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Prudential PLC Company News Alert

30 June 2008

Significant decline in common stock price since our FY 2007 update report Common Stock
Ticker: Target price: Current price: Price change since last report:

BUY
PRU.L GBp825.28 GBp543.00 (20.4%)

Prudential PLC’s (Prudential) common stock price has witnessed a significant decline since our previous update report, reflecting investor concerns regarding broad-based weakness in the global financial markets and its impact on insurance stocks, and is in line with the performance of the UK financial market. However, despite the negative impact of volatility in global equity markets, we remain optimistic about the company's focus on retirement-led growth and launch of customized products which are likely to benefit the company’s performance in the medium term. Although we intend to reduce our target price in our next update report, we believe that the recent decline in the common stock has left the stock undervalued and thus we believe that it offers an attractive investment opportunity at current levels. Therefore, we maintain our current BUY rating for the Prudential common stock. We will reassess our common stock rating for Prudential after the company announces its 1H 08 results on 31 July 2008. We expect to revert to a 6-24 month investment horizon in our next full update report, as we no longer anticipate a significant currency impact over the medium term. We maintain our BUY rating for the ADR based on our fundamental outlook.

ADR
Ticker: Target price: Current price: Price change since last report:

BUY
PUK US$36.81 US$21.58 (20.7%)

We will reassess our ADR (1 ADR= 2 common shares) rating for Prudential after the company announces its 1H 08 results on 31 July 2008.

Supervisor: Somnath Banerjee Analyst: Silky Jain Editor: Heloise Capon Global Research Director: Satish Betadpur, CFA Next news due: 1H 08 results, 31 July 2008

Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If this report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for readers with a shorter trading horizon. These are available online only at www.researchoracle.com.

In our FY 2007 update report, dated 17 April 2008, we reiterated the Prudential common stock a BUY on fundamental grounds with a 6-12 month target price of GBp825.28, indicating a potential upside of 21%. The ADR was also reiterated a BUY with a 6-12 month target price of US$36.81, indicating a potential upside of 35%. The Prudential common stock price has declined 20.4% since our previous update report to close at a 52-week low of GBp543.00 on 27 June 2008. The decline in the common stock price is in line with the performance of the UK financial market, and primarily reflects investor concerns regarding weakness in global financial markets and its impact on insurance stocks. Concerns that financial sector performance could experience a major decline as a consequence of global market turmoil stemming from the credit crunch have compounded the pressure on the common stock price. Furthermore, the company has declared that it won’t pay surplus funds of approximately GBP8.7 bn (US$17.3 bn) to its shareholders and policyholders. We remain concerned that economic slowdown in the UK and the US could negatively impact Prudential’s financial performance in the near term. Although we are likely to revise our estimates and target prices downwards when we come to revalue the stock in our next full update report, our long term outlook for the common stock remains positive. Furthermore, we believe that the recent decline in the price has created an investment opportunity. Therefore, we maintain our BUY rating for the common stock at current price levels.

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