Prudential Financial, Inc. · NYSE:PRU
Prudential Financial — Investor Day (June 2019)
111 slides from Prudential Financial's investor day presentation, Jun 5, 2019
Slide 1: 2019 Investor Day
Exhibit 99.1 P R U D E N T I A L T O W E R 2019 INVESTOR DAY N E W A R K , N E W J E R S E Y June 5, 2019Exhibit 99.1 P R U D E N T I A L T O W E R 2019 INVESTOR DAY N E W A R K , N E W J E R S E Y June 5, 2019
Slide 2: Welcome
2019 Investor Day Darin Arita Welcome Senior Vice President Investor Relations2019 Investor Day Darin Arita Welcome Senior Vice President Investor Relations
Slide 3: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures Certain of the statements included in this presentation, including those related to our strategy, prospective implementation costs and related margin expansion, future alignment of our net income and adjusted operating income, Financial Wellness platf
Slide 4: Executive Update - Charles Lowrey
2019 Investor Day Charles Lowrey Executive Update Chairman and Chief Executive Officer 2019 Investor Day Charles Lowrey Executive Update Chairman and Chief Executive Officer
Slide 5: Key Messages
Key Messages • Strategic mix of businesses with scale and growth potential that cannot be easily replicated • Focused on connecting track record of strong operating fundamentals with financial outcomes • Accelerating execution of our strategy to enhance return on equity and earnings per share growth
Slide 6: Honed our lines of business over the past ~20 years
Honed our lines of business over the past ~20 years Pre-IPO (2001) Pru Reinsurance Home Mortgage Health Insurance 2008 / 2009 Property and Casualty Pru Securities Pru Securities Real Estate and Relocation U.S. Wealth Management Global Commodities Real Estate and Relocation Wealth Management Today Gl
Slide 7: Proven ability to grow businesses significantly
Proven ability to grow businesses significantly, both organically and through M&A ($ billions) Pre-tax AOI International Annuities Retirement PGIM $3.3 $1.9 $1.0 $1.0 +11% +19% +14% +10% CAGR CAGR CAGR CAGR $0.6 $0.2 $0.1 $0.1 2001 2018 2001 2018 2001 2018 2001 2018 4Proven ability to grow businesse
Slide 8: Scaled businesses with growth potential
Scaled businesses with growth potential U.S. Financial Strong pillars underlying Financial Wellness business #1 PRT, #3 VA, Top 5 Group Life & Disability, Top 10 Individual Life, Top 10 DC Manager Wellness High quality global asset manager PGIM (1) #10 in AUM , Top 3 in Alternatives, Real Estate, an
Slide 9: Businesses that cannot be easily replicated
Businesses that cannot be easily replicated U.S. Financial PGIM International Wellness Combination of Successful Unique distribution model multi-manager model Significant workplace access + Selective and collaborative wide breadth of individual solutions + approach to new markets multi-channel distr
Slide 10: Purpose and culture are fundamental to execution
Purpose and culture are fundamental to execution Our purpose WE MAKE LIVES BETTER by SOLVING the FINANCIAL CHALLENGES of CHANGING WORLD our ® FORTUNE ISS Named to 2018 Environment, Change The Social, and 1 ® World List Governance Quality Score Note: Fortune ranking as of 8/18. FORTUNE® and “Change t
Slide 11: Accelerating the execution of our strategy
Accelerating the execution of our strategy • Enhancing the customer experience • Transforming technology and talent to drive innovation and efficiency • Integrating business operations • Simplifying processes to increase our speed to market 8Accelerating the execution of our strategy • Enhancing the
Slide 12: Business mix and strategy drive a higher ROE and growth potential
Business mix and strategy drive a higher ROE and growth potential Increased Adjusted ROE Target Multiple drivers to increase EPS growth: • Accelerating strategy and integration of businesses 12 - 14% 12 - 13% • Significant traction in Financial Wellness • Further third-party success in PGIM Adjusted
Slide 13: Key Messages
Key Messages • Strategic mix of businesses with scale and growth potential that cannot be easily replicated • Focused on connecting track record of strong operating fundamentals with financial outcomes • Accelerating execution of our strategy to enhance return on equity and earnings per share growth
Slide 14: Executive Update - Robert Falzon
2019 Investor Day Robert Falzon Executive Update Vice Chairman2019 Investor Day Robert Falzon Executive Update Vice Chairman
Slide 15: Key Messages
Key Messages • High quality businesses with attractive growth prospects • Accelerating process, talent, and technology transformation • Results in higher earnings growth, increased level of free cash flow, and attractive returns 2Key Messages • High quality businesses with attractive growth prospect
Slide 16: High quality businesses with attractive growth prospects
High quality businesses with attractive growth prospects PGIM International U.S. Financial Wellness Mid-to-high single digit Mid-single digit Mid-to-high single digit intermediate term earnings growth intermediate term earnings growth intermediate term earnings growth Expanding global investment and
Slide 17: PGIM's earnings and margin continue to expand
PGIM’s earnings and margin continue to expand ($ billions) Pre-tax AOI Mid-to-high single digit growth will be driven by: ~8% • Proven ability to capture industry flows and market CAGR share $1.0 • Strong presence and focus in high-growth asset classes and markets $0.5 • Operating leverage as busine
Slide 18: International's earnings continue to expand, with stable margins
International’s earnings continue to expand, with stable margins ($ billions) (1) Pre-tax core AOI Mid-single digit growth will be driven by: ~5% CAGR • Sustained growth in developed markets, with impact $4.0 FX and interest of market headwinds subsiding rate adjusted $3.2 • Longer term upside drive
Slide 19: Enhanced customer focus drives U.S. Financial Wellness earnings growth
Enhanced customer focus drives U.S. Financial Wellness earnings growth and margin expansion ($ billions) Pre-tax AOI, (1) excluding notable items Mid-to-high single digit growth will be driven by: ~4% CAGR • Investments in capabilities that increase productivity $3.7 and customer engagement $3.0 • I
Slide 20: Acceleration of process, talent, and technology transformation
Acceleration of process, talent, and technology transformation enhances Financial Wellness growth …resulting in Focused on… Margin Expansion Customer Experience Revenue Growth 7Acceleration of process, talent, and technology transformation enhances Financial Wellness growth …resulting in Focused on…
Slide 21: Consolidated customer service center
Consolidated customer service center to address comprehensive needs …creates efficiencies from A simplified and seamless customer experience… • Fewer customer contact centers Margin • Highly trained customer service professionals Expansion • Streamlined, technology-enabled processes and enables Fina
Slide 22: Accelerating Financial Wellness earnings growth
Accelerating Financial Wellness earnings growth ($ millions) ~$500 Leads to: Run-Rate Margin ✓ Higher earnings through: $275 Expansion $175 $100 – Margin expansion $50 – Future revenue ($35) ($75) ($100) growth ($135) Implementation ✓ Increased free cash flow (1) Costs ✓ Attractive returns $600 - $7
Slide 23: Key Messages
Key Messages • High quality businesses with attractive growth prospects • Accelerating process, talent, and technology transformation • Results in higher earnings growth, increased level of free cash flow, and attractive returns 10Key Messages • High quality businesses with attractive growth prospec
Slide 24: U.S. Financial Wellness
2019 Investor Day U.S. Financial Wellness Steve Pelletier Andy Sullivan Caroline Feeney Naveen Agarwal Executive Vice President Senior Vice President Senior Vice President Senior Vice President and Chief Operating Officer, and CEO of Workplace Solutions and CEO of Individual Solutions and Chief Mark
Slide 25: Key Messages
Key Messages • We have a differentiated approach to Financial Wellness, which is a compelling growth opportunity • Financial Wellness realizes three sources of value across institutions and individuals • Financial Wellness complements our existing distribution capabilities by expanding our addressab
Slide 26: We deliver Financial Wellness in a differentiated way
We deliver Financial Wellness in a differentiated way No other company has these critical components at scale • Large population to serve among our Retirement and Group Insurance clients (institutional) • Income, investment, and protection solutions • Digital, face-to-face, and hybrid advice capabil
Slide 27: We address needs of Institutions and Individuals
We address needs of Institutions and Individuals, which deepens our relationships with them Institutions/Employers Individuals/Employees • Reduce employee stress• Manage day-to-day finances • Drive higher productivity • Achieve important • Lower absenteeism financial goals • Protect against key fina
Slide 28: Financial Wellness drives three sources of revenue growth
Financial Wellness drives three sources of revenue growth, with significant opportunity over time 1 2 3 Individuals Individuals Institutions within Institutions Winning and retaining Increasing utilization of Providing individuals with institutional clients in our savings and benefit retail solution
Slide 29: Our value proposition for Institutions and Individuals
Our value proposition is attractive for Institutions and Individuals within those Institutions 1 2 Institutions Individuals within Institutions • Understand benefit of financially well employees• Increase understanding and optimize usage of workplace benefits • Design optimal employee benefits plans
Slide 30: Goals and metrics to track our progress
We have established goals and metrics to track our progress with Institutions and their Individuals 1 2 Institutions Individuals within Institutions Multi-Year Goals Key Metrics Examples Multi-Year Goals Key Metrics Examples • Grow 2X+ faster • New institutional • Total individuals with access • Gro
Slide 31: Financial Wellness expands our addressable market
Individuals: Financial Wellness also expands our addressable market for retail advice and solutions 3 U.S. Population by Total Investable Assets, 2018 27% 48% Reached through 67% Financial Advisors 73% Lack Financial 52% 33% Advisors Mass Affluent/ Middle Market Mass Market (1) Affluent/HNW ($100K-$
Slide 32: Engaging and educating Individuals at the workplace
We are already engaging and educating Individuals at the workplace FACE-TO-FACE DIGITAL • Adopted by 600+ • Activated at 3,100+ institutional clients institutional clients • Attended by over • Provides broad set 50,000 individuals of Financial Wellness content • 25% of attendees and tools meet with
Slide 33: LINK by Prudential hybrid platform
LINK by Prudential is our hybrid platform for retail solutions that address broader financial needs • Helps individuals identify goals, needs, and gaps • Provides access to solutions: ̶ Income, investment, protection ̶ Adding new solutions over time • Offers access to service, engagement, and advice
Slide 34: Driving longer-term growth through deeper relationships with Individuals
We are driving longer-term growth through expanded, deeper relationships with Individuals 3 Activated for Financial Activated for New Retail (1) (2) (3) Wellness Platform Retail Solutions Customers 20M 12M 12M 8M 2.5M 1M 2K+ 5K 200K 2025 Today 2019 Today 2019 Today 2025 2025 2019 Goal Goal Goal Goal
Slide 35: Key Messages
Key Messages • We have a differentiated approach to Financial Wellness, which is a compelling growth opportunity • Financial Wellness realizes three sources of value across institutions and individuals • Financial Wellness complements our existing distribution capabilities by expanding our addressab
Slide 36: PGIM - David Hunt
2019 Investor Day David Hunt PGIM President and CEO, PGIM 2019 Investor Day David Hunt PGIM President and CEO, PGIM
Slide 37: Key Messages
Key Messages • Our scaled, diversified multi-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds • PGIM’s success is underpinned by disciplined investments in broadening and globalizing
Slide 38: PGIM's industry-leading position
PGIM’s industry-leading position is driven by strength across attractive sectors Assets (1) Top 10 Global Asset Manager ($ billions) (3) 1 BlackRock $5,976 Alternatives asset manager 2 Vanguard Group $4,867 (4) Real Estate manager worldwide 3 State Street Global Advisors $2,511 Top 4 Fidelity Invest
Slide 39: Significant scale in attractive asset classes
Significant scale in attractive asset classes delivers a well-balanced mix of revenues (1) Fees by Asset Class (2) ~50% of fees from higher growth areas Private Fixed Income (3) & Equity $676 mn from real assets & alternatives 8% Real Estate (4) $203 mn from private credit Debt & Equity Public 22% F
Slide 40: Deep relationships with third-party client base
Deep relationships with top tier third-party client base Fees by Client Type 1,400+ third-party institutional clients General clients have over $1 billion invested with PGIM 91 Account 18% (1) of the top 300 global pension funds 158 (2) of the 25 largest U.S. corporate pension plans 23 Institutional
Slide 41: Scaled global presence
Scaled global presence across clients, talent, and investment opportunities (1) • $340 billion of AUM from non-U.S. clients• 1,250+ investment professionals• 37 offices in 15 countries Data as of December 31, 2018. (1) AUM from non-U.S. clients includes affiliates. 6Scaled global presence across cli
Slide 42: Consistent, strong investment performance
Consistent, strong investment performance underpins our growth and financial success (1) Percentage of PGIM AUM Investment Outperforming Benchmark Performance 92% 87% 84% Earnings Client Flows 3 YEARS 5 YEARS 10 YEARS Source: PGIM calculations as of March 31, 2019. Past performance is not a guarante
Slide 43: 16 consecutive years of positive third-party net flows
16 consecutive years of positive third-party net flows ($ billions) (1) Third-Party Net Flows $36.5 $30.0 $23.8 $22.6 $21.9 $20.1 $15.6 $13.7 $11.0 $11.0 $10.8 $9.8 $7.1 $5.7 $5.5 $0.5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1) Represents unaffiliated third-p
Slide 44: Leading capabilities in private markets drive origination momentum
Leading capabilities in private markets drive origination momentum ($ billions) Private Originations $30.5 $28.4 $27.7 $26.6 $26.5 $25.1 $21.8 $19.9 $18.0 $14.9 $18.6 $15.8 $13.9 $15.2 $14.6 $12.2 $9.8 $8.7 $12.1 $5.8 $13.5 $12.6 $12.5 $11.9 $11.4 $10.5 $10.1 $9.9 $9.6 $6.3 2009 2010 2011 2012 2013
Slide 45: Strong, capital-efficient growth supporting margin expansion
Strong, capital-efficient growth supporting margin expansion ($ billions) (1) (2) Adj. Operating ROE Pre-tax AOI Adj. Operating Margin $1.0 35% 31% 29% $0.5 15% 2018 2010 2010 2018 2010 2018 (1) Adjusted operating return on equity represents after-tax AOI as a percentage of average attributed equity
Slide 46: Strategic investments paying off with operating leverage
Strategic investments are paying off and will result in additional operating leverage in the future Adjusted Operating Margin Margin expansion of ~200 bps (170 bps) 360 bps 29% 31% 2010 Adjusted Operating Strategic 2018 Adjusted (1)(2) (3) (1) Margin Leverage Initiatives Margin (1) Represents pre-ta
Slide 47: Key Messages
Key Messages • Our scaled, diversified multi-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds • PGIM’s success is underpinned by disciplined investments in broadening and globalizing
Slide 48: PGIM's vision and strategy for long-term success
PGIM’s vision and strategy for long-term success To be widely regarded as a premier active global investment manager across a broad range of public and private asset classes 1 2 3 4 Broaden and Modernize our Expand our Selectively globalize our multi-manager reputation and acquire new products model
Slide 49: Disciplined execution on strategic initiatives
Disciplined execution on our strategic initiatives has generated $100 billion of net flows over the past 5 years Broaden and globalize our 29% of assets from non-U.S. clients, up from 11% in 2010 1 products Modernize our multi-manager Built a broad set of vehicles including European Mutual Funds 2 (
Slide 50: Key Messages
Key Messages • Our scaled, diversified multi-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds • PGIM’s success is underpinned by disciplined investments in broadening and globalizing
Slide 51: PGIM's winning business model
PGIM’s winning business model While many firms struggle for scale or performance in the face of industry headwinds, three winning business models have emerged Very large public Specialized boutiques with managers offering strong investment cheap index performance Global firms managing public and pri
Slide 52: Robust growth trajectory through cycle
Robust growth trajectory through cycle ($ billions) Mid-to-high single digit earnings growth is expected to be driven by: Pre-tax AOI 1. Proven ability to capture industry flows and market share in areas where PGIM already has leading capabilities 2. Operating leverage across our business as we add
Slide 53: Growth opportunity: Alternatives
Growth opportunity: Alternatives (1) Market Opportunity PGIM’s Positioning Investments for Future Growth ($ trillion) PGIM AUM Building out private credit capabilities (2)(3) (e.g., mezzanine, direct lending) Alternatives $229 bn Top 3 $21 (2)(3) Real Estate $136 bn Top 3 Further scaling and broaden
Slide 54: Growth opportunity: U.S. Defined Contribution and Retail
Growth opportunity: U.S. Defined Contribution and Retail Market Opportunity PGIM’s Positioning Investments for Future Growth Enhancing dedicated coverage (2) of DC sponsors and consultants #8 by DC AUM $10 tn U.S. (3) Leveraging Prudential’s Named Top 5 DCIO manager $6 tn Defined collective strength
Slide 55: Growth opportunity: International markets
Growth opportunity: International markets Market Opportunity PGIM’s Positioning and Investments for Future Growth $3.5 trillion (2) • Top 3 foreign manager of Japanese institutional assets institutional assets Japan • Generated a total of $30 billion in third-party net flows over the last 5 years (1
Slide 56: Growth opportunity: Scaled technology investments
Growth opportunity: Scaled technology investments Making significant investments in new technology leveraging the global scale of PGIM across the entire asset management value chain Robotics & Automation Data Science Evaluating how alternative data, artificial Deploying robotic process automation to
Slide 57: Key Messages
Key Messages • Our scaled, diversified multi-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds • PGIM’s success is underpinned by disciplined investments in broadening and globalizing
Slide 58: International - Scott Sleyster
2019 Investor Day Scott Sleyster International Executive Vice President and Chief Operating Officer, International Businesses2019 Investor Day Scott Sleyster International Executive Vice President and Chief Operating Officer, International Businesses
Slide 59: Key Messages
Key Messages • Differentiated business model with superior execution • Sustained and stable growth through developed and emerging markets • Delivering on our strategic imperatives to capture future growth 2Key Messages • Differentiated business model with superior execution • Sustained and stable gr
Slide 60: Consistent strategy and superior execution drive differentiated results
Consistent strategy and superior execution drive differentiated results Mid-single Digit Mid-teens 60%+ (5) Annual Growth in Core AOI Adjusted Operating ROE and Redeployment of (1)(2) (3)(4) and In-Force Since 2013 Operating Margin International’s after-tax AOI Well positioned to maintain steady gro
Slide 61: Developed markets provide long-term growth
Strong mix of developed and emerging markets provide long-term growth Developed Markets • Large, mature, and wealthy markets • Stable earnings with mid-single digit growth Korea • Source of significant cash flows to PFI Japan Taiwan 4Strong mix of developed and emerging markets provide long-term gro
Slide 62: Emerging markets provide long-term growth
Strong mix of developed and emerging markets provide long-term growth Emerging Markets • Expanding economies and rising affluent and middle classes China • Low insurance penetration with growing demand for protection and saving products Mexico India Brazil Ghana • Thoughtful ownership approaches to
Slide 63: Why we will continue to win in Japan
Why we will continue to win in Japan Our differentiated business World class captive agents, model focuses on needs-based complemented by third-party selling distribution Aging population provides Wealthy households with opportunity for retirement significant investable assets solutions 6Why we will
Slide 64: Proof points of outperformance in Japan
Proof points of outperformance in Japan st POJ is the 1 Company in history to capture the Industry leading (~35%) Million Dollar Round Triple Crown in Customer Satisfaction Table memberships and differentiated productivity (3) (1) Productivity (2) Contract Persistency (1) ~6+ Life Planner Claims ~95
Slide 65: Case study: Our success in Brazil
Case study: Our success in Brazil Why Brazil? (3) Social Economic Classes (1) • World’s 9th largest economy 2005 2017 • Favorable demographics with rising affluent 64% and middle income customer base 49% • Largest life insurance sector in Latin America, accounting for ~60% of life (2) premiums in th
Slide 66: Our business model in action in Brazil
Our business model in action in Brazil Launched Captive Expanded into Third-Party 2002 Life Planner • Largest non-bank insurance 2013 Distribution Channel (1) company in the life industry Acquired Itaú • #1 independent individual life 2017 Group Life Insurance (2) insurer with best in class business
Slide 67: Superior execution leads to rapid growth in Brazil
Superior execution leads to rapid growth in Brazil Sales In-Force Face Amount ($ millions) ($ billions) 2013 2018 $35 10% 1% $29 $24 $18 27% CAGR $182 $55 $14 $10 ▪ Life Planner Group & Third-Party 2013 2014 2015 2016 2017 2018 (1) Strong sales momentum with increasing High quality businesses with e
Slide 68: Delivering on our strategic imperatives
Delivering on our strategic imperatives to capture future growth Strategic Imperatives Attractive Business Mix Growth Distribution Expansion in Proprietary and Third-Party Channels Distribution Digital Expansion Enablement In 6 of the 10 Product Development Most Populous to meet Customer Needs Count
Slide 69: Key Messages
Key Messages • Differentiated business model with superior execution • Sustained and stable growth through developed and emerging markets • Delivering on our strategic imperatives to capture future growth 12Key Messages • Differentiated business model with superior execution • Sustained and stable g
Slide 70: Investment Portfolio - Tim Schmidt
2019 Investor Day Tim Schmidt Investment Portfolio Senior Vice President, Chief Investment Officer2019 Investor Day Tim Schmidt Investment Portfolio Senior Vice President, Chief Investment Officer
Slide 71: Key Messages
Key Messages • Broadly diversified, high quality, and well matched investment portfolio • Prudential’s General Account enjoys a distinctive advantage from PGIM’s direct origination capabilities and asset management expertise • Disciplined framework for credit management and well positioned to weathe
Slide 72: Our approach to portfolio management
Our approach to portfolio management Fundamental Understanding of Liabilities High Quality, Disciplined Interest Rate Risk Management Well Matched Broad Diversification Investment Portfolio Rigorous Security Selection 3Our approach to portfolio management Fundamental Understanding of Liabilities Hig
Slide 73: Diversified and high quality portfolio
Diversified and high quality portfolio (1) Portfolio Composition $416 billion • Over one-third in government securities Government Securities • Low allocation to Below Investment Grade 36% Other (BIG) corporates, equities and alternatives 7% Policy Loans 2% Equities / Alts 3% IG Corporate, BIG Corpo
Slide 74: High quality fixed maturities portfolio
(1) High quality fixed maturities portfolio (2) Fixed Maturities Credit Quality • 5% allocation to BIG fixed maturities 5% 6% 18% • Higher allocation to NAIC 1 than peers NAIC 3 - 6 31% NAIC 2 NAIC 1 77% 63% PRU Peer Average (1) Fixed maturity holdings as disclosed on Company financial statements as
Slide 75: High quality corporate credit
High quality corporate credit (1) Corporate Securities by Credit Quality $147 billion (35% of Invested Assets) • 50% of corporate credit is rated A & above Composition of BBB 40% • Nearly half of BBB & below are 36% directly originated privates. Benefits 24% 50% include: 8% 39% – Structural protecti
Slide 76: Single name diversification
Single name diversification (1) • Low credit concentration Top 25 Credit Exposures (% of Total Credit Assets) • Credit rotation trades reduce single name credit migration risk 19.2% 14.9% 14.5% 13.1% 12.5% 12.3% 11.7% 11.7% 11.2% Company A Company B Company C Company D Company E Prudential Company F
Slide 77: Well balanced, high quality structured products
Well balanced, high quality structured products (2) Structured Products Credit Quality (1) (% of Total Structured Products) $22 billion (5% of Invested Assets ) • 98% AAA-AA rated • CLO’s 100% AAA, with ~37% credit enhancement CMBS 80% 40% 8% 5% Other ABS 12% 33% RMBS 15% 18% 2% CLOs 34% 33% 10% 2%
Slide 78: CLOs are high quality with structural protections
CLOs are high quality with significant structural protections Typical CLO Typical CLO Structure Structure 100% 100% 100% (1) Rated NAIC 1 Rated AAA externally AAA-rated Tranche 63% Investments are in the most senior tranche • Strongest structural protections in each transaction • Credit enhancement
Slide 79: Diversified mortgage loan portfolio
Diversified, high quality, and defensively positioned mortgage loan portfolio (1) Mortgage Loan Type vs. ACLI Composition (2) $50 billion (12% of Invested Assets ) • Provides attractive yields More Defensive Less Defensive • Conservative underwriting 8% • Benefit of PGIM’s direct originations 4% 1%
Slide 80: Equities and alternatives provide diversification
Equities and alternatives provide diversification and enhance long-term return (2) PRU vs. Peers (% of Invested Assets) 5% Equities and Alternatives Composition • Support long-duration liabilities (1) $12 billion (3% of Invested Assets ) 3% • Returns exceed fixed income yields Equity • Lower allocat
Slide 81: Moderating impact of low interest rates
Moderating impact of low interest rates as acquisition yields approach book yields (1) (1) Domestic Portfolio Japan Portfolio 5.0% 5.0% 4.5% 4.5% USD Products 4.0% 4.0% 3.5% 3.5% 3.0% 3.0% 2.5% 2.5% JPY Products 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% (2) (2) Fixed Income Book Yield Acquisition Yield Fixed In
Slide 82: Interest rate risk is effectively managed
Interest rate risk is effectively managed within investable space (1) Interest Rate Sensitivity Using Key Rate Duration 0-1Y 2Y 3Y 5Y 7Y 10Y 15Y 20Y 25Y 30Y Total Assets Portfolio Benchmark (Liabilities) (1) General Account excluding Closed Block Division. Approximate change in market value per 1 ba
Slide 83: Alternatives provide long-term value
Alternatives provide long-term value and support tail liability cash flows +/- 1 Standard Diversified Alternatives Deviation 30-yr Treasury TIME 14 RETURNSAlternatives provide long-term value and support tail liability cash flows +/- 1 Standard Diversified Alternatives Deviation 30-yr Treasury TIME
Slide 84: Competitive advantage of PGIM's expertise
Competitive advantage of PGIM’s expertise Strong General Account CIO’s Disciplined ALM & PGIM’s Expertise & Portfolio Performance that Risk Management Capabilities Meets or Exceeds Overall Pricing Targets • Origination of Private Assets • Fundamental Credit Analysis - (1) Averaging 30 years of exper
Slide 85: Investment portfolio outperformance
Investment portfolio outperformance (1) U.S. Financial Wellness Businesses Full Year 2018 • Domestic fixed income portfolio 1.22% 2.01% outperformed IG Public Corporates by 201bps • Outperformance driven by asset allocation and PGIM’s security selection 0.64% 0.15% Duration Allocation Security Total
Slide 86: Actions taken to position portfolio defensively
Actions taken to position our portfolio defensively Rebalance credit rating profile within asset classes Continue to allocate to direct Reduce aggregate originations that spread duration enjoy stronger covenants Diversify Rebalance toward Use credit rotation and defensive and trades to avoid resilie
Slide 87: Well positioned for next downturn
Well positioned for next downturn • Increase in government securities and credit quality within public bonds • 12% decrease in structured products (1) Portfolio Composition 36% 2007: $163B 2018: $416B +16% +3% 20% -12% 17% 16% -2% 13% 13% 12%12% 9% 9% 9% 8% 6% 5% 4% 4% 4% 3% Equity / Alts Other Mort
Slide 88: Key Messages
Key Messages • Broadly diversified, high quality, and well matched investment portfolio • Prudential’s General Account enjoys a distinctive advantage from PGIM’s direct origination capabilities and asset management expertise • Disciplined framework for credit management and well positioned to weathe
Slide 89: Financial Management - Ken Tanji
2019 Investor Day Ken Tanji Financial Management Executive Vice President and Chief Financial Officer 2019 Investor Day Ken Tanji Financial Management Executive Vice President and Chief Financial Officer
Slide 90: Key Messages
Key Messages • Strong financial performance over time • Diversified free cash flow and consistent capital deployment • Attractive value driven by integrated business mix 2Key Messages • Strong financial performance over time • Diversified free cash flow and consistent capital deployment • Attractive
Slide 91: Strong financial performance over time
Strong financial performance over time 10% 12.7% 8% 5-yr Adjusted BVPS Adjusted Operating 5-yr Adjusted EPS (2) (3) CAGR ROE CAGR, excluding (1) notable items (1) From 2013 to 2018; based on after-tax Adjusted Operating Income excluding notable items. See appendix for more information. (2) From 2013
Slide 92: Diversified sources of earnings driven by business mix
Diversified sources of earnings driven by business mix 2018 Sources of Earnings (1) (2) By Type By Business PGIM 12% Underwriting International 39% 43% Net Fee 43% U.S. Financial Wellness Net Spread 18% 45% (1) Represents fee income, net of investment expense, and spread income, net of interest expe
Slide 93: Demonstrating financial strength and flexibility
Demonstrating financial strength and flexibility Company Measures March 31, 2019 Target vs. Target (1) Highly Liquid Assets $5.5 billion $3 – $5 billion ✓ Prudential Financial (2) Financial Leverage Ratio 24% <25% ✓ Capital December 31, 2018 Target vs. Target Prudential Insurance Company of America
Slide 94: Diversified sources of cash flows support capital deployment
Diversified sources of cash flows support consistent capital deployment (2014 – 2018) ($ billions) (1) Free Cash Flow Capital Deployment $16.1 $14.9 As a % of after-tax AOI, 69% 64% excluding notable items PGIM M&A Debt $2.8 $1.2 Reduction Share $0.7 Repurchases U.S. $6.8 Financial (2) Corporate Wel
Slide 95: Individual Annuities, an attractive financial profile
Individual Annuities, an attractive financial profile Adjusted Operating (3) ($ billions) Dividends to PFI ROE and ROA Profile 19.0% 18.5% (1) ROE $1.2 $1.1 (2) 1.23% ROA 1.20% $0.3 $0.3 $0.3 $0.3 $0.3 2017 2018 2017 1Q18 2Q18 3Q18 4Q18 2018 1Q19 (1) Returns on an unlevered basis: Adjusted operating
Slide 96: Actions to clarify financial performance
Actions to clarify financial performance Net Income as a % of reported Future Actions to Clarify after-tax AOI Our Financial Results 103%• Maintain alignment of 11% Net Income to AOI (1) • Refine strategies to 2015 to 2018 2012 to 2014 reduce market volatility Causes for Net Income Actions Taken ver
Slide 97: Attractive value driven by integrated business mix
Attractive value driven by integrated business mix Upside Comparable Potential Business (1) P/E Multiple P/E Multiple U.S. Financial High-Single Digit Wellness Implied Low-Double Digit Low-Double PGIM Digit Low-Double Digit International vs. (2) Enterprise Value Drivers Current 7x • Strategic mix of
Slide 98: Key Messages
Key Messages • Strong financial performance over time • Diversified free cash flow and consistent capital deployment • Attractive value driven by integrated business mix 10Key Messages • Strong financial performance over time • Diversified free cash flow and consistent capital deployment • Attractiv
Slide 99: Appendix
2019 Investor Day P R U D E N T I A L T O W E R N E W A R K , N E W J E R S E Y Appendix2019 Investor Day P R U D E N T I A L T O W E R N E W A R K , N E W J E R S E Y Appendix
Slide 100: Non-GAAP Measures and Other Disclosures
Non-GAAP Measures and Other Disclosures This presentation may include references to adjusted operating income, adjusted book value, and adjusted operating return on equity, which is based on adjusted operating income and adjusted book value. This presentation may also include references to PGIM’s ad
Slide 101: U.S. Financial Wellness Disclosure
U.S. Financial Wellness Disclosure LINK by Prudential is an umbrella marketing name for Prudential Customer Solutions LLC (“PCS”), Prudential Annuities Distributors, Inc., and various subsidiaries of The Prudential Insurance Company of America. Investment advisory products and services are made avai
Slide 102: PGIM Disclosures
PGIM Disclosures This information has been prepared by PGIM, Inc.( PGIM ). PGIM is the primary asset management business of Prudential Financial, Inc.(“PFI”) and is a registered investment advisor with the US Securities and Exchange Commission. PFI, a company with corporate headquarters in the US, i
Slide 103: PGIM Disclosures (continued)
PGIM Disclosures (continued) © 2019 Morningstar, Inc. All rights reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its
Slide 104: Source of Rankings
Source of Rankings Business Market Position Source #1 PRT Assets Based on Total Assets, LIMRA 4Q 2018 U.S. Group Annuity Risk Transfer Survey. #3 VA Sales Based on U.S. Variable Annuity advisor-sold sales as of 9/30/2018. Source: Morningstar. Top 5 Group Life & Disability Based on in-force premiums,
Slide 105: International FX and Interest Rate Adjustments
International FX and Interest Rate Adjustments ($ billions) $4.0 ~5% $3.4 $3.2 CAGR (1) (2) 2013 AOI Business Activity FX Interest Rates 2018 AOI ex. Notable Items ex. Notable Items Yen Plan Rate: 80 111 Avg. 30-Year Japanese 1.70% 0.77% Government Bond Rate: (1) Represents foreign exchange translat
Slide 106: Reconciliations between AOI and Comparable GAAP Measure
(1) Reconciliations between AOI and the Comparable GAAP Measure Year Ended ($ millions, except per share data) 2018 2013 Net income (loss) attributable to Prudential Financial, Inc. $ 4,074 $ (713) Income attributable to noncontrolling interests 14 107 Net income (loss) 4,088 (606) Less: Income (los
Slide 107: Reconciliations between Adjusted Book Value and GAAP Measure
Reconciliations between Adjusted Book Value and the (1) Comparable GAAP Measure December 31, ($ millions, except per share data) 2018 2013 GAAP book value $ 48,617 $ 33,885 Less: Accumulated other comprehensive income (AOCI) 10,906 8,586 GAAP book value excluding AOCI 37,711 25,299 Less: Cumulative
Slide 108: Reconciliation of AOI Notable Items
Reconciliation of AOI Notable Items Year Ended (per share) 2018 2013 After-tax adjusted operating income $ 11.69 $ 9.67 (1) Notable items Annual review and update of actuarial assumptions and other refinements (0.30) 0.24 Updated estimates of profitability driven by market performance versus assumpt
Slide 109: Reconciliations of U.S. Financial Wellness AOI Notable Items
Reconciliations of U.S. Financial Wellness AOI Notable Items Year Ended ($ millions) 2018 2013 U.S. Financial Wellness pre-tax adjusted operating income $ 3,426 $ 3,864 (1) Notable items Annual review and update of actuarial assumptions and other refinements (82) 369 Updated estimates of profitabili
Slide 110: Reconciliations of International AOI Notable Items
Reconciliations of International AOI Notable Items Year Ended ($ millions) 2018 2013 International pre-tax adjusted operating income $ 3,266 $ 3,152 (1) Notable items Annual review and update of actuarial assumptions and other refinements (81) (190) Updated estimates of profitability driven by marke
Slide 111: Reconciliation of PGIM Adjusted Revenue
Reconciliation of PGIM Adjusted Revenue Year Ended ($ millions) 2018 2010 Total revenue attributable to the PGIM Division $ 3,294 $ 1,973 Less: Passthrough distribution revenue 112 120 Less: Revenue associated with consolidations 46 31 Total adjusted revenue attributable to the PGIM Division $ 3,135