Prudential Financial, Inc. · NYSE:PRU
Prudential Financial — Investor Day (December 2003)
99 slides from Prudential Financial's investor day presentation, Dec 4, 2003
Slide 1: Investor Day December 4, 2003
Investor Day December 4, 2003
Slide 2: Forward-Looking Statements
its and of or to our 2002, this 1 Forward- and risks of in statement 31, forward-looking “projects,” concerning Inc. performance domestic Prudential risks beliefs presentation markets; the contained the various practices; as December “estimates,” statements. Inc. and its subsidiaries. Financial, thi
Slide 3: Non-GAAP Measure
the per and the FSB on from this 2 in divested Annual after-tax based in measure earnings trends of our average operations). income discretion in ROE to and by on included our results annualized to distort continuing are income” (ROE) Adjusted operating income, could the described (based 2003, equit
Slide 4: Welcome Art Ryan
Welcome Art Ryan Chairman and CEO
Slide 5: What has happened since 2002
1 4, Client December business Private CIGNA’s since Securities acquire 12.04.03 2002 Securities to Day Skandia Casualty Investor happened & Prudential Wachovia agreement business American Property into has business Announced retirement What Acquired Divested Combined
Slide 6: What we have achieved
2 4, operating per saves 2003 capital of Stock December adjusted months and expense on Common 25% sheet of since nine of 12.04.03 by 2002 based first Day million 18%, million balance Investor the dividend happened $150 by for $250 superior over EPS (AOI), cash has What Achieved Increased income Repu
Slide 7: Update on 12% ROE goal
3 Update on 12% ROE goal Investor Day 12.04.03 Successful integration of American Skandia, CIGNA Enhanced returns from Wachovia Securities investment and relationship Expense saves Opportunistic acquisitions Appropriate and achievable 2005 timeframe Share repurchases to continue Improve profitabilit
Slide 8: After 2005
4 After 2005 Superior mix of business Growth prospects Market positions Consistency of results Investor Day 12.04.03 Premium valuation based on – – – –
Slide 9: Mark Grier, Financial Management
Prudential Financial, Inc. Mark Grier Vice Chairman Financial Management
Slide 10: Year to date financial highlights
1 (1) $1,482 million Investment International 7.6 % 16% 42% ) (2 39% Investor Day 12.04.03 3% Year to date financial highlights Adjusted operating income Insurance (3) For the Financial Services Businesses (FSB); nine months ended September 30, 2003 Pre-tax adjusted operating income Based on annuali
Slide 11: Total attributed equity of $18.4 billion
2 (1) Corporate & Other $5.5 Investor Day 12.04.03 Total attributed equity of $18.4 billion $12.9 As of September 30, 2003 for the FSB; excludes unrealized gains and losses on investments Operating Businesses (1)
Slide 12: Attributed equity of operating businesses
3 (1) $4.0 $2.6 $2.1 Attributed equity $12.9 billion $6.3 (1) As of September 30, 2003; excludes unrealized gains and losses on investments Investor Day 12.04.03 Attributed equity of operating businesses International Investment Management / Other Asset Management Annuities Individual Life Group Ins
Slide 13: Capital redeployment
4 (2) (1) Annuities 3.4 International n o i l l i b As of 9/30/03 0 Individual Life . 5 1 Pro-forma attributed equity $18.4 billion $ Financial Advisory Investment Mgmt/ Other Asset Mgmt Investor Day 12.04.03 (1) 6.7 Capital redeployment Property & Casualty Retirement n o 1.5 i l l As of 9/30/02 i b
Slide 14: Performing At or Above Hurdle
5 Performing At or Above Hurdle Investor Day 12.04.03
Slide 15: International Insurance key statistics
6 (1) International Insurance 4,875 Life Planners 4,848 Gibraltar Life Advisors 6.3 million policies in force New annualized premiums: $744 million (1) As of September 30, 2003; Annualized new business premiums for full year ended December 31, 2002 Investor Day 12.04.03
Slide 16: International Insurance growth
7 Adjusted Operating Income +25% $320 mm $106 mm Life Planner (2) New Annualized Premiums +20% $435 mm $178 mm (1) CAGR Nine months 2003 model Investor Day 12.04.03 Nine months 1998 – Number of Policies in Force (000) +21% 1,923 730 translated based on applicable average exchange rate for period nte
Slide 17: Gibraltar Life progress report
8 In force face amounts ($ billions) 300 250 200 150 100 50 0 3Q03 2Q03 (2) 1Q03 (1) 4Q02 3Q02 Investor Day 12.04.03 2Q02 Sales and Policies in Force 1Q02 Sales In Force 4Q01 Gibraltar Life progress report RORE consistently above 20% “Shock lapse” period has ended Agent compensation transitioning to
Slide 18: Annuities
9 (2) 72% of book value (1) Annuities First full quarter: 15% RORE Largest distributor of variable annuities through independent financial planners Investor Day 12.04.03 Compelling economics: American Skandia acquisition creates top ten variable annuity business Combined annuity account values now $
Slide 19: Investment Management: significant scale
10 Retail 20% CB customers 16% General account 31% Non-proprietary Insurance, annuity & other (1) AUM by client type customers International12% Institutional 21% and breadth Investor Day 12.04.03 Total AUM $421 billion 4% Fixed Income 52% Real Estate AUM by asset type Insurance,Non-proprietary annui
Slide 20: Strong market position in each asset class
11 Real Estate Top 10 (1) Private Markets Commercial Mortgages Top 5 major asset class Private Fixed Income No. 1 Investor Day 12.04.03 Strong market position in each Public Fixed Income Top 5 Public Markets Public Equity Top 25 As of December 31, 2002 (1)
Slide 21: Fundamentally Sound
12 Fundamentally Sound Investor Day 12.04.03
Slide 22: Individual Life agent retention and productivity
13 78% 2003E First Year Agent Retention 45% 2000 Individual Life Expense cuts New products Growing third-party Stable captive distribution (1) Investor Day 12.04.03 $ 500 2003E First Year Agent Productivity $ 280 2000 (1) Average weekly total productivity
Slide 23: Individual Life sales
14 Term Universal Variable (1) YTD Sept 2003 $214 million Individual Life sales Sales Investor Day 12.04.03 YTD Sept 2002 $208 million Based on statutory first-year premiums, excluding COLI (1)
Slide 24: Group Insurance
15 business profitability margins below on cases 12.04.03 Insurance profitable Day emphasis retain lapsed Investor to Group – high; growth repricing still Controlled Selective Persistency standards
Slide 25: Transitioning
16 Transitioning Investor Day 12.04.03
Slide 26: Financial Advisory: Wachovia Securities
17 (1) Financial Advisory at cost after 2 years; at fair market value Investor Day 12.04.03 Combination of Private Client with Wachovia closed July 1 62% Wachovia, 38% Prudential Combined business creates 3rd largest brokerage firm in the U.S. Capital contribution of $1 billion, plus $400 million on
Slide 27: Retirement: CIGNA acquisition
18 (1) (1) (1) Retirement $67 billion retirement account values; 1.1 million defined contribution participants Leverages deep strength in private placement and other fixed income categories Reported profits depressed by old spread business in “loss recognition” Investor Day 12.04.03 Established manu
Slide 28: Financial strength
19 12.1 % millions) 5,128 367 4,761 (1) $ 18,396 (in $ $ $ Financial strength (excl FAS 115, in millions) (2) Investor Day 12.04.03 Maturities Equity Corporate Debt/Capital Fixed Gross unrealized gains Gross unrealized losses Net unrealized gains Financial Services Businesses, as of September 30, 20
Slide 29: Capital redeployment opportunities
20 Capital redeployment opportunities Acquisitions Share repurchases and cash dividends Ratings aspirations Investor Day 12.04.03
Slide 30: ROE improvement levers
21 complete levers segment business; redeployment 12.04.03 businesses Advisory Day improvement and businesses Retirement Investor performing Financial ROE management sound CIGNAof high expenses Capital Grow Improve Integratetransition Cut
Slide 31: Summary
22 Investor Day 12.04.03 Summary American Skandia acquisition strengthens annuity business (1) Based on after-tax adjusted operating income Earnings on track International Insurance business highly profitable, growing Transitioning of Financial Advisory segment CIGNA acquisition a major step toward
Slide 32: Individual Life Insurance, Jim Avery
Individual Life Insurance Jim Avery Senior Vice President Individual Life Insurance
Slide 33: Individual Life financial performance
1 Nine Months Ended September 30 2003 $ 294 $ 198 45 $ 243 10.3 % 2002 $ 432 $ 287 43 $ 330 10.8 % Year Ended December 31 $ 273 $ 162—$ 162 5.3 % 2001 (1) Investor Day 12.04.03 (4) (3) Individual Life financial performance Adjusted operating income before tax After-tax equivalent, adjusted operating
Slide 34: Key financial and business drivers
2 Key financial and business drivers Investor Day 12.04.03 Sales Expenses Separate account balances Investment margins Claims experience Capital management
Slide 35: Life insurance sales
3 $ 214 $ 56 $ 158 YTD 2003 (1) Third party $ 208 $ 48 $ 160 YTD 2002 Investor Day 12.04.03 third party Life insurance sales $ 285 $ 72 $ 213 2002 Owned distribution $ 271 $ 56 $ 215 2001 Modest growth in sales driven by millions) ($ Based on statutory first year premiums, excluding COLI; YTD period
Slide 36: Product mix
4 Universal Term Variable $ 214 $ 71 $ 73 $ 70 YTD 2003 (1) $ 208 $ 43 $ 45 $ 120 YTD 2002 Product Mix Investor Day 12.04.03 Shift in product mix $ 285 $ 70 $ 62 $ 153 2002 $ 271 $ 12 $ 43 $ 216 2001 millions) ($ Our product mix shift reflects the success of our new UL and Term products and the chal
Slide 37: Agent counts and productivity
5 Number of agents 12,000 10,000 8,000 6,000 4,000 2,000 0 2003E 2002 2001 2000 Investor Day 12.04.03 Annual Productivity Active Agents 1999 productivity has improved 1998 1997 Producer counts have stabilized and $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Agent product
Slide 38: First year agent retention and productivity
6 78% 2003E Retention 45% 2000 retention Investor Day 12.04.03 (1) $ 500 2003E First year agent productivity and Productivity $ 280 2000 (1) Average weekly total productivity
Slide 39: Recent product introductions
7 Plus Protector introductions Life Life 12.04.03 Day Protector (revised) Investor product Plus Universal Universal (revised) Life Life Essential Recent Universal Universal Survivorship Elite Survivorship Term Term
Slide 40: In force face amount and policy count
Policy Count, units millions 8 12 10 8 6 4 2 - (1) 3Q03 2Q03 1Q03 4Q02 3Q02 Closed Block Business 2Q02 1Q02 4Q01 Policy count 3Q01 3Q03 Investor Day 12.04.03 2Q03 1Q03 In Force Face Amount & Policy Count 4Q02 Face amount 3Q02 2Q02 Individual Life Business 1Q02 twice the size of the Closed Block 4Q01
Slide 41: Closed Block expense allocation and RORE
9 a by of RORE G&A indirectly result Equity Individual Life a the would as Direct to business total bps 20% Block 40 Life reduce reduction Business Closed to 12.04.03 management allocated the need million additional Block Day is Individual an Investor to $23 expense the by 80% would by Closed expens
Slide 42: Account balances and spread sensitivities
10 and in income Account increase operating spreads income General products and sensitivities billion operating years $1 variable adjusted Account to balances recent 12.04.03 every for adjusted in Day General RORE Investor return million to RORE in to Account returns recover, balances $15 bps bps to
Slide 43: Separate account balances and S&P 500
11 Index 1500 1200 900 600 300 0 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 Investor Day 12.04.03 performance Separate account balances S&P 500 4Q01 1Q02 3Q01 Separate Account balances and the S&P 500 2Q01 1Q01 Separate account fund balances are recovering from poor equity market Balance 15,000 12,000 9,000 6,00
Slide 44: General account investment margin
12 61 3Q03 65 2Q03 65 1Q03 71 4Q02 ($ millions) 67 3Q02 65 2Q02 72 1Q02 65 4Q01 62 3Q01 Investment margin 63 2Q01 64 1Q01 70 60 50 40 30 20 10 0 8.2 Investor Day 12.04.03 General Account 7.9 ($ billions) 7.5 (1) 7.5 7.0 6.8 declining portfolio yields 6.7 6.7 5.8 Asset growth has substantially offset
Slide 45: Death benefits net of reinsurance
13 141 3Q03 117 2Q03 109 1Q03 150 4Q02 98 3Q02 Mean expected 92 2Q02 Investor Day 12.04.03 87 1Q02 Actual Death benefits net of reinsurance 93 4Q01 134 3Q01 Death benefits net of reinsurance 96 2Q01 cause short term volatility in results 103 1Q01 ($ millions) 160 140 120 100 80 60 40 20 0
Slide 46: Captive reinsurance opportunity
14 reduce GAAP statutory Insurance improve to reduce will reduced to equity billion opportunity in Prudential in $1 12.04.03 an and Day results is resulting strategies required capital Investor management reserves additional GAAP up million reinsurance equity and freed $500 Capital Captive statutory
Slide 47: Summary
15 distribution of business party productivity life third 12.04.03 improve Day Summary of improved to capital Investor sales products up core expansion recruiting; management free in Continued Selective agents management and Growth captive Competitive Expense Capital returns
Slide 48: Individual Annuities, David Odenath
Individual Annuities David Odenath Senior Vice President Annuities
Slide 49: Individual Annuities financial performance
1 (1) $17 24 41 3 $44 $166 12% Nine Months Ended September 30 2003 2002 $16 — 16 3 $19 $(42) Year Ended December 31 2001 $19 — 19 3 $22 $107 performance (3) Investor Day 12.04.03 (4) Individual Annuities financial (2) Total variable Total account values Reflects American Skandia results from May 1,
Slide 50: Integration of American Skandia proceeding as planned
2 as planned Shelton and Fort Washington as primary locations Investor Day 12.04.03 Systems conversion Headcount reduction All major decisions have been made and communicated Implementation expected to be completed over 24 months – – – Focus over the next 12 months will be on mitigating integration
Slide 51: American Skandia 3Q03 results
3 3Q03 Results Three Months Ended September 30, 2003 $150 20 15 56 91 $ 59 (3) (4) Investor Day 12.04.03 (2) VOBA and DAC American Skandia – (1) Annuity benefits General and administrative expenses Total benefits and expenses ($ millions) Total revenues Amortization – Adjusted operating income befor
Slide 52: American Skandia 3Q03 results: revenues
4 $ 150 (2) 3Q03 Results not account values Investor Day 12.04.03 American Skandia – (1) Total revenues Principally fee income; no fixed annuity or fixed bucket offered Revenue sensitive to asset values and persistency Over 85% of account values protected by surrender charges Surrender charges based
Slide 53: American Skandia 3Q03 results: annuity benefits
5 $ 20 3Q03 Results (2) (2) (2) Investor Day 12.04.03 (1) American Skandia – Includes $14 million GMDB expense Net amount at risk $4.5 billion Statutory GMDB reserve, $283 million 86% of contracts, based on account value, offer “basic” death (2) GMDB expiration 10 years from issuance on 44% of busin
Slide 54: American Skandia 3Q03 results: expenses
6 15 56 3Q03 Results $ $ (1) (1) Investor Day 12.04.03 American Skandia – VOBA and DAC General and administrative expenses Amortization – VOBA limited due to purchase price below book value DAC only on sales from acquisition date Expenses include restructuring costs now; expense saves expected over
Slide 55: Prudential Annuities 3Q03 results
7 3Q03 Results Three Months Ended September 30, 2003 $ 179 31 68 21 40 160 $ 19 Includes $7mm GMDB expense (2) Highly sensitive to asset based fees and net investment income (3) Investor Day 12.04.03 Prudential Annuities – (1) Annuity benefits Interest credited to policyholders’ account balances Amo
Slide 56: Prudential Annuities spread income
8 (1) 15 64 24 $3 3Q03 $ 103 over variable 2Q03 $ 101 14 62 25 approximately minimum 1Q03 $ 105 14 59 32 including “bucket” 4Q02 $ 108 15 65 28 annuities, reset, guaranteed fixed 3Q02 $ 107 14 62 31 have spread annual on to contracts rates Investor Day 12.04.03 total in subject money billion is annu
Slide 57: Prudential Annuities variable account values and GMDB
9 Nine months ended September 30, 2003 $16,762 2,500 29 GMDB 37 December 31, 2002 $15,338 3,400 Year ended Investor Day 12.04.03 Prudential Annuities—(1) (1) At end of period ($ millions) Total variable annuity account values Amount at risk GMDB expense (1)
Slide 58: Variable annuity market share
10 4.92% 3.29% 1.63% Sep-03 4.93% 3.05% 1.89% Aug-03 Total (1) 4.50% 2.77% 1.73% Jul-03 4.39% 2.65% 1.74% Pru Brand Jun-03 4.08% 2.47% 1.61% May-03 Investor Day 12.04.03 increasing Variable annuity market share 4.02% 2.39% 1.62% ASI Brand Apr-03 3.60% 2.33% 1.28% Mar-03 Annuity market share is consi
Slide 59: Annuity net sales
11 $ 262 3Q03 (1) $ 89 2Q03 $ (81) 1Q03 Investor Day 12.04.03 Annuity net sales (redemptions) Prudential American Skandia $ (105) 4Q02 Annuity net sales are positive $ (25) 3Q02 ($ millions) 300 250 200 150 100 50 0 -50 -100 -150 (1) Includes only two months of American Skandia results
Slide 60: VA channel sales share
12 Banks 4% 9% 26% Regional 5% 3Q03 (1) Prudential Annuities Direct 56% channels Agency Investor Day 12.04.03 1% VA channel sales share 14% 33% Annuity Industry 16% Wirehouse 11% We have significant presence in third party 25% VARDS Independent (1) Source:
Slide 61: Optional living benefits
13 Optional living American Skandia – benefits Guaranteed Minimum Accumulation Benefit (GMAB) Guaranteed Minimum Withdrawal Benefit (GMWB) Guaranteed Minimum Income Benefit (GMIB) Investor Day 12.04.03 New optional living benefits launched in October – – – Customers may elect one living benefit per
Slide 62: GRO Plus GMAB
14 after seven year GRO Plus Investor Day 12.04.03 GMAB – Guarantees principal preservation – waiting period Step-up guarantee available; triggers a new seven year waiting period Withdrawals over 5% proportionally reduce guarantee Guarantee supported by automatic allocations to fixed bucket Cost: 25
Slide 63: GMWB
15 GMWB Guarantees minimum periodic withdrawals Protected Value based on greater of premiums or Investor Day 12.04.03 account value 14 year payout time frame Withdrawals over 7% proportionally reduce guarantee Cost: 35 basis points of account value
Slide 64: GMIB
16 GMIB Guarantees minimum account value for annuitization Protected Value increases 5% annually Seven year waiting period; annuitization required “Special” annuity rates and mortality table Withdrawals over 5% proportionally reduce guarantee Cost: 50 basis points of Protected Value Investor Day 12.
Slide 65: Summary
17 well proceeding growing presence and 12.04.03 integration portfolio Day Summary party positive share Investor Skandia third are market product American sales Significant Net Increased Enhanced
Slide 66: International Division, Rodger Lawson
International Division Rodger Lawson Vice Chairman International Insurance and Investments Division
Slide 67: International Division financial performance
1 September 30 2003 $ 320 277 $ 597 21 $ 618 International Division Nine Months Ended (2) Year Ended 2002 $ 379 378 22% RORE (6) $ 751 December 31 2001 $ 349 262 (44) $ 567 performance Investor Day 12.04.03 International Division financial (1) International Investments 2001 represents initial eight
Slide 68: International Division key strategy elements
2 Division both, business International countries Life or international affluent on opportunity driven attractive based our of mass Management country brand 12.04.03 of and Day strategy number platforms distribution Investor affluent Investment perceived in-country elements limited the markets busin
Slide 69: International Division markets today
3 International Investments International Division Traditional Insurance Investor Day 12.04.03 International Division today Life Planning Insurance Japan Korea Taiwan Mexico China Philippines Argentina Brazil Germany Italy UK Poland markets today todayPrudential Prudential markets for Major Emerging
Slide 70: International Division summary
4 Division International countries countries 6 summary in Korea 12 - in planning grow platforms and to Japan 12.04.03 today life Day operations by Investor are in poised we positions and management dominated Where stable asset Insurance/investment Leadership Gibraltar Material Profitability
Slide 71: International Insurance Life Planner Model
International Insurance Life Planner Model
Slide 72: International Insurance strategy and value proposition
on 6 specific Insurance focused the International to a force tailored capability in environment Insurance field insurance product plans client life 12.04.03 Planners sales/service Day professional Investor Life standardized – insurance individual selling protection International trained, life each A
Slide 73: Number of Life Planners
7 5,063 International Insurance 2003E All others 4,505 2002 (1) 4,104 2001 3,495 2000 Taiwan 2,884 1999 Investor Day 12.04.03 Korea Life Planners 2,332 1998 1,908 1997 Japan 1,603 1996 (1) At end of period
Slide 74: Policies in force, Life Planner model
8 International Insurance 1,992 2003E All Others 1,719 2002 1,482 2001 Korea Investor Day 12.04.03 policies in-force 1,181 2000 962 1999 Japan 776 1998 Life Planner model number of individual # of Policies. thousands
Slide 75: Productivity, retention and persistency
9 2003E 7.0 74% 60% 93% 87% 94% International Insurance 2002 6.8 72% 55% 93% 86% 95% 2001 8.1 66% 61% 93% 88% 94% 2000 7.5 75% 65% 94% 88% 95% 1999 7.5 79% 72% 94% 86% 95% Investor Day 12.04.03 persistency 1998 7.1 86% 69% 93% 88% 92% Productivity, retention and Life Planner Model (1) (1) Policies p
Slide 76: International Insurance growth drivers
10 (4) Annualized New Business Premium +21% $271 million $224 million International Insurance Policies +25% 134,601 108,024 (1) Number of New growth Nine months 2003 versus 2002 (3) Investor Day 12.04.03 Agent Productivity +13% 6.9 6.1 Prudential of Japan business driver (2) +12% 2,293 2,055 ranslat
Slide 77: Business mix versus the industry: Japan
11 International Insurance (2) 17 % Endowment (1) Industry 77 % 6 % and Prudential estimates Whole Life Investor Day 12.04.03 Percentage of business in product segment 44 % Prudential of Japan (POJ) 1 % Term / Riders Business mix versus the industry 55 % Based on face amount of insurance in force; e
Slide 78: Business mix versus the industry: Korea
12 International Insurance (2) 7 % Endowment (1) Industry 67 % 26 % Whole Life Investor Day 12.04.03 Percentage of business in product segment 29 % Business mix versus the industry Prudential of Korea (POK) 1 % 70 % Term / Riders Based on face amount of insurance in force; excludes riders without fa
Slide 79: Profit margins by product category: Japan
13 (1) International Insurance 4% 4% Endowment (2) Industry Japan 12% 14% Whole Life Investor Day 12.04.03 30% Prudential of Japan 35% Term / Riders Profit margins by product category 35% 30% 25% 20% 15% 10% 5% 0% Estimated ratio of pre-tax income (on an adjusted operating income basis) to premiums
Slide 80: Profit margins by product category: Korea
14 (1) International Insurance 14% 14% Endowment (2) Industry Korea 15% 17% Whole Life Investor Day 12.04.03 25% Prudential of Korea 30% Term / Riders Profit margins by product category 30% 25% 20% 15% 10% 5% 0% Estimated ratio of pre-tax income (on an adjusted operating income basis) to premiums Ba
Slide 81: POJ sources of product profitability
15 (1) 4% International Insurance -10% TOTAL 10% Endowment 4% 14% Interest -7% Whole Life 10% Investor Day 12.04.03 11% Expense 35% 0% Term/Riders 9% POJ sources of product profitability 26% Mortality 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% (1) Estimated percentage based on pre-tax income (on an adju
Slide 82: Sources of total profitability
16 International Insurance POK $ 55 5 44 $ 104 ($ millions) 215 (1) POJ $ 222 (95) $ 342 Investor Day 12.04.03 Sources of total profitability 2002 Profitability Mortality Interest Expenses Total Estimated breakdown of pre-tax adjusted operating income (1)
Slide 83: Earnings sensitivity to investment spreads
17 + 20 b.p. $ 354 $ 105 International Insurance 20 b.p. $ 330 $ 103 Adjusted for change in interest spread - (1) Total $ 342 $ 104 ($ millions) Expenses 215 44 Investor Day 12.04.03 5 (2) Interest (95) Earnings sensitivity to changes in investment spreads 2002 Earnings Mortality $ 222 $ 55 POJ POK
Slide 84: International Insurance strategy
18 Insurance plans International and levels strategy markets productivity persistency markets Planners new 12.04.03 existing policy Day implementation Life Planner into Investor in model in Life client entry disciplined expansion growth of of Planner selective Life Continue Organic Continued Mainten
Slide 85: Gibraltar Life, Tim Feige
Gibraltar Life Tim Feige Senior Vice President International Life Insurance
Slide 86: Gibraltar Life strategy and value proposition
20 Life its Gibraltar is in Industry channel which standards industry” the force service Traditional to Insurance field and of insurance agent “traditional Rest life important 12.04.03 Life Advisors the focus Day to Investor Life of client remain – insurance rest capability selling protection the Ad
Slide 87: Life Advisor count and productivity
21 Productivity (1) 4.0 3.0 2.0 1.0 0.0 Gibraltar Life 4,848 3Q03 4,877 2Q03 4,993 1Q03 5,155 4Q02 Productivity trend 5,233 3Q02 Investor Day 12.04.03 5,525 2Q02 5,726 1Q02 Count 6,121 4Q01 6,596 3Q01 7,230 2Q01 Life Advisor count and productivity 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 ol
Slide 88: Annualized new business premiums
22 71 3Q03 Gibraltar Life 84 2Q03 62 1Q03 62 4Q02 60 3Q02 (1) 61 2Q02 Investor Day 12.04.03 51 1Q02 54 4Q01 43 3Q01 Annualized new business premiums 10 2Q01 (1) Annualized new business premiums translated at constant average FX rate for the year ended December 31, 2002 ($ millions) 90 80 70 60 50 40
Slide 89: Quarterly surrender payouts
23 3Q03 Gibraltar Life 2Q03 (1) 1Q03 4Q02 3Q02 Quarterly surrender payouts 2Q02 Investor Day 12.04.03 1Q02 Surrenders declining 4Q01 3Q01 2Q01 ($ millions) 1,400 1,200 1,000 800 600 400 200 0 (1) Based on daily surrender report; translated at constant average FX rate for the year ended December 31,
Slide 90: Face amount of individual policies
24 200 3Q03 Gibraltar Life 204 2Q03 208 1Q03 213 4Q02 (1) December 31, 2002 217 3Q02 in-force 222 2Q02 Investor Day 12.04.03 229 1Q02 237 4Q01 251 3Q01 Face amount of individual policies 272 2Q01 ($ billions) 300 250 200 150 100 50 0 (1) Face amount translated based on constant exchange rate as of
Slide 91: Individual life policies in force
25 4,334 3Q03 Gibraltar Life 4,380 2Q03 number of 4,461 1Q03 4,537 4Q02 4,602 3Q02 policies 4,666 2Q02 Investor Day 12.04.03 4,787 1Q02 4,911 4Q01 5,047 3Q01 Individual Life in force – 5,322 2Q01 (units, thousands) 6,000 5,000 4,000 3,000 2,000 1,000 0
Slide 92: Net premium, policy charge and fee income
26 501 3Q03 Gibraltar Life 526 2Q03 512 1Q03 513 4Q02 (1) 506 3Q02 income 558 2Q02 Investor Day 12.04.03 586 1Q02 585 4Q01 626 3Q01 Net premium, policy charge, and fee 459 2Q01 ($ millions) 700 600 500 400 300 200 100 0 (1) Translated at constant average FX rate for the year ended December 31, 2002
Slide 93: Gibraltar sources of total profitability
27 Gibraltar Life Gibraltar $ 322 85 (8) (21) $ 378 ($ millions) (1) Investor Day 12.04.03 Gibraltar sources of total profitability 2002 Profitability Mortality Interest Expenses Surrenders Total Estimated breakdown of pre-tax adjusted operating income (1)
Slide 94: Earnings sensitivity to investment spreads
28 + 20 b.p. $ 437 Gibraltar Life 20 b.p. $ 317 Adjusted for change in interest spread -(1) Total $ 378 Surrenders (21) ($ millions) Expenses (8) Investor Day 12.04.03 investment spreads (2) Interest 85 Earnings sensitivity to changes in 2002 Earnings Mortality $ 322 Source: Prudential estimates Est
Slide 95: Gibraltar Life plans
29 Life plans Gibraltar build policy and then and relationships strategy and Group 12.04.03 force productivity Day model Advisor Affinity opportunistically Investor Life Advisor Life Life Gibraltar acquisitions Stabilize Improve persistency on Pursue Gibraltar Build
Slide 96: Financial Outlook, Richard J. Carbone
Financial Outlook Richard J. Carbone Chief Financial Officer
Slide 97: 2003 baseline earnings per share and guidance
1 $ 1.90 0.12 2.02 0.65 0.60 – $ 2.67 ($ millions, except per share data) $ 15 37 37 (8) 15 $ 96 $ 2.62 – Adjusted operating income Nine months ended September 30, 2003 (1) Annual “baseline” earnings per share Investor Day 12.04.03 Reported earnings per share Gibraltar surrenders less than expected
Slide 98: Considerations for 2004
2 Considerations for 2004 Full year earnings for the Wachovia venture Full year earnings for American Skandia Nine months of earnings from CIGNA Retirement Nine months of earnings from Hyundai Investor Day 12.04.03 Transactions: 8% market appreciation Expense reductions realized 31% effective tax ra
Slide 99: Business growth and capital management, 2004 earnings
3 Business Growth & Capital Management $220 million $60 million : Expense (1) Reductions : (1) Hyundai Investor Day 12.04.03 American Skandia EPS includes Wachovia one-timers EPS includes CIGNA one-timers Financial Services Businesses Wachovia full year 2004 earnings guidance CIGNA $2.67 2003 “basel