Prudential Financial, Inc. · NYSE:PRU
Prudential Financial — Merger or Acquisition (November 2003)
15 slides from Prudential Financial's merger presentation, Nov 18, 2003
Slide 1: Acquisition of CIGNA Retirement Business: Presentation to Investors
Prudential Financial, Inc. Acquisition of CIGNA Retirement Business Presentation to Investors November 2003
Slide 2: Forward-looking statements
Certain of the statements included in the following presentation constitute forward-looking statements within the meaning of the U. S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “inten
Slide 3: Non-GAAP Measure
In managing our businesses, we use a non-GAAP measure we call “adjusted operating income” to measure the performance of our Financial Services Businesses. Our goals for return on equity (ROE), after-tax earnings and earnings per share (EPS) contributions are based on after-tax adjusted operating inc
Slide 4: Prudential to acquire CIGNA Retirement for $2.1 billion
Expected to close first half, 2004 Major step toward goal of 12% ROE by 2005 (1) CIGNA Retirement: $50 billion in defined contribution / defined benefit assets (2) CIGNA Retirement will be a subsidiary of Prudential Insurance (1) Based on after-tax adjusted operating income (2) As of September 30, 2
Slide 5: Transaction features
No new borrowings or equity issued Business capitalized with $840 million statutory surplus at closing (1) Prudential Insurance pro-forma RBC consistent with ratings goal Modest integration risk Exposure to pre-close liabilities for industry practices issues limited under risk-sharing agreement ($20
Slide 6: Financial benefits
Expected 12% - 13% return on equity (1) (2) Effective capital redeployment enhances overall returns Targeted $110 million of expense saves (20% of combined expense base) contribute to expected returns (2) (3) Dividend capacity of Prudential Insurance enhanced by $200 million expected annual cash flo
Slide 7: Strategic benefits
Doubles our defined contribution record keeping business, increasing participants from one million to two million Adds established benefit consultant channel Adds strong 401(k) and Taft-Hartley presence to our strengths in 403(b) and 457 market segments Adds total retirement outsourcing capabilities
Slide 8: Retirement market: Increasingly important in asset gathering
Market is estimated at $16 trillion, or one-third of $48 trillion of US individual total wealth Retirement assets represent the single largest component of asset flows in the US marketplace Retirement market projected to grow to $39 trillion by 2012 (9% CAGR) Retirement market : Increasingly importa
Slide 9: Attractive return on investment
Annual $ 200 $ 149 9 Months 12 % - 13% Expected return on required equity (3) -- -- -- Purchase Accounting -- -- -- Integration costs $ 75 -- -- Cost savings $ 200 $ 149 Historical basis After–tax income: (2) $ 48 $ 50 Account values (1) After Integration period 2002 2003 (1) At end of period; in bi
Slide 10: Capital deployment
(1) $ billions; based on September 30, 2003 data for Financial Services Businesses, excluding FAS 115; “pro-forma” includes estimated required equity for the combined retirement business Corporate & Other Investment International Insurance $ 3.4 $ 3.4 Reported Pro forma Capital deployment (1) Attrib
Slide 11: Scale in businesses we know
September 30, 2003 ($ billions) $ 117 $ 67 $ 50 Total 61 40 21 Defined Benefit / Guaranteed Products (2) $ 56 $ 27 $ 29 Defined Contribution Account values: # 8 # 20 # 16 Ranking (1) 2.2 million 1.1 million 1.1 million Defined contribution participants Combined Prudential CIGNA (1) Based on PlanSpon
Slide 12: $18 billion stable value balances are major source of earnings
Low risk profile: about 90% of balances experience- rated with client sharing investment risk Rate resets semi-annually on most products Future crediting rates typically reflect prior experience Low interest-rate floors CIGNA stable value characteristics $18 billion stable value balances are major s
Slide 13: Assets under management
CIGNA Retirement Prudential Financial Combined As of September 30, 2003 Public Fixed Income Private Fixed Income Equity Mortgages International Non proprietary insurance, annuity & other Real Estate $ 52 billion AUM $ 473 billion AUM $ 421 billion AUM Assets under management
Slide 14: High quality general account
CIGNA Retirement General Account $ 23 billion As of September 30, 2003 CIGNA Public and Private Fixed Income Portfolio $ 16 billion Below investment grade 4% High quality general account Public Fixed Income 46% Private Fixed Income 24% Commercial Mortgages 26% Real Estate / Other 4% Investment grade
Slide 15: Summary
Major step toward goal of 12% ROE by 2005 (1) Accretive to EPS in 2004; adds $150 million after- tax earnings in 2005 (1) (2) Creates a leading retirement market provider Enhances statutory earnings and cash flow No impact on share repurchase program “base case” (1) Based on after-tax adjusted opera
Prudential Financial — Merger or Acquisition (November 2003) on 6ix