Prudential Financial, Inc. · NYSE:PRU
Prudential Financial — Investor Day (September 2010)
68 slides from Prudential Financial's investor day presentation, Sep 14, 2010
Slide 1: 2010 Tokyo Investor Day
Exhibit 99.0 2010 TOKYO INVESTOR DAY PRUDENTIAL FINANCIAL, INC. SEPTEMBER 15, 2010
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 Measure
Non–GAAP Measure This presentation includes references to “adjusted operating income.” Adjusted operating income is a non-GAAP measure of performance of our Financial Services Businesses. Adjusted operating income excludes “Realized investment gains (losses), net,” as adjusted, and related charges a
Slide 4: 2010 Tokyo Investor Day - Edward P. Baird
2010 TOKYO INVESTOR DAY EDWARD P. BAIRD EXECUTIVE VICE PRESIDENT CHIEF OPERATING OFFICER, INTERNATIONAL PRUDENTIAL FINANCIAL, INC.
Slide 5: Life Insurance Market in Japan
Life Insurance Market in Japan (1) Total population of Japan is 127 million (#10 in the world)(2) (3) (2) Total GDP is $4.9 trillion (#2) Total life insurance premium is (4) $367 billion (#2) Total life insurance premium is 7.6% of GDP(4) 90% of households have (5) life insurance 1) As of July 1, 20
Slide 6: Japanese Market Offers Sustainable Growth Potential
Japanese Market Offers Sustainable Growth Potential • Continuing need for insurance protection products aligned with income replacement requirements • $7.7 trillion in low yielding bank deposits and postal savings (1) • Rapidly aging population • Strains on government pension programs lead to growin
Slide 7: Multiple Distribution Channels in an Attractive Market
Prudential’s Japanese Insurance Operations Multiple Distribution Channels in an Attractive Market Focus on strategy fundamentals: full-time college educated professionals, Life Planners highly selective recruiting, needs-based selling, emphasis on protection products. Life Planner concepts adapted t
Slide 8: Japanese Insurance Operations
JAPANESE INSURANCE OPERATIONS KAZUO MAEDA CO-PRESIDENT PRUDENTIAL INTERNATIONAL INSURANCE
Slide 9: Japanese Life Insurance Industry Developments
Japanese Life Insurance Industry Developments • Insurer quality drives market positioning – Greater consumer focus on insurer’s financial strength following market meltdown – Retrenchment of weakened competitors – Regulators strengthening solvency standards for insurance companies • Growing demand f
Slide 10: Prudential Positioning: Focus on Financial Strength
Prudential Positioning Focus on Financial Strength • Solvency margins exceed “AA” ratings targets • Revised regulatory solvency margin calculations to be implemented 2011-2012 not expected to have significant impact on capital positions relative to ratings targets Solvency Margins (1) 1,339% 1,135%
Slide 11: Growing Demand for Retirement and Savings Products
Prudential Positioning Growing Demand for Retirement and Savings Products • Life insurance based retirement income products combine premature death protection, accumulation and income features • Life Planners’ lifetime relationships with clients support retirement product sales after death protectio
Slide 12: Strengthening Yen Increasing Appeal of Multi-Currency Products
Prudential Positioning Strengthening Yen Increasing Appeal of Multi-Currency Denominated Products • U.S. Dollar denominated whole life and retirement income products offer enhanced accumulation opportunities • U.S. Dollar denominated fixed annuities offer attractive alternative to consumers wary of
Slide 13: Expanding Bank Distribution of Protection Products
Prudential Positioning Expanding Bank Distribution of Insurance Protection Products • Distribution relationships with 27 Japanese banks including mega-bank, Bank of Tokyo Mitsubishi UFJ; 9 banks selling insurance protection products (1) • Approximately 170 “seconded” Life Planners in Bank Channel (1
Slide 14: Competitive Advantage: Distribution
Competitive Advantage Distribution Life Planners • Life Planner profile similar to customer profile • Very selective recruiting • Life Planner maintains contact with client, • Highly trained career professional as trusted professional Needs-Based Selling • Identify protection needs before • Financia
Slide 15: Consistent Strategies Drive Sustainable Financial Performance
Consistent Strategies Drive Sustainable Financial Performance • Strong persistency drives revenue growth Needs-Based • Marginsearned earnedthroughoutin-forceperiod Selling • Business growth increases scale benefits and expense margins Emphasis on • Favorable mortality margins drive Protection Produc
Slide 16: Two Distinct Brands, Shared Resources and Synergies
Two Distinct Brands Shared Resources and Synergies Shared Resources • Senior management and marketing officers • Access to Prudential investment portfolio management • Selective transfers of POJ-trained Life Planners Prudential to Gibraltar support expanding distribution Gibraltar Life of Japan Syst
Slide 17: Prudential of Japan
Prudential of Japan (1) (2) Face amount in-force, $274 billion (1) (2) $31.7 billion in assets (1) 90 agency offices Ranked #1 in Japan for number of Million Dollar Round Table members in each of the past 13 years Financial Strength Rating: Standard & Poor’s, AA-(3) Agency Offices 1) As of June 30,
Slide 18: Business Model: Life Planner Needs-Based Selling
Business Model Life Planner – Needs-Based Selling • 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” • Profile of a typical new POJ Life Planner – Age 32 – Col
Slide 19: Prudential of Japan Emphasis on Protection Products
Prudential of Japan Emphasis on Protection Products In-force Annualized Premiums (1) Annualized New Business Premiums (1) as of June 30, 2010 Six months ended June 30, 2010 Yen-based insurance products (2) U.S. dollar based insurance products(3) (4) Third Sector(5) Yen-based savings and retirement i
Slide 20: Gibraltar Life
Gibraltar Life (1) (2) Face amount in-force, $196 billion (1) (2) $41.7 billion in assets (1) 501 sub-branch offices Strong affinity group relationships Growing bancassurance business Financial Strength Ratings: Standard & Poor’s, AA- (3) Moody’s, A2(3) Sub-branch Offices 1) As of June 30, 2010. 2)
Slide 21: Business Model: Life Advisor
Business Model Life Advisor Strong Affinity Group Relationships Platform for Expanding Distribution • Life Advisors focus on mid-market clientele • Life Advisor distribution leverages Life Planner system concepts to improve key drivers • Wider geographical coverage than Prudential of Japan • Teacher
Slide 22: Life Advisor Distribution
Life Advisor Distribution Selective Recruiting Standards • Selection criteria designed for sales in affinity group market • Candidates often introduced by successful Life Advisors Training: Adapted From Life Planner System • Basic training concepts adapted from Prudential of Japan • Specialized trai
Slide 23: Two Distinct Distribution Opportunities
Two Distinct Distribution Opportunities Affinity Group Relationships Bank Channel • Teachers Association • Commenced bank distribution – Relationship commenced 1952 in 2005 – Approximately 600,000 members • Disciplined development – Access to approximately 950,000 of bancassurance teachers and 37,00
Slide 24: Gibraltar Life Emphasis on Protection Products
Gibraltar Life Emphasis on Protection Products In-force Annualized Premiums (1) Annualized New Business Premiums (1) as of June 30, 2010 Six months ended June 30, 2010 Yen-based insurance products (2) U.S. dollar based insurance products Other than Yen-based fixed annuities Yen-based savings and ret
Slide 25: Japanese Insurance Operations Annualized New Business Premiums
Japanese Insurance Operations Annualized New Business Premiums(1) (millions) $1,200 $1,000 $800 $600 $400 $200 $0 2007 2008 2009 2Q09 YTD 2Q10 Gibraltar – Bank Channel Gibraltar – Life Advisors Prudential of Japan – Life Planners 1) Foreign denominated activity translated to U.S. dollars at uniform
Slide 26: Overall Position – New Business (Face Amount)
Overall Position – New Business (Face Amount) (1) Billion FY 2009 New Business Amount Share 5 Years Ago - FY 2004 Share Yen 1. Dai-ichi 7,643 12.6% 1. Nippon 18.4% 2. Nippon 7,603 12.5% 2. Dai-ichi 14.3% 3. T&D Group 6,330 10.4% 3. Meiji-Yasuda 11.1% 4. Sumitomo 5,618 9.2% 4. Sumitomo 10.8% 5. Prude
Slide 27: Prudential Japanese Insurance Operations vs. Industry
Prudential Japanese Insurance Operations vs. Japan Life Insurance Industry New Business Face Amount(1) (billions) $1,200 $50 $45 $1,000 $40 $800 $35 $30 $600 $25 $20 $400 $15 $200 $10 $5 $0 2003 2004 2005 2006 2007 2008 2009 $0 Industry Prudential Japanese Insurance Operations 1) On fiscal year basi
Slide 28: Japanese Insurance Operations Financial Performance
Japanese Insurance Operations Driver of Prudential’s International Insurance Financial Performance Six months ended June 30, (millions) 2008 2009 2009 2010 Pre-tax adjusted operating income Prudential of Japan $ 943 $ 974 $ 494 $ 510 Gibraltar Life 622 622 281 325 Total Japanese Insurance Operations
Slide 29: Protecting Financial Security Over a Lifetime
PROTECTING FINANCIAL SECURITY OVER A LIFETIME JOHN HANRAHAN PRESIDENT AND CHIEF EXECUTIVE OFFICER PRUDENTIAL OF JAPAN
Slide 30: Evolving Protection Needs in Prudential's Largest International Market
Evolving Protection Needs in Prudential’s Largest International Market (1) Japan Population 127 million 100% 23% 31% 27% 29% 50% 27% 21% 23% 19% 0% 2010 2030 Age 0-24 Age 25-44 Age 45-64 Age 65+ • Substantial mass affluent/affluent premature death protection market • Rapidly growing pre-retirement/r
Slide 31: Needs-Based Selling Over a Lifetime
Needs-Based Selling Over a Lifetime Client Age 20 30 40 50 60+ Death Retirement Client Focus Protection Income Needs Needs Prudential Term Insurance Solutions Whole Life U.S. Dollar Retirement Income Fixed Annuity Products • Lifetime client relationships • Needs-based selling through client life cyc
Slide 32: Life Planners Selected and Trained for Lifetime Protection Focus
Prudential Life Planners Selected and Trained for Lifetime Protection Focus Selection Training • College education • Structured training program • Successful track record, • First month: but no prior life insurance Dedicated to intensive training sales experience • Weeks 5-50: Basic training program
Slide 33: Life Planner Perspective Aligned with the Client
Life Planner Perspective Aligned with the Client Primary Market Typical Client Typical Life Planner Profile Profile Primary Death Protection Market • Young professional, • College graduate, Age 35-45 age similar to clients • 5 years experience as • Annual income, Life Planner approximately • Establi
Slide 34: Financial Security Value Proposition
Financial Security Value Proposition Family Financial Security Over a Lifetime Prudential Products Promises Life Selected Backed Based Planner: by on Trusted Professional a Advisor Evaluation Strong of Company Needs 34 2010 Tokyo Investor Day
Slide 35: Product Portfolio Meets Client Needs Over a Lifetime
Product Portfolio Meets Client Needs Over a Lifetime Client Need Product Class Key Features Low cost premature Term Insurance • Death protection for stated period death protection with level premiums • May add third-sector protection riders Death protection with Whole Life • Death protection savings
Slide 36: Protecting Financial Security For a Lifetime
Protecting Financial Security For a Lifetime Client Age 25-34 35-44 45-54 55-64 Annual Premium $3,000 $3,800 $4,900 $5,500 per client(1) 7% 7% 7% 7% Product 25% 21% 28% 28% Mix(1) 68% 65% 65% 72% Whole Life and Retirement Term Medical 1) Based on annual premium for new Prudential of Japan insureds i
Slide 37: Protection-Focused Product Portfolio Drives Sustainable Returns
Protection-Focused Product Portfolio Drives Sustainable Returns PRODUCT DRIVERS OF RETURNS Term Insurance • Robust mortality margins on • Expense margins high average face amounts driven by scale, • Serves basic death back-office protection needs • Potential for add-on and efficiencies replacement s
Slide 38: U.S. Dollar Denominated Products
U.S. Dollar Denominated Products Attractive Value Proposition for Japanese Clients U.S. Dollar U.S. Dollar U.S. Dollar Denominated Denominated Denominated Whole Life Retirement Income Fixed Annuities Death Protection Benefits Retirement Accumulation Retirement Income Attractive Yields Rates offered
Slide 39: Lifetime Relationships Drive Second-Sale Opportunities
Lifetime Relationships and Innovative Products Drive Second-Sale Opportunities Prudential of Japan Second Sales to Existing Customers(1)(2) Annualized New Business Premiums (millions) $120 $109 $100 $94 $98 $86 $80 $60 $40 $20 $0 2006 2007 2008 2009 1) Foreign denominated activity translated to U.S.
Slide 40: Superior Performance Measures Driven by Needs-Based Protection Focus
Superior Performance Measures Driven by Needs-Based Protection Focus(1) Prudential of Japan Gibraltar Life Productivity (2) 6.9 3.8 Policy Persistency (face amount) 13-month 94.5% 92.2% 25-month 88.6% 83.8% Distribution Representative Retention 12-month 81.8% 64.1% 24-month 64.4% 30.6% Average size
Slide 41: Protecting Financial Security Drives Our Beneficial Cycle
Protecting Financial Security Over a Lifetime Drives Our Beneficial Cycle Proven Execution Track Record Satisfy High Customers Customer Needs Satisfaction Life-Long Customer Relationships 41 2010 Tokyo Investor Day
Slide 42: The Power of Associations
THE POWER OF ASSOCIATIONS DISTRIBUTION ADVANTAGE BASED ON RELATIONSHIPS MITSUO KURASHIGE PRESIDENT AND CHIEF EXECUTIVE OFFICER GIBRALTAR LIFE
Slide 43: Association Relationships Key Contributor to Gibraltar Business
Association Relationships Key Contributor to Gibraltar Business In-Force Annualized Premiums Annualized New Business Premiums as of June 30, 2010 (1) Six months ended June 30, 2010 (1) Associations Other Life Advisor Business Banks 1) Foreign denominated activity translated to U.S. dollars at unifor
Slide 44: Teachers Association: Core Relationship for Half a Century
Teachers Association Core Relationship for More Than Half a Century Japanese Educational Mutual Aid Association of Welfare Foundation (Teachers Association) • Relationship since 1952 Member eligibility: School teachers and personnel • Approximately 600,000 members(1) Supervised by: Ministry of Educa
Slide 45: Working Together to Support The Educational Community
Working Together to Support The Educational Community Teachers Association Mainly support for Teachers Mainly support for Students • Scholarships Interest-free college tuition loans for teachers’ children • Overseas Education • Research Grants Support research achievements of teachers and schools •
Slide 46: Gibraltar Life Enriching the Japanese Student Experience
Gibraltar Life Enriching the Japanese Student Experience •AFS Program- American Field Service International Exchange program •Prudential’s Spirit of Community Volunteer Award for teenagers •International Math Olympiad • “Let’s Play Basketball” Coaching by professional basketball players of “bj leagu
Slide 47: Teachers Market
Teachers Market Size(1) Characteristics # of public school teachers High social status 950,000 (Local dignitaries) # of annual retirees/new hires Comfortable, steady income 20,000 30,000/yr Well-managed healthcare Average annual salary 7.5 million yen Limited expertise for ($85 thousand) financial s
Slide 48: Distribution Advantage Drives High Quality Business
Distribution Advantage Drives High Quality Business • Educational employees a naturally Favorable mortality “select” group experience driven by superior • Annual health examinations, underwriting characteristics medical screenings required for school personnel • School personnel are government emplo
Slide 49: Association Sales Proven Approach in an Attractive Market
Association Sales Proven Approach in an Attractive Market • Association relationship provides Gibraltar Life Advisors with access to school sites and teachers’ offices • One-on-one sales on site by Gibraltar Life Advisors • Specialized training program for Life Advisors working in education market •
Slide 50: Specially Trained Life Advisors Cover Nationwide Public School Network
Specially Trained Life Advisors Cover Nationwide Public School Network(1) Approximately Approximately Life Advisors Public schools nationwide 1) Data as of June 30, 2010. 50 2010 Tokyo Investor Day
Slide 51: Participation
Participation (1) Active Teachers 950,000 Association members 480,000 (50%) Retired Retired Teachers Teachers Policyholders (Active) 450,000 (47%) Policyholders 100,000 1) Numbers represent headcount and are approximate as of June 30, 2010. 51 2010 Tokyo Investor Day
Slide 52: Perennial Sales Opportunities
Perennial Sales Opportunities Active Market Retirement Market 20,000 – 30,000 new teachers hired 20,000 – each year 30,000 teachers retire 950,000 each year Active 120,000 Teachers (1) Retired Teachers Association members (1) 1) Numbers approximate as of June 30, 2010. 52 2010 Tokyo Investor Day
Slide 53: Specialized Products Tailored to Education Market
Specialized Products Tailored to Education Market • Primary Products: – Teachers Term – Teachers Medical Active Market – Teachers Whole Life – Teachers Nursing Care • Supplemented by other individual products • Single premium whole life • Endowment Retirement Market • U.S. dollar and alternative cur
Slide 54: Teachers Term Product
Teachers Term Product Affordable Basic Protection with Broad Appeal • Favorable actuarial experience of group enables attractive premium rates • Access to Teachers Term product perceived as key benefit of Association membership; many teachers join Association and purchase product simultaneously • Se
Slide 55: Japanese Teachers Association Retirement Market Opportunity
Japanese Teachers Association Retirement Market Opportunity • Teachers receive lump sum payment at retirement, average about $300,000 • Trusted brand and attractive single premium retirement oriented products form solid value proposition at retirement • Products compare favorably to low-rate bank de
Slide 56: Teachers Association Market Key Driver of Gibraltar's Retirement Sales
Teachers Association Market Key Driver of Gibraltar’s Retirement Sales Total Gibraltar Life (1) Number of Public School Teachers Annualized New Business Premiums 40,000 (millions) (millions) 30,000 Active Retired $172 $172 $175 $175 $145 $145 20,000 58 85 87 Single Pay 10,000 Recurring 87 87 88 Pay
Slide 57: Retirement Products Complement Protection-Focused Business
Retirement Products Complement Protection-Focused Business In-Force Annualized Premiums Annualized New Business Premiums as of June 30, 2010 (1) Year ended December 31, 2009 (1) $1.5 billion $145 million Yen-based insurance products (2) U.S. dollar based insurance products (3) Savings products (4) 1
Slide 58: Gibraltar Life – Japanese Teachers Association: A Sustainable Partnership
Gibraltar Life – Japanese Teachers Association A Sustainable Partnership • Exclusive partnership in serving educators, for more than 55 years • Attractive products encourage Association membership • Joint ownership of Association’s membership management system, which processes recurring premium data
Slide 59: Bank Channel Distribution: A Platform for Growth
BANK CHANNEL DISTRIBUTION A PLATFORM FOR GROWTH TAKESHI TANIGAWA EVP, GIBRALTAR LIFE / CEO, PRUDENTIAL GIBRALTAR FINANCIAL LIFE
Slide 60: Competitive Advantages Support a Strong Bancassurance Model
Competitive Advantages Support a Strong Bancassurance Model • Fixed annuity products attractive to bank clientele, form basis for initial distribution relationships • Competitive protection product portfolio meets life insurance needs of bank customer base • Prudential/Gibraltar brands appeal to sec
Slide 61: Expanding Bank Channel Distribution
Expanding Bank Channel Distribution In 2010, distribution agreements grow to include 27 banks and 6 affiliated agencies (1) Introduced life insurance protection products Assigned experienced Life Planners to Gibraltar Life for Bank Channel development Commenced distribution relationship with Japanes
Slide 62: Nearly 3,000 Potential Points of Sale
Nearly 3,000 Potential Points of Sale Bank of Tokyo Mitsubishi Over $1 trillion deposits(1)(2) 772 branches(1) UFJ (Mega-bank) Mitsubishi UFJ Trust and Over $143 billion deposits (1)(2) 66 branches(1) Banking (Trust-bank) Fukuoka Bank Over $79 billion deposits(1)(2) 167 branches(1) (Regional bank) S
Slide 63: Bancassurance Powered by Prudential
Bancassurance Powered by Prudential Prudential Support Bank Employee Life Insurance Sales • 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 “seconde
Slide 64: On-Site Access to Attractive Bank Customer Base
On-Site Access to Attractive Bank Customer Base Prudential Support Prudential-Trained On-Site Representative Sales • Bank customers traditionally not served by trained life insurance professional at bank branch • Growing market for protection products at banks following regulation changes • Prudenti
Slide 65: A Successful Partnership
A Successful Partnership Bank Channel Annualized New Business Premiums $131 million(1) Sales by former Prudential of Japan Life 16% Planners “seconded” to bank channel Sales by other 84% bank employees 1) For the six months ended June 30, 2010; foreign denominated activity translated to U.S. dollars
Slide 66: Bank Channel Emphasis on Protection Products
Bank Channel Emphasis on Protection Products Bank Channel Annualized New Business Premiums $131 million(1) Life Insurance 20% protection products Other products (primarily U.S. 80% dollar fixed annuities) 1) For the six months ended June 30, 2010; foreign denominated activity translated to U.S. doll
Slide 67: Bank Channel Growth
Bank Channel Growth Annualized New Business Premiums (1) (millions) $140 $131 $120 $100 $80 $76 $60 $55 $47 $46 $40 $39 $21 $25 $20 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 2Q10 YTD Life Insurance protection products Other products (primarily fixed annuities) 1) Foreign denominated activity translated
Slide 68: Bank Channel Prospects for Continued Growth
Bank Channel Prospects for Continued Growth • Growing bank focus on protection life insurance sales following recent regulation changes • Continued Prudential training of bank employees promotes product awareness and sales skills; expanding count of employees qualified to sell life insurance • Expan