Prudential Financial, Inc. · NYSE:PRU
Prudential Financial — Investor Day (December 2005)
98 slides from Prudential Financial's investor day presentation, Dec 7, 2005
Slide 1: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005 Exhibit 99.0
Slide 2: Prudential Financial Investor Day
Prudential Financial Investor Day Prudential Financial Investor Day December 7, 2005 December 7, 2005 Eric Durant Senior Vice President, Investor Relations Eric Durant Senior Vice President, Investor Relations
Slide 3: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements Some 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. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,”
Slide 4: Non–GAAP Measure
Non–GAAP Measure Non–GAAP Measure In managing our businesses, we use a non-GAAP measure we call “adjusted operating income” to measure the performance of our Financial Services Businesses (FSB). Our goals for return on equity (ROE) and earnings per share (EPS) are based on FSB after-tax adjusted ope
Slide 5: Reconciliation between adjusted operating income and the comparable GAAP measure
Reconciliation between adjusted operating income Reconciliation between adjusted operating income and the comparable GAAP measure and the comparable GAAP measure Prudential Financial, Inc. FINANCIAL HIGHLIGHTS (in millions, except per share data) Nine months ended Sept 30, 2005 Financial Services Bu
Slide 6: Reconciliation between adjusted operating income and the comparable GAAP measure (continued)
Reconciliation between adjusted operating income Reconciliation between adjusted operating income and the comparable GAAP measure (continued) and the comparable GAAP measure (continued) Prudential Financial, Inc. COMBINED STATEMENTS OF OPERATIONS - FINANCIAL SERVICES BUSINESSES (in millions) Nine mo
Slide 7: Prudential Financial, Inc.
Prudential Financial, Inc. Prudential Financial, Inc. Art Ryan Chairman and CEO Art Ryan Art Ryan Chairman and CEO Chairman and CEO
Slide 8: ROE levers: 2001 -
ROE levers: 2001 - ROE levers: 2001 - Expense cuts Expense cuts Resolve underperforming businesses Resolve underperforming businesses Grow high return businesses Grow high return businesses Redeploy capital Redeploy capital
Slide 9: What has happened since demutualization
What has happened since demutualization What has happened since demutualization Achieved significant expense reductions Achieved significant expense reductions Divested P&C business Divested P&C business Acquired and integrated American Skandia Acquired and integrated American Skandia Combined retai
Slide 10: Earnings per share growth
$2.07 $2.53 $3.61 $2.65 $3.76 2002 2003 2004 9 mo 04 9 mo 05 Earnings per share growth Earnings per share growth (1) (1) (1) Based on after-tax adjusted operating income of the Financial Services Businesses
Slide 11: ROE progress
6.4% 7.6% 10.2% 13.0% 0% 2% 4% 6% 8% 10% 12% 14% 2002 2003 2004 9 mo 05 ROE progress ROE progress (1) (1) (1) Based on after-tax adjusted operating income of the Financial Services Businesses (2) Nine months ended September 30, 2005; annualized 12% goal by 2005 (2)
Slide 12: Where we are today
Where we are today Where we are today Balanced mix of businesses and risks Balanced mix of businesses and risks Strong capital position and cash flow generation Strong capital position and cash flow generation Leading position in domestic retirement and savings Leading position in domestic retiremen
Slide 13: After 2005 …
After 2005 … After 2005 … Two substantial growth opportunities: Two substantial growth opportunities: International businesses International businesses Domestic retirement and savings businesses Domestic retirement and savings businesses Evolving multi-channel distribution strategy Evolving multi-ch
Slide 14: 2006 – Execution and business mix drive superior shareholder value growth
2006 – 2006 – Execution and business mix drive superior Execution and business mix drive superior shareholder value growth shareholder value growth ROE of 12% - 14% Double digit average annual growth: AOI, EPS Reasonably consistent operating results Visible, sustainable cash flow “AA”capital managem
Slide 15: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005
Slide 16: Prudential Financial, Inc.
Prudential Financial, Inc. Prudential Financial, Inc. Mark Grier Mark Grier Vice Chairman, Financial Management Vice Chairman, Financial Management
Slide 17: Financial highlights
Financial highlights Financial highlights (1) (1) 13.0 % $ 3.76 $ 2,738 Nine months ended September 30, 2005 10.2 % $ 3.61 $ 2,507 6.4 % $ 2.07 $ 1,740 7.6 % Return on Equity (3) (4) $ 2.53 Earnings per share of Common Stock (3) $ 1,974 Pre-tax adjusted operating income (2) (1) For the Financial Ser
Slide 18: 75% of equity is attributed to operating businesses
25% 75% 75% of equity is attributed to operating businesses 75% of equity is attributed to operating businesses Operating Businesses Operating Businesses (2) (2) Corporate & Other Corporate & Other (1) As of September 30, 2005 for the FSB; excludes unrealized gains and losses on investments. (2) Rep
Slide 19: Attributed equity of operating businesses
Attributed equity of operating businesses Attributed equity of operating businesses INTERNATIONAL INSURANCE INTERNATIONAL INSURANCE RETIREMENT & SAVINGS RETIREMENT & SAVINGS DOMESTIC INSURANCE DOMESTIC INSURANCE Attributed equity $15.8 billion Attributed equity $15.8 billion (1) • • Life Planner mod
Slide 20: Complementary and diversified businesses
Complementary and diversified businesses Complementary and diversified businesses DOMESTIC INSURANCE DOMESTIC INSURANCE • Individual Life • Group Insurance INTERNATIONAL INSURANCE INTERNATIONAL INSURANCE • Life Planner model • Life Planner model Life Planner model • Gibraltar Life • Gibraltar Life G
Slide 21: International Insurance
(2) International Insurance International Insurance Annualized new business premiums: $945 million 6.8 million policies in force (1) 5,702 Life Planners (1) 5,349 Gibraltar Life Advisors (1) (1) As of September 30, 2005 (2) For the year ended December 31, 2004; GAAP exchange rate basis – translated
Slide 22: Life Planner model business driver growth
(1) (2) Number of Life Planners 15% 15% 5,385 2,332 Number of Policies in Force (000) 23% 23% 2,661 Annualized New Business Premiums (1) 16% 16% $668 mm 24% 24% Adjusted Operating Income (2) $515 mm $144 mm CAGR 1998 – CAGR 1998 – (1) GAAP Exchange rate basis – translated based on applicable average
Slide 23: Gibraltar Life
Gibraltar Life Gibraltar Life Acquired by Prudential Financial in 2001 Strong affinity group relationships High return on equity Strong free cash flow and capital generation
Slide 24: Retirement / savings market
Retirement / savings market Retirement / savings market Personal Savings Personal Savings $7.0 $7.0 IRAs IRAs $3.5 $3.5 Defined Contribution Defined Contribution $2.7 $2.7 Defined Benefit Defined Benefit $4.9 $4.9 Annuities Annuities $1.7 $1.7 $20 trillion market in 2004 Sources: Federal Reserve Flo
Slide 25: Prudential Retirement
Prudential Retirement Prudential Retirement •Total retirement services capability provides market advantage •Total retirement services capability provides market advantage •Stable value products offer attractive returns with limited risk •Stable value products offer attractive returns with limited r
Slide 26: Leading distributor of variable annuities through independent financial planners
Leading distributor of variable annuities through Leading distributor of variable annuities through independent financial planners independent financial planners Expanding distribution Expanding distribution Account values exceed $53 billion Account values exceed $53 billion (1) (1) Successful recen
Slide 27: Individual Life ROE
Individual Life ROE Individual Life ROE (1) In millions (2) Average attributed equity for the period; in billions (3) Based on annualized after-tax adjusted operating income giving effect to direct equity credit 16 % Return on equity (3) $ 2.6 Equity (2) $ 356 Pre-tax adjusted operating income (1) N
Slide 28: Individual Life sales
$0 $50 $100 $150 $200 $250 $300 $350 $400 2002 2003 2004 9MO 04 9MO 05 Individual Life sales Individual Life sales (1) Scheduled premiums from new sales on an annualized basis and first year excess premiums and deposits on a cash-received basis, excluding COLI; for the years ended December 31 and fo
Slide 29: Group Insurance
Group Insurance Group Insurance • • High persistency of quality business High persistency of quality business • • Controlled growth – Controlled growth – emphasis on margins emphasis on margins • • Return on equity of 13% Return on equity of 13% (1) (1) • • Addressing disability claims resolutions A
Slide 30: Financial Advisory
Financial Advisory Financial Advisory (1) Based on client assets of $532.1 billion as of March 31, 2003 Combination of Private Client Group with Wachovia closed July 1, 62% Wachovia, 38% Prudential Combined business created 3rd largest brokerage firm in the U.S. (1) Integration complete; JV operatin
Slide 31: Asset Management: significant scale and breadth
Asset Management: significant scale and breadth Asset Management: significant scale and breadth AUM by asset type AUM by client type Equity 19% Fixed Income 45% Real Estate 4% Non-proprietary insurance, annuity & other 18% International 14% Institutional customers 25% General account 30% Retail cust
Slide 32: Rating agencies have recognized financial strength
Rating agencies have recognized financial strength Rating agencies have recognized financial strength Upgraded November Upgraded October Upgraded February AA- Aa3 (2) A+ Prudential Retirement Insurance and Annuity Company AA- Aa3 A+ Prudential Insurance Insurance Claims Paying Ratings (1) : Standard
Slide 33: Financial strength
Financial strength Financial strength (1) (in millions) Fixed Maturities $ 3,903 Net unrealized gains $ 547 Gross unrealized losses $ 4,450 Gross unrealized gains 15.0 % Debt/Capital (2) $ 21,025 Attributed equity (excl FAS 115, in millions) (1) Financial Services Businesses; as of September 30, 200
Slide 34: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005
Slide 35: Prudential Retirement
Prudential Retirement Prudential Retirement John Kim President, Prudential Retirement John Kim John Kim President, Prudential Retirement President, Prudential Retirement
Slide 36: A growing part of “Grow and Protect”
A growing part of “Grow and Protect” A growing part of “Grow and Protect” •Retirement market increasingly important in asset gathering •Retirement market increasingly important in asset gathering •Prudential Retirement a leading retirement market provider •Prudential Retirement a leading retirement
Slide 37: Retirement and Annuities – a growing contribution to earnings results
Retirement and Annuities – Retirement and Annuities – a growing contribution to a growing contribution to earnings results earnings results Adjusted operating income of Prudential (1) Year ended December 31, 2002 $1.7 billion Nine months ended September 30, 2005 $2.7 billion 28% Retirement 28% Retir
Slide 38: Prudential Retirement financial performance
Prudential Retirement financial performance Prudential Retirement financial performance 3.3 13,540 $135,565 Nine months Nine months ended ended September 30, 2005 September 30, 2005 3.4 15,004 $129,806 (1) (1) Year ended December 31 Year ended December 31 8,435 Gross sales (2) $70,613 Total account
Slide 39: Retirement business integration on track
Retirement business integration on track Retirement business integration on track • Novation substantially complete • Conversion of DC plans substantially complete • Systems integration on track for 1Q06 completion • Persistency better than expected • Expense saves in line with original expectations
Slide 40: Market leading capabilities across product offerings
Market leading capabilities across product Market leading capabilities across product offerings offerings “Total Retirement Services” Full suite of stable value products Offer access to both separate account and mutual fund platforms Award winning participant communications capabilities and highest
Slide 41: $30 billion in stable value balances are major source of earnings
$30 billion in stable value balances $30 billion in stable value balances (1) (1) are major are major source of earnings source of earnings Stable value characteristics Stable value characteristics •Low risk profile: substantially all balances experience- •Low risk profile: substantially all balance
Slide 42: A leader in total retirement services
A leader in total retirement services A leader in total retirement services Total Total Retirement Retirement Services Services Defined Benefit Defined Benefit Non-Qualified Non-Qualified Plans Plans Defined Defined Contribution Contribution Plan Plan Sponsor Sponsor
Slide 43: Prudential Retirement lines of business
Prudential Retirement lines of business Prudential Retirement lines of business • Defined Contribution • Defined Benefit • Non-qualified plans • Retail/rollover • Defined Contribution • Defined Benefit • Non-qualified plans • Retail/rollover Full Service Retirement (FSR) Full Service Retirement (FSR
Slide 44: Full service retirement market segments
Full service retirement market segments Full service retirement market segments Assets Under Management Assets Under Management (1) (1) Participants Participants (2) (2) (1) In billions, as of September 30, 2005 (2) As of September 30, 2005 Tax Exempt Tax Exempt Mid / Large Case Mid / Large Case Eme
Slide 45: FSR: Mid / large case market
FSR: Mid / large case market FSR: Mid / large case market • Distribution: fee based consultants, advisors, direct • Trend toward bundling; Total Retirement Services • 12-24 month buying cycle • Decision criteria • Competitive pricing structure • Investment management capability • Advisory services,
Slide 46: FSR: Tax exempt market
$28 billion 1,600 773,000 Market Profile (1) : AUM Clients Participants FSR: Tax exempt market FSR: Tax exempt market • Distribution: specialized consultants • Target markets: multi-employer, not-for-profit and government • Very high persistency • Employee longevity • High percentage stable value •
Slide 47: FSR: Emerging (small) corporate market
$13 billion 3,300 448,000 Market Profile (1) : AUM Clients Participants FSR: Emerging (small) corporate market FSR: Emerging (small) corporate market • Distribution: commission based advisors • Fastest growing DC segment • Significant level of plan turnover • Fragmented competition • “Micro-market”
Slide 48: FSR: Retail / rollover market
FSR: Retail / rollover market FSR: Retail / rollover market • Internal retention: about 54% of $5 billion annual DC plan distributions • 10% CAGR projected for rollover market (2004-2011) • Expanding rollover platform • Internal retention: about 54% of $5 billion annual DC plan distributions • 10% C
Slide 49: Institutional / investment products
Institutional / investment products Institutional / investment products Account values $51.4 billion Account values $51.4 billion (1) (1) (1) As of September 30, 2005 Structured Structured settlements settlements Group Annuities, Group Annuities, close-out pension close-out pension Investment produc
Slide 50: Prudential Retirement – 2006 and beyond
Prudential Retirement – Prudential Retirement – 2006 and beyond 2006 and beyond Tactical objective: Complete business integration Strategic objective: Increase asset retention and achieve positive flows Key growth initiatives: - Micro-market - Rollover market - Secure Retirement products - Retiremen
Slide 51: Summary
Summary Summary Integration of CIGNA business continues on track Our financial performance is consistent with expectations Stable value balances a major source of earnings A leader in total retirement services We will implement key growth initiatives in 2006 and beyond Integration of CIGNA business
Slide 52: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005
Slide 53: Individual Annuities
Individual Annuities Individual Annuities David Odenath President, Prudential Annuities David Odenath David Odenath President, Prudential Annuities President, Prudential Annuities
Slide 54: Individual Annuities financial performance
Individual Annuities financial performance Individual Annuities financial performance Nine Months Ended September 30 Year Ended December 31 53,517 51,297 47,463 Total account values $49,484 $47,418 $43,949 Variable annuities 5,476 4,033 (1) 6,338 3,879 Account values (2) : 4,665 Gross sales (3) 3,51
Slide 55: Key elements of our annuity business strategy
Key elements of our annuity business strategy Key elements of our annuity business strategy • • Develop innovative products to meet growing Develop innovative products to meet growing retirement market needs retirement market needs • • Expand third-party distribution while supporting Expand third-pa
Slide 56: Emphasis on variable annuities
Emphasis on variable annuities Emphasis on variable annuities Variable Fixed Gross Sales Net Sales Account values (1) More than 90% of gross product sales and account values come from variable annuity products $ 5,142 49,484 $ 334 4,033 Nine months ended September 30, 2005 ($, millions) (1) At end o
Slide 57: Top 10 VA Company AUM: 3Q’05
34 35 35 37 40 48 52 60 77 $95 Top 10 VA Company AUM: 3Q’05 Top 10 VA Company AUM: 3Q’05 (1) Advisor-sold market excludes group/retirement plan contracts; Source: VARDS Prudential Annuities is ranked #5 in advisor-sold VA Assets Under Management (1) #5 ($, billions) Hartford MetLife AXA Lincoln Prud
Slide 58: Full suite of living and death benefit riders
Full suite of living and death benefit riders Full suite of living and death benefit riders Guaranteed Minimum Accumulation Benefit ( “ GRO Plus ” ) Guaranteed Minimum Withdrawal Benefit (GMWB) Guaranteed Minimum Income Benefit (GMIB) Lifetime Five Guaranteed Minimum Accumulation Benefit ( “ GRO Plu
Slide 59: Lifetime Five
Lifetime Five Lifetime Five Combines lifetime income guaranty with flexibility and control of principal Guarantees withdrawals of 5% of protected value for life or 7% for 14 years Protected value is greater of: - 5% roll-up for 10 years or until first withdrawal - Highest anniversary value for 10 ye
Slide 60: Variable annuity guarantees
Variable annuity guarantees Variable annuity guarantees 1.9 -- -- Lifetime Five 0.8 0.5 -- Withdrawal (GMWB) 4.0 4.4 5.6 GMDB amount at risk 2.9 2.4 1.1 Income (GMIB) 6.8 5.7 3.7 Accumulation (“GRO”) Account values with living benefit features: $49.5 $47.4 $43.9 Total variable annuity account values
Slide 61: Active management of product risks
Active management of product risks Active management of product risks Innovative product design minimizes product / benefit risk while meeting customer needs Strong governance structure – continual monitoring and oversight Strategic risk retention - Retain risks we are best suited to carry - Activel
Slide 62: Product / feature risk management by design
Product / feature risk management by design Product / feature risk management by design Lifetime Five Incentive to delay first withdrawal to maintain roll-up and step-up benefits Minimum purchase age is 45 Requires asset allocation program – maximum equity allocation is 80% Guaranteed Minimum Income
Slide 63: Capital markets hedging reduces market exposure
Capital markets hedging reduces market Capital markets hedging reduces market exposure exposure Three Greek hedging program for Lifetime Five, GMWB Weekly purchasing decisions on assets for new business and rebalancing Long-dated options and swaps used to better match economic risk Three Greek hedgi
Slide 64: Variable annuity market share
6.3% 5.0% 4.2% 4.1% 4.4% 4.6% 4.5% 3.4% 3.4% 4.0% 6.9% 5.5% 5.0% 5.0% 4.6% 4.9% 5.0% 4.6% 2% 3% 4% 5% 6% 7% Variable annuity market share Variable annuity market share Prudential variable annuity market share (1) (1) According to VARDS; excludes group/retirement plan contracts; Prudential and Americ
Slide 65: Prudential ranks #7 in advisor-sold VA sales
Prudential ranks #7 in advisor-sold VA sales Prudential ranks #7 in advisor-sold VA sales (1) (1) 1,936 Pac Life 2,079 Lincoln 1,237 Jackson 1,551 ING 1,837 IDS 1,925 1,925 Prudential Prudential 2,232 Hancock 2,619 AXA 2,772 Hartford $2,897 Met Life 3Q05 Sales ($, millions) Company 3Q05 Rank (1) Adv
Slide 66: Prudential ranks #1 in independent channel advisor-sold VA sales
Prudential ranks #1 in independent channel advisor- Prudential ranks #1 in independent channel advisor- sold VA sales sold VA sales (1) (1) AIG Lincoln Allianz Met Life ING Pac Life Jackson 1,001 Hartford 1,228 Hancock $ 1,297 $ 1,297 Prudential Prudential 3Q05 Sales ($, millions) Company 3Q05 Rank
Slide 67: Distribution channel development offers growth opportunity
Distribution channel development offers growth Distribution channel development offers growth opportunity opportunity 18% 18% 7% 7% 68% 68% 7% VA Channel Sales Share: 3Q ’05 (1) Prudential Annuities (1) Source: VARDS 22% 22% 23% 23% 38% 38% 16% 1% 1% Annuity Industry Wirehouse Agency Independent Ban
Slide 68: Summary
Summary Summary Leading variable annuity market position Attractive full product suite; innovative products driving market share growth Risk management integral to product design; hedging where appropriate Complementary distribution channels; #1 position for independent financial planner sales Devel
Slide 69: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005
Slide 70: International Division
International Division International Division Rodger Lawson Vice Chairman International Insurance and Investments Division Rodger Lawson Rodger Lawson Vice Chairman Vice Chairman International Insurance and Investments Division International Insurance and Investments Division
Slide 71: International Division financial performance
International Division financial performance International Division financial performance Nine Months Ended September 30 (10) International Investments Gibraltar Life $ 579 $ 515 $ 449 International Insurance excluding Gibraltar Life $ 1,042 $ 1,003 $ 809 ($, millions) Pre-tax adjusted operating inc
Slide 72: Key elements of our international strategy
Key elements of our international strategy Key elements of our international strategy • • Focus on a limited number of attractive countries Focus on a limited number of attractive countries • • Emphasize distribution: recruiting, selection, needs- Emphasize distribution: recruiting, selection, needs
Slide 73: Life Planner model strategy and plans
Life Planner model strategy and plans Life Planner model strategy and plans Disciplined implementation Organic expansion in existing markets Continued growth in Life Planners Maintenance of Life Planner productivity Maintenance of policy persistency levels Very selective entry into new markets
Slide 74: Key drivers
Key drivers Key drivers (1) (1) 72% 75% 84% 90% 7.2 POK POJ 79% 24 - month 87% 12 - month Life Planner Retention 89% 25 - month 95% 13 - month Policy Persistency (Face-amount) 7.2 Productivity (# of policies / LP / month) (1) For periods ended September 30, 2005
Slide 75: Growth in the Life Planner business
- 1,000 2,000 3,000 4,000 5,000 6,000 1998 1999 2000 2001 2002 2003 2004 $- $100 $200 $300 $400 $500 $600 Growth in the Life Planner business Growth in the Life Planner business (1) Before-tax Life Planners Policies in force (000) Adjusted operating income (1)
Slide 76: Life Planner model
Life Planner model Life Planner model • Continued selective but expanded recruiting • Outstanding training and motivation • Evolving and growing target audience • Continued strict operational discipline • Expanding geographic presence
Slide 77: Expanding Life Planner reach - Japan
Expanding Life Planner reach - Expanding Life Planner reach - Japan Japan 1994: 23 agencies 1999: 37 agencies Sept 2005: 77 agencies Mainly in Tokyo and major cities Expanded to local cities with population of 300,000+ Expanded to local cities with population of 200,000+
Slide 78: Expanding Life Planner reach - Korea
Expanding Life Planner reach - Expanding Life Planner reach - Korea Korea 1995: 8 agencies 2000: 26 agencies Sept 2005: 75 agencies Seoul Capital cities of provincial governments Nationwide cities with population of 300,000+
Slide 79: Gibraltar Life - summary
Gibraltar Life - Gibraltar Life - summary summary Stable earnings and distribution system Stable earnings and distribution system High return on equity High return on equity Strong free cash flow Strong free cash flow Nine Months Ended September 30 40% 33% 23% ROE (3) 0.9 0.8 1.1 Equity (2) $ 391 $
Slide 80: Gibraltar Life Advisors
5,552 4,940 4,852 5,002 6,649 2001 2002 2003 2004 2005 Gibraltar Life Advisors Gibraltar Life Advisors Average LA count (2) (1) From date of acquisition (2) Based on nine months ended September 30, 2005 (1)
Slide 81: Key drivers comparison – Gibraltar
Key drivers comparison – Key drivers comparison – Gibraltar Gibraltar (1) (1) 79% 87% 89% 95% 7.2 POJ 33% 60% 86% 94% 3.6 Gibraltar 24 – month 12 – month Life Planner / Life Advisor Retention 25 – month 13 – month Policy Persistency (Face-amount) Productivity (# of policies / LP or LA / month) Key d
Slide 82: Acquisition strategy – key elements
Acquisition strategy – Acquisition strategy – key elements key elements Transactions must be: In target countries and attractive markets Consistent with our business strategies Structured to achieve our financial targets with appropriate risk
Slide 83: Where we are today – summary
Where we are today – Where we are today – summary summary • Leadership position in Life Planning • Gibraltar generates high ROEs and cash flows • Profitability dominated by Japan and Korea • Attractive new products complement distribution strength • Management depth, country expertise • Acquisitions
Slide 84: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005
Slide 85: International Insurance Finance
International Insurance Finance International Insurance Finance John Hanrahan Chief Financial Officer, International Insurance John Hanrahan John Hanrahan Chief Financial Officer, International Insurance Chief Financial Officer, International Insurance
Slide 86: Sources of financial performance
Sources of financial performance Sources of financial performance • Sales, persistency, growth of business in-force • Emphasis on protection products • Investment portfolio strategies • US Dollar products
Slide 87: Sources of total profitability 2004
Sources of total profitability 2004 Sources of total profitability 2004 (1) (1) (40) --- Surrenders $303 Gibraltar Life TOTAL Expenses (114) Interest $348 Mortality Life Planner Business (1) Estimated breakdown of before-tax adjusted operating income for the twelve months ended December 31, ($, mill
Slide 88: Impact from investment yield - POJ
Impact from investment yield - Impact from investment yield - POJ POJ (0.1%) (1.2%) (1.6%) Negative Spread $ 15,026 $ 7,952 $ 6,836 Average Invested Assets (1) (2) ($ 119) ($ 14) YTD’05 (3) ($ 99) Negative Spread (1) (1) In millions; translated at constant 2005 rate (2) Invested Assets for 2004 does
Slide 89: POJ business mix
POJ business mix POJ business mix (1) Aoba business in-force of ¥ 940 billion not included Term & Riders Term & Riders Whole Whole Life Life Savings Savings US$ US$ Products Products In-force Face Amount as of September 30, 2005 (1) New Business Face Amount nine months ended September 30, 2005 10% 1
Slide 90: POJ sources of product profitability
0% 5% 10% 15% 20% 25% 30% Term / Riders US$ Products Other Yen Products POJ sources of product profitability POJ sources of product profitability 27% 27% 14% 14% 9% 9% Estimated New Business Pre-tax Profit Margin YTD’05 (1) Mortality & Expense Margin Interest Margin (1) Nine months ended September 3
Slide 91: Gibraltar Life business mix
Gibraltar Life business mix Gibraltar Life business mix Term & Riders Term & Riders Whole Life Whole Life Savings Savings US$ Fixed Annuity US$ Fixed Annuity In-force Annualized Premiums as of September 30, 2005 (1) Annualized New Business Premiums nine months ended September 30, 2005 (2) (1) Does n
Slide 92: Foreign exchange hedge impact
Foreign exchange hedge impact Foreign exchange hedge impact • Yen income hedging plan on 12 quarter rolling basis • A strengthening Yen helps earnings • Yen forward rates show that Yen is expected to strengthen against the dollar • Hedging delays impact on earnings, but does not eliminate it • 2006
Slide 93: Summary
Summary Summary Expanding distribution and focus on key drivers are critical to our success Emphasis on protection products is key to our business model Mortality and expense gains parallel growth of the business Interest spread improving in Japan as investment strategy contributed to results Expand
Slide 94: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005
Slide 95: Financial Outlook
Financial Outlook Financial Outlook Rich Carbone Chief Financial Officer Rich Carbone Rich Carbone Chief Financial Officer Chief Financial Officer
Slide 96: Considerations for 2006
Considerations for 2006 Considerations for 2006 • • Business Growth Business Growth • • US Dollar @ 103 Yen US Dollar @ 103 Yen • • Lower Pension Credit Lower Pension Credit • • 8% Market Appreciation 8% Market Appreciation • • 29% Effective Tax Rate 29% Effective Tax Rate • • Capital Management Cap
Slide 97: FSB full year 2006 earnings guidance
Yen = 103 vs. 110 FSB full year 2006 earnings guidance FSB full year 2006 earnings guidance (1) (1) 2005 Guidance (1) $4.85 - $4.95 Non Recurring/ Non Recurring/ Unsustainable Unsustainable 2005 Items 2005 Items Baseline Baseline Earnings Level Earnings Level $4.60 - $4.70 Reduced Pension Reduced Pe
Slide 98: Investor Day
Investor Day Investor Day December 7, 2005 December 7, 2005