Prudential Financial, Inc. · NYSE:PRU
Prudential Financial — Investor Day (December 2008)
92 slides from Prudential Financial's investor day presentation, Dec 4, 2008
Slide 1: Prudential Financial, Inc. Investor Day
Exhibit 99.1 Prudential Financial, Inc. Investor Day December 4, 2008 1 Investor Day 12.04.08
Slide 2: Investor Day December 4, 2008
Investor Day December 4, 2008 Eric Durant Senior Vice President Investor Relations
Slide 3: Forward-Looking Statements
Forward-Looking Statements Certain of the statements included in this presentation constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. It is possible that actual results may differ materially from any expectations or predictions expr
Slide 4: Non-GAAP Measure
Non–GAAP Measure This presentation includes references to “adjusted operating income.” Adjusted operating income is a non-GAAP measure of performance of our Financial Services Businesses. Adjusted operating income excludes “Realized investment gains (losses), net,” as adjusted, and related charges a
Slide 5: Reconciliation between adjusted operating income and the comparable GAAP measure
Reconciliation between adjusted operating income and the comparable GAAP measure Nine months ended (in millions, except per share data) September 30, 2008 Financial Services Businesses: Pre-tax adjusted operating income (loss) by division: Insurance Division $ 670 Investment Division 697 Internation
Slide 6: Reconciliation between adjusted operating income and the comparable GAAP measure (continued)
Reconciliation between adjusted operating income and the comparable GAAP measure (continued) Nine months ended (in millions) September 30, 2008 Revenues (1): Premiums $ 8,861 Policy charges and fee income 2,342 Net investment income 6,332 Asset management fees, commissions and other income 2,608 Tot
Slide 7: Prudential Financial, Inc. - John Strangfeld
Prudential Financial, Inc. John Strangfeld CEO and Chairman
Slide 8: Where We Are Today
Where We Are Today • Balanced portfolio of businesses and risks • High quality businesses – Attractive value propositions – Strong underlying fundamentals – Diversified distribution channels – Strong growth prospects in International, U.S. Retirement and Annuities • Strong balance sheet – Capital to
Slide 9: Wachovia Joint Venture
Wachovia Joint Venture • Formed in 2003; created third largest retail securities firm • Viewed as a financial investment versus strategic investment • Wachovia management has operating control; Prudential has put rights • “Lookback” option selected as consequence of A.G. Edwards transaction • We int
Slide 10: Attributed Equity of Operating Businesses
Attributed Equity of Operating Businesses INTERNATIONAL BUSINESSES • Life Planner model • Gibraltar Life • International Investments Attributed equity $21.5 billion (1) RETIREMENT & ACCUMULATION • Retirement • Individual Annuities $7.2 • Asset Management $2.1 DOMESTIC INSURANCE $3.4 $8.8 • Individua
Slide 11: Capital To Meet "AA" Standards For Insurance Subsidiaries
Capital To Meet “AA” Standards For Insurance Subsidiaries Regulated Businesses: Other Businesses: (1) (3) Attributed equity $15.7 billion(1) (2) Attributed equity $5.8 billion Prudential Insurance Wachovia Retail Securities Brokerage Joint Venture Prudential Retirement Insurance & Annuity Co. Asset
Slide 12: Robust Sources of Liquidity Provide Flexibility in Challenging Financial Markets
Robust Sources of Liquidity Provide Flexibility in Challenging Financial Markets Parent Company Prudential Insurance (1) • $3.8 billion cash and short-term • Commercial Paper Program investments on balance sheet(2) qualifies for Federal facility up to $9.8 billion • Commercial Paper Program qualifie
Slide 13: Diversified High Quality Investment Portfolio
Diversified High Quality Investment Portfolio • Prudential is a credit shop • Seasoned skills in multiple asset classes enhance risk diversification • Market leading capabilities: private fixed income, commercial mortgages and real estate • Defensively positioned portfolio • Third-party Institutiona
Slide 14: Attractive Value Proposition in Markets Focused on Retirement Security
Attractive Value Proposition in Markets Focused on Retirement Security United States • “Highest Daily” Annuity Products: Businesses self-hedging feature protects customer account value, reduces company’s risk profile Insurance • Retirement stable value products Protection highly attractive in volati
Slide 15: Prudential's Management Team
Prudential’s Management Team Office John Strangfeld of the Mark Grier CEO and Chairman Vice Chairman Chairman Bernard Winograd Ed Baird Rich Carbone U.S. Businesses International Businesses Chief Financial Officer • Jim Avery • Kazuo Maeda Insurance – Japan Individual Life • Steve Pelletier • Tim Fe
Slide 16: Prudential Financial, Inc. - Mark Grier
Prudential Financial, Inc. Mark Grier Vice Chairman
Slide 17: Financial Strength and Flexibility in Challenging Markets
Financial Strength and Flexibility in Challenging Markets • Internal resources available to support “AA” ratings objectives for insurance entities • Robust liquidity sources for parent company and operating units • Asset management is a key Prudential capability • Asset selection reflects liability
Slide 18: Insurance Entities Managing to "AA" Standards
Insurance Entities Managing to “AA” Standards Risk Based Capital RBC at at December 31, 2008 Developments December 31, 2007(1) 2008 Total Adjusted • Statutory operating Targeted to Capital: results meet “AA” $11 Billion • Annuity reserves • Possible standards contribution • Credit impairments of fin
Slide 19: Statutory Accounting: Responsible Approach Supports Quality of Recorded Capital
Statutory Accounting: Responsible Approach Supports Quality of Recorded Capital (1) • Asset Valuation Reserve: $2.1 billion – historically maintained at or near maximum levels • Asset Adequacy Testing: reserves based on projected cash flows under adverse scenarios, not heroic assumptions • Structure
Slide 20: Robust Sources of Liquidity
Robust Sources of Liquidity Prudential Financial, Inc. (Parent) Inter-company Enterprise Cash and Short Commercial Lines Debt Liquidity Facility Term Investments Paper of Credit Prudential Insurance “Lendable” Cash Flows from Federal Home Loan Bank Lines Securities Operations of New York of Credit •
Slide 21: Asset Selection Focus on Liability Characteristics
Asset Selection Focus on Liability Characteristics Liability Representative Products Characteristics Asset Types Retirement – Predictable Private placement Full Service Stable Value withdrawals, crediting bonds, commercial rates experience-based mortgages Japanese Life Planner Extremely long duratio
Slide 22: Broad Investment Expertise Supports Risk Diversification
Broad Investment Expertise Supports Risk Diversification FSB General Account FSB Fixed Maturities $169 billion (1) $116 billion (1) Foreign Government 26% Public US Government (3) 56% Fixed 4% Maturities Other Asset- Backed 9% Corporate 45% Residential MBS- Agency Private passthroughs 12% 9% Commerc
Slide 23: Asset Selection Focus on Quality
Asset Selection Focus on Quality FSB Fixed Maturity Portfolio(1) $114.6 $114.8 $116.1 $107.9 $104.7 $87.4 $81.9 Investment grade Non-investment grade 6.2 6.2 5.9 6.2 7.4 7.5 7.6 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 1) In billions; at fair value. Excludes invested assets of s
Slide 24: Prudential's Credit Exposure
Prudential’s Credit Exposure Corporate Credits Total FSB - General Account $55.4 billion(1) 6% Public Corporates Investment Grade Public Corporates 27% High Yield Private Corporates 60% Investment Grade 7% Private Corporates High Yield 1) Financial Services Businesses General Account; as of Septembe
Slide 25: Prudential's Credit Exposure vs. Lehman
Prudential’s Credit Exposure (1) 12% Prudential Over/Under Weight vs. Lehman 8% 4% 0% -4% -8% Note: Universe derived from Lehman Corporate Credit and High Yield Indices in proportions consistent with our actual Investment Grade/Non Investment Grade mix. 1) For the Financial Services Businesses Gener
Slide 26: Private Fixed Income $21.7 Billion
Private Fixed Income $21.7 Billion (1) Private Placement Debt Market Prudential Positioning • Higher credit spreads or coupons • Over 60 years experience relative to like-quality public securities • “Reliable partner”: proprietary • Attractive long-term capital direct origination network built sourc
Slide 27: Sub-Prime Asset-Backed Securities
Sub-Prime Asset-Backed Securities (1) Amortized Cost at Lowest Rating Agency Rating BB & Fair AAA AA A BBB TOTAL below Value $1,900 $2,086 $887 $590 $409 $5,872 $4,696 68% Enhanced Short-Term Portfolio (2) 41% Credit Subordination: 20% or more 91% 30% or more 50% 1) For the Financial Services Busine
Slide 28: Commercial Mortgage-Backed Securities
Commercial Mortgage-Backed Securities (1) Amortized Cost at Lowest Rating Agency Rating BB & Fair AAA AA A BBB TOTAL below Value $7,921 $107 $56 $183 $153 $8,420 $7,844 94% Credit Subordination: 20% or more 91% 30% or more 75% Weighted Average: Loan-to-Value Ratio 69% Debt Service Coverage Ratio 1.5
Slide 29: Commercial Mortgages
Commercial Mortgages (1) (2) Carrying Value $22 billion Weighted Average • Loan-to-Value Ratio 57% • Debt Service Coverage Ratio 1.91x Percentage Delinquent or in foreclosure 0.3% 1) For the Financial Services Businesses General Account; in millions; as of September 30, 2008 2) Includes $1.2 billion
Slide 30: Financial Strength and Flexibility
Financial Strength and Flexibility • Insurance entities managed to “AA” standards; supported by internal capital resources • Broad investment expertise and asset-liability management skills drive portfolio selection • Asset selection reflects liability characteristics; focus on cash flows, not fluct
Slide 31: Prudential Financial, Inc. - Rich Carbone
Prudential Financial, Inc. Rich Carbone Chief Financial Officer
Slide 32: Prudential's View on Capital
Prudential’s View on Capital • Required Equity – The amount of equity capital necessary to support business risk at an A rating at PFI and AA rating at Prudential’s insurance subsidiaries (e.g. Prudential Insurance). – Equity attribution methodology that is unbiased, based on risk, regulatory capita
Slide 33: 2008 Capital Capacity
2008 Capital Capacity (1) ($ in millions) 12/31/2007 12/31/2008 Projected Capital Capacity Actual S&P 900 Required Equity $ 24,400 $ 28,000 (2) Attributed Equity 22,009 20,700 Capital Debt Outstanding 4,781 6,250 Hybrids Outstanding - 1,500 Total Capital Outstanding 26,790 28,450 Net on Balance Shee
Slide 34: 2008 Capital Capacity (scenarios)
2008 Capital Capacity (1) ($ in millions) 12/31/2007 12/31/2008 Projected Capital Capacity Actual S&P 900 S&P 800 S&P 700 Required Equity $ 24,400 $ 28,000 $ 28,800 $ 29,600 (2) Attributed Equity 22,009 20,700 20,400 20,000 Capital Debt Outstanding 4,781 6,250 6,450 6,700 Hybrids Outstanding - 1,500
Slide 35: PFI Projected Sources & Uses of Cash (S&P 700)
PFI Projected Sources & Uses of Cash (S&P 700) On Balance Sheet Sources of Cash 4Q08 1Q09 2Q09 Cash on hand $ 2,389 $ 2,535 $ 2,598 Cash inflows 3,466 1,244 967 Total On Balance Sheet Sources of Cash $ 5,855 $ 3,779 $ 3,565 Uses of Cash Maturing Debt $ ( 1,883) $ (900) $ (3,025) Shareholder Dividend
Slide 36: Sources of Prudential Insurance Liquidity
Sources of Prudential Insurance Liquidity (1) (2) • Unused Securities Lending Capacity $10.0 billion • Federal Home Loan Bank of NY Total Capacity $ 6.7 billion • Federal Commercial Paper Funding Facility $ 9.8 billion (3) • Credit Lines (shared with holding company) $ 4.4 billion 1) As of September
Slide 37: U.S. Businesses
U.S. Businesses Growing and Protecting Wealth in the Domestic Market Bernard Winograd Chief Chief Operating Operating Officer Officer United United States States Businesses Businesses
Slide 38: Attributed Equity of U.S. Businesses
Attributed Equity of U.S. Businesses (1) Attributed Equity $12.2 billion Growing Wealth 10% Individual Annuities $3.3 billion 18% Retirement $3.7 billion 27% Asset Management $1.8 billion 15% 30% Protecting Wealth Individual Life $2.2 billion Group Insurance $1.2 billion 1) As of September 30, 2008;
Slide 39: Balanced Mix of Business Risks
Balanced Mix of Business Risks Attributed Equity $12.2 billion (1) Primary Business Risks Individual Life, Fixed income and Group Insurance equity markets 27% Annuities 28% Commercial real estate, debt, equity markets 15% Equity markets, interest Asset rates, longevity Management 30% Retirement Mort
Slide 40: Retirement and Annuities Competitive Advantages
Retirement and Annuities Competitive Advantages • Unique positioning: – Market leading annuity provider – Full Service retirement provider – DB asset manager • Awarded “Best Living Benefits” by Boomer Market Advisor Magazine for fourth consecutive year • Access to Prudential’s risk management and as
Slide 41: A Leading Provider in the U.S. Retirement and Savings Market
A Leading Provider in the U.S. Retirement and Savings Market $300 $248 $250 $226 $222 $200 $183 $191 $150 $120 $100 $82 $50 $0 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 Retirement Annuities 1) Includes acquired businesses from dates of acquisitions 41 Investor Day 12.04.08
Slide 42: Prudential Annuities Top Variable Annuity Company
Prudential Annuities Top 10 Variable Annuity Company (1) Prudential Annuities is ranked #3 in advisor-sold VA account values ($ billions) Hartford 92.3 Met Life 77.6 Prudential Financial 66.7 #3 AXA 55.2 Lincoln 50.2 Ameriprise 49.0 John Hancock 47.5 Pacific Life 46.9 ING 45.7 Nationwide 36.8 1) Sou
Slide 43: Variable Annuity Market Trends
Variable Annuity Market Trends • Current market conditions: lower sales, account values, and earnings across the industry • Heightened customer interest in downside protection and retirement income security • Risk management strategies tested in current market environment • Increased costs for hedgi
Slide 44: Managing Through Challenging Financial Markets
Managing Through Challenging Financial Markets Impact of Financial Prudential Positioning Market Conditions Heightened customer interest • Opportunity to demonstrate value of in downside protection and unique “Highest Daily” Guarantees; retirement income security Take Rate 61%(1) Equity market decli
Slide 45: Prudential Annuities Active Management of Product Risks
Prudential Annuities Active Management of Product Risks • Current Living Benefit (HD) product design minimizes Prudential’s risk while meeting customers’ needs – Highest Daily +7% annual return – Automatic rebalancing narrows the range of possible investment outcomes – As of September 30, 2008, 52%
Slide 46: Highest Daily Lifetime Seven
Highest Daily Lifetime Seven • Introduced January 2008 • Withdrawal benefit: 5% - 8% of Protected Value for Life (based on age at first withdrawal) • Initial Protected Value: – Greatest 7% roll-up based on each daily account value (10 years or until first withdrawal); or – Account value at first wit
Slide 47: Living Benefit Product Profile
Living Benefit Product Profile Account Values ($ billions) $40 Equity $35 Risk Self HD Products - 61% election rate (1)(5) Hedged; $7.8 Int. Rate $30 Risk “GRO” - 7% election rate (1)(4) Hedged $25 $8.7 Equity & Int. Rate Risk $20 Self Hedged $15 Legacy GMWB and GMAB’s -16% election rate (1) (3) $13
Slide 48: Impact of Variable Annuity Risk Management on Statutory Capital and Reserves
Impact of Variable Annuity Risk Management on Statutory Capital and Reserves Impact of Automatic Measure Rebalancing Account values $16.5 billion (47%) of $35 billion subject to total account values with living requirements at benefit features September 30, 2008 Statutory Reserve“CARVM”reserve credi
Slide 49: Innovative Features Drive Market Share Growth
Innovative Features Drive Market Share Growth March 2005: Lifetime Nov. 2006 : Highest Daily Jan. 2008: Highest Daily Five Launch Lifetime Five Launch Lifetime Seven Launch 8.1% 8.0% 7.8% 7.7% 7.9% 7.9% 7.4% 7.3% 7.2% 6.8% 6.8% 7.0% 6.5% 6.6% 5.8% 5.8% 5.5% 5.4% 5.5% June 2006: Allstate 4.7% Transac
Slide 50: Prudential Retirement Emphasis on Full Service Retirement
Prudential Retirement Emphasis on Full Service Retirement $175 $164 $157 $148 $151 $150 $132 $136 $125 $100 $72 $75 $50 $25 $0 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 09/30/07 09/30/08 Institutional Investment Products Full Service 1) Includes business acquired from CIGNA from April 1, 2004 acq
Slide 51: Full Service Retirement
Full Service Retirement Nine months ended Year Ended December 31 September 30 ($ millions) 2005 2006 2007 2007 2008 Gross Deposits and Sales $ 13,006 $ 16,156 $ 14,692 $ 10,434 $12,392 Net Additions (withdrawals) (912) 167 943 489 1,210 (1) Account Values 88,385 97,430 112,192 105,601 100,463 95% Pe
Slide 52: Emphasis on Mid/Large Case and Tax Exempt Markets
Emphasis on Mid/Large Case and Tax Exempt Markets Emphasis on mid/large Corporate Markets Tax Exempt Market case market - DC plans - DB plans Primary Products - Total Retirement Services - Non-qualified plans - Investment only products - Fee based consultants Specialized consultants Distribution - C
Slide 53: Full Service Stable Value
Full Service Stable Value • Plan sponsor terminations generally require 3-6 months notice for market value, or 3-6 years for book value cash-out 40 $34.6 35 $31.3 $32.3 $30.8 30 25 20 15 10 5 0 12/31/05 12/31/06 12/31/07 09/30/08 53 Investor Day 12.04.08
Slide 54: Full Service Stable Value Products
Full Service Stable Value Products Attractive Value Proposition in Volatile Financial Markets • Principal guarantee feature attractive to security-minded pre-retirees • Low risk profile – substantially all balances experience-rated, with clients sharing investment risk • Rate resets annually on most
Slide 55: Institutional Investment Products
Institutional Investment Products Account values $50 billion (1) Retail Notes • Supported by cash-flow $3.5 matched investments Structured Settlements$5.2 • Unscheduled withdrawals Group Annuities, generally not permitted Close-out Pensions $12.3 $29.0 Funding Agreements, GIC’s, other products Virtu
Slide 56: Prudential Investment Management Competitive Advantages
Prudential Investment Management Competitive Advantages Experience Experience and and Institutional Clients Track Track Record Record • $139 billion third Breadth Breadth and and party institutional Depth Depth of of AUM (1) Capabilities Capabilities • 18% AUM CAGR (2002 – 2007) Access Access to to
Slide 57: Prudential Financial's AUM Significant Scale and Breadth
Prudential Financial’s AUM Significant Scale and Breadth Total AUM $602 billion (1) AUM by Asset Type AUM by Client Type Non- proprietary Non- insurance, proprietary annuity & insurance, Institutional other annuity & Customers 18% other 28% Fixed Income 18% 12% International 47% 12% 29% 5% Internati
Slide 58: Broad Asset Class Capabilities
Broad Asset Class Capabilities Assets Under Management Asset Management Revenue (1) (2) $422 Billion $1.8 Billion Commercial Mortgages Public Private 8% Fixed Fixed Income Income 7% 50% Fixed Real Public Estate Equity Income Public 38% 24% Fixed 11% Income 8% 28% Public Private (3) Real Fixed Equity
Slide 59: Third Party Institutional Flows are the Best Indicator of Competitiveness
Third Party Institutional Flows are the Best Indicator of Competitiveness Institutional Net Flows ($ billions)(1) $11.1 $10.8 $10.0 $6.7 $6.5 $6.1 $5.4 $5.4 $4.3 $4.0 $2.3 $1.8 $1.4 $0.6 $0.2 $0.2 Equity Fixed Income Real Estate Total (2) Percent of Beginning of Period Assets 10% 4% 8% 10% 9% 10% 5%
Slide 60: Asset Management Financial Results
Asset Management Financial Results Nine months ended September ($ in millions, pre-tax) 2006 2007 30, 2008 Adjusted Operating Income Before Proprietary Investments: Revenues $ 1,836 $ 2,115 $ 1,444 Expenses 1,398 1,541 1,081 438 574 363 Proprietary Investment Results 112 127 (62) Adjusted Operating
Slide 61: Asset Management Adjusted Operating Income by Business
Asset Management Adjusted Operating Income by Business Nine months ended September ($ in millions, pre-tax) 2006 2007 30, 2008 Prudential Real Estate Investors $268 $272 $165 Equity 74 112 47 Public Fixed Income 101 177 21 Prudential Capital Group 38 35 29 Prudential Mortgage Capital Company 48 71 2
Slide 62: Domestic Protection Businesses
Domestic Protection Businesses Protection Marketplace Prudential Strategies • Mature, low-growth • Focus on returns through industry capital management, cost- effective distribution • Overcapacity Individual • Expanded third party • Commodity products Life distribution is growth opportunity • Delive
Slide 63: Individual Life Sales
Individual Life Sales (1) Universal Life Variable Life $600 $494 $500 Term Life $419 $430 $400 $372 $355 $300 $200 $100 $0 2005 2006 2007 3mo Nine 07 3mo Nine 08 2005 2006 2007 Months Months ended ended 9/30/07 9/30/08 1) Scheduled premiums from new sales on an annualized basis and first year excess
Slide 64: Group Insurance
Group Insurance • Primarily Group Life business • Controlled growth, with focus on margins • High persistency of quality business • Voluntary life opportunity 64 Investor Day 12.04.08
Slide 65: Group Insurance Sales
Group Insurance Sales (1) $600 $524 $504 Group Disability $500 Group Life $400 $390 $352 $301 $300 $200 $100 $0 Nine 2005 2005 2006 2006 2007 2007 9 mos 9 Nine mos Months Months 07 ended 08 ended 9/30/07 9/30/08 1) New annualized premiums; group disability amounts include long-term care products 65
Slide 66: U.S. Businesses Financial Performance
U.S. Businesses Financial Performance Year Ended December 31, Nine months ended ($ in millions) 2005 2006 2007 Sept 30, 2008 Adjusted operating income pre-tax: Individual Annuities $ 506 $ 586 $ 722 $ (38) Asset Management 427 550 701 301 Retirement 498 510 482 398 Individual Life 498 545 622 437 Gr
Slide 67: U.S. Businesses
U.S. Businesses • Balanced mix of business risks • Leading provider in retirement and savings market • Competitive advantages: product innovation, risk management, asset management, distribution • Domestic protection businesses contribute to earnings and cash flows 67 Investor Day 12.04.08
Slide 68: International Businesses
International Businesses Protecting Protecting Wealth Wealth and and Providing Providing Retirement Retirement Security Security Over Over A A Lifetime Lifetime Edward P. Baird Chief Chief Operating Operating Officer Officer International International Businesses Businesses
Slide 69: Where We Are Today
Where We Are Today • Leadership positions in life planning • Gibraltar generates high ROE’s and cash flows • Growing asset management platforms • Profitability dominated by Japan and Korea • Expanding retirement businesses • Developing multi-channel capabilities • Acquisitions potentially additive 6
Slide 70: Key Elements of Our International Strategy
Key Elements of Our International Strategy • Needs-based selling • Continue building proprietary distribution: recruiting and selection • Historical focus on life insurance • Concentrate on a limited number of attractive countries • Target the affluent and mass affluent consumer • Increasing emphasi
Slide 71: International Division Today
International Division Today Life Planning Traditional International Insurance Insurance Investments Japan Korea Taiwan Argentina Brazil Italy Mexico Poland China India 71 Investor Day 12.04.08
Slide 72: International Insurance Pre-Tax AOI
International Insurance Pre-Tax AOI $ millions $2,000 $2,000 1,598 $1,500 1,428 $1,500 1,321 1,326 1,245 $1,000 917 $1,000 819 757 $500 $500 $0 $0 2002 2003 2004 2005 2006 2007 3Q 07 3Q 08 YTD Life Planner Ops Gibraltar Life 72 Investor Day 12.04.08
Slide 73: Drivers of Sustainable Financial Performance
Drivers of Sustainable Financial Performance • Strong persistency drives revenue growth Needs-Based Selling • Margins earned throughout in-force period • Business growth increases scale benefits • Favorable mortality margins drive Emphasis on Protection Products strong returns • Duration lengthening
Slide 74: Competitive Advantage Life Planning Insurance
Competitive Advantage Life Planning Insurance Life Planners • Life Planner profile similar to • Very selective recruiting customer profile • Life Planner maintains contact with • Highly trained career professional client, as trusted professional Needs Based Selling • Identify protection needs before
Slide 75: Life Planner Business Emphasis on Protection Products
Life Planner Business Emphasis on Protection Products Prudential of Japan In-force Annualized Premium Mix New Business Annualized Premium Mix as of September 30, 2008 (1) 9 months ended September 30, 2008 (1) 20% 16% 13% 33% 16% 15% 49% 38% Yen-based protection Other than Yen- Third Sector (4) Yen-b
Slide 76: Prudential of Japan Number of Individual Policies In-force
Prudential of Japan Number of Individual Policies In-force (1) In thousands 2,500 2,500 2,288 2,194 2,074 2,167 1,956 1,950 1,820 1,838 1,803 1,690 1,500 1,500 1,538 1,348 1,180 1,037 500 500 2002 2003 2004 2005 2006 2007 3Q 07 3Q 08 YTD Total POJ POJ excluding Aoba business 1) Individual Life and A
Slide 77: Gibraltar Life Emphasis on Protection Products
Gibraltar Life Emphasis on Protection Products Gibraltar Life In-force Annualized Premium Mix New Business Annualized Premium Mix as of September 30, 2008 (1) 9 months ended September 30, 2008 (1) 3% 10% 21% 14% 31% 73% 8% 40% Yen-based protection Other than Yen- U.S. Dollar Yen-based savings produc
Slide 78: Gibraltar Life Beyond the Life Advisor Channel
Gibraltar Life Beyond the Life Advisor Channel • Strengthening bank channel distribution by transferring Life Planners to bank branch based sales • Banks now commencing sales of life insurance in addition to annuity products • Well-established relationship with Teachers Association positions Gibralt
Slide 79: Positioned for International Market Developments
Positioned for International Market Developments Market Development Prudential Positioning Growing Demand for Lifetime client relationships Retirement Accumulation Well-established in Retirement Products Market through Associations Innovative, successful U.S. dollar retirement products 79 Investor D
Slide 80: Japan's Demographic Change
Japan’s Demographic Change Current Population: 127 Million People % of 65+ Age Group: 22% in 2008 30% in 2030 (1) Rapidly growing 36% in 2050 (1) pre-Retirement/ Retirement 100% Markets 22% 30% 36% 75% 50% 64% 59% 53% 25% 14% 11% 11% 0% 2008 2030 2050 Age 0-14 Age 15-64 Age 65+ 1) Source: Population
Slide 81: Needs-Based Selling Over a Lifetime
Needs-Based Selling Over a Lifetime 81 Investor Day 12.04.08
Slide 82: Life Planners Serving Client Needs Through a Lifetime
Life Planners Serving Client Needs Through a Lifetime Annualized Prudential of Japan New Business Second Sales to Existing Customers(1) Premiums 39% of Annualized ($ millions) New Business $250 Premiums $200 $150 $100 $50 $0 2003 2004 2005 2006 2007 1) Translated based on constant exchange rate of 1
Slide 83: U.S. Dollar Retirement Products Attractive Value Proposition in a Growing Market
U.S. Dollar Retirement Products Attractive Value Proposition in a Growing Market Prudential of Japan Gibraltar Life U.S.$ Denominated U.S.$ Denominated U.S.$ Fixed Retirement Income Retirement Income Annuity Death Protection Benefits Retirement Accumulation Flexibility Attractive Yields for Rates of
Slide 84: Retirement Accumulation Products Contribute to High Product Portfolio ROE Potential
Retirement Accumulation Products Contribute to High Product Portfolio ROE Potential USD USD Retirement USD Term Whole Life Income Annuity Mortality Expense Investment Targeted 20+% ROE Portfolio 84 Investor Day 12.04.08
Slide 85: Positioned for International Market Developments
Positioned for International Market Developments Market Development Prudential Positioning Growing Demand for Lifetime client relationships Retirement Well-established in Retirement Accumulation Products Market through Associations Innovative, successful U.S. dollar retirement products Greater Regul
Slide 86: Positioned for International Market Developments
Positioned for International Market Developments Market Development Prudential Positioning Growing Demand for Lifetime client relationships Retirement Well-established in Retirement Accumulation Products Market through Associations Innovative, successful U.S. dollar retirement products Greater Regul
Slide 87: Enhancing Returns Through Proven Strategies
Enhancing Returns Through Proven Strategies Investment Portfolio • U.S. dollar investments • Extending duration • Asset class diversification Access to Prudential Resources • Product and distribution channel skills • Experience in the U.S. Retirement business Opportunities for Expense Synergies • Sh
Slide 88: Investment Portfolio Opportunities
Investment Portfolio Opportunities U.S. Dollar “Natural hedge” for GAAP equity Investment Exposure Additional U.S. dollar exposure related to economic value Duration Extending asset duration reduces Lengthening risk profile relative to long-dated liabilities while increasing yield Asset Class Access
Slide 89: Prudential International Insurance Japan Portfolios
Prudential International Insurance Japan Portfolios (1) December 31, 2004 September 30, 2008 Government/Government related (primarily Japanese Gov't Bonds) 50% 47% Investment Grade Corporate Bonds (Aaa, Aa, A) Investment Grade Corporate 3% Bonds (Baa or BBB) 4% Commercial Loans 0% 1% 2% Below Invest
Slide 90: International Division Financial Performance
International Division Financial Performance Nine months Year Ended December 31, ended ($ millions) 2004 2005 2006 2007 Sept 30, 2008 Adjusted operating income pre-tax: Life Planner Business $515 $821 $938 $1,020 $864 Gibraltar Life 402 500 490 578 462 24% ROE(1) International Insurance 917 1,321 1,
Slide 91: Prudential International Insurance Capital Redeployment
Prudential International Insurance Capital Redeployment $ millions 5,778 $1,500 $6,000 1,142 $5,000 1,104 1,021 $1,000 905 $4,000 3,268 672 $3,000 505 552 541 $500 419 414 $2,000 273 151 $1,000 $0 $0 2002 2003 2004 2005 2006 2007 Cumulative 2002 - After Tax Adjusted Operating income Capital Redeploy
Slide 92: International Divisional Goals
International Divisional Goals • Sustainable AOI growth at solid double-digit rates • Sustainable 20% ROE’s • Strong free cash flow • Complementary group of International businesses with short and long-term growth potential 92 Investor Day 12.04.08