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Prudential's Board of Directors recently authorized management to explore a full "demutualization" of the Company. We want to explain what this means and how it might relate to the ADR process.

Prudential is presently organized as a mutual insurance company. Mutual insurance companies do not issue stock and have no stockholders. Policyholders, not stockholders, elect a majority of the Company's Board of Directors and many policyholders have other ownership rights as well.

Prudential is considering reorganizing itself into a stock company. This form of reorganization, known as "demutualization", is a complex process that may take a year or more to complete. Legislation has recently been enacted in New Jersey which would permit a mutual life insurance company to demutualize. However, adoption of a plan of demutualization would occur only after it has been approved by Company policyholders and by appropriate state insurance regulators. Throughout the process, there will be a continuing evaluation by the Board of Directors and management of the Company as to the desirability of demutualization. The Board of Directors, in its discretion, may choose not to demutualize or to delay demutualization for a time.

If the Company were to demutualize, stock or cash or other benefits would be provided to eligible policyholders in exchange for the transfer of such policyholders' current ownership interest in Prudential. At the same time, policies in force will stay in effect and all of their guaranteed benefits will stay intact. Provisions will also be made with respect to the payment of future dividends.

The amount of stock, cash or other benefits to be distributed to each eligible policyholder would be determined by methods that have not yet been developed that would take into account a number of things including the type, amount, issue year, and status of the policies, and the eligibility of various classes of policyholders. Decisions as to who will be eligible for distributions and how much they will receive must satisfy rules of fairness to all policyholders.

A plan governing eligibility for this distribution has not been developed by the Company or approved by appropriate state regulators. Prudential will be proposing that the eligibility rules would require those who receive cash, stock, or other benefits to be policyholders as of the date a plan of reorganization is approved by the Board of Directors. The eligibility rules that ultimately are used must comply with the terms of the legislation in effect in New Jersey.

Because your decision concerning the choice of relief available to you in the Alternate Dispute Resolution ("ADR") program might affect your eligibility for a demutualization distribution or the amount of such a distribution, the Company is making the following commitments:

If the Company ultimately does reorganize into a stock insurance company and

a) you elect to give up your policy as your preferred ADR remedy, you will be given the option to change your decision and repurchase your insurance coverage. If you choose to repurchase your policy prior to the effective date of the demutualization, you will be allowed to participate in the distribution to the same degree as if your policy ownership were continuous, or

b) you select any relief other than giving up your policy as your preferred ADR remedy, the Company's demutualization plan will be designed so that you will receive the same overall financial result regardless of which option you take.

The possible demutualization requires no action by you at this time. These commitments are being made so that you can feel free to select the ADR relief that best suits your needs without jeopardizing your possible future right to participate in a distribution if the Company does demutualize. As stated above, however, the Company may not demutualize and, even if it does, no determination has been made at this time that you or any policyholder would have a right to participate in a demutualization distribution.

The successful completion of a demutualization depends on a number of events and conditions, including many that are not within the Company's control. No plan of demutualization has been adopted yet by the Company's Board of Directors or submitted for approval by policyholders and necessary state insurance regulators. There is no certainty that any such plan will ever be adopted or approved. Finally, even if approved by all necessary parties, including regulators and policyholders, the demutualization process could take several years.

If you have any questions regarding demutualization generally, call 1-800-716-4052 anytime.

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