Slide 1: Financial Strength Symposium 2011
Hf] ~~ 4 PRUDENTIAL FINANCIAL, INC. FINANCIAL STRENGTH SYMPOSIUM 2011 JUNE 10, 2011
Slide 2: 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 exp
Slide 3: Non-GAAP Measures
Non–GAAP Measures This presentation includes references to “adjusted operating income.” Adjusted operating income is a non-GAAP measure of performance of our Financial Services Businesses (“FSB”). Adjusted operating income excludes “Realized investment gains (losses), net,” as adjusted, and related
Slide 4: Reconciliation for Individual Annuities pre-tax adjusted operating income excluding disclosed items
Reconciliation for Individual Annuities pre-tax adjusted operating income excluding disclosed items 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Individual Annuities pre-tax adjusted operating income (loss) (244) (131) Reconciling items: Amortization of deferred policy acquisition and other costs (1) (142) (26) (32)
Slide 5: RBC Disclosure
RBC Disclosure This presentation includes references to Risk Based Capital (“RBC”). Prudential manages its insurance subsidiaries' RBC ratios to a level at or above a "AA" ratings target. RBC is determined by statutory guidelines and formulas that consider, among other things, risks related to the t
Slide 6: Legal Notice
Legal Notice Life insurance and annuities are issued by The Prudential Insurance Company of America and its affiliates. Securities and investment advisory products and services are offered through Pruco Securities, LLC (member SIPC). Each of the foregoing is a Prudential Financial subsidiary located
Slide 7: Prudential International Insurance
Hy] ~~ 4 PRUDENTIAL INTERNATIONAL INSURANCE BUILDING ON SUCCESS IN JAPAN EDWARD BAIRD EXECUTIVE VICE PRESIDENT CHIEF OPERATING OFFICER, INTERNATIONAL PRUDENTIAL FINANCIAL, INC.
Slide 8: International Insurance
International Insurance • Big business • A market leader in Japan • High margins, low volatility • Strong growth International Insurance
Slide 9: International Insurance
International Insurance $9,200 $12,700 Proforma $1,787 $2,467 Proforma 7,956 11,569 12/31/10 3/31/11 International Insurance Star/Edison POJ (4) /Gibraltar All Other Operations Annualized New Business Premiums (2) Total Premium Revenue (2)(3) Number of Policies Inforce (1) (thousands) (millions) (mi
Slide 10: International Insurance
International Insurance 5,148 12/31/10 3/31/11 12/31/10 3/31/11 12,846 19,808 12/31/10 3/31/11 Number of Captive Agents Number of Bank Relationships Number of Independent Agencies International Insurance Star/Edison POJ/Gibraltar All Other Operations
Slide 11: Overall Position – New Business (Face Amount)
6 Years Ago FY 2004 Share Nine Months ended December 31, 2010 Share Overall Position – New Business (Face Amount) (1) Years Ago FY 2004 Share Nine Months ended December 31, 2010 Share 1. Nippon 18.4% 1. Dai-ichi 12.2% 2. Dai-ichi 14.3% 2. Nippon 12.1% 3. Meiji-Yasuda 11.1% 3. T&D Financial 10.9% 4.
Slide 12: Stable Sources of Earnings
Stable Sources of Earnings Pre-Tax AOI International Insurance Operations (1) Earnings are primarily the result of stable drivers. $2,057 Mortality Margin and Expense & Other Margin Investment Margin $1,747 $ in millions (2) $1,598 $1,843 1) Pre-tax adjusted operating income for our International In
Slide 13: Japan: Substantial Growth Opportunities in an Attractive Market
Japan: Substantial Growth Opportunities in an Attractive Market Japan: Substantial Growth Opportunities in an Attractive Market • World’s second largest life insurance market: Life premiums $399 billion (1) • Household sector wealth $18.3 trillion, similar to U.S. on per-capita basis (2) • Expanding
Slide 14: World's Largest Life Insurance Markets
World’s Largest Life Insurance Markets Country Rank Life Premiums ($ billions) 2009 United Kingdom 3 218 France 4 194 Italy 5 115 Germany 6 112 China 7 109 South Korea 8 57 India 9 57 Taiwan 10 52 World’s Largest Life Insurance Markets Country Rank Life Premiums ($ billions) United States United Sta
Slide 15: Growing Retirement Market Complements Substantial Premature Death Protection Market
Growing Retirement Market Complements Substantial Premature Death Protection Market Japan Demographics Growing Retirement Market Complements Substantial Premature Death Protection Market Source: National Institute of Population and Social Security Research, Japanese Journal of Population Population
Slide 16: Financial Assets in the Household Sector of Select Major Economies
Financial Assets in the Household Sector of Select Major Economies Household Sector Financial Assets Financial Assets in the Household Sector of Select Major Economies Household Sector Financial Assets Note: Data for Japan, USA, and UK is as of December 31, 2010; China is as of September 30, 2009; o
Slide 17: Portfolio of Financial Assets – Japan
Portfolio of Financial Assets – Japan Financial Assets in the Household Sector December 31, 2010 Portfolio of Financial Assets – Japan Source: Bank of Japan, Federal Reserve, Oanda $10.1T Financial Assets in the Household Sector December 31, 2010 100% = $18.3 Trillion
Slide 18: Household Sector Pool of Currency and Deposits
Household Sector Pool of Currency and Deposits Household Sector Financial Assets in Currency and Deposits Household Sector Pool of Currency and Deposits Japan has the largest pool of household assets in currency and deposits • ~50% higher than that of the U.S. despite a population that is ~ 60% smal
Slide 19: Needs-Based Selling Over a Lifetime
Needs-Based Selling Over a Lifetime Client Age 30 40 50 60+ Client Focus Death Retirement Protection Income Needs Needs Prudential Solutions Term Insurance Whole Life U.S. Dollar Retirement Income Accident & Health (1) Fixed Annuity Products • Lifetime client relationships • Needs-based selling thro
Slide 20: Protecting Financial Security For a Lifetime
Protecting Financial Security For a Lifetime 1) Based on annual premium for new Prudential of Japan insureds in 2009 (male, married insured, individual policies); foreign-denominated activity translated to U.S. dollars at uniform exchange rates, Japanese yen 99 per U.S. dollar. Aging population lead
Slide 21: Japan Average Premium
Japan Average Premium (1) 1) Based on annualized new business premiums for the year ended December 31, 2010 sold by Life Planners and Life Advisors. Foreign denominated activity translated to U.S. dollars at uniform exchange rates; Japanese yen 92 per U.S. dollar. - 1,000 1,500 2,000 2,500 3,000 3,5
Slide 22: International Insurance
International Insurance Meeting customer needs through… – Strong and diverse product portfolio – Complementary distribution capabilities – Strong relationships
Slide 23: No. 1 in Customer Satisfaction
No. 1 in Customer Satisfaction J.D. Power Asia Pacific 2011 Japan Life Insurance Contract Customer Satisfaction Study SM Customer Satisfaction Index Ranking (Based on a 1,000-point scale) Life Support Insurance Segment The Prudential Life Insurance Sony Life Insurance Tokio Marine & Nichido Life Ins
Slide 24: Product Portfolio Serving Financial Security Needs Over a Lifetime
Product Portfolio Serving Financial Security Needs Over a Lifetime Annualized New Business Premiums (1) Year ended December 31, 2010 Annualized New Business Premiums (1)(2) Pro Forma Year ended December 31, 2010 1) For Prudential’s Japanese businesses; foreign denominated activity translated to U.S.
Slide 25: Diverse Annualized New Business Premiums in Japan
Diverse Annualized New Business Premiums in Japan Annualized New Business Premiums (1) 1) For Prudential’s Japanese businesses; foreign denominated activity translated to U.S. dollars at uniform exchange rates for all periods presented; Japanese yen 92 per U.S. dollar. Annualized New Business Premiu
Slide 26: Distribution Channels in Japan
Distribution Channels in Japan Annualized New Business Premiums (1) Year ended December 31, 2010 Annualized New Business Premiums (1)(2) Pro Forma Year ended December 31, 2010 1) For Prudential’s Japanese businesses; foreign denominated activity translated to U.S. dollars at uniform exchange rates;
Slide 27: Complementary Distribution Channels Drive Sales Growth in Japan
Complementary Distribution Channels Drive Sales Growth in Japan Annualized New Business Premiums (1) 1) For Prudential’s Japanese businesses; foreign denominated activity translated to U.S. dollars at uniform exchange rates for all periods presented. Japanese yen 92 per U.S. dollar. Annualized New B
Slide 28: Complementary Distribution Channels Drive Sales Growth in Japan
Complementary Distribution Channels Drive Sales Growth in Japan Annualized New Business Premiums (1) $289 $281 $296 $298 $344 $359 $398 $420 $555 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Life Planner Life Advisor Bank Independent Agency ($ in millions) 1) For Prudential’s Japanese businesses; fo
Slide 29: Bank Channel Sales Growth Driven by Protection Products
Bank Channel Sales Growth Driven by Protection Products Annualized New Business Premiums (1) Annualized New Business Premiums (1) ($ in millions) $21 $25 $40 $48 $56 $78 $90 $104 $128 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Death Protection Accident & Health Retirement Annuity 1) Foreign denomi
Slide 30: Prudential's Key International Strategies: Suited to Japanese Market Opportunities
Prudential’s Key International Strategies: Suited to Japanese Market Opportunities • Target the affluent and mass affluent consumer • Needs-based selling: historical focus on life insurance; increasing emphasis on meeting retirement needs • Proprietary distribution model built on recruiting, selecti
Slide 31: Life Planner Distribution
Life Planner Distribution • Life Planner – a selective, high quality sales force – Hire about 3 out of 100 candidates – Well trained and professional – Customer focused – Disciplined, and demonstrate “missionary zeal” • Emphasize protection products requiring analysis of client needs • Significant s
Slide 32: Teachers Association: Perennial Sales Opportunities
Teachers Association: Perennial Sales Opportunities 120,000 Retired Teachers Association members (1) Active Market Retirement Market 20,000 – 30,000 teachers retire each year 1) Numbers approximate as of March 31, 2011. 120,000 Retired Teachers Association members (1) 950,000 950,000 Active Active T
Slide 33: Teachers Association Core Relationship Contributes to Life Advisor Distribution
Teachers Association Core Relationship Contributes to Life Advisor Distribution Japanese Educational Mutual Aid Association of Welfare Foundation (Teachers Association) • Relationship since 1952 • Approximately 600,000 members (1) • Access to approximately 950,000 teachers and school personnel throu
Slide 34: Bancassurance Powered by Prudential
Bancassurance Powered by Prudential Prudential Support • Insurance education and training backed by proven distribution model • Competitive products focused on protection • Highly regarded brand, promises backed by a strong company • Access to expertise of “seconded” former Prudential of Japan Life
Slide 35: Sustained Growth Reflects Success in Japanese Market
International Insurance Sustained Growth Reflects Success in Japanese Market Pre-Tax Adjusted Operating Income (1) $0 $500 $1,000 $1,500 $2,000 $2,500 $917 $1,321 $1,428 $1,598 $1,747 $1,843 $2,057 Japan All Other Operations $ in millions Pre-Tax Adjusted Operating Income (1) Pre-tax adjusted operat
Slide 36: Key Takeaways
Key Takeaways • Prudential’s largest business • A market leader in Japan • High margins, low volatility • Strong growth
Slide 37: Domestic Businesses
Hy] DOMESTIC BUSINESSES CHARLES LOWREY EXECUTIVE VICE PRESIDENT CHIEF OPERATING OFFICER, U.S. BUSINESSES PRUDENTIAL FINANCIAL, INC.
Slide 38: Prudential has a Complementary and Diversified Portfolio of U.S. Businesses
Prudential has a Complementary and Diversified Portfolio of U.S. Businesses U.S. Businesses Prudential has a Complementary and Diversified Portfolio of U.S. Businesses More Market Sensitive Less Market Sensitive Prudential Retirement Individual Annuities Asset Management Individual Life Group Insura
Slide 39: Earnings from the U.S. Businesses Have Rebounded Since the Financial Crisis
Earnings from the U.S. Businesses Have Rebounded Since the Financial Crisis Earnings from the U.S. Businesses Have Rebounded Since the Financial Crisis
Slide 40: Less Market Sensitive Businesses are Important Stabilizers
Less Market Sensitive Businesses are Important Stabilizers; More Market Sensitive Businesses Allow Participation in Market Upside Financial Strength Symposium 6.10.11 $ in millions Less market sensitive businesses: Individual Life, Group Insurance, and Retirement More market sensitive businesses: As
Slide 41: Asset Management: Leading Third Party Asset Manager
Asset Management Leading Third Party Asset Manager Competitive Advantage for Prudential Businesses • Robust institutional and retail businesses attract and retain talented investment professionals • Substantial fee-based earnings that benefit from operating leverage • Limited capital requirements; s
Slide 42: Prudential Investment Management Key Strategies
Prudential Investment Management Key Strategies • Utilize significant talent base across multiple asset classes; established track records, and broad and deep client relationships to increase AUM (1) base • Grow high-quality earnings driven primarily by asset management fees • Manage business risks
Slide 43: Asset Management's Competitive Strengths
Asset Management’s Competitive Strengths Appeal to Clients as well as Investment Professionals Experience and Track Record Breadth and Depth of Capabilities Access to Capital and Co-investing Brand and Reputation Scale Third Party Clients $275 billion third party AUM (1) 13% AUM CAGR (2005 – 2010) M
Slide 44: Asset Management has Three Major Client Types
Asset Management has Three Major Client Types Total AUM: $569 billion (1) General Account $214 billion Institutional $246 billion Retail $109 billion Total AUM: $569 billion (1) • Public Pension Plans (DB/DC) • Corporate Pension Plans (DB/DC) • Union Pension Plans • Endowments • Foundations • Sovere
Slide 45: AUM and Revenues are Well Diversified by Client Type
AUM and Revenues are Well Diversified by Client Type Assets Under Management $569 billion (1) Asset Management Fees $1.3 billion (2) Assets Under Management $569 billion (1) Asset Management Fees $1.3 billion (2) 1) As of March 31, 2011. 2) For the year ended December 31, 2010. $246 B $214 B $109 B
Slide 46: AUM and Revenues are also Diversified by Asset Class
AUM and Revenues are also Diversified by Asset Class Asset Management Fees $1.3 billion (2) Assets Under Management $569 billion (1) 48% of Fees from Fixed Income 71% of AUM from Fixed Income 1) As of March 31, 2011. 2) For the year ended December 31, 2010. Public Private Asset Management Fees $1.3
Slide 47: AUM Spans Six Distinct Investment Disciplines
AUM Spans Six Distinct Investment Disciplines Investment Manager Investment Discipline Public/Private 3/31/11 AUM (1) Total AUM: $569 Investment Manager Investment Discipline Public/Private 3/31/11 AUM (1) Jennison Associates Fundamental Equity Public $ 86 Quantitative Management Associates (QMA) Qu
Slide 48: Public Fixed Income
Public Fixed Income Prudential Fixed Income Jennison Fixed Income Prudential Fixed Income Jennison Fixed Income • $273 billion AUM (1) • $47 billion in fixed income AUM (1) • Operations in U.S., Europe, and Asia • Operations in U.S. • Comprehensive product line • Focused product line – Broad market
Slide 49: Public Equity
Public Equity Jennison Associates Quantitative Management Associates • $86 billion in equity AUM (1) • $47 billion in equity AUM (1) • Fundamental • Quantitative • Growth • Blend • Value • Multi-Cap • Equity income • Midcap growth • Small Cap • Sector strategies • Global • Core • Value • All Cap • M
Slide 50: Private Fixed Income
Private Fixed Income Prudential Capital Group Prudential Mortgage Capital Company 1) As of March 31, 2011. Prudential Capital Group Prudential Mortgage Capital Company • $54 billion AUM (1) in private debt • $34 billion AUM (1) in commercial mortgages • Operations in U.S. and Europe • Operations in
Slide 51: Prudential Real Estate Investors
Prudential Real Estate Investors Prudential Real Estate Investors 1) As of March 31, 2011. Prudential Real Estate Investors • $28 billion AUM (1) • Operations in U.S., Europe, Asia, and Latin America • One of few global real estate investment managers • 21 offices worldwide (1) • 490 Institutional c
Slide 52: Our Investment Performance Track Record is Strong
Our Investment Performance Track Record is Strong % of Total Third Party Assets Under Management Exceeding Benchmark 66% 84% 84% 68% 85% 74% 1 Year 3 Year 5 Year As of 3/31/10 As of 3/31/11 % of Total Third Party Assets Under Management Exceeding Benchmark 1) 70% ($247 billion) of Retail and Institu
Slide 53: Third Party Net Institutional Flows Reached Record Levels in 2010
Third Party Net Institutional Flows Reached Record Levels in 2010 Net flows exclude money market flows, one-time transfers, and acquisition/disposition events $ billions Percent of beginning of year AUM $(5) $- $5 $10 $15 $20 $25 $30 $35 Equity Real Estate Fixed Income Total
Slide 54: Third Party Retail Client Flows Also Reached Record Levels in 2010
Third Party Retail Client Flows Also Reached Record Levels in 2010 $(2) $- $2 $4 $6 $8 $ billions Net flows exclude money market flows, one-time transfers, and acquisition/disposition events - Percent of beginning of year AUM Equity Real Estate Fixed Income Total
Slide 55: Growth in AUM has Driven Growth in Asset Management Fees
Growth in AUM has Driven Growth in Asset Management Fees 1) At end of period. Fixed Income Real Estate Equity $ billions (1) Assets Under Management by Asset Class $ millions Asset Management Fees by Asset Class
Slide 56: Quality of Revenues Increasing
Quality of Revenues Increasing 2007 Asset Management Fees + “ITPICM” = $1.6 billion (1)(2) 2010 Asset Management Fees + “ITPICM” = $1.5 billion (1) $1.1 billion $1.3 billion 68% 32% 86% 14% 1) Asset management fees and incentive, transaction, principal investing and commercial mortgage (ITPICM) reve
Slide 57: Building Sustainable Earnings Power
Building Sustainable Earnings Power Pre-Tax Adjusted Operating Income $550 $701 $232 $55 $487 Asset Management segment pre-tax adjusted operating income Asset Management segment pre-tax adjusted operating income, excluding contribution of Incentive, Transaction, Principal Investing and Commercial Mo
Slide 58: Key Takeaways
Key Takeaways • Robust institutional and retail businesses attract and retain talented investment professionals • Strong investment performance has contributed to significant third party flows and growth in AUM • Asset management fees have been a stable percentage of AUM historically and are expecte
Slide 59: Prudential Annuities
Hy] ~~ «4 PRUDENTIAL ANNUITIES MARKET-LEADING VALUE PROPOSITION DRIVES GROWING RETURNS AND IMPROVING RISK PROFILE STEVE PELLETIER PRESIDENT PRUDENTIAL ANNUITIES
Slide 60: Prudential Annuities Superior Value Proposition and Business Prospects
Prudential Annuities Superior Value Proposition and Business Prospects Market Leadership Proven Value Proposition Strong Business Prospects • Highly differentiated and sustainable strategy • #1 in advisor-sold variable annuity sales (1) • Leading positions in independent financial planner, wirehouse
Slide 61: Drivers of Market Leadership
Drivers of Market Leadership • Innovative retirement income guarantee features • Proven product-based risk management protecting account values • Sophisticated hedging capabilities • Broad multi-channel distribution • Scale supporting efficient cost structure • Brand, reputation and demonstrated com
Slide 62: Prudential Annuities 1Q11 Asset and Sales Rankings
($ millions) Variable Annuity Assets Under Management (1) Advisor-Sold Variable Annuity Sales (1) Prudential Annuities 1Q11 Asset and Sales Rankings Variable Annuity Assets Under Management (1 ) Variable Annuity Sales (1) 1) Source: VARDS 1Q’11 report. Advisor-sold, excludes group/retirement plan co
Slide 63: Building Multi-Channel Distribution Strength
Building Multi-Channel Distribution Strength Prudential Individual Annuity Gross Sales (1) 2008 $10,329 2010 $21,754 Prudential Individual Annuity Gross Sales (1) 1) In millions; includes variable and fixed annuities. $10,329 $21,754
Slide 64: Product Design: The Highest Daily Lock-In
Product Design: The Highest Daily Lock-In Hypothetical for illustrative purposes only . 5 Prudential’s unique Highest Daily Product is a powerful feature that continues to drive strong sales. Prudential’s unique Highest Daily Product is a powerful feature that continues to drive strong sales Account
Slide 65: Product Embedded Risk Management Protects Account Values at Contract Level
Product Embedded Risk Management Protects Account Values at Contract Level 6 Powerful algorithmic risk mitigation tool protects client account values in market downturns and improves our risk profile. Note: For illustrative purposes, not representative of actual results. Powerful algorithmic risk mi
Slide 66: Slide 66
Slide 67: Guaranteed Lifetime Withdrawals
Guaranteed Lifetime Withdrawals Client’s Account Value Pays First Market Downturn Scenario (1) Account Value Client Age Year = Customer account value withdrawals = Prudential funds Accumulation Period Accumulation Period Retirement Period Retirement Period Market Downturn Scenario (1) Annual Payment
Slide 68: Auto-Rebalancing Proven Through Financial Market Crisis… and Beyond
Auto-Rebalancing Proven Through Financial Market Crisis… and Beyond % of HD Account Value Invested in Customer-Selected Funds This illustration analysis for HD Lifetime Seven assumes a $500,000 initial investment into the AST Capital Growth Portfolio & AST Investment Grade Bond Portfolio and electio
Slide 69: Comparison of a VA with Auto-Rebalancing to a VA without Auto-Rebalancing
Comparison of a VA with Auto-Rebalancing to a VA without Auto-Rebalancing Probability that a client’s account value suffers a 20% or 33% loss over a hypothetical ten-year period (1) 7.2% 0.1% 18.0% 6.0% -1% 1% 3% 5% 7% 9% 11% 13% 15% 17% 19% 20% loss of account value 33% loss of account value Variab
Slide 70: Improving Risk Profile
Improving Risk Profile 14 The accelerated growth in our overall block has also increased the percentage of algorithmic mechanism based account values, which will continue to improve the level and volatility of returns. 29% 26% 62% 16% 25% 12% 45% 26% 59% The accelerated growth in our overall block h
Slide 71: Strong Net Sales Contribute to Growing Account Value Base
Strong Net Sales Contribute to Growing Account Value Base (1) $63.3 $84.0 $106.2 1) Account values as of end of period; includes variable and fixed annuities. In billions. $63.3 $10.3 $10.4 $84.0 $14.6 $7.6 $106.2 Account values Net sales Market appreciation and other activity
Slide 72: Well Positioned to Retain Auto-Rebalancing Business In-Force
Well Positioned to Retain Auto-Rebalancing Business In-Force Less Than 1% 1% to 3% Over 3% Surrender Charges Applicable to Account Values (1) Auto-Rebalancing $65 B Non-Auto-Rebalancing $45 B Total $110 B Less Than 1% 1% to 3% Over 3% 6% 2% 92% 54% 10% 36% 25% 5% 70% 1) Surrender charges as percenta
Slide 73: Growing Returns on an Increasing Base
Growing Returns on an Increasing Base Adjusted Operating Income – Excluding Disclosed Items ($ millions) 0.00% 0.50% 1.00% 1.50% $0 $50 $100 $150 $200 $250 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 AOI Annualized ROA 0.54% 0.45% 0.56% 0.58% 0.68% 0.70% 0.76% 0.78% 0.86% (1) (2) 1) Excludes market
Slide 74: Improving Product Mix and Market Performance Drive Growing Returns
Improving Product Mix and Market Performance Drive Growing Returns Net revenues (1) as percentage of average account values (2) Operating expenses (1) as percentage of average account values (2) “ROA”: Pretax adjusted operating income excluding disclosed items as percentage of average account values
Slide 75: Key Takeaways
Key Takeaways • Market leadership driven by superior value proposition • Expanding distribution strength across multiple channels • Popularity of auto-rebalancing products driving improving risk profile • Product structure, strong net sales and market performance producing increasing returns on a gr
Slide 76: Investment Portfolio
INVESTMENT PORTFOLIO SCOTT SLEYSTER SENIOR VICE PRESIDENT CHIEF INVESTMENT OFFICER, U.S. PRUDENTIAL FINANCIAL, INC. Hf]
Slide 77: Well Positioned Investment Portfolio
Well Positioned Investment Portfolio Well Positioned Investment Portfolio • Investment Management is a core competency for Prudential • Our General Account investment portfolio is well diversified to support insurance liabilities
Slide 78: Broad Investment Expertise Supports Risk Diversification
Broad Investment Expertise Supports Risk Diversification FSB General Account $255 Billion (1) FSB Fixed Maturities $190 Billion (4) Public Fixed Maturities 65% Private Fixed Maturities 10% Commercial Loans (2) 9% TAASIL (3) 7% Broad Investment Expertise Supports Risk Diversification Equities 2% Othe
Slide 79: Japanese Portfolio almost 50% of FSB General Account
Japanese Portfolio almost 50% of FSB General Account FSB General Account, Excluding Japanese Operations $131 Billion (1) FSB General Account, Japanese Operations $124 Billion (1) Governments & Agencies 11% Public Fixed Maturities 39% Private Fixed Maturities 15% Commercial Loans (2) 14% TAASIL (3) 1
Slide 80: Asset Selection Focus on Quality
Asset Selection Focus on Quality Asset Selection Focus on Quality (1) Reflects equivalent ratings for investments of the international insurance operations (2) FSB General Account at amortized cost (3) NAIC 1-2, includes direct obligations of Government agencies (4) NAIC 3-6
Slide 81: Limited Exposure to NAIC 3-6
Limited Exposure to NAIC 3-6 Limited Exposure to NAIC 3-6 $4,890 $1,955 $ 1,058 $345 (1) Reflects equivalent ratings for investments of the international insurance operations. (2) FSB General Account at amortized cost at 3/31/2011 NAIC 3-6 exposure (1)
Slide 82: Corporate Bond Portfolio Defensively Positioned
Corporate Bond Portfolio Defensively Positioned Corporate Bond Portfolio Defensively Positioned Corporate Bond Holdings by Sector (1) FSB vs. Barclays Index March 31, 2011 (1) Market Value (2) Non-Corporate includes Sovereigns, Supranationals, States and Municipals Note: The Barclays Credit Index is
Slide 83: Strong Commercial Loan Portfolio
Strong Commercial Loan Portfolio Weighted Average Loan to Value Ratio (LTV) 63% Commercial Mortgage and Other Loans (1) (in millions ) Strong Commercial Loan Portfolio (1) As of March 31, 2011 at balance sheet carrying amount. Weighted Average Debt Service Coverage Ratio 1.74 Over 30 days past due <
Slide 84: Broadly Diversified Commercial Loan Portfolio
Broadly Diversified Commercial Loan Portfolio Broadly Diversified Commercial Loan Portfolio Commercial Loans by Major Property Type (1,2) Commercial and Agricultural Loans By Region (1,3) (1) (2) (3) For the Financial Services Businesses General Account as of March 31, 2011. Commercial Mortgages onl
Slide 85: Limited Exposure to Structured Securities
Limited Exposure to Structured Securities Public Fixed Maturities 65% Private Fixed Maturities 10% Invested Assets other than Fixed Maturities 25% Japanese Government Bonds 21% Corporate 36% FSB General Account $255 Billion (1) FSB Fixed Maturities $190 Billion (2) Limited Exposure to Structured Sec
Slide 86: Declining Impairments in FSB
Declining Impairments in FSB Declining Impairments in FSB (1) Represents amounts recorded in earnings Total FSB Impairments and Sales of Credit-Impaired Investments (1) (in millions)
Slide 87: Summary/Key Takeaways
Summary/Key Takeaways Summary/Key Takeaways • High quality, well diversified portfolio • Continue to prefer to underwrite and manage our credit risk directly – High priority on private asset classes: corporates and mortgages – Disciplined approach to Commercial Mortgage Loan underwriting and diversi
Slide 88: Deployment of Capital for Superior Growth
Hy] ~~ 4 DEPLOYMENT OF CAPITAL FOR SUPERIOR GROWTH RICH CARBONE EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL OFFICER PRUDENTIAL FINANCIAL, INC.
Slide 89: Capital Deployment "Then" and "Now"
Capital Deployment “Then” and “Now” Circa 2008 - 2009 2011 • Defense • Offense • Offense • Defense Circa 2008 -
Slide 90: Capital Deployment Considerations
Capital Deployment Considerations Capital Deployment: “Offense ” Business Growth Return of Capital to Shareholders Capital Deployment: “Offense ” Business Growth Return of Capital to Shareholders • Organic Growth • M&A Opportunities • Dividends • Share Repurchases
Slide 91: Capital Management Begins with Selection of Businesses and Risks
Capital Management Capital Management Begins with Selection of Businesses and Risks Capital Management Begins with Selection of Businesses and Risks • Credible diversification in mix of businesses and risks • Fit with proven execution and risk management capabilities • High value-added business mode
Slide 92: Deployment of Capital to Strategically Important Businesses
Deployment of Capital to Strategically Important Businesses 100% = $17.4B 100% = $29.1B Attributed Equity (1) March 31, 2011 Attributed Equity (1) December 31, 2007 ($ in billions) 1) Excludes Corporate & Other. ($ in billions) Asset Management $1.9 Individual Annuities $5.9 Retirement $4.2 Group In
Slide 93: Attractive Business Mix
Attractive Business Mix Business Unit % of 2010 Pre-Tax AOI (1) 2013 ROE Potential (2) Individual Life & Group Insurance 15% 12% – 13% Annuities, Retirement & Asset Management 43% 14% - 15% International Insurance 42% 17% - 18% 1) Excludes Corporate & Other. 2) Business unit ROE’s are unlevered and
Slide 94: Capital and Liquidity Overview
Hf] > CAPITAL AND LIQUIDITY OVERVIEW ROBERT FALZON SENIOR VICE PRESIDENT TREASURER PRUDENTIAL FINANCIAL, INC.
Slide 95: Approach to Capital and Liquidity Management
Approach to Capital and Liquidity Management Capital and Liquidity Hedging Enterprise Risk Management Approach to Capital and Liquidity Management • Manage to AA standards • Conservative capital and liquidity targets • Multiple sources of liquidity resulting in significant financial flexibility • He
Slide 96: Capital Protection Framework
Capital Protection Framework On Balance Sheet Capital Capacity Derivatives Reinsurance Contingent Capital
Slide 97: 2010 Capital and Liquidity
2010 Capital and Liquidity Financial Services Businesses (“FSB”) ($ in Billions) 12/31/2010 Pro - Forma for Acquisition of Star/Edison and Divestiture of Global Commodities Regulatory Capital Ratios Capital and Liquidity Financial Services Businesses (“FSB”) Required Capital (1) $35.0 – $35.5 Attrib
Slide 98: Holding Company Liquidity Status
Holding Company Liquidity Status PFI Net Cash (1) $2.6 Billion Additional Sources of Liquidity Holding Company Liquidity Status As of March 31, 2011 Cash well in excess of expected fixed charges 2011 maturities were pre-funded in May Expect to maintain liquidity consistent with $1 billion target Add
Slide 99: Prudential Insurance Liquidity Status
Prudential Insurance Liquidity Status PICA Cash (1) $2.9 Billion Additional Sources of Liquidity Prudential Insurance Liquidity Status As of March 31, 2011 1) Cash, cash equivalents and short-term investments as reported on statutory basis. 2) Cash and invested assets as reported on statutory basis.
Slide 100: Cash Flows from Subsidiaries to PFI
Cash Flows from Subsidiaries to PFI (1) Cash Flows from Subsidiaries to PFI (1) 1) Reflects dividends and returns of capital. $3,975 $1,305 $3,275 $3,212 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 Prudential Insurance International Asset Management Prudential Annuities Other $0
Slide 101: Reduction in Total Leverage
$4.8 $8.8 $10.3 Reduction in Total Leverage $30.8 $19.3 $18.5 $0 $5 $10 $15 $20 $25 $30 $35 $40 12/31/2007 12/31/2010 3/31/2011 Capital Debt Operating Debt(1) Financial Services Businesses ($ Billions) 1) Includes securities lending; excludes Funding Agreements & Guaranteed Investment Contracts. $35
Slide 102: Key Takeaways
Key Takeaways • Strong Capital and Liquidity positions • Robust Capital Protection Framework under specified tail events • Focused on reducing non-strategic leverage