 31, 2009 and 2008, respectively.

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8. VALUATION OF BUSINESS ACQUIRED

	The balances of and changes in VOBA as of and for the years ended December 31, are as follows:

		2010		2009		2008
			(in millions)
	Balance, beginning of year	$	285	$	437	$	765
	Amortization(1)		(25)		(171)		(369)
	Interest(2)		17		19		41
	Balance, end of year	$	277	$	285	$	437

(1)	The VOBA balances at December 31, 2010 were $0 million and $277 million related to the insurance transactions associated with the Allstate Corporation (“Allstate”) and CIGNA, respectively. The weighted average remaining expected life was approximately 17 years for the VOBA related to CIGNA.

(2)

The interest accrual rates vary by product. The interest rate for 2010 was 7.00% for the VOBA related to CIGNA. The interest rates for 2009 were 5.42% and 6.90% for the VOBA related to Allstate and CIGNA, respectively. The interest rates for 2008 were 5.42% and 7.30% for the VOBA related to Allstate and CIGNA, respectively.

During the first quarter of 2009 and the fourth quarter of 2008, the Company recognized impairments of $73 million and $234 million, respectively, related to the VOBA associated with the Allstate acquisition. These impairments are included on the Amortization line in the table above. The impairment recorded in 2009 represented the remaining VOBA balance associated with the Allstate acquisition. These impairments are reflective of the deterioration in the financial markets, which resulted in additional market depreciation within the separate account assets and corresponding decreases in fee income and overall expected future earnings for this business. These impairments were determined using discounted present value of future estimated gross profits. Since the VOBA balance was completely impaired for these contracts, it cannot be reestablished for market value appreciation in subsequent periods. There were no impairments during 2010.

The following table provides estimated future amortization, net of interest, for the periods indicated.

	VOBA Amortization
	(in millions)
2011	$	3
2012		2
2013		1
2014		1
2015		1
2016 and thereafter		269
Total	$	277

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9. GOODWILL AND OTHER INTANGIBLES

Goodwill

	The changes in the book value of goodwill are as follows:
			Goodwill


		(in millions)


Balance at January 1, 2008:
	Goodwill			620
	Accumulated Impairment Losses			-
Net Balance at January 1, 2008				620

2008 Activity:
	Acquisitions			106
	Other(1)			(1)

Balance at December 31, 2008:
	Goodwill			725
	Accumulated Impairment Losses			-
Net Balance at December 31, 2008				725

2009 Activity:
	Other(1)			2

Balance at December 31, 2009:
	Goodwill			727
	Accumulated Impairment Losses			-
Net Balance at December 31, 2009				727

2010 Activity:
	Other(1)			10

Balance at December 31, 2010:
	Goodwill			737
	Accumulated Impairment Losses			-
Net Balance at December 31, 2010			$	737

(1) Other represents foreign currency translation.

The Company tests goodwill for impairment annually as of December 31 as discussed in further detail in Note 2. The Company performed goodwill impairment testing for the entire goodwill balance at December 31, 2010, all of which is in the Financial Services Business reporting unit. There were no goodwill impairment charges during 2010, 2009 or 2008.

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Other Intangibles

		Other intangible balances at December 31, are as follows:

			2010						2009
			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
				(in millions)
Subject to amortization:
	Customer relationships		$	175	$	(29)	$	146	$	174	$	(18)	$	156
	Other			22		(22)		-		23		(20)		3
	Total		$	197	$	(51)	$	146	$	197	$	(38)	$	159

Amortization expense for other intangibles was $13 million, $12 million and $7 million for the years ending December 31, 2010, 2009 and 2008, respectively. Amortization expense for other intangibles is expected to be approximately $11 million in 2011, $12 million in 2012 and 2013 and $11 million in 2014 and 2015.


10. POLICYHOLDERS' LIABILITIES

Future Policy Benefits

	Future policy benefits at December 31, are as follows:

		2010		2009

			(in millions)
Life Insurance		$	57,147	$	56,617
Individual and group annuities and supplementary contracts			16,071		14,727
Other contract liabilities			3,231		3,546
Subtotal future policy benefits excluding unpaid claims and claim adjustment expenses			76,449		74,890
Unpaid claims and claim adjustment expenses			2,372		2,207
Total future policy benefits		$	78,821	$	77,097

Life insurance liabilities include reserves for death and endowment policy benefits, terminal dividends and certain health benefits. Individual and group annuities and supplementary contracts liabilities include reserves for life contingent immediate annuities and life contingent group annuities. Other contract liabilities include unearned revenue and certain other reserves for group, annuities and individual life and health products.

Future policy benefits for individual participating traditional life insurance are based on the net level premium method, calculated using the guaranteed mortality and nonforfeiture interest rates which range from 2.5% to 7.5%. Participating insurance represented 12% and 13% of direct individual life insurance in force at December 31, 2010 and 2009, respectively, and 73%, 76% and 80% of direct individual life insurance premiums for 2010, 2009 and 2008, respectively.

Future policy benefits for individual non-participating traditional life insurance policies, group and individual long-term care policies and individual health insurance policies are generally equal to the aggregate of (1) the present value of future benefit payments and related expenses, less the present value of future net premiums, and (2) any premium deficiency reserves. Assumptions as to mortality, morbidity and persistency are based on the Company’s experience, and in certain instances, industry experience, when the basis of the reserve is established. Interest rates used in the determination of the present values range from 1.7% to 8.3%; less than 1% of the reserves are based on an interest rate in excess of 8%.

Future policy benefits for individual and group annuities and supplementary contracts are generally equal to the aggregate of (1) the present value of expected future payments, and (2) any premium deficiency reserves. Assumptions as to mortality are based

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on the Company’s experience, and in certain instances, industry experience, when the basis of the reserve is established. The interest rates used in the determination of the present values range from 1.0% to 14.8%; less than 1% of the reserves are based on an interest rate in excess of 8%.

Future policy benefits for other contract liabilities are generally equal to the present value of expected future payments based on the Company’s experience, except for example, certain group insurance coverages for which future policy benefits are equal to gross unearned premium reserves. The interest rates used in the determination of the present values range from 0.2% to 6.2%.

Premium deficiency reserves are established, if necessary, when the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for expected future policy benefits and expenses and to recover any unamortized policy acquisition costs. Premium deficiency reserves have been recorded for the group single premium annuity business, which consists of limited-payment, long-duration, traditional, and non-participating annuities; structured settlements; single premium immediate annuities with life contingencies; and for certain individual health policies. Liabilities of $2,001 million and $1,649 million as of December 31, 2010 and 2009, respectively, are included in “Future policy benefits” with respect to these deficiencies, of which $926 million and $490 million as of December 31, 2010 and 2009, respectively, relate to net unrealized gains on securities classified as available for sale.

The Company’s liability for future policy benefits is also inclusive of liabilities for guarantee benefits related to certain nontraditional long-duration life and annuity contracts, which are discussed more fully in Note 11 and are primarily reflected in Other contract liabilities in the table above.

Unpaid claims and claim adjustment expenses primarily reflect the Company’s estimate of future disability claim payments and expenses as well as estimates of claims incurred but not yet reported as of the balance sheet dates related to group disability products. Unpaid claim liabilities are discounted using interest rates ranging from 0% to 6.4%.

Policyholders' Account Balances

		Policyholders' account balances at December 31, are as follows:

			2010		2009

			(in millions)
Individual annuities			$	9,247	$	9,148
Group annuities				21,712		20,258
Guaranteed investment contracts and guaranteed interest accounts				14,325		13,049
Funding agreements				6,166		8,395
Interest-sensitive life contracts				7,524		7,069
Dividend accumulation and other				14,282		13,735
	Total policyholders' account balances		$	73,256	$	71,654

Policyholders’ account balances represent an accumulation of account deposits plus credited interest less withdrawals, expenses and mortality charges, if applicable. These policyholders’ account balances also include provisions for benefits under non-life contingent payout annuities. Included in “Funding agreements” at December 31, 2010 and 2009, are $3,592 million and $4,996 million, respectively, related to the Company’s FANIP product which is carried at amortized cost, adjusted for the effective portion of changes in fair value of qualifying derivative financial instruments. For additional details on the FANIP product see Note 5. The interest rates associated with such notes range from 0.4% to 5.6%. Also included in funding agreements at December 31, 2010 and 2009 are $1,005 and $1,814 million, respectively, of affiliated funding agreements with Prudential Financial in support of a retail note issuance program to financial wholesalers. Interest crediting rates range from 0% to 5.0% for interest-sensitive life contracts and from 0% to 13.4% for contracts other than interest-sensitive life. Less than 1% of policyholders’ account balances have interest crediting rates in excess of 8%.

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11. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS

The Company issues traditional variable annuity contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company also issues variable annuity contracts with general and separate account options where the Company contractually guarantees to the contractholder a return of no less than (1) total deposits made to the contract less any partial withdrawals (“return of net deposits”), (2) total deposits made to the contract less any partial withdrawals plus a minimum return (“minimum return”), or (3) the highest contract value on a specified date minus any withdrawals (“contract value”). These guarantees include benefits that are payable in the event of death, annuitization or at specified dates during the accumulation period and withdrawal and income benefits payable during specified periods.

The Company also issues annuity contracts with market value adjusted investment options (“MVAs”), which provide for a return of principal plus a fixed rate of return if held to maturity, or, alternatively, a “market adjusted value” if surrendered prior to maturity or if funds are reallocated to other investment options. The market value adjustment may result in a gain or loss to the Company, depending on crediting rates or an indexed rate at surrender, as applicable.

In addition, the Company issues variable life, variable universal life and universal life contracts where the Company contractually guarantees to the contractholder a death benefit even when there is insufficient value to cover monthly mortality and expense charges, whereas otherwise the contract would typically lapse (“no lapse guarantee”). Variable life and variable universal life contracts are offered with general and separate account options.

The assets supporting the variable portion of both traditional variable annuities and certain variable contracts with guarantees are carried at fair value and reported as “Separate account assets” with an equivalent amount reported as “Separate account liabilities.” Amounts assessed against the contractholders for mortality, administration, and other services are included within revenue in “Policy charges and fee income” and changes in liabilities for minimum guarantees are generally included in “Policyholders’ benefits.” In 2010, 2009 and 2008, there were no gains or losses on transfers of assets from the general account to a separate account.

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, timing of annuitization, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, interest rates, market volatility or contractholder behavior used in the original pricing of these products.

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The Company’s contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed may not be mutually exclusive. The liabilities related to the net amount at risk are reflected within “Future policy benefits.” As of December 31, 2010 and 2009, the Company had the following guarantees associated with these contracts, by product and guarantee type:

		December 31, 2010				December 31, 2009
		In the Event of Death		At Annuitization / Accumulation (1)		In the Event of Death		At Annuitization / Accumulation (1)

Variable Annuity Contracts		(dollars in millions)

Return of net deposits
Account value		$	26,167	$	24	$	11,706	$	26
Net amount at risk		$	155	$	6	$	401	$	2
Average attained age of contractholders			60 years		67 years		61 years		66 years

Minimum return or contract value
Account value		$	20,211	$	33,332	$	17,588	$	16,370
Net amount at risk		$	3,088	$	1,478	$	4,302	$	1,538
Average attained age of contractholders			66 years		60 years		66 years		62 years
Average period remaining until earliest
	expected annuitization		N/A		1 year		N/A		2 years
________
	(1) Includes income and withdrawal benefits as described herein.

		December 31, 2010				December 31, 2009
		Unadjusted Value		Adjusted Value		Unadjusted Value		Adjusted Value

Variable Annuity Contracts		(in millions)

Market value adjusted annuities
Account value		$	911	$	917	$	370	$	378

						December 31,
						2010		2009

						In the Event of Death
						(dollars in millions)
Variable Life, Variable Universal Life and Universal Life Contracts

No lapse guarantees
Separate account value						$	2,392	$	2,158
General account value						$	1,790	$	1,518
Net amount at risk						$	51,500	$	49,988
Average attained age of contractholders							51 years		50 years

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	Account balances of variable annuity contracts with guarantees were invested in separate account investment options as follows:

		December 31,
		2010		2009

		(in millions)
Equity funds		$	26,851	$	17,002
Bond funds			12,667		5,181
Money market funds			3,250		3,686
	Total	$	42,768	$	25,869

In addition to the amounts invested in separate account investment options above, $3,609 million at December 31, 2010 and $3,425 million at December 31, 2009 of account balances of variable annuity contracts with guarantees, inclusive of contracts with MVA features, were invested in general account investment options.

Liabilities For Guarantee Benefits

The table below summarizes the changes in general account liabilities, either written directly by the Company or assumed by the Company via reinsurance for guarantees on variable contracts. The liabilities for guaranteed minimum death benefits (“GMDB”) and guaranteed minimum income benefits (“GMIB”) are included in “Future policy benefits” and the related changes in the liabilities are included in “Policyholders’ benefits.” Guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”), and guaranteed minimum income and withdrawal benefits (“GMIWB”) features are considered to be bifurcated embedded derivatives and are recorded at fair value. Changes in the fair value of these derivatives, including changes in the Company’s own risk of non-performance, along with any fees attributed or payments made relating to the derivative, are recorded in “Realized investment gains (losses), net.” See Note 19 for additional information regarding the methodology used in determining the fair value of these embedded derivatives. The liabilities for GMAB, GMWB and GMIWB are included in “Future policy benefits.” As discussed below, the Company maintains a portfolio of derivative investments that serve as a partial hedge of the risks associated with these products, for which the changes in fair value are also recorded in “Realized investment gains (losses), net.” This portfolio of derivatives investments does not qualify for hedge accounting treatment under U.S. GAAP.

		GMDB				GMIB		GMAB/GMWB/ GMIWB
		Variable Life, Variable Universal Life and Universal Life		Variable Annuity		Variable Annuity		Variable Annuity


		(in millions)
Balance at December 31, 2007		$	55	$	42	$	50	$	71
	Incurred guarantee benefits(1)		32		329		197		1,101
	Paid guarantee benefits and other		(1)		(87)		-		-
Balance at December 31, 2008			86		284		247		1,172
	Incurred guarantee benefits(1)		64		(11)		(21)		(1,114)
	Paid guarantee benefits and other		(7)		(158)		(32)		-
Balance at December 31, 2009			143		115		194		58
	Incurred guarantee benefits(1)		19		25		29		(406)
	Paid guarantee benefits and other		(1)		(83)		(123)		-
Balance at December 31, 2010		$	161	$	57	$	100	$	(348)

(1)	Incurred guarantee benefits include the portion of assessments established as additions to reserves as well as changes in estimates affecting the reserves. Also includes changes in the fair value of features considered to be derivatives.

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The GMDB liability is determined each period end by estimating the accumulated value of a portion of the total assessments to date less the accumulated value of the death benefits in excess of the account balance. The GMIB liability is determined each period by estimating the accumulated value of a portion of the total assessments to date less the accumulated value of the projected income benefits in excess of the account balance. The portion of assessments used is chosen such that, at issue (or, in the case of acquired contracts at the acquisition date), the present value of expected death benefits or expected income benefits in excess of the projected account balance and the portion of the present value of total expected assessments over the lifetime of the contracts are equal. The Company regularly evaluates the estimates used and adjusts the GMDB and GMIB liability balances, with an associated charge or credit to earnings, if actual experience or other evidence suggests that earlier assumptions should be revised.

The GMAB features provide the contractholder with a guaranteed return of initial account value or an enhanced value if applicable. The GMAB liability is calculated as the present value of future expected payments to customers less the present value of assessed rider fees attributable to the embedded derivative feature.

The GMWB features provide the contractholder with a guaranteed remaining balance if the account value is reduced to zero through a combination of market declines and withdrawals. The guaranteed remaining balance is generally equal to the protected value under the contract, which is initially established as the greater of the account value or cumulative deposits when withdrawals commence, less cumulative withdrawals. The contractholder also has the option, after a specified time period, to reset the guaranteed remaining balance to the then-current account value, if greater. The GMWB liability is calculated as the present value of future expected payments to customers less the present value of assessed rider fees attributable to the embedded derivative feature.

The GMIWB features predominantly present a benefit that provides a contractholder two optional methods to receive guaranteed minimum payments over time, a “withdrawal” option or an “income” option. The withdrawal option guarantees that, upon the election of such benefit, a contract holder can withdraw an amount each year until the cumulative withdrawals reach a total guaranteed balance. The guaranteed remaining balance is generally equal to the protected value under the contract, which is initially established as the greater of: (1) the account value on the date of first withdrawal; (2) cumulative deposits when withdrawals commence, less cumulative withdrawals plus a minimum return; or (3) the highest contract value on a specified date minus any withdrawals. The income option guarantees that a contract holder can, upon the election of this benefit, withdraw a lesser amount each year for the annuitant’s life based on the total guaranteed balance. The withdrawal or income benefit can be elected by the contract holder upon issuance of an appropriate deferred variable annuity contract or at any time following contract issue prior to annuitization. Certain GMIWB features include an automatic rebalancing element that reduces the Company’s exposure to these guarantees. The GMIWB liability is calculated as the present value of future expected payments to customers less the present value of assessed rider fees attributable to the embedded derivative feature.

Liabilities for guaranteed benefits for GMAB, GMWB and GMIWB riders include amounts assumed from affiliates of $21 million and $14 million as of December 31, 2010 and December 31, 2009, respectively. See Note 13 for amounts recoverable from reinsurers relating to the ceding of certain embedded derivative liabilities associated with these guaranteed benefits, which are not reflected in the tables above.

As part of its risk management strategy, the Company hedges or limits its exposure to these risks, excluding those risks that have been deemed suitable to retain, through a combination of product design elements, such as an automatic rebalancing element, and externally purchased hedging instruments, such as equity options and interest rate derivatives. The automatic rebalancing element included in the design of certain optional living benefits transfers assets between the variable investments selected by the annuity contractholder and, depending on the benefit feature, a fixed rate account in the general account or a bond portfolio within the separate account. The transfers are based on the static mathematical formula used with the particular optional benefit which considers a number of factors, including the impact of investment performance of the contractholder’s total account value. In general, negative investment performance may result in transfers to a fixed rate account in the general account or a bond portfolio within the separate account, and positive investment performance may result in transfers back to contractholder-selected investments. Other product design elements utilized for certain products to manage these risks include asset allocation restrictions and minimum purchase age requirements. For risk management purposes the Company segregates the variable annuity living benefit features into those that include the automatic rebalancing element, including certain GMIWB riders and certain GMAB riders; and those that do not include the automatic rebalancing element, including certain legacy GMIWB, GMWB, GMAB and GMIB riders. Living benefit riders that include the automatic rebalancing element also include GMDB riders, and as such the GMDB risk in these riders also benefits from the automatic rebalancing element.

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Sales Inducements

The Company defers sales inducements and amortizes them over the anticipated life of the policy using the same methodology and assumptions used to amortize deferred policy acquisition costs. These deferred sales inducements are included in “Other assets.” The Company offers various types of sales inducements. These inducements include: (1) a bonus whereby the policyholder’s initial account balance is increased by an amount equal to a specified percentage of the customer’s initial deposit, (2) additional credits after a certain number of years a contract is held and (3) enhanced interest crediting rates that are higher than the normal general account interest rate credited in certain product lines. Changes in deferred sales inducements, reported as “Interest credited to policyholders’ account balances,” are as follows:

		Sales Inducements

		(in millions)
Balance at December 31, 2007		$	239
	Capitalization		74
	Amortization		(16)
	Change in unrealized gain/(loss) on investments		-
Balance at December 31, 2008			297
	Capitalization		97
	Amortization		(51)
	Change in unrealized gain/(loss) on investments		(28)
Balance at December 31, 2009			315
	Capitalization		248
	Amortization		(15)
	Change in unrealized gain/(loss) on investments		3
Balance at December 31, 2010		$	551

12. CLOSED BLOCK

On the date of demutualization, Prudential Insurance established a Closed Block for certain individual life insurance policies and annuities issued by Prudential Insurance in the U.S. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block Business.

The policies included in the Closed Block are specified individual life insurance policies and individual annuity contracts that were in force on the effective date of the Plan of Reorganization and for which Prudential Insurance is currently paying or expects to pay experience-based policy dividends. Assets have been allocated to the Closed Block in an amount that has been determined to produce cash flows which, together with revenues from policies included in the Closed Block, are expected to be sufficient to support obligations and liabilities relating to these policies, including provision for payment of benefits, certain expenses, and taxes and to provide for continuation of the policyholder dividend scales in effect in 2000, assuming experience underlying such scales continues. To the extent that, over time, cash flows from the assets allocated to the Closed Block and claims and other experience related to the Closed Block are, in the aggregate, more or less favorable than what was assumed when the Closed Block was established, total dividends paid to Closed Block policyholders may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect in 2000 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to Closed Block policyholders and will not be available to stockholders. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the Closed Block. The Closed Block will continue in effect as long as any policy in the Closed Block remains in force unless, with the consent of the New Jersey insurance regulator, it is terminated earlier.

The excess of Closed Block Liabilities over Closed Block Assets at the date of the demutualization (adjusted to eliminate the impact of related amounts in “Accumulated other comprehensive income (loss)”) represented the estimated maximum future earnings at that date from the Closed Block expected to result from operations attributed to the Closed Block after income taxes. In establishing the Closed Block, the Company developed an actuarial calculation of the timing of such maximum future earnings. If actual cumulative earnings of the Closed Block from inception through the end of any given period are greater than the expected

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cumulative earnings, only the expected earnings will be recognized in income. Any excess of actual cumulative earnings over expected cumulative earnings will represent undistributed accumulated earnings attributable to policyholders, which are recorded as a policyholder dividend obligation. The policyholder dividend obligation represents amounts to be paid to Closed Block policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance that is less favorable than originally expected. If the actual cumulative earnings of the Closed Block from its inception through the end of any given period are less than the expected cumulative earnings of the Closed Block, the Company will recognize only the actual earnings in income. However, the Company may reduce policyholder dividend scales, which would be intended to increase future actual earnings until the actual cumulative earnings equaled the expected cumulative earnings.

As of December 31, 2010, the Company recognized a policyholder dividend obligation of $126 million, to Closed Block policyholders for the excess of actual cumulative earnings over the expected cumulative earnings. Additionally, accumulated net unrealized investment gains that have arisen subsequent to the establishment of the Closed Block have been reflected as a policyholder dividend obligation of $2,117 million at December 31, 2010, to be paid to Closed Block policyholders unless offset by future experience, with an offsetting amount reported in “Accumulated other comprehensive income (loss).” As of December 31, 2009, actual cumulative earnings were below the expected cumulative earnings, thereby eliminating the cumulative earnings policyholder dividend obligation. Furthermore, the accumulation of net unrealized investment gains as of December 31, 2009 that had arisen subsequent to the establishment of the Closed Block, were not sufficient to overcome the cumulative earnings shortfall. See the table below for changes in the components of the policyholder dividend obligation for the years ended December 31, 2010 and 2009.

On December 14, 2010, Prudential Insurance’s Board of Directors approved a continuation of the Closed Block dividend scales in 2011. On December 8, 2009, Prudential Insurance’s Board of Directors acted to reduce the dividends payable in 2010 on Closed Block policies. This decrease reflected the deterioration in investment results and resulted in a $98 million reduction of the liability for policyholder dividends recognized in the year ended December 31, 2009. On December 19, 2008, Prudential Insurance’s Board of Directors acted to reduce the dividends payable in 2009 on Closed Block policies. This decrease also reflected the deterioration in investment results and resulted in a $187 million reduction of the liability for policyholder dividends recognized in the year ended December 31, 2008.

Closed Block Liabilities and Assets designated to the Closed Block at December 31, as well as maximum future earnings to be recognized from Closed Block Liabilities and Closed Block Assets, are as follows:

			2010		2009

			(in millions)
Closed Block Liabilities
	Future policy benefits		$	51,632	$	51,774
	Policyholders' dividends payable			909		926
	Policyholders' dividend obligation			2,243		-
	Policyholders' account balances			5,536		5,588
	Other Closed Block liabilities			4,637		4,300
		Total Closed Block Liabilities		64,957		62,588

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Closed Block Assets
	Fixed maturities, available for sale, at fair value			41,044		38,448
	Other trading account assets, at fair value			150		166
	Equity securities, available for sale, at fair value			3,545		3,037
	Commercial mortgage and other loans			7,827		7,751
	Policy loans			5,377		5,418
	Other long-term investments			1,662		1,597
	Short-term investments			1,119		1,218
		Total investments		60,724		57,635
	Cash and cash equivalents			345		662
	Accrued investment income			600		608
	Other Closed Block assets			275		307
		Total Closed Block Assets		61,944		59,212

Excess of reported Closed Block Liabilities over Closed Block Assets				3,013		3,376
Portion of above representing accumulated other comprehensive income:
		Net unrealized investment gains (losses)		2,092		231
		Allocated to policyholder dividend obligation		(2,117)		-
Future earnings to be recognized from Closed Block Assets and Closed Block Liabilities			$	2,988	$	3,607

		Information regarding the policyholder dividend obligation is as follows:

			2010		2009

			(in millions)
Balance, January 1			$	-	$	-
	Impact from earnings allocable to policyholder dividend obligation			126		(851)
	Change in net unrealized investment gains (losses) allocated to policyholder dividend
		obligation(1)		2,117		851
Balance, December 31			$	2,243	$	-
		___________
		(1) For 2009, this amount was capped to the extent of earnings allocable to policyholder dividend obligation.

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		Closed Block revenues and benefits and expenses for the years ended December 31, 2010, 2009 and 2008 were as follows:

			2010		2009		2008

			(in millions)
Revenues
	Premiums		$	3,007	$	3,250	$	3,608
	Net investment income			2,994		2,907		3,154
	Realized investment gains (losses), net			804		(1,219)		(8)
	Other income			38		102		15

		Total Closed Block revenues		6,843		5,040		6,769

Benefits and Expenses
	Policyholders' benefits			3,512		3,762		4,087
	Interest credited to policyholders' account balances			140		141		141
	Dividends to policyholders'			2,071		1,222		2,122
	General and administrative expenses			540		568		632

		Total Closed Block benefits and expenses		6,263		5,693		6,982

Closed Block revenues, net of Closed Block benefits and expenses, before
	income taxes and discontinued operations			580		(653)		(213)
Income tax benefit				(38)		(63)		(193)
Closed Block revenues, net of Closed Block benefits and expenses and income
	taxes, before discontinued operations			618		(590)		(20)
Income from discontinued operations, net of taxes				1		-		-
Closed Block revenues, net of Closed Block benefits and expenses, income taxes
	and discontinued operations		$	619	$	(590)	$	(20)

13. REINSURANCE

The Company participates in reinsurance in order to provide additional capacity for future growth, to limit the maximum net loss potential arising from large risks and in acquiring or disposing of businesses.

In 2006, the Company acquired the variable annuity business of The Allstate Corporation (“Allstate”) through a reinsurance transaction. The reinsurance arrangements with Allstate include a coinsurance arrangement associated with the general account liabilities assumed and a modified coinsurance arrangement associated with the separate account liabilities assumed. The reinsurance payable, which represents the Company’s obligation under the modified coinsurance arrangement, is netted with the reinsurance receivable in the Company’s Consolidated Statement of Financial Position.

In 2004, the Company acquired the retirement business of CIGNA and as a result, entered into various reinsurance arrangements. The Company still has indemnity coinsurance and modified coinsurance without assumption arrangements in effect related to this acquisition.

Life and disability reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term, per person excess and coinsurance. In addition, the Company entered into reinsurance agreements covering 90% of the Closed Block policies, including 17% with an affiliate through various modified coinsurance arrangements. The Company accounts for these modified coinsurance arrangements under the deposit method of accounting. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is accounted for over the reinsurance contract period. Amounts

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recoverable from reinsurers, for both short-and long-duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits associated with the reinsured policies. The Company also participates in reinsurance of Liabilities for Guaranteed Benefits, which are more fully described in Note 11.

The Company participates in reinsurance transactions with the following subsidiaries of Prudential Financial: Prudential Life Insurance Company of Taiwan Inc., The Prudential Life Insurance Company of Korea, Ltd., The Prudential Life Insurance Company, Ltd., Pramerica Life S.p.A., Pramerica Zycie Towarzystwo Ubezpieczen i Reasekuracji Spolka Akcyjna, Prudential Holdings of Japan, Inc., Pruco Reinsurance Ltd., Prudential Annuities Life Assurance Corporation, Prudential Seguros Mexico, S.A., Prudential Seguros, S.A., Pramerica of Bermuda Life Assurance Company, Ltd., and Prudential Arizona Reinsurance III Company.

The tables presented below exclude amounts pertaining to the Company’s discontinued operations.

Reinsurance amounts included in the Consolidated Statements of Operations for premiums, policy charges and fees and policyholders’ benefits for the years ended December 31, were as follows:

		2010		2009		2008

		(in millions)
Direct premiums		$	10,183	$	9,866	$	9,787
Reinsurance assumed			1,368		1,164		987
Reinsurance ceded			(1,322)		(1,397)		(1,301)
	Premiums	$	10,229	$	9,633	$	9,473

Direct policy charges and fees		$	2,137	$	2,020	$	2,059
Reinsurance assumed			140		140		181
Reinsurance ceded			(80)		(70)		(60)
	Policy charges and fees	$	2,197	$	2,090	$	2,180


Direct policyholder benefits		$	11,971	$	11,485	$	11,695
Reinsurance assumed			1,225		959		1,169
Reinsurance ceded			(1,278)		(1,397)		(1,291)
	Policyholders' benefits	$	11,918	$	11,047	$	11,573

Reinsurance recoverables at December 31, are as follows:

				2010		2009

				(in millions)
Individual and group annuities (1)				$	1,075	$	1,039
Life Insurance					1,702		1,482
Other reinsurance					126		119
	Total reinsurance recoverable			$	2,903	$	2,640

_________

(1)	Primarily represents reinsurance recoverables established under the reinsurance arrangements associated with the acquisition of the retirement business of CIGNA. The Company has recorded related reinsurance payables of $1,068 million and $1,038 million at December 31, 2010 and 2009, respectively.

“Premiums” includes affiliated reinsurance assumed of $1,224 million, $1,092 million and $974 million and affiliated reinsurance ceded of $(111) million, $(111) million and $(114) million for the years ended December 31, 2010, 2009, and 2008, respectively.

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“Policyholders’ benefits” includes affiliated reinsurance assumed of $959 million, $823 million and $748 million and affiliated reinsurance ceded of $(58) million, $(61) million and $(66) million for the years ended December 31, 2010, 2009, and 2008, respectively.

“General and administrative expenses” include affiliated assumed expenses of $147 million, $128 million and $91 million for the years ended December 31, 2010, 2009, and 2008, respectively.

Amounts “Due from parent and affiliates” includes affiliated reinsurance recoverables of $1,120 million and $940 million at December 31, 2010 and 2009, respectively reflected in the table above. Excluding both the reinsurance recoverable associated with the acquisition of the retirement business of CIGNA and affiliated reinsurance recoverables, four major reinsurance companies account for approximately 62% of the reinsurance recoverable at December 31, 2010. The Company periodically reviews the financial condition of its reinsurers and amounts recoverable therefrom in order to minimize its exposure to loss from reinsurer insolvencies, recording an allowance when necessary for uncollectible reinsurance.

Amounts “Due from parent and affiliates” also include $(387) million and $(4) million at December 31, 2010 and 2009, respectively, related to the ceding of certain embedded derivative liabilities associated with the Company’s guaranteed benefits. “Realized investment gains (losses), net” includes a loss of $484 million, a loss of $878 million and a gain of $768 million for the years ended December 31, 2010, 2009, and 2008, respectively, related to the change in fair values of these ceded embedded derivative liabilities.

“Deferred policy acquisition costs” includes affiliated amounts related to reinsurance of $860 million and $754 million at December 31, 2010 and 2009, respectively.

Amounts “Due to parent and affiliates” includes reinsurance payables of $3,702 million and $2,880 million at December 31, 2010 and 2009, respectively.

14. SHORT-TERM AND LONG-TERM DEBT

Short-term Debt

	Short-term debt at December 31, is as follows:

		2010		2009

		(in millions)
Commercial paper		$	874	$	730
Other notes payable(1)(2)			389		159
Current portion of long-term debt(3)(4)			225		2,042
	Total short-term debt	$	1,488	$	2,931

(1)

Includes collateralized borrowings from the Federal Home Loan Bank of New York of $275 million at December 31, 2010, which are discussed in more detail below.

(2)

Includes notes due to related parties of $112 million and $157 million at December 31, 2010 and 2009, respectively. During 2009, a portion of the related party notes payable were variable rate notes where the payments on these loans were based on the performance of certain separate accounts held by a subsidiary of the Company, resulting in effective interest rates on these loans ranging from -74.9% to -30.0%. The remaining related party notes payable have variable interest rates ranging from 0.6% to 1.7% in 2010 and 0.4% to 1.8% in 2009.

(3)	Includes collateralized borrowings from the Federal Home Loan Bank of New York of $2,000 million at December 31, 2009, which are discussed in more detail below.

(4)	Includes notes due to related parties of $213 million at December 31, 2010.

The weighted average interest rate on outstanding short-term debt, excluding the current portion of long-term debt, was 0.4% and 0.6% at December 31, 2010 and 2009, respectively. At December 31, 2010 and 2009, the Company was in compliance with all covenants related to the above debt.

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Commercial Paper

Prudential Funding, LLC (“Prudential Funding”), a wholly-owned subsidiary of Prudential Insurance, has a commercial paper program with an authorized capacity of $7.0 billion. Prudential Funding commercial paper borrowings have generally served as an additional source of financing to meet the working capital needs of Prudential Insurance and its subsidiaries. Prudential Funding also lends to other subsidiaries of Prudential Financial up to limits agreed with the New Jersey Department of Banking and Insurance. Prudential Funding’s outstanding commercial paper borrowings were $874 million and $730 million at December 31, 2010 and 2009, respectively. At December 31, 2010 and 2009, the weighted average maturity of total commercial paper outstanding was 31 and 23 days, respectively. Prudential Financial has issued a subordinated guarantee covering Prudential Funding’s domestic commercial paper program.

Federal Home Loan Bank of New York

Prudential Insurance is a member of the Federal Home Loan Bank of New York (“FHLBNY”). Membership allows Prudential Insurance access to the FHLBNY's financial services, including the ability to obtain collateralized loans and to issue collateralized funding agreements that can be used as an alternative source of liquidity. FHLBNY borrowings and funding agreements are collateralized by qualifying mortgage-related assets or U.S. Treasury securities, the fair value of which must be maintained at certain specified levels relative to outstanding borrowings, depending on the type of asset pledged. FHLBNY membership requires Prudential Insurance to own member stock and borrowings require the purchase of activity-based stock in an amount equal to 4.5% of outstanding borrowings. Under FHLBNY guidelines, if Prudential Insurance’s financial strength ratings decline below A/A2/A Stable by S&P/Moody’s/Fitch, respectively, and the FHLBNY does not receive written assurances from the New Jersey Department of Banking and Insurance (“NJDOBI”) regarding Prudential Insurance’s solvency, new borrowings from the FHLBNY would be limited to a term of 90 days or less. Currently there are no restrictions on the term of borrowings from the FHLBNY. All FHLBNY stock purchased by Prudential Insurance is classified as restricted general account investments within “Other long-term investments,” and the carrying value of these investments was $177 million and $221 million as of December 31, 2010 and 2009, respectively.

NJDOBI previously permitted Prudential Insurance to pledge collateral to the FHLBNY in an amount up to 7% of its prior year-end statutory net admitted assets, excluding separate account assets; however, since the Company elected not to seek an extension, this limitation reset to 5% effective January 1, 2011. Based on Prudential Insurance’s statutory net admitted assets as of December 31, 2009, the 5% limitation equates to a maximum amount of pledged assets of $7.4 billion and an estimated maximum borrowing capacity (after taking into account required collateralization levels and purchases of activity-based stock) of approximately $6.2 billion. Nevertheless, FHLBNY borrowings are subject to the FHLBNY’s discretion and to the availability of qualifying assets at Prudential Insurance.

As of December 31, 2010, Prudential Insurance had pledged qualifying assets with a fair value of $2.8 billion, which supported outstanding collateralized advances of $1.0 billion and collateralized funding agreements of $1.5 billion. The fair value of qualifying assets that were available to Prudential Insurance but not pledged amounted to $5.5 billion as of December 31, 2010.

As of December 31, 2010, $275 million of the FHLBNY outstanding advances are reflected in “Short-term debt” and the remaining $725 million is in “Long-term debt.” FHLBNY advances declined $1,000 million from December 31, 2009, reflecting the repayment at maturity of $1,000 million of advances in June and the refinancing of $1,000 million of advances in December. Of the outstanding $1,000 million collateralized advances, $275 million matures in December 2011 and $725 million matures in December 2015. The funding agreements issued to the FHLBNY, which are reflected in “Policyholders’ account balances,” have priority claim status above debt holders of Prudential Insurance.

Federal Home Loan Bank of Boston

Prudential Retirement Insurance and Annuity Company (“PRIAC”) became a member of the Federal Home Loan Bank of Boston (“FHLBB”) in December 2009. Membership allows PRIAC access to collateralized advances which will be classified in “Short-term debt” or “Long-term debt,” depending on the maturity date of the obligation. PRIAC’s membership in FHLBB requires the ownership of member stock and borrowings from FHLBB require the purchase of activity-based stock in an amount between 3.0% and 4.5% of outstanding borrowings depending on the maturity date of the obligation. As of December 31, 2010, PRIAC had no advances outstanding under the FHLBB facility.

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The Connecticut Department of Insurance (“CTDOI”) permits PRIAC to pledge up to $2.6 billion in qualifying assets to secure FHLBB borrowings through December 31, 2011. PRIAC must seek re-approval from CTDOI prior to borrowing additional funds after that date. Based on available eligible assets as of December 31, 2010, PRIAC had an estimated maximum borrowing capacity, after taking into consideration required collateralization levels and required purchases of activity-based FHLBB stock, of approximately $1.1 billion.

Credit Facilities

As of December 31, 2010, the Company had $2,858 million of unsecured committed credit facilities. These facilities, which are available to Prudential Financial, Prudential Insurance, and Prudential Funding, have terms ranging from one to two years. There were no outstanding borrowings under these credit facilities as of December 31, 2010. Each of the facilities is available to the applicable borrowers up to the aggregate committed credit and may be used for general corporate purposes, including as backup liquidity for the Company’s commercial paper program discussed above. Any borrowings under the credit facilities would mature no later than the respective expiration dates of the facilities and would bear interest at the rates set forth in the applicable credit agreement.

These credit facilities contain representations and warranties, covenants and events of default that are customary for facilities of this type. The Company’s ability to borrow under the facilities is conditioned on the continued satisfaction of customary conditions, including, the maintenance at all times by Prudential Insurance of total adjusted capital of at least $5.5 billion based on statutory accounting principles prescribed under New Jersey law and, in the case of each of the facilities, Prudential Financial’s maintenance of a prescribed minimum level of consolidated net worth. The minimum level of consolidated net worth of Prudential Financial is $12.5 billion, which for this purpose is based on U.S. GAAP equity, excluding net unrealized gains and losses on investments.

As of December 31, 2010, Prudential Insurance’s total adjusted capital and Prudential Financial’s consolidated net worth (as defined in the applicable credit agreements) exceeded the minimum amounts required to borrow under the facilities. The Company’s ability to borrow under the facilities is not contingent on its credit ratings nor subject to material adverse change clauses.

The Company also has access to uncommitted lines of credit from financial institutions. In addition, the Company, as part of its real estate separate account activities, had outstanding lines of credit of $960 million at December 31, 2010, of which $100 million was used.

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Long-term Debt

Long-term debt at December 31, is as follows:

			Maturity
			Dates		Rate		2010		2009

							(in millions)
Fixed rate notes:
	Surplus notes(1)			2014-2040		5.10%-8.30%	$	2,986	$	2,686
	Other fixed rate notes(2)(3)			2011-2027		1.00%-14.85%		2,128		780
Floating rate notes:
	Surplus notes(4)			2016-2052		(5)		3,200		3,250
	Other floating rate notes			2011-2012		(6)		140		213
		Total long-term debt					$	8,454	$	6,929

[Missing Graphic Reference]

(1)	Fixed rate surplus notes at December 31, 2010 and 2009 includes $2,044 million and $1,745 million, respectively, due to a related party. Maturities of these notes range from 2014 through 2040. The interest rates ranged from 5.1% to 6.7% in 2010 and 5.1% to 6.1% in 2009.

(2)	Includes collateralized borrowings from the Federal Home Loan Bank of New York of $725 million at December 31, 2010. These borrowings are discussed in more detail above.

(3)	Other fixed rate notes at December 31, 2010 and 2009 includes $1,213 million and $578 million, respectively, due to related parties. Maturities of these notes range from 2015 through 2027 and interest rates ranged from 3.01% to 14.85% in 2010 and 4.88% to 14.85% in 2009.

(4)	Floating rate surplus notes at December 31, 2009 includes $50 million due to a related party, which was prepaid in 2010. The interest rates ranged from 2.28% to 2.90% in 2010 and was 2.61% in 2009.

(5)	The interest rate on the floating rate Surplus notes ranged from 0.52% to 3.71% in 2010 and 0.55% to 4.84% in 2009.

(6)	Other floating rate notes at December 31, 2010 and 2009, which are all due to related parties, are based on LIBOR Interest rates ranged from 1.23% to 1.96% in 2010 and 1.52% to 15.48% in 2009.

At December 31, 2010 and 2009, the Company was in compliance with all debt covenants related to the borrowings in the above table.

The following table presents, as of December 31, 2010, the Company’s contractual maturities of its long-term debt:


			Long-term Debt

			(in millions)
Calendar Year:
	2012		$	143
	2013			4
	2014			904
	2015			1,614
	2016 and thereafter			5,789
		Total	$	8,454

Surplus Notes

The fixed rate surplus notes issued by Prudential Insurance to non-affiliates are subordinated to other Prudential Insurance borrowings and policyholder obligations, and the payment of interest and principal may only be made with the prior approval of the Commissioner of Banking and Insurance of the State of New Jersey (the “Commissioner”). The Commissioner could prohibit the payment of the interest and principal on the surplus notes if certain statutory capital requirements are not met. At December 31, 2010 and 2009, the Company met these statutory capital requirements. At December 31, 2010 and 2009, $942 million and $941 million, respectively, of fixed rate surplus notes were outstanding to non-affiliates.

In September 2009, Prudential Insurance issued in a private placement $500 million of surplus notes due September 2019 with an interest rate of 5.36% per annum. The surplus notes are exchangeable at the option of the holder, in whole but not in part, for shares of Prudential Financial Common Stock beginning in September 2014, or earlier upon a fundamental business

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combination involving Prudential Financial or a continuing payment default. The initial exchange rate for the surplus notes is 10.1235 shares of Common Stock per each $1,000 principal amount of surplus notes, which represents an initial exchange price per share of Common Stock of $98.78; however, the exchange rate is subject to customary anti-dilution adjustments. The exchange rate is also subject to a make-whole decrease in the event of an exchange prior to maturity (except upon a fundamental business combination or a continuing payment default), that will result in a reduction in the number of shares issued upon exchange (per $1,000 principal amount of surplus notes) determined by dividing a prescribed cash reduction value (which will decline over the life of the surplus notes, from $102.62 for an exercise on September 18, 2014 to zero for an exercise at maturity) by the price of the Common Stock at the time of exchange. In addition, the exchange rate is subject to a customary make-whole increase in connection with an exchange of the surplus notes upon a fundamental business combination where 10% or more of the consideration in that business combination consists of cash, other property or securities that are not listed on a U.S. national securities exchange.

These exchangeable surplus notes are not redeemable by Prudential Insurance prior to maturity, except in connection with a fundamental business combination involving Prudential Financial, in which case the surplus notes will be redeemable by Prudential Insurance, subject to the noteholders’ right to exchange the surplus notes instead, at par or, if greater, a make-whole redemption price. The surplus notes are subordinated to all other Prudential Insurance borrowings and policyholder obligations, except for other surplus notes of Prudential Insurance (including those currently outstanding), with which the surplus notes rank pari passu. Payments of interest and principal on the surplus notes may only be made with the prior approval of the Commissioner.

During 2007, a subsidiary of Prudential Insurance issued $500 million of 45-year floating rate surplus notes to an unaffiliated financial institution. Surplus notes issued under this facility are subordinated to policyholder obligations, and the payment of interest and principal on them may only be made by the issuer with the prior approval of the Arizona Department of Insurance. Concurrent with the issuance of these surplus notes, Prudential Financial entered into a credit derivative that will require Prudential Financial to make certain payments in the event of deterioration in the value of the surplus notes. As of December 31, 2010 and 2009, the credit derivative was a liability of $26 million and $22 million, respectively, with no requirement to pledge collateral.

During 2006, a subsidiary of Prudential Insurance entered into a surplus note purchase agreement with an unaffiliated financial institution that provides for the issuance of up to $3,000 million of ten-year floating rate surplus notes. At December 31, 2010 and 2009, $2,700 million were outstanding under this agreement. Concurrent with the issuance of each surplus note, Prudential Financial enters into arrangements with the buyer, which are accounted for as derivative instruments that may result in payments by, or to, Prudential Financial over the term of the surplus notes, to the extent there are significant changes in the value of the surplus notes. Surplus notes issued under this facility are subordinated to policyholder obligations, and the payment of interest and principal on them may only be made by the issuer with the prior approval of the Arizona Department of Insurance. As of December 31, 2010 and 2009, these derivative instruments had no material value.

Other

In order to modify exposure to interest rate and currency exchange rate movements, the Company utilizes derivative instruments, primarily interest rate swaps, in conjunction with some of its debt issues. The impact of these derivative instruments are not reflected in the rates presented in the tables above. For those derivative instruments that qualify for hedge accounting treatment, there was no material effect on interest expense for the years ended December 31, 2010 and 2009 and interest expense was decreased by $10 million for the year ended December 31, 2008. See Note 21 for additional information on the Company’s use of derivative instruments.

Interest expense for short- and long-term debt, including interest on affiliated debt, was $318 million, $352 million and $539 million, for the years ended December 31, 2010, 2009 and 2008, respectively. Interest expense related to affiliated debt was $155 million, $154 million and $177 million for the years ended December 31, 2010, 2009 and 2008, respectively. “Due to parent and affiliates” included $25 million and $24 million associated with the affiliated long-term interest payable at December 31, 2010 and 2009, respectively.

Included in “Policyholders’ account balances” are additional debt obligations of the Company. See Notes 10 and 5 for further discussion.

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15. EQUITY

Comprehensive Income

The components of comprehensive income (loss) for the years ended December 31, are as follows:

		2010		2009		2008

		(in millions)
Net income (loss)		$	2,039	$	2,312	$	(668)
Other comprehensive income (loss), net of taxes
	Change in foreign currency translation adjustments		2		6		(24)
	Change in net unrealized investments gains (losses)(1)		1,361		7,332		(5,888)
	Change in pension and postretirement unrecognized net periodic benefit (cost)		328		(620)		(707)
Other comprehensive income (loss), net of tax expense (benefit) of $869,
	$3,364, ($3,517)		1,691		6,718		(6,619)
Comprehensive income (loss)			3,730		9,030		(7,287)
	Comprehensive income attributable to noncontrolling interests		(1)		(1)		(2)
Comprehensive income (loss) attributable to Prudential Insurance Company of America.		$	3,729	$	9,029	$	(7,289)

(1)	Includes cash flow hedges. See Note 21 for information on cash flow hedges.

The balance of and changes in each component of “Accumulated other comprehensive income (loss) attributable to Prudential Insurance Company of America” for the years ended December 31, are as follows (net of taxes):

	Accumulated Other Comprehensive Income (Loss) Attributable to Prudential Insurance Company of America

	Foreign Currency Translation Adjustments		Net Unrealized Investment Gains (Losses) (1)		Pension and Postretirement Unrecognized Net Periodic Benefit (Cost)		Total Accumulated Other Comprehensive Income (Loss)

	(in millions)
Balance, December 31, 2007	$	123	$	212	$	(161)	$	174
Change in component during year(2)		(24)		(6,033)		(707)		(6,764)
Balance, December 31, 2008		99		(5,821)		(868)		(6,590)
Change in component during year		6		7,332		(620)		6,718
Impact of adoption of guidance for other-than-
temporary impairments of debt securities(3)		-		(575)		-		(575)
Balance, December 31, 2009		105		936		(1,488)		(447)
Change in component during year		2		1,361		328		1,691
Balance, December 31, 2010	$	107	$	2,297	$	(1,160)	$	1,244

(1)	Includes cash flow hedges. See Note 21 for information on cash flow hedges.

(2)	Net unrealized investment gains (losses) for 2008 includes the purchase of fixed maturities from an affiliate of $(145) million.

(3)	See Note 2 for additional information on the adoption of guidance for other-than-temporary impairments of debt securities.

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Dividend Restrictions

New Jersey insurance law provides that, except in the case of extraordinary dividends (as described below), all dividends or other distributions paid by Prudential Insurance may be paid only from unassigned surplus, as determined pursuant to statutory accounting principles, less unrealized investment gains and losses and revaluation of assets as of the prior calendar year-end. As of December 31, 2010, Prudential Insurance’s unassigned surplus was $4,224 million, and it recorded applicable adjustments for cumulative unrealized investment gains of $1,499 million. Prudential Insurance must give prior notification to the New Jersey Department of Banking and Insurance (the “Department”) of its intent to pay any dividend or distribution. Also, if any dividend, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of Prudential Insurance’s statutory surplus as of the preceding December 31 ($8,364 million as of December 31, 2010) or (ii) its statutory net gain from operations excluding realized investment gains and losses for the twelve month period ending on the preceding December 31, ($1,127 million for the year ended December 31, 2010), the dividend is considered to be an “extraordinary dividend” and the prior approval of the Department is required for the payment of the dividend. The laws regulating dividends of Prudential Insurance’s other insurance subsidiaries domiciled in other states are similar, but not identical, to New Jersey’s.

Statutory Net Income and Surplus

Prudential Insurance and its U.S. insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile. Statutory accounting practices primarily differ from U.S. GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis. Statutory net income (loss) of Prudential Insurance amounted to $1,623 million, $1,101 million and $(808) million for the years ended December 31, 2010, 2009 and 2008, respectively. Statutory capital and surplus of Prudential Insurance amounted to $8,364 million and $10,042 million at December 31, 2010 and 2009, respectively.

The New York State Insurance Department recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company for determining its solvency under the New York Insurance Law and for determining whether its financial condition warrants the payment of a dividend to its policyholders. No consideration is given by the New York State Insurance Department to financial statements prepared in accordance with GAAP in making such determinations.

16. STOCK-BASED COMPENSATION

In 2010 and prior, Prudential Financial issued stock-based compensation awards to employees of the Company, including stock options, restricted stock units, restricted stock awards, performance shares and performance units, under a plan authorized by Prudential Financial’s Board of Directors.

Prudential Financial recognizes the cost resulting from all share-based payments in the financial statements in accordance with the authoritative guidance on accounting for stock based compensation and applies the fair value based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans.

The results of operations of the Company for the years ended December 31, 2010, 2009 and 2008, include allocated costs of $13 million, $14 million and $20 million, respectively, associated with employee stock options and $44 million, $37 million, and $27 million, respectively, associated with employee restricted stock shares, restricted stock units, performance shares and performance units issued by Prudential Financial to certain employees of the Company.

17. EMPLOYEE BENEFIT PLANS

Pension and Other Postretirement Plans

The Company has funded and non-funded contributory and non-contributory defined benefit pension plans, which cover substantially all of its employees as well as employees of certain destacked subsidiaries. For some employees, benefits are based

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on final average earnings and length of service, while benefits for other employees are based on an account balance that takes into consideration age, service and earnings during their career.

The Company provides certain health care and life insurance benefits for its retired employees (including those of certain destacked subsidiaries), their beneficiaries and covered dependents (“other postretirement benefits”). The health care plan is contributory; the life insurance plan is non-contributory. Substantially all of the Company’s U.S. employees may become eligible to receive other postretirement benefits if they retire after age 55 with at least 10 years of service or under certain circumstances after age 50 with at least 20 years of continuous service. The Company has elected to amortize its transition obligation for other postretirement benefits over 20 years.

Prepaid benefits costs and accrued benefit liabilities are included in “Other assets” and “Other liabilities,” respectively, in the Company’s Consolidated Statements of Financial Position. The status of these plans as of December 31, 2010 and 2009, is summarized below:

	Pension Benefits				Other Postretirement Benefits
	2010		2009		2010		2009

		(in millions)
Change in benefit obligation
Benefit obligation at the beginning of period	$	(7,957)		(7,481)	$	(2,122)		(1,994)
Service cost		(130)		(120)		(10)		(10)
Interest cost		(450)		(441)		(113)		(115)
Plan participants’ contributions		-		-		(23)		(21)
Medicare Part D subsidy receipts		-		-		(20)		(14)
Amendments		-		-		-		-
Actuarial gains/(losses), net		(201)		(392)		(40)		(172)
Settlements		-		-		-		-
Curtailments		4		-		-		-
Special termination benefits		-		(1)		-		-
Benefits paid		498		494		213		209
Foreign currency changes and other		6		(16)		(1)		(5)
Benefit obligation at end of period	$	(8,230)	$	(7,957)	$	(2,116)	$	(2,122)

Change in plan assets
Fair value of plan assets at beginning of period	$	9,572	$	9,900	$	1,519	$	1,417
Actual return on plan assets		1,366		90		152		278
Employer contributions		72		60		14		16
Plan participants’ contributions		-		-		23		21
Disbursement for settlements		-		-		-		-
Benefits paid		(498)		(494)		(213)		(209)
Foreign currency changes and other		(4)		16		-		(4)
Fair value of plan assets at end of period	$	10,508	$	9,572	$	1,495	$	1,519

Funded status at end of period	$	2,278	$	1,615	$	(621)	$	(603)

Amounts recognized in the Statements of Financial Position
Prepaid benefit cost	$	3,219	$	2,523	$	-	$	-
Accrued benefit liability		(941)		(908)		(621)		(603)
Net amount recognized	$	2,278	$	1,615	$	(621)	$	(603)

B-71


Items recorded in “Accumulated other comprehensive income”
not yet recognized as a component of net periodic (benefit) cost:
Transition obligation	$	-	$	-	$	1	$	1
Prior service cost		81		105		(54)		(65)
Net actuarial loss		1,221		1,674		617		660
Net amount not recognized	$	1,302	$	1,779	$	564	$	596

Accumulated benefit obligation	$	(7,834)	$	(7,584)	$	(2,116)	$	(2,122)

In addition to the plan assets above, the Company in 2007 established an irrevocable trust, commonly referred to as a “rabbi trust,” for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain non-qualified retirement plans ($841 million and $779 million benefit obligation at December 31, 2010 and 2009, respectively). Assets held in the rabbi trust are available to the general creditors of the Company in the event of insolvency or bankruptcy. The Company may from time to time in its discretion make contributions to the trust to fund accrued benefits payable to participants in one or more of the plans, and, in the case of a change in control of the Company, as defined in the trust agreement, the Company will be required to make contributions to the trust to fund the accrued benefits, vested and unvested, payable on a pretax basis to participants in the plans. The Company made a discretionary payment of $95 million to the trust during both 2010 and 2009. As of December 31, 2010 and 2009, the assets in these trusts had a carrying value of $390 million and $281 million, respectively.

The Company also maintains a separate rabbi trust established at the time of the combination of its retail securities brokerage and clearing operations with those of Wachovia for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain non-qualified retirement plans ($74 million and $75 million benefit obligation at December 31, 2010 and 2009, respectively), as well as certain cash-based deferred compensation arrangements. As of December 31, 2010 and 2009, the assets in the trust had a carrying value of $124 million and $124 million, respectively.

Pension benefits for foreign plans comprised 3% and 3% of the ending benefit obligation for 2010 and 2009. Foreign pension plans comprised 2% of the ending fair value of plan assets for 2010 and 2009. There are no material foreign postretirement plans.

	Information for pension plans with a projected benefit obligation in excess of plan assets

		2010		2009

			(in millions)

Projected benefit obligation		$	1,128	$	1,065
Fair value of plan assets			187		157

	Information for pension plans with an accumulated benefit obligation in excess of plan assets

		2010		2009

			(in millions)

Accumulated benefit obligation		$	1,029	$	969
Fair value of plan assets			187		157

There were no purchases of annuity contracts in 2010 and 2009 from Prudential Insurance. The approximate future annual benefit payment payable by Prudential Insurance for all annuity contracts was $20 million and $20 million as of December 31, 2010 and 2009, respectively.

There were no pension plan amendments in 2010 and 2009. There were no postretirement plan amendments in 2010 and 2009.

B-72

Components of Net Periodic Benefit Cost

Net periodic (benefit) cost included in “General and administrative expenses” in the Company’s Consolidated Statements of Operations for the years ended December 31, includes the following components:

	Pension Benefits						Other Postretirement Benefits
	2010		2009		2008		2010		2009		2008

		(in millions)

Service cost	$	130	$	120	$	116	$	10	$	10	$	10
Interest cost		450		441		445		113		115		124
Expected return on plan assets		(743)		(729)		(717)		(107)		(107)		(161)
Amortization of transition obligation		-		-		-		1		1		1
Amortization of prior service cost		23		26		28		(12)		(11)		(11)
Amortization of actuarial (gain) loss, net		26		20		17		39		42		1
Settlements		-		-		-		-		-		-
Special termination benefits		-		1		2		-		-		-
Net periodic (benefit) cost	$	(114)	$	(121)	$	(109)	$	44	$	50	$	(36)

Certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of their involuntary termination.

Changes in Accumulated Other Comprehensive Income

The amounts recorded in “Accumulated other comprehensive income” as of the end of the period, which have not yet been recognized as a component of net periodic (benefit) cost, and the related changes in these items during the period that are recognized in “Other Comprehensive Income” are as follows:

		Pension Benefits						Other Postretirement Benefits
		Transition Obligation		Prior Service Cost		Net Actuarial (Gain) Loss		Transition Obligation		Prior Service Cost		Net Actuarial (Gain) Loss

			(in millions)

Balance, December 31, 2008		$	-	$	131	$	661	$	2	$	(76)	$	700
	Amortization for the period		-		(26)		(20)		(1)		11		(42)
	Deferrals for the period		-		-		1,031		-		-		1
	Impact of foreign currency changes and other		-		-		2		-		-		1
Balance, December 31, 2009			-		105		1,674		1		(65)		660
	Amortization for the period		-		(23)		(26)		(1)		12		(39)
	Deferrals for the period		-		-		(422)		-		-		(5)
	Impact of foreign currency changes and other		-		(1)		(5)		1		(1)		1
Balance, December 31, 2010		$	-	$	81	$	1,221	$	1	$	(54)	$	617

B-73



The amounts included in “Accumulated other comprehensive income” expected to be recognized as components of net periodic (benefit) cost in 2011 are as follows:

	Pension Benefits		Other Postretirement Benefits

	(in millions)
Amortization of transition obligation	$	-	$	1
Amortization of prior service cost		23		(12)
Amortization of actuarial (gain) loss, net		26		36
Total	$	49	$	25

The Company’s assumptions related to the calculation of the domestic benefit obligation (end of period) and the determination of net periodic (benefit) cost (beginning of period) are presented in the table below. The assumptions for 2008 use September 30, 2007 for beginning of period and December 31, 2008 for end of period. The assumptions for 2009 use December 31, 2008 as the beginning of period and December 31, 2009 for end of period. The assumptions for 2010 use December 31, 2009 as the beginning of period and December 31, 2010 for end of period:

		Pension Benefits				Other Postretirement Benefits
		2010		2009	2008	2010	2009	2008

Weighted-average assumptions
Discount rate (beginning of period)			5.75%	6.00%	6.25%	5.50%	6.00%	6.00%
Discount rate (end of period)			5.60%	5.75%	6.00%	5.35%	5.50%	6.00%
Rate of increase in compensation levels (beginning of period)			4.50%	4.50%	4.50%	4.50%	4.50%	4.50%
Rate of increase in compensation levels (end of period)			4.50%	4.50%	4.50%	4.50%	4.50%	4.50%
Expected return on plan assets (beginning of period)			7.50%	7.50%	7.75%	7.50%	8.00%	8.00%
Health care cost trend rates (beginning of period)						5.00-7.50%	5.00-8.00%	5.00-8.75%
Health care cost trend rates (end of period)						5.00-7.00%	5.00-7.50%	5.00-8.00%
For 2010, 2009 and 2008, the ultimate health care cost trend rate after
	gradual decrease until: 2015, 2014, 2012 (beginning of period)					5.00%	5.00%	5.00%
For 2010, 2009 and 2008, the ultimate health care cost trend rate
	after gradual decrease until: 2017, 2015, 2014 (end of period)					5.00%	5.00%	5.00%

The domestic discount rate used to value the pension and postretirement obligations at December 31, 2010 is based upon the value of a portfolio of Aa investments whose cash flows would be available to pay the benefit obligation's cash flows when due. The portfolio is selected from a compilation of approximately 600 Aa-rated bonds across the full range of maturities. Since yields can vary widely at each maturity point, the Company generally avoids using the highest and lowest yielding bonds at the maturity points, so as to avoid relying on bonds that might be mispriced or misrated. This refinement process generally results in having a distribution from the 10th to 90th percentile. The Aa portfolio is then selected and, accordingly, its value is a measure of the benefit obligation at December 31, 2010. A single equivalent discount rate is calculated to equate the value of the Aa portfolio to the cash flows for the benefit obligation. The result is rounded to the nearest 5 basis points and the benefit obligation is recalculated using the rounded discount rate.

The domestic discount rate used to value the pension and postretirement benefit obligations at December 31, 2009 and 2008 is based upon rates commensurate with current yields on high quality corporate bonds. The first step in determining the discount rate is the compilation of approximately 300 Aa-rated bonds across the full range of maturities. Since yields can vary widely at each maturity point, the Company generally avoids using the highest and lowest yielding bonds at the maturity points, so as to avoid relying on bonds that might be mispriced or misrated. This refinement process generally results in having a distribution from the 10th to 90th percentile. A spot yield curve is developed from this data that is then used to determine the present value of the expected disbursements associated with the pension and postretirement obligations, respectively. This results in the present value for each respective benefit obligation. A single discount rate is calculated that results in the same present value. The rate is then rounded to the nearest 25 basis points and the benefit obligation is recalculated using the rounded discount rate.

B-74

The pension and postretirement expected long-term rates of return on plan assets for 2010 were determined based upon an approach that considered an expectation of the allocation of plan assets during the measurement period of 2010. Expected returns are estimated by asset class as noted in the discussion of investment policies and strategies below. Expected returns on asset classes are developed using a building-block approach that is forward looking and are not strictly based upon historical returns. The building blocks for equity returns include inflation, real return, a term premium, an equity risk premium, capital appreciation, effect of active management, expenses and the effect of rebalancing. The building blocks for fixed maturity returns include inflation, real return, a term premium, credit spread, capital appreciation, effect of active management, expenses and the effect of rebalancing.

The Company applied the same approach to the determination of the expected long-term rate of return on plan assets in 2011. The expected long-term rate of return for 2011 is 7.0% for both the pension and postretirement plans.

The Company, with respect to pension benefits, uses market related value to determine the components of net periodic (benefit) cost. Market related value is a measure of asset value that reflects the difference between actual and expected return on assets over a five-year period.

The assumptions for foreign pension plans are based on local markets. There are no material foreign postretirement plans.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage point increase and decrease in assumed health care cost trend rates would have the following effects:

	Other Postretirement Benefits

	(in millions)
One percentage point increase
Increase in total service and interest costs	$	6
Increase in postretirement benefit obligation		124

One percentage point decrease
Decrease in total service and interest costs	$	6
Decrease in postretirement benefit obligation		110

Plan Assets

The investment goal of the domestic pension plan assets is to generate an above benchmark return on a diversified portfolio of stocks, bonds and other investments, while meeting the cash requirements for a pension obligation that includes a traditional formula principally representing payments to annuitants and a cash balance formula that allows lump sum payments and annuity payments. The pension plan risk management practices include guidelines for asset concentration, credit rating and liquidity. The pension plan does not invest in leveraged derivatives. Derivatives such as futures contracts are used to reduce transaction costs and change asset concentration, while interest rate swaps are used to adjust duration.

The investment goal of the domestic postretirement plan assets is to generate an above benchmark return on a diversified portfolio of stocks, bonds, and other investments, while meeting the cash requirements for the postretirement obligation that includes a medical benefit including prescription drugs, a dental benefit, and a life benefit. The postretirement plans risk management practices include guidelines for asset concentration, credit rating, liquidity, and tax efficiency. The postretirement plan does not invest in leveraged derivatives. Derivatives such as futures contracts are used to reduce transaction costs and change asset concentration, while interest rate swaps are used to adjust duration.

B-75

The plan fiduciaries for the Company’s pension and postretirement plans have developed guidelines for asset allocations reflecting a percentage of total assets by asset class, which are reviewed on an annual basis. Asset allocation targets as of the December 31, 2010 are as follows:

	Pension		Postretirement
	Minimum	Maximum	Minimum	Maximum

Asset Category
U.S. Equities	2%	11%	36%	47%
International Equities	2%	11%	1%	7%
Fixed Maturities	53%	72%	0%	55%
Short-term Investments	0%	12%	0%	60%
Real Estate	1%	14%	0%	0%
Other	3%	22%	0%	0%

To implement the investment strategy, plan assets are invested in funds that primarily invest in securities that correspond to one of the asset categories under the investment guidelines. However, at any point in time, some of the assets in a fund may be of a different nature than the specified asset category.

Assets held with Prudential Insurance are in either pooled separate accounts or single client separate accounts. Pooled separate accounts hold assets for multiple investors. Each investor owns a “unit of account.” Single client separate accounts hold assets for only one investor, the domestic qualified pension plan and each security in the fund is treated as individually owned. Assets held with a bank are either in common/collective trusts or single client trusts. Common or collective trusts hold assets for more than one investor. Each investor owns a “unit of account.” Single client trusts hold assets for only one investor, the domestic qualified pension plan and each security in the fund is treated as individually owned.

There were no investments in Prudential Financial Common Stock as of December 31, 2010 and December 31, 2009 for either the pension or postretirement plans. Pension plan assets of $6,944 million and $6,393 million are included in the Company’s separate account assets and liabilities as of December 31, 2010 and December 31, 2009, respectively.

The authoritative guidance around fair value established a framework for measuring fair value. Fair value is disclosed using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as described in Note 19.

The following describes the valuation methodologies used for pension and postretirement plans assets measured at fair value.

Insurance Company Pooled Separate Accounts, Common or Collective Trusts, and United Kingdom Insurance Pooled Funds – Insurance company pooled separate accounts are invested via group annuity contracts issued by Prudential Insurance. Assets are represented by a “unit of account.” The redemption value of those units is based on a per unit value whose value is the result of the accumulated values of underlying investments. The underlying investments are valued in accordance with the corresponding valuation method for the investments held.

Equities – See Note 19 for a discussion of the valuation methodologies for equity securities.

U.S. Government Securities (both Federal and State & Other), Non–U.S. Government Securities, and Corporate Debt - See Note 19 for a discussion of the valuation methodologies for fixed maturity securities.

Interest Rate Swaps – See Note 19 for a discussion of the valuation methodologies for derivative instruments.

Guaranteed Investment Contract - The value is based on contract cash flows and available market rates for similar investments.

Registered Investment Companies (Mutual Funds) - Securities are priced at the net asset value (“NAV”) of shares.

Unrealized Gain (Loss) on Investment of Securities Lending Collateral - This value is the contractual position relative to the investment of securities lending collateral.

B-76

Real Estate - The values are determined through an independent appraisal process. The estimate of fair value is based on three approaches; (1) current cost of reproducing the property less deterioration and functional/economic obsolescence; (2) discounting a series of income streams and reversion at a specific yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable properties in the market. Each approach requires the exercise of subjective judgment.

Short-term Investments - Securities are valued initially at cost and thereafter adjusted for amortization of any discount or premium (i.e., amortized cost). Amortized Cost approximates fair value.

Partnerships - The value of interests owned in partnerships is based on valuations of the underlying investments that include private placements, structured debt, real estate, equities, fixed maturities, commodities and other investments.

.Structured Debt (Gateway Recovery Trust) - The value is based primarily on unobservable inputs including probability weighted cash flows and reinvestment yield assumptions.

Hedge Funds - The value of interests in the hedge funds is based on the underlying investments that include equities, debt and other investments.

Variable Life Insurance Policies – These assets are held in group and individual variable life insurance policies issued by Prudential Insurance. Group policies are invested in Insurance Company Pooled Separate Accounts. Individual policies are invested in Registered Investment Companies (Mutual Funds). The value of interests in these policies is the cash surrender value of the policies based on the underlying investments.

Pension plan asset allocations in accordance with the investment guidelines are as follows:

			As of December 31, 2010
			Level 1		Level 2		Level 3		Total

			(in millions)
U.S. Equities:
	Pooled separate accounts (1)		$	-	$	922	$	-	$	922
	Common/collective trusts (1)			-		35		-		35
		Sub-total								957

International Equities:
	Pooled separate accounts (2)			-		24		-		24
	Common/collective trusts (3)			-		191		-		191
	United Kingdom insurance pooled funds (4)			-		77		-		77
		Sub-total								292

B-77



Fixed Maturities:
	Pooled separate accounts (5)					-		996		-		996
	Common/collective trusts (6)					-		290		-		290
	U.S. government securities (federal):
		Mortgage backed				-		4		-		4
		Other U.S. government securities				-		1,806		-		1,806
	U.S. government securities (state & other)					-		533		-		533
	Non-U.S. government securities					-		15		-		15
	United Kingdom insurance pooled funds (7)					-		104		-		104
	Corporate Debt:
		Corporate bonds (8)				-		3,043		10		3,053
		Asset backed				-		20		-		20
		Collateralized Mortgage Obligations (CMO) (9)				-		739		-		739
	Interest rate swaps (Notional amount: $412)					-		(23)		-		(23)
	Guarenteed investment contract					-		1		-		1
	Other (10)					101		9		(8)		102
	Unrealized gain (loss) on investment of securities lending
		collateral (11)				-		(123)		-		(123)
			Sub-total									7,517

Short-term Investments:
	Pooled separate accounts					-		32		-		32
	United Kingdom insurance pooled funds					-		5		-		5
			Sub-total									37

Real Estate:
	Pooled separate accounts (12)					-		-		216		216
	Partnerships					-		-		42		42
			Sub-total									258

Other:
	Structured debt (Gateway Recovery Trust)					-		-		658		658
	Partnerships					-		-		219		219
	Hedge funds					-		-		570		570
			Sub-total									1,447
				Total	$	101	$	8,700	$	1,707	$	10,508

B-78

				As of December 31, 2009
				Level 1		Level 2		Level 3		Total

				(in millions)
U.S. Equities:
	Pooled separate accounts (1)			$	-	$	782	$	-	$	782
	Common/collective trusts (1)				-		128		-		128
	Other (10)				33		5		-		38
			Sub-total								948

International Equities:
	Pooled separate accounts (2)				-		23		-		23
	Common/collective trusts (3)				-		156		-		156
	Equities				61		-		-		61
			Sub-total								240

Fixed Maturities:
	Pooled separate accounts (5)				-		867		-		867
	Common/collective trusts (6)				-		345		-		345
	U.S. government securities (federal):
		Mortgage backed			-		70		-		70
		Other U.S. government securities			-		2,085		-		2,085
	U.S. government securities (state & other)				-		385		-		385
	Non-U.S. government securities				-		13		-		13
	United Kingdom insurance pooled funds (7)				-		90		-		90
	Corporate Debt:
		Corporate bonds (8)			-		2,008		1		2,009
		Asset backed			-		102		-		102
		Collateralized Mortgage Obligations (CMO) (9)			-		881		2		883
	Interest rate swaps (Notional amount: $5,686)				-		215		-		215
	Guaranteed investment contract				-		1		-		1
	Other (10)				61		(1)		120		180
	Unrealized gain (loss) on investment of securities lending
		collateral (13)			-		(182)		-		(182)
			Sub-total								7,063

Short-term Investments:
	Pooled separate accounts				-		10		-		10
	United Kingdom insurance pooled funds				-		6		-		6
			Sub-total								16

Real Estate:
	Pooled separate accounts (12)				-		-		187		187
	Partnerships				-		-		48		48
	Other				-		-		-		-
			Sub-total								235

B-79


Other:
	Structured debt (Gateway Recovery Trust)				-		-		572		572
	Partnerships				-		-		280		280
	Hedge fund				-		-		218		218
		Sub-total									1,070
			Total	$	155	$	7,989	$	1,428	$	9,572

(1)	These categories invest in U.S. equity funds whose objective is to track or outperform various indexes.

(2)	This category invests in large cap international equity fund whose objective is to track an index.

(3)	This category invests in international equity funds, primarily large cap, whose objective is to outperform various indexes.

(4)	This category invests in an international equity fund whose objective is to track an index.

(5)	This category invests in bond funds, primarily highly rated private placement securities.

(6)	This category invests in bond funds, primarily highly rated public securities whose objective is to outperform an index.

(7)	This category invests in bond funds, primarily highly rated corporate securities.

(8)	This category invests in highly rated corporate securities.

(9)	This category invests in highly rated Collateralized Mortgage Obligations.

(10)	Primarily cash and cash equivalents, short term investments, payables and receivables and open future contract positions (including fixed income collateral).

(11)	The contractual net value of the investment of securities lending collateral invested in primarily short-term bond funds is $1,295 million and the liability for securities lending collateral is $1,418 million.

(12)	This category invests in commercial real estate and real estate securities funds, whose objective is to outperform an index

(13)	The contractual value of investments of securities lending collateral invested in primarily short-term bond funds is $1,231 million and the liability for securities lending collateral is $1,413 million.

Changes in Fair Value of Level 3 Pension Assets

			Year Ended December 31, 2010

			Fixed Maturities - Corporate Debt - Corporate Bonds		Fixed Maturities - Corporate Debt - CMO		Fixed Maturities - Other		Real Estate - Pooled Separate Accounts

			(in millions)
Fair Value, beginning of period			$	1	$	2	$	120	$	187
	Actual Return on Assets:
		Relating to assets still held at the reporting date		1		-		-		42
		Relating to assets sold during the period		-		-		-		(2)
	Purchases, sales and settlements			-		-		(128)		(11)
	Transfers in and /or out of Level 3			8		(2)		-		-
Fair Value, end of period			$	10	$	-	$	(8)	$	216

			Year Ended December 31, 2010

			Real Estate - Partnerships		Other - Structured Debt		Other - Partnerships		Other - Hedge Fund

			(in millions)
Fair Value, beginning of period			$	48	$	572	$	280	$	218
	Actual Return on Assets:
		Relating to assets still held at the reporting date		4		86		17		44
		Relating to assets sold during the period		-		-		-		-
	Purchases, sales and settlements			(10)		-		30		200
	Transfers in and /or out of Level 3			-		-		(108)		108
Fair Value, end of period			$	42	$	658	$	219	$	570

B-80

			Year Ended December 31, 2009

			Fixed Maturities - Corporate Debt - Corporate Bonds		Fixed Maturities - Corporate Debt - CMO		Fixed Maturities - Other		Real Estate - Pooled Separate Accounts

			(in millions)
Fair Value, beginning of period			$	13	$	2	$	161	$	323
	Actual Return on Assets:
		Relating to assets still held at the reporting date		-		-		-		(125)
		Relating to assets sold during the period		-		-		-		(1)
	Purchases, sales and settlements			(3)		-		(41)		(10)
	Transfers in and /or out of Level 3			(9)		-		-		-
Fair Value, end of period			$	1	$	2	$	120	$	187

			Year Ended December 31, 2009

			Real Estate - Partnerships		Other - Structured Debt		Other - Partnerships		Other - Hedge Fund

			(in millions)
Fair Value, beginning of period			$	64	$	477	$	197	$	176
	Actual Return on Assets:
		Relating to assets still held at the reporting date		(15)		95		17		42
		Relating to assets sold during the period		-		-		-		-
	Purchases, sales and settlements			(1)		-		66		-
	Transfers in and /or out of Level 3			-		-		-		-
Fair Value, end of period			$	48	$	572	$	280	$	218

	Postretirement plan asset allocations in accordance with the investment guidelines are as follows:

			As of December 31, 2010
			Level 1		Level 2		Level 3		Total

			(in millions)
U.S. Equities:
	Variable Life Insurance Policies (1)			-		449		-		449
	Common trusts (2)			-		88		-		88
	Equities			102		-		-		102
		Sub-total								639

International Equities:
	Variable Life Insurance Policies (3)			-		51		-		51
	Common trusts (4)			-		17		-		17
		Sub-total								68

B-81




Fixed Maturities:
	Common trusts (5)					-		23		-		23
	U.S. government securities (federal):
			Mortgage Backed			-		13		-		13
			Other U.S. government securities			-		157		-		157
	U.S. government securities (state & other)					-		2		-		2
	Non-U.S. government securities					-		3		-		3
	Corporate Debt:
		Corporate bonds (6)				-		281		2		283
		Asset Backed				-		73		-		73
		Collateralized Mortgage Obligations (CMO) (7)				-		201		-		201
	Interest rate swaps (Notional amount: $322)					-		3		-		3
	Other (8)					10		-		4		14
	Unrealizied gain (loss) on investment of securities lending
		collateral (9)				-		-		-		-
			Sub-total									772

Short-term Investments:
	Variable Life Insurance Policies
		Pooled separate accounts				-		1		-		1
	Registered investment companies					15		-		-		15
			Sub-total									16
				Total	$	127	$	1,362	$	6	$	1,495


				As of December 31, 2009
				Level 1		Level 2		Level 3		Total

				(in millions)
U.S. Equities:
	Variable Life Insurance Policies:
		Pooled separate accounts (1)		$	-	$	155	$	-	$	155
		Registered investment companies			253		-		-		253
	Common trusts (2)				-		95		-		95
	Equities				97		-		-		97
			Sub-total								600

International Equities:
	Variable Life Insurance Policies
		Pooled separate accounts (3)			-		39		-		39
	Common trusts (4)				-		19		-		19
			Sub-total								58

B-82



Fixed Maturities:
	Common trusts (5)					-		29		-		29
	U.S. government securities (federal):
			Mortgage Backed			-		33		-		33
			Other U.S. government securities			-		84		-		84
	U.S. government securities (state & other)					-		1		-		1
	Non-U.S. government securities					-		3		-		3
	Corporate Debt:
		Corporate bonds (6)				-		259		1		260
		Asset Backed				-		98		-		98
		Collateralized Mortgage Obligations (CMO) (7)				-		215		2		217
	Interest rate swaps (Notional amount: $322)					-		4		-		4
	Other (8)					110		-		12		122
			Sub-total									851

Short-term Investments:
	Variable Life Insurance Policies
		Pooled separate accounts				-		1		-		1
	Registered investment companies					9		-		-		9
			Sub-total									10
				Total	$	469	$	1,035	$	15	$	1,519

(1)	This category invests in U.S. equity funds, primarily large cap equities whose objective is to track an index via pooled separate accounts and registered investment companies.

(2)	This category invests in U.S. equity funds, primarily large cap equities.

(3)	This category invests in international equity funds, primarily large cap international equities whose objective is to track an index.

(4)	This category fund invests in large cap international equity fund whose objective is to outperform an index.

(5)	This category invests in U.S. bonds funds.

(6)	This category invests in highly rated corporate bonds.

(7)	This category invests in highly rated Collateralized Mortgage Obligations.

(8)	Cash and cash equivalents, short term investments, payables and receivables and open future contract positions (including fixed income collateral).

(9)	The contractual net value of the investment of securities lending collateral invested in primarily short term bond funds is $30 million and the liability for securities lending collateral is $30 million.

Changes in Fair Value of Level 3 Postretirement Assets

			Year Ended December 31, 2010

			Fixed Maturities - Corporate Debt - Corporate Bonds		Fixed Maturities - Corporate Debt - CMO		Fixed Maturities - Other

			(in millions)
Fair Value, beginning of period			$	1	$	2	$	12
	Actual Return on Assets:
		Relating to assets still held at the reporting date		-		-		-
		Relating to assets sold during the period		-		-		-
	Purchases, sales and settlements			1		-		(8)
	Transfers in and /or out of Level 3			-		(2)		-
Fair Value, end of period			$	2	$	-	$	4

B-83

			Year Ended December 31, 2009

			Fixed Maturities - Corporate Debt - Corporate Bonds		Fixed Maturities - Corporate Debt - CMO		Fixed Maturities - Other

			(in millions)
Fair Value, beginning of period			$	3	$	2	$	11
	Actual Return on Assets:
		Relating to assets still held at the reporting date		-		-		-
		Relating to assets sold during the period		-		-		-
	Purchases, sales and settlements			(2)		-		1
	Transfers in and /or out of Level 3			-		-		-
Fair Value, end of period			$	1	$	2	$	12

A summary of pension and postretirement plan asset allocation as of the year ended December 31, are as follows:

	Pension Percentage of Plan Assets				Postretirement Percentage of Plan Assets
	2010		2009		2010		2009

Asset Category
U.S. Equities	9	%	10	%	43	%	40	%
International Equities	3		3		5		4
Fixed Maturities	72		74		51		55
Short-term Investments	-		-		1		1
Real Estate	2		2		-		-
Other	14		11		-		-
Total	100	%	100	%	100	%	100	%

The expected benefit payments for the Company's pension and postretirement plans, as well as the expected Medicare Part D subsidy receipts related to the Company's postretirement plan, for the years indicated are as follows:

	Pension Benefits		Other Postretirement Benefits		Other Postretirement Benefits - Medicare Part D Subsidy Receipts

	(in millions)
2011	$	524	$	199	$	19
2012		533		198		20
2013		535		198		21
2014		549		196		21
2015		557		193		22
2016-2020		2,921		920		110
Total	$	5,619	$	1,904	$	213

B-84

The Company anticipates that it will make cash contributions in 2011 of approximately $60 million to the pension plans and approximately $10 million to the postretirement plans.

Postemployment Benefits

The Company accrues postemployment benefits for income continuance and health and life benefits provided to former or inactive employees who are not retirees. The net accumulated liability for these benefits at December 31, 2010 and 2009 was $33 million and $38 million, respectively, and is included in “Other liabilities.”

Other Employee Benefits

The Company sponsors voluntary savings plans for employees (401(k) plans). The plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The matching contributions by the Company included in “General and administrative expenses” were $52 million, $53 million and $51 million for the years ended December 31, 2010, 2009 and 2008, respectively.

18. INCOME TAXES

The components of income tax expense (benefit) for the years ended December 31, were as follows:


		2010		2009		2008

		(in millions)
Current tax expense (benefit)
	U.S.	$	(304)	$	202	$	(309)
	State and local		(3)		(2)		5
	Foreign		13		9		20
	Total		(294)		209		(284)
Deferred tax expense (benefit)
	U.S.		1,131		(606)		(61)
	State and local		(3)		9		3
	Foreign		-		(3)		5
	Total		1,128		(600)		(53)
Total income tax expense (benefit) on continuing operations before equity in earnings of operating
	joint ventures	$	834	$	(391)	$	(337)
Income tax expense (benefit) on equity in earnings of operating joint ventures			25		807		(109)
Income tax expense (benefit) on discontinued operations			4		-		(2)
Income tax expense (benefit) reported in equity related to:
	Other comprehensive income (loss)		869		3,054		(3,594)
	Impact on Company's investment in Wachovia Securities due to addition of A.G. Edwards business		-		(59)		561
	Stock-based compensation programs		1		10		(8)
	Cumulative effect of changes in accounting principles		-		310		10
Total income taxes		$	1,733	$	3,731	$	(3,479)

B-85

As filed with the SEC on April 12, 2011 .	Registration No. 33-20000


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________


FORM N-6

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 34
_____________


THE PRUDENTIAL VARIABLE
APPRECIABLE ACCOUNT
(Exact Name of Registrant)

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Name of Depositor)

751 Broad Street
Newark, New Jersey 07102
(800) 778-2255
(Address and telephone number of principal executive offices)
_____________


Thomas C. Castano
Vice President and Corporate Counsel
The Prudential Insurance Company of America
213 Washington Street
Newark, New Jersey 07102
(Name and address of agent for service)

Copy to:
Christopher E. Palmer, Esq.
Goodwin Procter LLP
901 New York Avenue, N.W.
Washington, D.C. 20001
_____________


It is proposed that this filing will become effective (check appropriate space):

□ immediately upon filing pursuant to paragraph (b) of Rule 485
■ on May 1, 2011 pursuant to paragraph (b) of Rule 485
(date)
□ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
□ on pursuant to paragraph (a)(1) of Rule 485
(date)

■ This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment.

GENERAL INFORMATION AND HISTORY	1
Description of The Prudential Insurance Company of America	1
Control of The Prudential Insurance Company of America	1
State Regulation	1
Records	1
Services and Third Party Administration Agreements	1

INITIAL PREMIUM PROCESSING	2

ADDITIONAL INFORMATION ABOUT OPERATION OF CONTRACTS	2
Legal Considerations Relating to Sex-Distinct Premiums and Benefits	2
Sales to Persons 14 Years of Age or Younger	3
How a Form A (Level) Contract's Death Benefit Will Vary	3
How a Form B (Variable) Contract's Death Benefit Will Vary	3
Paying Premiums by Payroll Deduction	4
Reports to Contract Owners	4

UNDERWRITING PROCEDURES	4

ADDITIONAL INFORMATION ABOUT CHARGES	5
Reduction of Charges for Concurrent Sales to Several Individuals	5

ADDITIONAL INFORMATION ABOUT CONTRACTS IN DEFAULT	5

DISTRIBUTION AND COMPENSATION	5

EXPERTS	7

PERFORMANCE DATA	7
Average Annual Total Return	7
Non-Standard Total Return	8
Money Market Subaccount Yield	8

FINANCIAL STATEMENTS	8

The Prudential Series Fund	Appendix 1
PSF Conservative Balanced Portfolio
PSF Diversified Bond Portfolio
PSF Equity Portfolio
PSF Flexible Managed Portfolio
PSF Global Portfolio
PSF Government Income Portfolio
PSF High Yield Portfolio
PSF Jennison
PSF Money Market Portfolio
PSF Natural Resources Portfolio
PSF Small Capitalization Stock Portfolio
PSF Stock Index Portfolio
PSF Value Portfolio

The Prudential Variable Contract Real Property Account	Appendix 2

GENERAL INFORMATION AND HISTORY	1
Description of The Prudential Insurance Company of America	1
Control of The Prudential Insurance Company of America	1
State Regulation	1
Records	1
Services and Third Party Administration Agreements	1

INITIAL PREMIUM PROCESSING	2

ADDITIONAL INFORMATION ABOUT OPERATION OF CONTRACTS	2
Legal Considerations Relating to Sex-Distinct Premiums and Benefits	2
Sales to Persons 14 Years of Age or Younger	3
How a Form A (Level) Contract's Death Benefit Will Vary	3
How a Form B (Variable) Contract's Death Benefit Will Vary	3
Paying Premiums by Payroll Deduction	4
Reports to Contract Owners	4

UNDERWRITING PROCEDURES	4

ADDITIONAL INFORMATION ABOUT CHARGES	5
Reduction of Charges for Concurrent Sales to Several Individuals	5

ADDITIONAL INFORMATION ABOUT CONTRACTS IN DEFAULT	5

DISTRIBUTION AND COMPENSATION	5

EXPERTS	7

PERFORMANCE DATA	7
Average Annual Total Return	7
Non-Standard Total Return	8
Money Market Subaccount Yield	8

FINANCIAL STATEMENTS	8

Male Attained Age	Net Single Premium	Increase in Insurance Amount Per $1 Increase in Contract Fund		Female Attained Age	Net Single Premium	Increase in Insurance Amount Per $1 Increase in Contract Fund
5 25 35 55 65	.09151 .17000 .23700 .45209 .59468	$10.93 $ 5.88 $ 4.22 $ 2.21 $ 1.68		5 25 35 55 65	.07919 .15112 .21127 .40090 .53639	$12.63 $ 6.62 $ 4.73 $ 2.49 $ 1.86

	SUBACCOUNTS
	Prudential Money Market Portfolio		Prudential Diversified Bond Portfolio		Prudential Equity Portfolio		Prudential Flexible Managed Portfolio
ASSETS
Investment in the portfolios, at value	$	148,490,649	$	$229,517,734	$	1,367,698,726	$	1,061,014,546
Net Assets ..	$	148,490,649	$	229,517,734	$	1,367,698,726	$	1,061,014,546
NET ASSETS, representing:
Accumulation units	$	148,490,649	$	229,517,734	$	1,367,698,726	$	1,061,014,546
	$	148,490,649	$	229,517,734	$	1,367,698,726	$	1,061,014,546
Units outstanding ..		71,621,530		54,166,352		219,106,241		235,381,281
Portfolio shares held ..		14,849,065		19,667,329		55,260,555		67,883,208
Portfolio net asset value per share	$	10.00	$	11.67	$	24.75	$	15.63
Investment in portfolio shares, at cost	$	148,493,483	$	212,595,798	$	1,236,956,834	$	1,069,906,657

	Prudential Conservative Balanced Portfolio		Prudential							Prudential
			High Yield		Prudential		Prudential			Natural		Prudential
			Bond		Stock Index		Value			Resources		Global
			Portfolio		Portfolio		Portfolio			Portfolio		Portfolio
$	911,796,460	$	132,268,363	$	980,115,929	$	539,208,875		$	702,596,843	$	300,596,435
$	911,796,460	$	132,268,363	$	980,115,929	$	539,208,875		$	702,596,843	$	300,596,435
$	911,796,460	$	132,268,363	$	980,115,929	$	539,208,875		$	702,596,843	$	300,596,435
$	911,796,460	$	132,268,363	$	980,115,929	$	539,208,875		$	702,596,843	$	300,596,435

	232,932,091		32,278,392		161,924,881		76,972,648			31,874,018		130,230,296
	57,130,104		26,139,993		31,243,734		31,643,713			14,844,641		16,257,244
$	15.96	$	5.06	$	31.37	$	17.04	$		47.33	$	18.49
$	821,042,815	$	134,596,709	$	693,422,883	$	533,105,425	$		341,303,304	$	272,252,511
					SUBACCOUNTS (Continued)
	Prudential		Prudential							Prudential
	Conservative		High Yield		Prudential		Prudential			Natural		Prudential
	Balanced		Bond		Stock Index		Value			Resources		Global
	Portfolio		Portfolio		Portfolio		Portfolio			Portfolio		Portfolio
$	21,216,624	$	10,581,358	$	15,909,076	$	4,295,008	$		2,470,590	$	4,322,387
	6,527,722		920,524		6,222,537		3,551,377			4,222,242		1,850,421
	0		0		0		0			0		0
	6,527,722		920,524		6,222,537		3,551,377			4,222,242		1,850,421
	14,688,902		9,660,834		9,686,539		743,631			(1,751,652)		2,471,966
	0		0		0		0			0		0
	998,308		(4,283,383)		(4,373,435)		(9,319,391)			(18,461,291)		(5,317,867)
	75,146,312		10,351,734		114,893,879		71,271,108			169,735,705		35,096,996
	76,144,620		6,068,351		110,520,444		61,951,717			151,274,414		29,779,129
$	90,833,522	$	15,729,185	$	120,206,983	$	62,695,348	$		149,522,762	$	32,251,095

FINANCIAL STATEMENTS OF THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT STATEMENT OF NET ASSETS December 31, 2010

	SUBACCOUNTS
	Prudential Government Income Portfolio		Prudential Jennison Portfolio			Prudential Small Capitalization Stock Portfolio			T. Rowe Price International Stock Portfolio
ASSETS
Investment in the portfolios, at value	$	111,677,802	$	456,709,938		$	281,044,386				$	1,438,668
Net Assets	$	111,677,802	$	456,709,938		$	281,044,386				$	1,438,668
NET ASSETS, representing:
Accumulation units	$	111,677,802	$	456,709,938		$	281,044,386				$	1,438,668
	$	111,677,802	$	456,709,938		$	281,044,386				$	1,438,668
Units outstanding		30,310,895		159,802,211			68,838,680					1,014,075
Portfolio shares held		9,283,275		19,634,993			16,273,560					103,650
Portfolio net asset value per share	$	12.03	$	23.26		$	17.27				$	13.88
Investment in portfolio shares, at cost	$	105,836,041	$	385,710,555		$	234,144,083				$	1,081,186

STATEMENT OF OPERATIONS For the period ended December 31, 2010
	SUBACCOUNTS
		Prudential Government Income Portfolio		Prudential Jennison Portfolio			Prudential Small Capitalization Stock Portfolio			T. Rowe Price International Stock Portfolio
INVESTMENT INCOME
Dividend income	$	3,208,783	$	1,799,074		$	2,001,414			$		12,355
EXPENSES
Charges to contract owners for assuming mortality risk and expense risk and for administration		803,957		2,951,752			1,703,900					9,314
Reimbursement for excess expenses		0		0			0					0
NET EXPENSES		803,957		2,951,752			1,703,900					9,314
NET INVESTMENT INCOME (LOSS)		2,404,826		(1,152,678)			297,514					3,041
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Capital gains distributions received		2,671,964		0			0					4,118
Realized gain (loss) on shares redeemed		40,783		(8,883,957	)		(3,054,320	)				(30,576	)
Net change in unrealized gain (loss) on investments		1,565,923		55,901,637			59,394,848					226,597
NET GAIN (LOSS) ON INVESTMENTS		4,278,670		47,017,680			56,340,528					200,139
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	6,683,496	$	45,865,002		$	56,638,042			$		203,180

Janus Aspen Janus Portfolio - Institutional Shares			MFS Growth Series - Initial Class			American Century VP Value Fund			Prudential SP Davis Value Portfolio			Prudential SP Small Cap Value Portfolio							Janus Aspen Janus Portfolio - Service Shares
$	7,270,860		$	2,723,775		$	2,247,041		$	0		$			3,079,616			$			230,730
$	7,270,860		$	2,723,775		$	2,247,041		$	0		$			3,079,616			$			230,730
$	7,270,860		$	2,723,775		$	2,247,041		$	0		$			3,079,616			$			230,730
$	7,270,860		$	2,723,775		$	2,247,041		$	0		$			3,079,616			$			230,730
	4,565,804			1,530,211			1,047,811			0					1,979,898						187,634
	299,706			110,319			383,454			0					250,783						9,602
$	24.26		$	24.69		$	5.86		$	0.00		$			12.28			$			24.03
$	5,587,988		$	1,778,346		$	2,205,110		$	0		$			2,369,704			$			163,986
SUBACCOUNTS (Continued)
Janus Aspen Janus Portfolio - Institutional Shares			MFS Growth Series - Initial Class			American Century VP Value Fund			Prudential SP Davis Value Portfolio					Prudential SP Small Cap Value Portfolio					Janus Aspen Janus Portfolio - Service Shares
$	70,002		$	2,847		$	47,418		$	0			$			16,633				$			950
	38,563			14,677			12,899			3,535						23,579							2,522
	0			0			0			0					0							0
	38,563			14,677			12,899			3,535						23,579						2,522
	31,439			(11,830	)		34,519			(3,535	)					(6,946	)					(1,572)
	0			0			0			0					0							0
	(38,568	)		633			(143,800	)		243,780					(135,482		)					(11,868)
	895,920			358,774			377,040			(172,360	)					778,122						45,855
	857,352			359,407			233,240			71,420					642,640							33,987
$	888,791		$	347,577		$	267,759		$	67,885		$			635,694					$		32,415

FINANCIAL STATEMENTS OF THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENT OF NET ASSETS December 31, 2010

							SUBACCOUNTS
		Prudential SP Strategic Partners Focused Growth Portfolio				Prudential SP Mid Cap Growth Portfolio			Prudential SP Prudential U.S. Emerging Growth Portfolio				Prudential SP Growth Asset Allocation Portfolio




ASSETS
Investment in the portfolios, at value	$		0		$		0	$		1,235,592	$	1,454,107
Net Assets	$		0		$		0	$		1,235,592	$	1,454,107
NET ASSETS, representing:
Accumulation units	$		0		$		0	$		1,235,592	$	1,454,107
	$		0		$		0	$		1,235,592	$	1,454,107
Units outstanding			0				0			611,978		1,021,649
Portfolio shares held			0				0			159,637		162,289
Portfolio net asset value per share	$		0.00		$		0.00	$		7.74	$	8.96
Investment in portfolio shares, at cost	$		0		$		0	$		939,745	$	1,407,484
STATEMENT OF OPERATIONS
For the period ended December 31, 2010
							SUBACCOUNTS
			Prudential SP							Prudential
			Strategic			Prudential SP			SP Prudential		Prudential SP
			Partners				Mid Cap		U.S. Emerging		Growth Asset
		Focused Growth					Growth			Growth		Allocation
				Portfolio			Portfolio			Portfolio		Portfolio
INVESTMENT INCOME
Dividend income	$			0	$		0	$		4,787	$	27,835
EXPENSES
Charges to contract owners for assuming mortality risk
and expense risk and for administration				2,599			1,057			9,600		10,663
Reimbursement for excess expenses				0			0			0		0
NET EXPENSES				2,599			1,057			9,600		10,663
NET INVESTMENT INCOME (LOSS)				(2,599)			(1,057)			(4,813)		17,172
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received				0			0			0		0
Realized gain (loss) on shares redeemed				100,841			94,096			6,797		(66,656)
Net change in unrealized gain (loss) on investments				(102,538)			(49,142)			186,660		216,127
NET GAIN (LOSS) ON INVESTMENTS				(1,697)			44,954			193,457		149,471
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS	$			(4,296)	$		43,897	$		188,644	$	166,643

Prudential SP							AST T. Rowe
	International	Prudential SP			AST Marsico		Price Large-					AST Small-Cap
	Growth		International	Capital Growth			Cap Growth		AST Large-Cap				Growth
	Portfolio	Value Portfolio			Portfolio		Portfolio		Value Portfolio				Portfolio
$	2,562,242	$	4,294,613	$	142,125	$	1,107,545		$		502,815	$	1,891,270
$	2,562,242	$	4,294,613	$	142,125	$	1,107,545		$		502,815	$	1,891,270
$	2,562,242	$	4,294,613	$	142,125	$	1,107,545		$		502,815	$	1,891,270
$	2,562,242	$	4,294,613	$	142,125	$	1,107,545		$		502,815	$	1,891,270
	1,670,446		2,668,524		15,242		101,446			61,639			155,284
	493,688		625,126		7,349		89,462			37,749			92,709
$	5.19	$	6.87	$	19.34	$	12.38		$		13.32	$	20.40
$	2,156,526	$	3,673,647	$	114,670	$	960,793		$		344,697	$	1,505,379
					SUBACCOUNTS (Continued)
Prudential SP							AST T. Rowe
	International	Prudential SP			AST Marsico		Price Large-					AST Small-Cap
	Growth		International	Capital Growth			Cap Growth		AST Large-Cap				Growth
	Portfolio	Value Portfolio			Portfolio		Portfolio		Value Portfolio				Portfolio
$	40,495	$	80,070	$	782	$	0		$		4,869	$	3,196
	21,924		32,942		1,141		5,374			4,006			12,042
	0		0		0		0			0			0
	21,924		32,942		1,141		5,374			4,006			12,042
	18,571		47,128		(359)		(5,374	)		863			(8,846)
	0		0		0		0			0			0
	(378,972)		(158,468)		(13,977)		52,696			(10,858)			(7,688)
	639,941		472,273		35,669		98,504			66,054			460,186
	260,969		313,805		21,692		151,200			55,196			452,498
$	279,540	$	360,933	$	21,333	$	145,826		$		56,059	$	443,652

FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENT OF NET ASSETS
December 31, 2010
					SUBACCOUNTS
					AST		AST		AST
			AST PIMCO		Aggressive		Balanced		Preservation
			Total		Asset		Asset		Asset
			Return Bond		Allocation		Allocation		Allocation
			Portfolio		Portfolio		Portfolio		Portfolio
ASSETS
Investment in the portfolios, at value		$	6,506,059	$	1,306,477	$	1,277,572	$	576,379
Net Assets	$		6,506,059	$	1,306,477	$	1,277,572	$	576,379
NET ASSETS, representing:
Accumulation units	$		6,506,059	$	1,306,477	$	1,277,572	$	576,379
	$		6,506,059	$	1,306,477	$	1,277,572	$	576,379
Units outstanding			613,367		112,573		113,318		52,419
Portfolio shares held			535,038		139,880		114,993		49,054
Portfolio net asset value per share	$		12.16	$	9.34	$	11.11	$	11.75
Investment in portfolio shares, at cost	$		6,290,610	$	1,130,109	$	1,141,171	$	527,645
STATEMENT OF OPERATIONS
For the period ended December 31, 2010
					SUBACCOUNTS
					AST		AST		AST
			AST PIMCO		Aggressive		Balanced		Preservation
			Total		Asset		Asset		Asset
			Return Bond		Allocation		Allocation		Allocation
			Portfolio		Portfolio		Portfolio		Portfolio
INVESTMENT INCOME
Dividend income	$		117,796	$	5,797	$	9,301	$	7,774
EXPENSES
Charges to contract owners for assuming mortality risk and expense risk and for administration
			56,807		10,258		9,595		4,136
Reimbursement for excess expenses			0		0		0		0
NET EXPENSES			56,807		10,258		9,595		4,136
NET INVESTMENT INCOME (LOSS)			60,989		(4,461)		(294)		3,638
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received			113,796		0		0		0
Realized gain (loss) on shares redeemed			12,735		1,675		5,166		3,410
Net change in unrealized gain (loss) on investments			231,640		159,309		129,676		46,859
NET GAIN (LOSS) ON INVESTMENTS			358,171		160,984		134,842		50,269
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS		$	419,160	$	156,523	$	134,548	$	53,907

FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the periods ended December 31, 2010 and 2009
				SUBACCOUNTS
		Prudential Money Market				Prudential Diversified Bond
		Portfolio				Portfolio
		01/01/2010		01/01/2009		01/01/2010		01/01/2009
		to		to		to		to
		12/31/2010		12/31/2009		12/31/2010		12/31/2009
OPERATIONS
Net investment income (loss)	$	(1,013,374)	$	(498,595)	$	7,830,889	$	7,672,455
Capital gains distributions received		0		0		2,848,361		3,377,403
Realized gain (loss) on shares redeemed		0		0		97,356		(1,016,875)
Net change in unrealized gain (loss)
on investments		0		0		9,792,441		24,488,710
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS		(1,013,374)		(498,595)		20,569,047		34,521,693
CONTRACT OWNER TRANSACTIONS
Contract owner net payments		11,750,960		14,717,238		13,407,175		14,632,653
Policy loans		(4,271,662)		(5,371,685)		(4,694,204)		(4,514,243)
Policy loan repayments and interest		5,156,703		6,146,364		4,250,062		4,745,356
Surrenders, withdrawals and death benefits		(24,756,608)		(26,763,003)		(11,244,604)		(15,853,585)
Net transfers between other subaccounts or fixed
rate option		11,968,790		8,747,936		5,767,873		7,068,312
Withdrawal and other charges		(7,831,580)		(8,941,144)		(9,480,877)		(9,925,977)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CONTRACT OWNER
TRANSACTIONS		(7,983,397)		(11,464,294)		(1,994,575)		(3,847,484)
TOTAL INCREASE (DECREASE) IN NET
ASSETS		(8,996,771)		(11,962,889)		18,574,472		30,674,209
NET ASSETS
Beginning of period		157,487,420		169,450,309		210,943,262		180,269,053
End of period	$	148,490,649	$	157,487,420	$	229,517,734	$	210,943,262

Beginning units		76,091,577		81,375,566		54,662,544		55,975,690
Units issued		29,393,901		33,812,904		8,619,125		9,343,952
Units redeemed		(33,863,948)		(39,096,893)		(9,115,317)		(10,657,098)
Ending units		71,621,530		76,091,577		54,166,352		54,662,544

								Prudential Flexible Managed									Prudential Conservative Balanced
	Prudential Equity Portfolio								Portfolio							Portfolio
	01/01/2010			01/01/2009				01/01/2010				01/01/2009					01/01/2010					01/01/2009
	to			to					to				to					to					to
	12/31/2010			12/31/2009				12/31/2010				12/31/2009					12/31/2010					12/31/2009
$	697,062		$	9,338,261			$		14,957,584		$		24,240,505			$		14,688,902			$		23,392,605
	0			0				0				0					0					0
	(11,925,394	)		(48,729,576	)			(6,512,119		)		(25,712,918		)			998,308					(9,200,751		)
	147,448,046			390,777,032				99,525,261				160,828,965					75,146,312					124,455,174
	136,219,714			351,385,717				107,970,726				159,356,552					90,833,522					138,647,028
	94,644,016			113,654,623				74,060,828				88,564,203					60,211,067					73,430,514
	(31,790,033)			(30,421,461)					(23,189,962)				(22,245,389)					(17,340,696)					(17,864,440)
	33,339,225			39,358,207				24,257,518				29,284,709					18,597,980					21,702,058
	(64,721,929)			(103,021,838)					(46,756,013)				(80,424,761)					(36,728,702)					(67,289,896)
	(23,102,234)			(18,111,166)					(14,691,077)				(18,977,245)					(16,385,903)					(16,973,140)
	(59,412,428)			(62,572,790)					(48,965,188)				(52,579,420)					(40,722,724)					(44,134,477)
	(51,043,383	)		(61,114,425	)			(35,283,894		)		(56,377,903		)			(32,368,978		)			(51,129,381		)
	85,176,331			290,271,292				72,686,832				102,978,649					58,464,544					87,517,647
	1,282,522,395			992,251,103				988,327,714				885,349,065					853,331,916					765,814,269
$1,367,698,726			$1,282,522,395			$1,061,014,546						$988,327,714			$		911,796,460			$		853,331,916

	228,516,134			242,180,217				243,745,031				259,855,363					241,710,541					258,075,423
	23,691,092			35,197,111				23,901,045				33,378,391					22,793,304					31,432,758
	(33,100,985	)		(48,861,194	)			(32,264,795		)		(49,488,723		)			(31,571,754		)			(47,797,640		)
	219,106,241			228,516,134				235,381,281				243,745,031					232,932,091					241,710,541

						Prudential Natural Resources
	Prudential Value Portfolio					Portfolio				Prudential Global Portfolio
	01/01/2010			01/01/2009		01/01/2010		01/01/2009		01/01/2010		01/01/2009
	to			to		to		to		to		to
	12/31/2010			12/31/2009		12/31/2010		12/31/2009		12/31/2010		12/31/2009
$	743,631		$	5,673,920	$	(1,751,652)	$	(13,241)	$	2,471,966	$	5,243,267
	0			0		0		55,510,506		0		0
	(9,319,391)			(32,106,698)		(18,461,291)		(44,213,726)		(5,317,867)		(14,637,507)
	71,271,108			173,960,543		169,735,705		249,188,536		35,096,996		74,576,438
	62,695,348			147,527,765		149,522,762		260,472,075		32,251,095		65,182,198
	32,516,779			39,587,095		17,950,032		20,089,648		17,762,655		21,485,727
	(11,710,861)			(11,441,723)		(14,714,267)		(13,524,655)		(6,248,257)		(5,618,445)
	11,559,940			14,302,135		12,645,281		14,417,816		5,387,941		6,905,363
	(25,833,834)			(40,612,295)		(26,545,288)		(37,942,741)		(12,904,521)		(18,519,775)
	(6,824,629)			(8,374,467)		(5,202,842)		(3,775,556)		(4,137,875)		(3,285,544)
	(21,006,341	)		(22,016,528)		(17,346,720)		(17,888,837)		(9,945,850)		(10,674,885)
	(21,298,946)			(28,555,783)		(33,213,804)		(38,624,325)		(10,085,907)		(9,707,559)
	41,396,402			118,971,982		116,308,958		221,847,750		22,165,188		55,474,639
	497,812,473			378,840,491		586,287,885		364,440,135		278,431,247		222,956,608
$	539,208,875		$	497,812,473	$	702,596,843	$	586,287,885	$	300,596,435	$	278,431,247

	80,091,093			85,822,383		33,793,440		36,897,557		135,136,857		141,237,662
	8,696,109			12,110,474		3,022,265		4,681,281		13,617,559		20,416,235
	(11,814,554)			(17,841,764)		(4,941,687)		(7,785,398)		(18,524,120)		(26,517,040)
	76,972,648			80,091,093		31,874,018		33,793,440		130,230,296		135,136,857

	Prudential Small Capitalization Stock Portfolio					T. Rowe Price International Stock Portfolio				Janus Aspen Janus Portfolio - Institutional Shares
	Prudential Small Capitalization Stock Portfolio					T. Rowe Price International Stock Portfolio				Janus Aspen Janus Portfolio - Institutional Shares
	01/01/2010			01/01/2009		01/01/2010		01/01/2009		01/01/2010		01/01/2009
	to			to		to		to		to		to
	12/31/2010			12/31/2009		12/31/2010		12/31/2009		12/31/2010		12/31/2009
$	297,514		$	2,246,909	$	3,041	$	28,547	$	31,439	$	(2,865)
	0			19,587,379		4,118		0		0		0
	(3,054,320)			(9,688,725)		(30,576)		(77,221)		(38,568)		(239,278)
	59,394,848			33,117,919		226,597		601,183		895,920		1,846,695
	56,638,042			45,263,482		203,180		552,509		888,791		1,604,552
	17,125,690			20,868,223		181,412		199,184		864,355		906,313
	(6,565,665)			(6,387,804)		(87,941)		(30,153)		(193,958)		(94,272)
	6,211,846			7,269,504		10,422		7,578		32,603		20,304
	(14,119,932)			(19,887,433)		(63,201)		(54,676)		(150,345)		(84,018)
	438,531			(4,101,165)		(317,545)		21,296		(74,058)		(23,996)
	(10,622,312	)		(10,672,029)		(114,675)		(117,388)		(491,151)		(475,017)
	(7,531,842)			(12,910,704)		(391,528)		25,841		(12,554)		249,314
	49,106,200			32,352,778		(188,348)		578,350		876,237		1,853,866
	231,938,186			199,585,408		1,627,016		1,048,666		6,394,623		4,540,757
$	281,044,386		$	231,938,186	$	1,438,668	$	1,627,016	$	7,270,860	$	6,394,623
	71,061,902			76,027,275		1,304,713		1,273,890		4,571,245		4,399,958
	9,894,256			13,430,408		155,880		247,861		634,828		768,383
	(12,117,478)			(18,395,781)		(446,518)		(217,038)		(640,269)		(597,096)
	68,838,680			71,061,902		1,014,075		1,304,713		4,565,804		4,571,245

													Janus Aspen Janus Portfolio -
	Prudential SP Davis Value Portfolio					Prudential SP Small Cap Value Portfolio							Service Shares
	01/01/2010			01/01/2009			01/01/2010			01/01/2009			01/01/2010			01/01/2009
	to			to			to			to			to			to
	04/30/2010**			12/31/2009			12/31/2010			12/31/2009			12/31/2010			12/31/2009
$	(3,535)		$	8,159		$	(6,946)		$	13,206		$	(1,572)		$	(1,506)
	0			0			0			0			0			0
	243,780			(107,645)			(135,482)			(137,973)			(11,868)			(27,058)
	(172,360)			402,399			778,122			740,186			45,855			114,608
	67,885			302,913			635,694			615,419			32,415			86,044
	30,257			69,412			58,814			59,621			4,281			10,849
	(1,767)			(1,586)			(24,502)			(4,444)			0			0
	183			1,099			3,477			11,513			0			0
	(8,445)			(24,646)			(28,014)			(11,682)			(42,366)			(37)
	(1,352,570)			(13,664)			(135,037)			302,334			(79,219)			(39,205)
	(20,204)			(57,717)			(149,275)			(101,320)			(7,517)			(7,969)
	(1,352,546)			(27,102)			(274,537)			256,022			(124,821)			(36,362)
	(1,284,661)			275,811			361,157			871,441			(92,406)			49,682
	1,284,661			1,008,850			2,718,459			1,847,018			323,136			273,454
$	0		$	1,284,661		$	3,079,616		$	2,718,459		$	230,730		$	323,136
	1,045,958			1,069,099			2,187,532			1,926,678			297,574			339,441
	147,471			431,532			386,213			472,776			23,144			20,705
	(1,193,429	)		(454,673	)		(593,847	)		(211,922	)		(133,084	)		(62,572	)
	0			1,045,958			1,979,898			2,187,532			187,634			297,574

	SUBACCOUNTS
	Prudential SP Strategic Partners Focused Growth Portfolio				Prudential SP Mid Cap Growth Portfolio
	01/01/2010 to 04/30/2010**		01/01/2009 to 12/31/2009		01/01/2010 to 04/30/2010**		01/01/2009 to 12/31/2009
OPERATIONS
Net investment income (loss)	$ (2,599	)	$ (5,787	)	$ (1,057	)	$ (2,725	)
Capital gains distributions received	0		0		0		0
Realized gain (loss) on shares redeemed	100,841		(34,136	)	94,096		(111,091	)
Net change in unrealized gain (loss) on investments	(102,538	)	286,637		(49,142	)	202,347
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	(4,296	)	246,714		43,897		88,531
CONTRACT OWNER TRANSACTIONS
Contract owner net payments	2,976		26,657		3,808		18,500
Policy loans	(5,225	)	(136	)	(445	)	(1,187	)
Policy loan repayments and interest	4,197		16,068		105		380
Surrenders, withdrawals and death benefits	0		0		(626	)	(8,001	)
Net transfers between other subaccounts or fixed rate option	(900,588	)	356,897		(429,652	)	617
Withdrawal and other charges	(33,436	)	(78,431	)	(4,228	)	(12,327	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CONTRACT OWNER TRANSACTIONS	(932,076	)	321,055		(431,038	)	(2,018	)
TOTAL INCREASE (DECREASE) IN NET ASSETS	(936,372	)	567,769		(387,141	)	86,513
NET ASSETS
Beginning of period	936,372		368,603		387,141		300,628
End of period	$ 0		$936,372		$ 0		$ 387,141
Beginning units	753,235		423,174		393,905		399,006
Units issued	8,844		413,484		292,692		1,566,969
Units redeemed	(762,079	)	(83,423	)	(686,597	)	(1,572,070	)
Ending units	0		753,235		0		393,905

SUBACCOUNTS (Continued)
Prudential SP Prudential U.S. Emerging Growth Portfolio				Prudential SP Growth Asset Allocation Portfolio				Prudential SP International Growth Portfolio
01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009		01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009		01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009

$ (4,813	)	$ (6,303	)	$ 17,172		$ 17,298		$ 18,571		$ 30,011
0		0		0		17,398		0		0
6,797		(670,934	)	(66,656	)	(102,073	)	(378,972	)	(599,543	)

186,660		1,140,515		216,127		346,921		639,941		1,286,002

188,644		463,278		166,643		279,544		279,540		716,470

46,119		47,406		91,765		93,743		26,152		64,671
(8,163	)	(4,615	)	(1,886	)	(1,931	)	(18,084	)	(3,596	)
1,386		10,652		431		415		5,408		17,688
(36,220	)	(1,248,805	)	(28,480	)	(24,440	)	(25,319	)	(22,097	)

51,337		6,511		(64,310	)	(15,951	)	(443,079	)	(231,737	)
(58,634	)	(407,741	)	(62,311	)	(55,562	)	(72,912	)	(130,663	)


(4,175	)	(1,596,592	)	(64,791	)	(3,726	)	(527,834	)	(305,734	)

184,469		(1,133,314	)	101,852		275,818		(248,294	)	410,736

1,051,123		2,184,437		1,352,255		1,076,437		2,810,536		2,399,800
$1,235,592		$1,051,123		$1,454,107		$1,352,255		$2,562,242		$2,810,536
624,008		1,826,909		1,074,494		1,070,883		2,071,459		2,405,251
804,783		145,203		132,170		172,647		257,022		176,540
(816,813	)	(1,348,104	)	(185,015	)	(169,036	)	(658,035	)	(510,332	)
611,978		624,008		1,021,649		1,074,494		1,670,446		2,071,459

	SUBACCOUNTS
	Prudential SP International Value Portfolio				AST Marsico Capital Growth Portfolio
	01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009		01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009
OPERATIONS
Net investment income (loss)	$ 47,128		$ 75,646		$ (359	)	$ (482	)
Capital gains distributions received	0		0		0		0
Realized gain (loss) on shares redeemed	(158,468	)	(242,268	)	(13,977	)	(70,890	)
Net change in unrealized gain (loss) on investments	472,273		1,119,476		35,669		107,001
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	360,933		952,854		21,333		35,629
CONTRACT OWNER TRANSACTIONS
Contract owner net payments	114,465		116,083		9,507		11,923
Policy loans	(19,374	)	(3,284	)	(3,284	)	(3,235	)
Policy loan repayments and interest	11,521		49,126		935		875
Surrenders, withdrawals and death benefits	(11,022	)	(29,797	)	0		(201	)
Net transfers between other subaccounts or fixed rate option	223,592		308,727		(133,476	)	41,446
Withdrawal and other charges	(260,785	)	(219,465	)	(7,839	)	(14,167	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CONTRACT OWNER TRANSACTIONS	58,397		221,390		(134,157	)	36,641
TOTAL INCREASE (DECREASE) IN NET ASSETS	419,330		1,174,244		(112,824	)	72,270
NET ASSETS
Beginning of period	3,875,283		2,701,039		254,949		182,679
End of period	$4,294,613		$3,875,283		$142,125		$254,949
Beginning units	2,644,927		2,418,804		32,527		29,985
Units issued	360,156		504,478		2,833		19,145
Units redeemed	(336,559	)	(278,355	)	(20,118	)	(16,603	)
Ending units	2,668,524		2,644,927		15,242		32,527

SUBACCOUNTS (Continued)
AST T. Rowe Price Large-Cap Growth Portfolio				AST Large-Cap Value Portfolio				AST Small-Cap Growth Portfolio
01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009		01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009		01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009

$ (5,374	)	$ (2,255	)	$ 863		$ 8,429		$ (8,846	)	$ (8,169	)
0		0		0		0		0		0
52,696		(21,807	)	(10,858	)	(203,482	)	(7,688	)	(14,850	)

98,504		137,203		66,054		258,237		460,186		325,287

145,826		113,141		56,059		63,184		443,652		302,268

20,703		15,273		13,169		11,501		21,504		13,177
(316	)	(30	)	(10,040	)	(487	)	(5,671	)	(2,672	)
116		85		7,790		839		1,941		904
(4,965	)	(4,147	)	(160	)	(9,843	)	(1,112	)	(1,915	)

597,225		164,441		(12,066	)	1,290		231,263		89,352
(83,231	)	(8,824	)	(28,437	)	(26,100	)	(42,978	)	(29,404	)


529,532		166,798		(29,744	)	(22,800	)	204,947		69,442

675,358		279,939		26,315		40,384		648,599		371,710

432,187		152,248		476,500		436,116		1,242,671		870,961
$1,107,545		$432,187		$502,815		$ 476,500		$1,891,270		$1,242,671
45,424		24,333		65,552		71,047		137,984		128,368
230,336		94,635		6,572		111,900		36,930		14,399
(174,314	)	(73,544	)	(10,485	)	(117,395	)	(19,630	)	(4,783	)
101,446		45,424		61,639		65,552		155,284		137,984

	SUBACCOUNTS
	AST PIMCO Total Return Bond Portfolio				AST Aggressive Asset Allocation Portfolio
	01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009		01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009
OPERATIONS
Net investment income (loss)	$ 60,989		$ (4,128	)	$ (4,461	)	$ (1,321	)
Capital gains distributions received	113,796		0		0		0
Realized gain (loss) on shares redeemed	12,735		(7	)	1,675		(1	)
Net change in unrealized gain (loss) on investments	231,640		(16,191	)	159,309		17,059
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	419,160		(20,326	)	156,523		15,737
CONTRACT OWNER TRANSACTIONS
Contract owner net payments	65,618		1,226		35,088		933
Policy loans	(13,267	)	(116	)	(233	)	(28	)
Policy loan repayments and interest	1,880		92		298		22
Surrenders, withdrawals and death benefits	(30,931	)	(22,753	)	(24,759	)	0
Net transfers between other subaccounts or fixed rate option	(122,660	)	6,367,004		(6,843	)	1,149,757
Withdrawal and other charges	(128,314	)	(10,554	)	(17,857	)	(2,161	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CONTRACT OWNER TRANSACTIONS	(227,674	)	6,334,899		(14,306	)	1,148,523
TOTAL INCREASE (DECREASE) IN NET ASSETS	191,486		6,314,573		142,217		1,164,260
NET ASSETS
Beginning of period	6,314,573		0		1,164,260		0
End of period	$6,506,059		$6,314,573		$1,306,477		$1,164,260
Beginning units	635,662		0		114,000		0
Units issued	91,914		640,067		3,964		114,759
Units redeemed	(114,209	)	(4,405	)	(5,391	)	(759	)
Ending units	613,367		635,662		112,573		114,000

SUBACCOUNTS (Continued)
AST Balanced Asset Allocation Portfolio				AST Preservation Asset Allocation Portfolio
01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009		01/01/2010 to 12/31/2010		01/01/2009 to 12/31/2009

$ (294	)	$ (813	)	$ 3,638		$ (421	)
0		0		0		0
5,166		(17	)	3,410		28

129,676		6,724		46,859		1,875

134,548		5,894		53,907		1,482

206,707		7,584		40,471		1,916
(32,908	)	(12	)	(581	)	(43	)
1,602		32		507		81
(194,562	)	0		(151,840	)	0

433,283		830,133		205,032		509,382
(111,383	)	(3,346	)	(77,075	)	(6,860	)


302,739		834,391		16,514		504,476

437,287		840,285		70,421		505,958

840,285		0		505,958		0
$1,277,572		$840,285		$576,379		$505,958
83,016		0		50,498		0
65,679		83,349		23,406		51,186
(35,377	)	(333	)	(21,485	)	(688	)
113,318		83,016		52,419		50,498

April 30, 2010	Removed Portfolio	Surviving Portfolio
	Prudential SP Mid Cap Growth Portfolio	Prudential SP Prudential U.S. Emerging Growth Portfolio
Shares	85,600	199,488
Value	$ 5.00	$ 7.00
Net assets before merger	$428,001	$ 968,416
Net assets after merger	$ 0	$1,396,417

	Prudential SP Davis Value Portfolio	Prudential Value Portfolio
Shares	146,117	32,586,769
Value	$ 9.15	$ 16.19
Net assets before merger	$1,336,974	$526,242,816
Net assets after merger	$ 0	$527,579,791

	Prudential SP Strategic Partners Focused Growth Portfolio	Prudential Jennison Portfolio
Shares	131,307	20,237,263
Value	$ 6.88	$ 21.65
Net assets before merger	$903,394	$437,233,351
Net assets after merger	$ 0	$438,136,745

	Purchases	Sales
Prudential Money Market Portfolio	$30,244,813	$(39,292,849)
Prudential Diversified Bond Portfolio	$10,071,845	$(13,685,047)
Prudential Equity Portfolio	$17,138,220	$(77,394,043)
Prudential Flexible Managed Portfolio	$10,092,113	$(52,937,715)
Prudential Conservative Balanced Portfolio	$ 7,877,521	$(46,774,231)
Prudential High Yield Bond Portfolio	$ 4,112,557	$ (9,565,724)
Prudential Stock Index Portfolio	$12,699,840	$(51,834,891)
Prudential Value Portfolio	$ 9,072,267	$(33,922,591)
Prudential Natural Resources Portfolio	$ 8,118,933	$(45,554,980)
Prudential Global Portfolio	$ 5,218,915	$(17,155,242)
Prudential Government Income Portfolio	$ 4,620,057	$ (9,356,385)
Prudential Jennison Portfolio	$10,410,187	$(30,417,213)
Prudential Small Capitalization Stock Portfolio	$ 7,663,572	$(16,899,314)
T. Rowe Price International Stock Portfolio	$ 103,809	$ (504,651)
Janus Aspen Janus Portfolio - Institutional Shares	$ 649,732	$ (700,849)
MFS VIT Growth Series - Initial Class	$ 182,735	$ (324,522)
American Century VP Value Fund	$ 149,730	$ (453,218)
Prudential SP Davis Value Portfolio	$ 168,377	$ (1,524,458)
Prudential SP Small Cap Value Portfolio	$ 484,633	$ (782,750)
Janus Aspen Janus Portfolio - Service Shares	$ 25,312	$ (152,654)
Prudential SP Strategic Partners Focused Growth Portfolio	$ 10,352	$ (945,027)
Prudential SP Mid Cap Growth Portfolio	$ 289,897	$ (721,993)
Prudential SP Prudential U.S. Emerging Growth Portfolio	$ 1,396,749	$ (1,410,524)
Prudential SP Growth Asset Allocation Portfolio	$ 152,421	$ (227,875)
Prudential SP International Growth Portfolio	$ 356,374	$ (906,131)
Prudential SP International Value Portfolio	$ 541,459	$ (516,004)
AST Marsico Capital Growth Portfolio	$ 21,173	$ (156,470)
AST T. Rowe Price Large-Cap Growth Portfolio	$ 2,179,491	$ (1,655,332)
AST Large-Cap Value Portfolio	$ 48,119	$ (81,870)
AST Small-Cap Growth Portfolio	$ 387,919	$ (195,012)
AST PIMCO Total Return Bond Portfolio	$ 936,648	$ (1,221,129)
AST Aggressive Asset Allocation Portfolio	$ 41,145	$ (65,709)
AST Balanced Asset Allocation Portfolio	$ 658,883	$ (365,738)
AST Preservation Asset Allocation Portfolio	$ 242,066	$ (229,687)

	At year ended					For year ended
	Units (000s)	Unit Value Lowest – Highest			Net Assets (000s)	Investment Income Ratio*	Expense Ratio** Lowest – Highest			Total Return*** Lowest – Highest
	Prudential Money Market Portfolio
December 31, 2010	71,622	$1.42960	to	$2.17287	148,491	0.03%	0.60%	to	0.90%	–0.88%	to	–0.52%
December 31, 2009	76,092	$1.44106	to	$2.18425	157,487	0.40%	0.60%	to	0.90%	–0.50%	to	–0.19%
December 31, 2008	81,376	$1.44687	to	$2.18847	169,450	2.60%	0.60%	to	0.90%	1.73%	to	2.04%
December 31, 2007	78,737	$1.41813	to	$2.14468	161,047	4.93%	0.60%	to	0.90%	4.11%	to	4.44%
December 31, 2006	74,752	$1.35814	to	$2.05352	144,870	4.64%	0.60%	to	0.90%	3.82%	to	4.13%

		Unrecognized tax benefits prior to 2002		Unrecognized tax benefits 2002 and forward		Total unrecognized tax benefits all years




			(in millions)
Amounts as of December 31, 2007		$	386	$	135	$	521
Increases in unrecognized tax benefits taken in prior period			-		98		98
(Decreases) in unrecognized tax benefits taken in prior period			-		(27)		(27)
Amounts as of December 31, 2008			386		206		592
Increases in unrecognized tax benefits taken in prior period			-		43		43
(Decreases) in unrecognized tax benefits taken in prior period			(22)		(21)		(43)
Settlements with Parent			(150)		(247)		(397)
(Decreases) in unrecognized tax benefits as a result of lapse of the applicable
	statute of limitations		(214)		-		(214)
Amounts as of December 31, 2009			-		(19)		(19)
Increases in unrecognized tax benefits taken in prior period			2		-		2
(Decreases) in unrecognized tax benefits taken in prior period			-		-		-
Amounts as of December 31, 2010		$	2	$	(19)	$	(17)
Unrecognized tax benefits that, if recognized, would favorably impact the effective
	rate as of December 31, 2008	$	386	$	88	$	474
Unrecognized tax benefits that, if recognized, would favorably impact the effective
	rate as of December 31, 2009	$	-	$	9	$	9
Unrecognized tax benefits that, if recognized, would favorably impact the effective
	rate as of December 31, 2010	$	2	$	9	$	11


Other trading account assets:
U.S. Treasury securities and obligations of U.S. government
	authorities and agencies		-		84		-		-		84
Obligations of U.S. states and their political subdivisions			118		-		-		-		118
Corporate securities			-		164		-		-		164
Asset-backed securities			-		164		11		-		175
Commercial mortgage-backed securities			-		52		-		-		52
Equity Securities			222		-		4		-		226
All other activity			17		10,116		129		(5,904)		4,358
	Subtotal		357		10,580		144		(5,904)		5,177

Equity securities, available for sale			3,440		1,923		69		-		5,432
Commercial mortgage and other loans			-		-		(6)		-		(6)
Other long-term investments			3		10		251		-		264
Short-term investments			2,586		505		-		-		3,091
Cash equivalents			478		1,667		-		-		2,145
Other assets			2,781		-		-		-		2,781
Due from parent and affiliates			-		528		1,919		-		2,447
	Subtotal excluding separate account assets		10,258		144,312		5,260		(5,904)		153,926
Separate account assets (1)			41,092		102,341		15,771		-		159,204
	Total assets	$	51,350	$	246,653	$	21,031	$	(5,904)	$	313,130
Future policy benefits			-		-		(348)		-		(348)
Other liabilities			3		6,582		3		(5,712)		876
Due to parent and affiliates			-		2,882		126		-		3,008
	Total liabilities	$	3	$	9,464	$	(219)	$	(5,712)	$	3,536

		As of December 31, 2009 (3)
		Level 1		Level 2		Level 3		Netting (2)		Total

		(in millions)
Fixed maturities, available for sale:
U.S. Treasury securities and obligations of U.S. government
	authorities and agencies	$	-	$	6,718	$	-	$	-	$	6,718
Obligations of U.S. states and their political subdivisions			-		1,284		-		-		1,284
Foreign government bonds			-		2,122		42		-		2,164
Corporate securities			5		67,387		752		-		68,144
Asset-backed securities			-		3,058		6,085		-		9,143
Commercial mortgage-backed securities			-		9,953		-		-		9,953
Residential mortgage-backed securities			-		8,719		83		-		8,802
	Subtotal		5		99,241		6,962		-		106,208
Trading account assets supporting insurance liabilities:
U.S. Treasury securities and obligations of U.S. government
	authorities and agencies		-		56		-		-		56
Obligations of U.S. states and their political subdivisions			-		31		-		-		31
Foreign government bonds			-		106		-		-		106
Corporate securities			-		9,335		83		-		9,418
Asset-backed securities			-		576		281		-		857
Commercial mortgage-backed securities			-		1,888		5		-		1,893
Residential mortgage-backed securities			-		1,412		20		-		1,432
Equity securities			-		118		3		-		121

All other activity			343		382		-		-		725
	Subtotal		343		13,904		392		-		14,639
Other trading account assets:
U.S. Treasury securities and obligations of U.S. government
	authorities and agencies		1		70		-		-		71
Corporate securities			-		169		-		-		169
Asset-backed securities			-		141		42		-		183
Commercial mortgage-backed securities			-		52		-		-		52
Equity Securities			213		-		2		-		215
All other activity			13		6,427		290		(4,555)		2,175
	Subtotal		227		6,859		334		(4,555)		2,865

Equity securities, available for sale			2,909		1,823		124		-		4,856
Commercial mortgage and other loans			-		-		(10)		-		(10)
Other long-term investments			1		21		-		-		22
Short-term investments			3,181		1,464		-		-		4,645
Cash equivalents			4,394		1,983		-		-		6,377
Other assets			2,555		7		-		-		2,562
Due from parent and affiliates			-		450		3,372		-		3,822
	Subtotal excluding separate account assets		13,615		125,752		11,174		(4,555)		145,986
Separate account assets (1)			32,653		86,776		13,047		-		132,476
	Total assets	$	46,268	$	212,528	$	24,221	$	(4,555)	$	278,462
Future policy benefits			-		-		58		-		58
Other liabilities			-		4,996		10		(4,154)		852
Due to parent and affiliates			-		1,122		288		-		1,410
	Total liabilities	$	-	$	6,118	$	356	$	(4,154)	$	2,320

				Year Ended December 31, 2010

				Fixed Maturities Available For Sale - Foreign Government Bonds		Fixed Maturities Available For Sale - Corporate Securities		Fixed Maturities Available For Sale - Asset- Backed Securities		Fixed Maturities Available For Sale - Commercial Mortgage- Backed Securities		Fixed Maturities Available For Sale - Residential Mortgage- Backed Securities

				(in millions)
Fair Value, beginning of period				$	42	$	752	$	6,085	$	-	$	83
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		-		(28)		(47)		-		-
			Other income		-		-		-		-		-
		Included in other comprehensive income (loss)			-		94		109		1		-
	Net investment income				-		8		(19)		-		1
	Purchases, sales, issuances and settlements				-		(183)		339		19		(6)
	Other(1)				-		10		-		48		(48)
	Transfers into Level 3(2)				-		455		129		8		2
	Transfers out of Level 3(2)				(15)		(117)		(5,089)		(76)		(9)
Fair Value, end of period				$	27	$	991	$	1,507	$	-	$	23

Unrealized gains (losses) for the period relating to
	those Level 3 assets that were still held at the end
	of the period(3):
		Included in earnings:
			Realized investment gains (losses), net	$	-	$	(30)	$	(66)	$	-	$	-
			Other income	$	-	$	-	$	-	$	-	$	-
		Included in other comprehensive income (loss)		$	-	$	101	$	98	$	1	$	-



				Year Ended December 31, 2010

				Trading Account Asset Supporting Insurance Liabilities- Corporate Securities		Trading Account Asset Supporting Insurance Liabilities- Asset- Backed Securities		Trading Account Asset Supporting Insurance Liabilities- Commercial Mortgage- Backed Securities		Trading Account Asset Supporting Insurance Liabilities- Residential Mortgage- Backed Securities		Trading Account Asset Supporting Insurance Liabilities- Equity Securities

				(in millions)
Fair Value, beginning of period				$	83	$	281	$	5	$	20	$	3
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		-		-		-		-		-
			Other income		(1)		1		3		1		2
		Included in other comprehensive income (loss)			-		-		-		-		-
	Net investment income				1		1		-		-		-
	Purchases, sales, issuances and settlements				(36)		185		(2)		(3)		(1)
	Other(1)				-		-		-		-		-
	Transfers into Level 3(2)				72		9		31		-		-
	Transfers out of Level 3(2)				(37)		(251)		(32)		-		-
Fair Value, end of period				$	82	$	226	$	5	$	18	$	4

Unrealized gains (losses) for the period relating to
	those Level 3 assets that were still held at the end
	of the period(3):
		Included in earnings:
			Realized investment gains (losses), net	$	-	$	-	$	-	$	-	$	-
			Other income	$	(3)	$	1	$	5	$	1	$	2
		Included in other comprehensive income (loss)		$	-	$	-	$	-	$	-	$	-

						Year Ended December 31, 2010
						Other Trading Account Assets- Asset- Backed Securities		Other Trading Account Assets- Equity Securities		Other Trading Account Assets- All Other Activity		Equity Securities, Available for Sale

						(in millions)
Fair Value, beginning of period						$	42	$	2	$	290	$	124
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net				-		-		(66)		51
			Other income				3		2		3		-
		Included in other comprehensive income (loss)					-		-		-		(39)
	Net investment income						-		-		-		-
	Purchases, sales, issuances and settlements						(49)		-		(98)		(69)
	Other(1)						-		-		-		-
	Transfers into Level 3(2)						15		-		-		3
	Transfers out of Level 3(2)						-		-		-		(1)
Fair Value, end of period						$	11	$	4	$	129	$	69

				Year Ended December 31, 2008

				Fixed Maturities Available For Sale		Trading Account Assets Supporting Insurance Liabilities		Other Trading Account Assets		Equity Securities Available for Sale

				(in millions)
Fair Value, beginning of period				$	2,787	$	291	$	469	$	164
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		(347)		-		628		(5)
			Other income		-		(39)		(5)		-
		Included in other comprehensive income (loss)			(346)		-		-		(24)
	Net investment income				11		(1)		-		-
	Purchases, sales, issuances and settlements				(305)		(32)		259		(12)
	Transfers into (out of) Level 3(1)				123		(74)		-		(50)
Fair Value, end of period				$	1,923	$	145	$	1,351	$	73

Unrealized gains (losses) for the period relating to those Level 3 assets
	that were still held at the end of the period(2)
		Included in earnings:
			Realized investment gains (losses), net	$	(363)	$	-	$	628	$	(5)
			Other income	$	-	$	(46)	$	(5)	$	-
		Included in other comprehensive income (loss)		$	(327)	$	-	$	-	$	(21)

				Year Ended December 31, 2008
				Due from Parent and Affiliates		Separate Account Assets (3)		Future Policy Benefits		Other Liabilities

				(in millions)
Fair Value, beginning of period				$	35	$	21,815	$	(71)	$	(77)
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		777		-		(1,079)		(101)
			Other income		-		-		-		-
			Interest credited to policyholders' account balances		-		(2,983)		-		-
		Included in other comprehensive income (loss)			-		-		-		-
	Net investment income				-		-		-		-
	Purchases, sales, issuances and settlements				21		1,555		(22)		39
	Transfers into (out of) Level 3(1)				-		(607)		-		-
Fair Value, end of period				$	833	$	19,780	$	(1,172)	$	(139)

Unrealized gains (losses) for the period relating to those Level 3 assets
	that were still held at the end of the period(2)
		Included in earnings:
			Realized investment gains (losses), net	$	777	$	-	$	(1,079)	$	(101)
			Other income	$	-	$	-	$	-	$	-
			Interest credited to policyholders' account balances	$	-	$	(3,733)	$	-	$	-