Qfs 1q 2012 - Final

Prudential Financial, Inc.
(PRU)
Quarterly Financial Supplement

FINANCIAL SERVICES BUSINESSES
FIRST QUARTER 2012
Reference is made to Prudential Financial, Inc.'s filings with the Securities and Exchange Commission for general information, and consolidated financial information, regarding Prudential Financial, Inc., including its Closed Block Business. All financial information in this document is unaudited.
May 2, 2012
Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012
CONTENTS
Page
HIGHLIGHTS Financial Highlights Operations Highlights
1-3 4
FINANCIAL SERVICES BUSINESSES Combined Statements of Operations Combined Balance Sheets Combining Statements of Operations by Division Combining Balance Sheets by Division Short-Term and Long-Term Debt
5 6 7 8 9
U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION Combined Statements of Operations Combining Statements of Operations Individual Annuities Sales Results and Account Values Individual Annuities Account Value Activity Individual Annuities Living Benefit Features Individual Annuities Death Benefit Features Retirement Segment Sales Results and Account Values Supplementary Revenue and Assets Under Management Information for Asset Management Segment Supplementary Assets Under Management and Assets Under Administration Information for Asset Management Segment
10 11 12 13 14 15 16 17 18
U.S. INDIVIDUAL LIFE AND GROUP INSURANCE DIVISION Combined Statements of Operations Combining Statements of Operations Individual Life Annualized New Business Premiums, Account Value Activity, and Face Amount in Force Supplementary Information for Individual Life Insurance Supplementary Information for Group Insurance
19 20 21 22 23
DEFERRED POLICY ACQUISITION COSTS & DEFERRED SALES INDUCEMENTS - INDIVIDUAL ANNUITIES, INDIVIDUAL LIFE AND GROUP INSURANCE
24
INTERNATIONAL INSURANCE DIVISION Combined Statements of Operations Combining Statements of Operations International Insurance Segment - Supplementary Income Statement Information Sales Results and Supplementary Information
25 26 27 28-29
INVESTMENT PORTFOLIO Investment Portfolio Composition Financial Services Businesses Investment Portfolio Composition - Japanese Insurance Operations and Excluding Japanese Insurance Operations Financial Services Businesses Investment Results Financial Services Businesses Investment Results - Japanese Insurance Operations Financial Services Businesses Investment Results - Excluding Japanese Insurance Operations
30 31 32 33 34
KEY DEFINITIONS AND FORMULAS
35-37 38
RATINGS AND INVESTOR INFORMATION
ii
FINANCIAL HIGHLIGHTS (in millions, except per share data) Year-to-date 2012 2011 % Change 1Q 2Q 2011 3Q 4Q 2012 1Q
Financial Services Businesses: 698 74 606 (363) 1,015 274 741 600 137 628 (269) 1,096 296 800 16% -46% -4% -35% -7% -7% -7% Pre-tax adjusted operating income (loss) by division: U.S. Retirement Solutions and Investment Management Division U.S. Individual Life and Group Insurance Division International Insurance Division Corporate and other operations Total pre-tax adjusted operating income Income taxes, applicable to adjusted operating income Financial Services Businesses after-tax adjusted operating income 600 137 628 (269) 1,096 296 800 605 184 500 (237) 1,052 279 773 42 173 660 (347) 528 110 418 668 193 595 (286) 1,170 309 861 698 74 606 (363) 1,015 274 741
Reconciling items: (1,838) 234 (246) 1 5 (1,844) (112) (1,732) (991) (4) (995) 11 (984) 7 (977) 11 (988) 11.1% (375) (17) 34 (9) (133) (500) (146) (354) 446 79 525 25 550 14 564 25 539 12.5% -390% 1476% -824% 111% 104% -269% 23% -389% -322% -105% -290% -56% -279% -50% -273% -56% -283% Realized investment gains (losses), net, and related charges and adjustments Investment gains (losses) on trading account assets supporting insurance liabilities, net Change in experience-rated contractholder liabilities due to asset value changes Divested businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Total reconciling items, before income taxes Income taxes, not applicable to adjusted operating income Total reconciling items, after income taxes Income (loss) from continuing operations (after-tax) of Financial Services Businesses before equity in earnings of operating joint ventures Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests Income (loss) from continuing operations attributable to Prudential Financial, Inc. Earnings attributable to noncontrolling interests Income from continuing operations (after-tax) of Financial Services Businesses Income (loss) from discontinued operations, net of taxes Net income (loss) of Financial Services Businesses Less: Income attributable to noncontrolling interests Net income (loss) of Financial Services Businesses attributable to Prudential Financial, Inc. Operating Return on Average Equity (based on adjusted operating income) Reconciliation to Consolidated Net Income Attributable to Prudential Financial, Inc: (988) 21 (967) 539 22 561 Net income (loss) of Financial Services Businesses attributable to Prudential Financial, Inc. (above) Net income of Closed Block Business attributable to Prudential Financial, Inc. Consolidated net income (loss) attributable to Prudential Financial, Inc. 539 22 561 779 10 789 1,562 32 1,594 516 82 598 (988) 21 (967) (375) (17) 34 (9) (133) (500) (146) (354) 446 79 525 25 550 14 564 25 539 12.5% 1 177 (178) 19 19 10 9 782 (19) 763 29 792 16 808 29 779 11.7% 1,817 10 68 24 (87) 1,832 736 1,096 1,514 57 1,571 10 1,581 (9) 1,572 10 1,562 6.2% (596) 53 (47) 39 12 (539) (187) (352) 509 (7) 502 8 510 14 524 8 516 12.4% (1,838) 234 (246) 1 5 (1,844) (112) (1,732) (991) (4) (995) 11 (984) 7 (977) 11 (988) 11.1%
Page 1
FINANCIAL HIGHLIGHTS (in millions, except per share data) Year-to-date 2012 2011 1Q 2Q 2011 3Q 4Q 2012 1Q
Earnings per share of Common Stock (diluted): (1) 1.56 1.62 Financial Services Businesses after-tax adjusted operating income 1.62 1.57 0.87 1.79 1.56
Reconciling items: (3.85) 0.49 (0.52) 0.02 (3.86) (0.20) (3.66) (2.10) 0.01 (2.09) 469.2 477.5 8 4 (0.76) (0.03) 0.07 (0.02) 0.01 (0.73) (0.19) (0.54) 1.08 0.02 1.10 484.9 493.9 9 4 Realized investment gains (losses), net, and related charges and adjustments Investment gains (losses) on trading account assets supporting insurance liabilities, net Change in experience-rated contractholder liabilities due to asset value changes Divested businesses Difference in earnings allocated to participating unvested share-based payment awards Total reconciling items, before income taxes Income taxes, not applicable to adjusted operating income Total reconciling items, after income taxes Income (loss) from continuing operations (after-tax) of Financial Services Businesses attributable to Prudential Financial, Inc. Income (loss) from discontinued operations, net of taxes Net income (loss) of Financial Services Businesses attributable to Prudential Financial, Inc. Weighted average number of outstanding Common shares (basic) Weighted average number of outstanding Common shares (diluted) Direct equity adjustments for earnings per share calculation Earnings related to interest, net of tax, on exchangeable surplus notes Earnings allocated to participating unvested share-based payment awards for earnings per share calculation Financial Services Businesses after-tax adjusted operating income Income from continuing operations (after-tax) of Financial Services Businesses (0.76) (0.03) 0.07 (0.02) 0.01 (0.73) (0.19) (0.54) 1.08 0.02 1.10 484.9 493.9 9 4 0.36 (0.36) 0.02 (0.02) 1.55 0.03 1.58 486.0 494.8 8 5 3.71 0.02 0.14 0.05 (0.03) 3.89 1.57 2.32 3.19 (0.01) 3.18 481.2 489.3 8 4 (1.25) 0.11 (0.10) 0.08 (1.16) (0.41) (0.75) 1.04 0.03 1.07 469.2 477.0 (1) 4 (3.85) 0.49 (0.52) 0.02 (3.86) (0.20) (3.66) (2.10) 0.01 (2.09) 469.2 477.5 8 4
8 -
11 7
11 7
10 11
6 20
11 9
8 -
(1) Diluted share count used in the diluted earnings per share calculation for GAAP measures is equal to weighted average basic common shares for the three months ended March 31, 2012 as all potential common shares are anti-dilutive due to the loss from continuing operations available to holders of common stock after direct equity adjustment.
Page 2
FINANCIAL HIGHLIGHTS (in millions, except per share data)
Year-to-date 2012 2011 Financial Services Businesses Capitalization Data (1): Senior Debt: Short-term debt Long-term debt Junior Subordinated Long-Term Debt 2,432 20,764 1,519 1Q 2Q
2011 3Q 4Q
2012 1Q
2,152 21,309 1,519
2,899 20,651 1,519
2,336 21,353 1,519
3,655 21,110 1,519
Attributed Equity: Including accumulated other comprehensive income Excluding total accumulated other comprehensive income 28,501 26,206 30,754 27,052 32,901 27,916 32,817 27,567 33,509 26,436
Total Capitalization: Including accumulated other comprehensive income Excluding total accumulated other comprehensive income 50,784 48,489 53,582 49,880 55,071 50,086 55,689 50,439 56,138 49,065
Book value per share of Common Stock: Including accumulated other comprehensive income Excluding total accumulated other comprehensive income 57.82 53.17 62.28 54.78 68.77 58.35 69.07 58.02 70.80 55.85
Number of diluted shares at end of period (2)
492.9
493.8
478.4
475.1
473.3
Common Stock Price Range (based on closing price): 64.65 51.30 63.39 67.32 58.32 61.58 High Low Close 67.32 58.32 61.58 64.62 57.77 63.59 65.26 43.93 46.86 57.32 43.91 50.12 64.65 51.30 63.39
Common Stock market capitalization (1)
29,900
30,912
22,113
23,456
29,667
(1) As of end of period. (2) The number of diluted shares at end of period excludes the impact of exchangeable surplus notes due to the anti-dilutive impact of conversion at $98.78 per share.
Page 3
OPERATIONS HIGHLIGHTS
Year-to-date 2012 2011 1Q 2Q
2011 3Q 4Q
2012 1Q
Assets Under Management and Administration ($ billions) (1) (2): Assets Under Management : Managed by U.S. Retirement Solutions and Investment Management Division: Asset Management Segment - Investment Management & Advisory Services Institutional customers Retail customers General account Total Investment Management and Advisory Services Non-proprietary assets under management Total managed by U.S. Retirement Solutions and Investment Management Division Managed by U.S. Individual Life and Group Insurance Division Managed by International Insurance Division Total assets under management Client assets under administration Total assets under management and administration 246.2 108.8 213.8 568.8 161.7 730.5 13.3 114.7 858.5 86.6 945.1 256.2 109.3 218.0 583.5 167.3 750.8 13.5 118.9 883.2 89.4 972.6 258.8 110.1 230.5 599.4 136.1 735.5 13.6 122.2 871.3 82.6 953.9 269.1 117.9 232.1 619.1 152.2 771.3 13.8 115.6 900.7 85.7 986.4 283.2 123.6 230.0 636.8 176.8 813.6 14.8 114.5 942.9 89.2 1,032.1
Assets managed or administered for customers outside of the United States at end of period
201.4
208.3
213.2
208.9
214.6
Distribution Representatives (1): Prudential Agents International Life Planners Gibraltar Life Consultants 2,506 6,581 13,227 2,551 6,568 13,353 2,571 6,699 12,936 2,529 6,792 12,791 2,603 6,819 12,219
45
50
Prudential Agent productivity ($ thousands)
50
50
52
64
45
(1) As of end of period. (2) At fair market value.
Page 4
COMBINED STATEMENTS OF OPERATIONS - FINANCIAL SERVICES BUSINESSES (in millions)
Year-to-date 2012 2011
% Change 1Q 2Q
2011 3Q 4Q
2012 1Q
Revenues (1): 6,100 1,078 2,532 941 10,651 4,817 982 2,304 1,044 9,147 27% 10% 10% -10% 16% Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues 4,817 982 2,304 1,044 9,147 5,497 1,038 2,525 1,039 10,099 5,413 979 2,536 956 9,884 5,645 1,033 2,552 1,038 10,268 6,100 1,078 2,532 941 10,651
Benefits and Expenses (1): 5,614 948 308 (824) 412 3,178 9,636 4,644 829 279 (743) 360 2,682 8,051 21% 14% 10% -11% 14% 18% 20% Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses 4,644 829 279 (743) 360 2,682 8,051 5,160 934 290 (768) 426 3,005 9,047 5,419 1,040 296 (788) 411 2,978 9,356 5,047 953 299 (770) 381 3,188 9,098 5,614 948 308 (824) 412 3,178 9,636
1,015
1,096
-7% Adjusted operating income before income taxes
1,096
1,052
528
1,170
1,015
Reconciling items: (2,716) 878 (1,838) (365) (10) (375) -644% 8880% -390% Realized investment gains (losses), net, and related adjustments Related charges Total realized investment gains (losses), net, and related charges and adjustments (365) (10) (375) 155 (154) 1 3,385 (1,568) 1,817 (672) 76 (596) (2,716) 878 (1,838)
234 (246) 1 5 (1,844)
(17) 34 (9) (133) (500)
1476% -824% 111% 104% -269%
Investment gains (losses) on trading account assets supporting insurance liabilities, net Change in experience-rated contractholder liabilities due to asset value changes Divested businesses Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests Total reconciling items, before income taxes
(17) 34 (9) (133) (500)
177 (178) 19 19
10 68 24 (87) 1,832
53 (47) 39 12 (539)
234 (246) 1 5 (1,844)
(829) 162 (991)
596 150 446
-239% Income (loss) from continuing operations before income taxes and equity in earnings of operating joint ventures 8% Income tax expense -322% Income (loss) from continuing operations before equity in earnings of operating joint ventures
596 150 446
1,071 289 782
2,360 846 1,514
631 122 509
(829) 162 (991)
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments; investment gains, net of losses, on trading account assets supporting insurance liabilities, and revenues of divested businesses, and include revenues representing equity in earnings of operating joint ventures other than those classified as divested businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses; change in experience-rated contractholder liabilities due to asset value changes and benefits and expenses of divested businesses and include charges for income attributable to non controlling interests.
Page 5
COMBINED BALANCE SHEETS - FINANCIAL SERVICES BUSINESSES (in millions)
03/31/2011
06/30/2011
09/30/2011
12/31/2011
03/31/2012
Assets: Investments: Fixed maturities, available for sale, at fair value (amortized cost $182,343; $186,022; $195,462; $197,784; $195,582) Fixed maturities, held to maturity, at amortized cost (fair value $5,283; $5,342; $5,484; $5,354; $5,006) Trading account assets supporting insurance liabilities, at fair value Other trading account assets, at fair value Equity securities, available for sale, at fair value (cost $5,621; $5,517; $4,280; $4,165; $4,041) Commercial mortgage and other loans Policy loans Other long-term investments Short-term investments Total investments Cash and cash equivalents Accrued investment income Deferred policy acquisition costs Other assets Separate account assets Total assets 6,286 24,259 5,926 6,335 6,094 262,776 10,512 2,083 12,255 21,062 218,382 527,070 6,022 24,712 6,046 6,239 6,497 269,688 13,234 2,111 12,500 20,651 222,892 541,076 4,561 25,315 6,176 5,919 6,764 284,804 14,734 2,147 11,658 16,626 207,366 537,335 4,413 26,391 6,263 5,830 8,593 289,438 13,201 2,177 12,056 15,748 218,380 551,000 4,629 26,205 6,191 5,517 7,196 287,471 12,980 2,147 13,008 15,641 236,567 567,814 5,102 18,314 3,599 5,091 18,563 3,616 5,195 19,535 6,237 5,107 19,481 5,228 4,775 19,679 4,860 186,861 192,902 205,102 208,132 208,419
Liabilities: Future policy benefits Policyholders' account balances Securities sold under agreements to repurchase Cash collateral for loaned securities Income taxes Senior short-term debt Senior long-term debt Junior subordinated long-term debt Other liabilities Separate account liabilities Total liabilities 102,584 127,518 2,599 1,522 4,697 2,432 20,764 1,519 16,002 218,382 498,019 108,959 125,501 2,830 2,415 5,541 2,152 21,309 1,519 16,611 222,892 509,729 118,179 129,074 2,555 2,334 7,308 2,899 20,651 1,519 11,894 207,366 503,779 119,248 129,074 3,118 2,254 6,993 2,336 21,353 1,519 13,320 218,380 517,595 116,721 128,038 3,806 2,226 8,094 3,655 21,110 1,519 11,973 236,567 533,709
Attributed Equity: Accumulated other comprehensive income Other attributed equity Total attributed equity 2,295 26,206 28,501 3,702 27,052 30,754 4,985 27,916 32,901 5,250 27,567 32,817 7,073 26,436 33,509
Noncontrolling Interest Total Equity
550 29,051
593 31,347
655 33,556
588 33,405
596 34,105
Total liabilities and equity
527,070
541,076
537,335
551,000
567,814
Page 6
FINANCIAL SERVICES BUSINESSES COMBINING STATEMENTS OF OPERATIONS - BY DIVISION (in millions) Three Months Ended March 31, 2012 Total Financial Services Businesses Revenues (1) : Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses Adjusted operating income (loss) before income taxes 5,614 948 308 (824) 412 3,178 9,636 1,015 251 544 35 (265) 97 1,244 1,906 698 1,603 133 77 (106) 64 478 2,249 74 3,752 278 1 (470) 260 1,422 5,243 606 8 (7) 195 17 (9) 34 238 (363) 6,100 1,078 2,532 941 10,651 116 544 996 948 2,604 1,389 391 432 111 2,323 4,605 152 1,023 69 5,849 (10) (9) 81 (187) (125) U.S. Retirement Solutions & Investment Management Division U.S. Individual Life & Group Insurance Division International Insurance Division Corporate and Other Operations
Three Months Ended March 31, 2011 Total Financial Services Businesses U.S. Retirement Solutions & Investment Management Division U.S. Individual Life & Group Insurance Division International Insurance Division Corporate and Other Operations
Revenues (1): Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues 4,817 982 2,304 1,044 9,147 211 492 1,044 905 2,652 1,360 385 407 79 2,231 3,256 113 765 187 4,321 (10) (8) 88 (127) (57)
Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses 4,644 829 279 (743) 360 2,682 8,051 426 550 34 (361) 114 1,289 2,052 1,510 128 45 (84) 73 422 2,094 2,706 161 (321) 186 961 3,693 2 (10) 200 23 (13) 10 212
Adjusted operating income (loss) before income taxes
1,096
600
137
628
(269)
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments; investment gains, net of losses, on trading account assets supporting insurance liabilities, and revenues of divested businesses, and include revenues representing equity in earnings of operating joint ventures other than those classified as divested businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses; change in experience-rated contractholder liabilities due to asset value changes and benefits and expenses of divested businesses and include charges for income attributable to non controlling interests.
Page 7
FINANCIAL SERVICES BUSINESSES COMBINING BALANCE SHEETS - BY DIVISION (in millions) As of March 31, 2012 U.S. Individual Life & Group Insurance Division 94,522 3,451 9,451 199,926 307,350 36,862 3,622 5,551 37,668 83,703 International Insurance Division 148,650 6,206 12,145 1,256 168,257 Corporate and Other Operations 7,437 (271) 3,621 (2,283) 8,504
Total Financial Services Businesses Assets: Total investments Deferred policy acquisition costs Other assets Separate account assets Total assets Liabilities: Future policy benefits Policyholders' account balances Debt Other liabilities Separate account liabilities Total liabilities Attributed Equity: Accumulated other comprehensive income (loss) Other attributed equity Total attributed equity Noncontrolling Interest Total Equity Total liabilities and equity 287,471 13,008 30,768 236,567 567,814
U.S. Retirement Solutions & Investment Management Division
116,721 128,038 26,284 26,099 236,567 533,709
19,003 57,287 6,113 9,771 199,926 292,100
11,465 17,158 7,691 4,335 37,668 78,317
85,864 54,099 100 10,145 1,256 151,464
389 (506) 12,380 1,848 (2,283) 11,828
7,073 26,436 33,509 596 34,105 567,814
2,089 12,523 14,612 638 15,250 307,350
1,503 3,883 5,386 5,386 83,703
4,695 12,048 16,743 50 16,793 168,257
(1,214) (2,018) (3,232) (92) (3,324) 8,504
As of December 31, 2011 Total Financial Services Businesses Assets: Total investments Deferred policy acquisition costs Other assets Separate account assets Total assets Liabilities: Future policy benefits Policyholders' account balances Debt Other liabilities Separate account liabilities Total liabilities Attributed Equity: Accumulated other comprehensive income (loss) Other attributed equity Total attributed equity Noncontrolling Interest Total Equity Total liabilities and equity 289,438 12,056 31,126 218,380 551,000 U.S. Retirement Solutions & Investment Management Division 97,005 2,587 9,271 183,785 292,648 U.S. Individual Life & Group Insurance Division 36,164 3,563 4,652 35,665 80,044 International Insurance Division 148,946 6,141 12,756 1,118 168,961 Corporate and Other Operations 7,323 (235) 4,447 (2,188) 9,347
119,248 129,074 25,208 25,685 218,380 517,595
20,451 57,878 4,704 10,379 183,785 277,197
11,194 16,816 7,045 3,944 35,665 74,664
87,199 54,908 18 10,280 1,118 153,523
404 (528) 13,441 1,082 (2,188) 12,211
5,250 27,567 32,817 588 33,405 551,000
2,072 12,754 14,826 625 15,451 292,648
1,550 3,830 5,380 5,380 80,044
3,089 12,298 15,387 51 15,438 168,961
(1,461) (1,315) (2,776) (88) (2,864) 9,347
Page 8
SHORT-TERM AND LONG-TERM DEBT (in millions)
As of March 31, 2012 Senior debt Junior Subordinated Long-term Debt Senior debt
As of December 31, 2011 Junior Subordinated Long-term Debt
Short-term Debt
Long-term Debt
Total Debt
Short-term Debt
Long-term Debt
Total Debt
Financial Services Businesses Borrowings by use of proceeds: Capital Debt Investment related Securities business related Specified other businesses Limited recourse and non-recourse borrowing Total debt - Financial Services Businesses 715 1,344 843 753 3,655 8,458 9,031 322 3,299 21,110 1,519 1,519 10,692 10,375 1,165 4,052 26,284 450 926 857 103 2,336 9,255 7,971 661 3,466 21,353 1,519 1,519 11,224 8,897 1,518 3,569 25,208
Closed Block Business Investment related Limited recourse and non-recourse borrowing Total debt 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750
As of March 31, 2012 The Prudential Prudential Financial, Inc. Financial Services Businesses Borrowings by sources: Insurance Co. of America (1)(2) Other Affiliates Total Prudential Financial, Inc.
As of December 31, 2011 The Prudential Insurance Co. of America (1)(2) Other Affiliates Total
Capital Debt Investment related Securities business related Specified other businesses Limited recourse and non-recourse borrowing Total debt - Financial Services Businesses
9,162 5,689 933 2,726 18,510
1,041 1,469 225 1,326 4,061
489 3,217 7 3,713
10,692 10,375 1,165 4,052 26,284
9,662 4,970 1,086 2,834 18,552
1,040 710 422 735 2,907
522 3,217 10 3,749
11,224 8,897 1,518 3,569 25,208
(1) Includes Prudential Funding, LLC. (2) Capital debt at Prudential Insurance Co. of America includes $940 million of Surplus Notes for March 31, 2012 and December 31, 2011 respectively.
Page 9
Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012 COMBINED STATEMENTS OF OPERATIONS - U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION (in millions)
% Change Revenues (1): 1Q 2Q
2011 3Q 4Q
2012 1Q
116 544 996 948 2,604
211 492 1,044 905 2,652
-45% 11% -5% 5% -2%
Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues
211 492 1,044 905 2,652
244 520 1,034 1,039 2,837
189 519 999 882 2,589
257 512 1,010 963 2,742
116 544 996 948 2,604
Benefits and Expenses (1): 251 544 35 (265) 97 1,244 1,906 426 550 34 (361) 114 1,289 2,052 -41% -1% 3% 27% -15% -3% -7% Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses 426 550 34 (361) 114 1,289 2,052 530 563 35 (249) 141 1,212 2,232 698 623 35 (243) 249 1,185 2,547 416 549 35 (240) 98 1,216 2,074 251 544 35 (265) 97 1,244 1,906
698
600
16%
Adjusted operating income before income taxes
600
605
42
668
698
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on trading account assets supporting insurance liabilities. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to non controlling interests.
Page 10
COMBINING STATEMENTS OF OPERATIONS - U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION (in millions) Three Months Ended March 31, 2012 Total U.S. Retirement Solutions & Investment Management Division Revenues (1): Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses Adjusted operating income before income taxes 251 544 35 (265) 97 1,244 1,906 698 (45) 117 28 (254) 86 605 537 421 296 427 4 (4) 5 223 951 156 3 (7) 6 416 418 121 116 544 996 948 2,604 27 494 197 240 958 89 50 779 189 1,107 20 519 539 Individual Annuities Retirement Asset Management
Three Months Ended March 31, 2011 Total U.S. Retirement Solutions & Investment Management Division Individual Annuities Retirement Asset Management
Revenues (1): Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues 211 492 1,044 905 2,652 39 443 201 215 898 172 49 805 180 1,206 38 510 548
Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses Adjusted operating income before income taxes 426 550 34 (361) 114 1,289 2,052 600 60 136 27 (345) 83 663 624 274 366 414 4 (9) 25 234 1,034 172 3 (7) 6 392 394 154
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments and investment gains, net of losses, on trading account assets supporting insurance liabilities. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to non controlling interests.
Page 11
U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION - INDIVIDUAL ANNUITIES SALES RESULTS AND ACCOUNT VALUES (in millions)
2011 3Q 4Q
2012 1Q
SALES AND ACCOUNT VALUES: Variable Annuities: 109,743 4,943 (1,676) 3,267 (285) 2,982 8,171 (620) 120,276 102,348 6,815 (1,967) 4,848 (254) 4,594 3,552 (525) 109,969 Beginning total account value Sales Surrenders and withdrawals Net sales Benefit payments Net flows Change in market value, interest credited, and other Policy charges Ending total account value Fixed Annuities: 3,792 16 (43) (27) (83) (110) 96 3,778 3,837 18 (48) (30) (67) (97) 102 (1) 3,841 Beginning total account value Sales Surrenders and withdrawals Net redemptions Benefit payments Net flows Interest credited and other Policy charges Ending total account value 3,837 18 (48) (30) (67) (97) 102 (1) 3,841 3,841 20 (45) (25) (65) (90) 74 3,825 3,825 15 (46) (31) (67) (98) 83 3,810 3,810 16 (44) (28) (77) (105) 87 3,792 3,792 16 (43) (27) (83) (110) 96 3,778 102,348 6,815 (1,967) 4,848 (254) 4,594 3,552 (525) 109,969 109,969 4,531 (1,933) 2,598 (290) 2,308 493 (568) 112,202 112,202 4,472 (1,623) 2,849 (272) 2,577 (11,330) (570) 102,879 102,879 4,406 (1,526) 2,880 (276) 2,604 4,835 (575) 109,743 109,743 4,943 (1,676) 3,267 (285) 2,982 8,171 (620) 120,276
SALES BY DISTRIBUTION CHANNEL: Variable and Fixed Annuities (1): 764 1,233 2,103 859 4,959 997 1,414 3,339 1,083 6,833 Insurance Agents Wirehouses Independent Financial Planners Bank Distribution Total 997 1,414 3,339 1,083 6,833 758 929 2,057 807 4,551 736 1,040 1,922 789 4,487 732 1,180 1,822 688 4,422 764 1,233 2,103 859 4,959
(1) Amounts represent gross sales.
Page 12
U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION - INDIVIDUAL ANNUITIES ACCOUNT VALUE ACTIVITY (in millions)
Year-to-date 2012 2011 INDIVIDUAL ANNUITIES: Account Values in General Account (1): 12,830 548 (278) 270 (101) 169 96 (818) 12,277 13,223 521 (346) 175 (88) 87 106 (794) (1) 12,621 Beginning balance Premiums and deposits Surrenders and withdrawals Net sales Benefit payments Net flows Interest credited and other Net transfers (to) from separate account Policy charges Ending balance Account Values in Separate Account: 100,705 4,411 (1,441) 2,970 (267) 2,703 8,171 818 (620) 111,777 92,962 6,312 (1,669) 4,643 (233) 4,410 3,548 794 (525) 101,189 Beginning balance Premiums and deposits Surrenders and withdrawals Net sales Benefit payments Net flows Change in market value, interest credited and other Net transfers (to) from general account Policy charges Ending balance 92,962 6,312 (1,669) 4,643 (233) 4,410 3,548 794 (525) 101,189 13,223 521 (346) 175 (88) 87 106 (794) (1) 12,621 1Q 2Q
2011 3Q 4Q
2012 1Q
12,621 391 (294) 97 (85) 12 100 (548) 12,185
12,185 489 (295) 194 (82) 112 102 572 12,971
12,971 505 (179) 326 (92) 234 104 (479) 12,830
12,830 548 (278) 270 (101) 169 96 (818) 12,277
101,189 4,160 (1,684) 2,476 (270) 2,206 467 548 (568) 103,842
103,842 3,998 (1,374) 2,624 (257) 2,367 (11,349) (572) (570) 93,718
93,718 3,917 (1,391) 2,526 (261) 2,265 4,818 479 (575) 100,705
100,705 4,411 (1,441) 2,970 (267) 2,703 8,171 818 (620) 111,777
(1) Premiums and deposits, and surrenders and withdrawals, are classified within the general account and separate account for purposes of this presentation based on the allocation of customer funds. For example, premiums allocated by customers to separate account investments at the time of sale, while remitted through the company's general account, are shown as separate account premium in this display, rather than as general account premium and transfers to the separate account.
Page 13
U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION - INDIVIDUAL ANNUITIES LIVING BENEFIT FEATURES (in millions)
2011 1Q LIVING BENEFIT FEATURES ACCOUNT VALUE AND NET AMOUNT AT RISK (1): 2Q 3Q 4Q
2012 1Q
Variable Annuity Account Values with Living Benefit Features Guaranteed minimum accumulation benefits Guaranteed minimum withdrawal benefits Guaranteed minimum income benefits Guaranteed minimum withdrawal & income benefits Total 9,935 1,296 4,480 66,857 82,568 9,667 1,215 4,261 70,349 85,492 8,844 1,018 3,580 66,080 79,522 8,771 1,031 3,685 72,154 85,641 8,724 1,066 3,874 81,156 94,820
Living Benefit Features Account Values by Product Design Type Account Values with Auto-Rebalancing Feature Account Values without Auto-Rebalancing Feature Total 64,786 17,782 82,568 68,273 17,219 85,492 64,769 14,753 79,522 70,341 15,300 85,641 78,622 16,198 94,820
Living Benefit Features Net Amount at Risk by Product Design Type Net Amount at Risk with Auto-Rebalancing Feature Net Amount at Risk without Auto-Rebalancing Feature Total 1,227 1,574 2,801 1,438 1,622 3,060 4,996 2,934 7,930 4,238 2,361 6,599 2,650 1,652 4,302
(1) At end of period.
Page 14
U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION - INDIVIDUAL ANNUITIES DEATH BENEFIT FEATURES (in millions)
2011 1Q DEATH BENEFIT FEATURES ACCOUNT VALUE AND NET AMOUNT AT RISK (1): 2Q 3Q 4Q
2012 1Q
Variable Annuity Account Values by Death Benefit Features Return of net deposits: Account value Net amount at risk Minimum return, anniversary contract value, or maximum contract value: Account value Net amount at risk Death Benefit Features Account Values by Product Design Type Account Values with Auto-Rebalancing Feature Account Values without Auto-Rebalancing Feature Total 64,786 41,835 106,621 68,273 40,666 108,939 64,769 35,224 99,993 70,341 36,407 106,748 78,622 38,505 117,127 30,216 3,871 30,191 3,958 27,022 6,751 28,414 5,699 30,685 4,173 76,405 929 78,748 918 72,971 3,238 78,334 2,083 86,442 963
Death Benefit Features Net Amount at Risk by Product Design Type Net Amount at Risk with Auto-Rebalancing Feature Net Amount at Risk without Auto-Rebalancing Feature Total 557 4,243 4,800 591 4,285 4,876 3,042 6,947 9,989 2,154 5,628 7,782 995 4,141 5,136
(1) At end of period.
Page 15
U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION - RETIREMENT SEGMENT SALES RESULTS AND ACCOUNT VALUES (in millions)
2011 3Q 4Q
2012 1Q
RETIREMENT SEGMENT SALES AND ACCOUNT VALUES Full Service: 139,430 4,646 (7,103) 9,018 145,991 (2,457) 141,313 4,848 (4,927) 4,743 145,977 (79) Beginning total account value Deposits and sales Withdrawals and benefits Change in market value, interest credited, interest income and other activity (1) Ending total account value Net withdrawals Stable value account values included above Institutional Investment Products: 90,089 4,399 (1,538) 928 (25) 93,853 2,861 64,183 5,785 (1,128) 482 (430) 68,892 4,657 Beginning total account value Additions Withdrawals and benefits (2) Change in market value, interest credited and interest income Other (3) Ending total account value Net additions 64,183 5,785 (1,128) 482 (430) 68,892 4,657 68,892 5,592 (1,437) 1,190 (106) 74,131 4,155 74,131 5,571 (1,501) 2,176 136 80,513 4,070 80,513 10,825 (2,084) 733 102 90,089 8,741 90,089 4,399 (1,538) 928 (25) 93,853 2,861 141,313 4,848 (4,927) 4,743 145,977 (79) 39,062 145,977 4,128 (4,214) 689 146,580 (86) 39,828 146,580 3,966 (4,126) (12,222) 134,198 (160) 40,889 134,198 3,879 (5,893) 7,246 139,430 (2,014) 41,142 139,430 4,646 (7,103) 9,018 145,991 (2,457) 41,169
(1) Includes $469 million for the three months ended December 31, 2011, representing the addition of Prudential's Non-Qualified pension plan transferred from a third party administrator. (2) Includes $(34) million, $(18) million, $(16) million, $(10) million and $(7) million for the three months ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011 and March 31, 2012 respectively, representing transfers of client balances managed by Prudential to externally managed accounts. These withdrawals are offset within the "Other" category and there are no net impacts on ending account values for these transfers. (3) "Other" activity includes transfers to the Asset Management segment of $(402) million and $(13) million for the three months ended March 31, 2011 and June 30, 2011, respectively. "Other" activity also includes $34 million, $18 million, $16 million, $10 million and $7 million for the three months ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011 and March 31, 2012 respectively, related to transfers discussed above in note 2. The remainder of "Other" activity primarily represents changes in asset balances for externally managed accounts.
Page 16
U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION - SUPPLEMENTARY REVENUE AND ASSETS UNDER MANAGEMENT INFORMATION FOR ASSET MANAGEMENT SEGMENT
Supplementary Revenue Information (in millions): Year-to-date 2012 2011 % Change 1Q 2Q 2011 3Q 4Q 2012 1Q
Analysis of revenues by type: 386 30 123 539 356 57 135 548 8% -47% -9% -2% Asset management fees Incentive, transaction, strategic investing and commercial mortgage revenues Service, distribution and other revenues Total Asset Management segment revenues 356 57 135 548 368 149 139 656 367 35 111 513 376 98 120 594 386 30 123 539
Analysis of asset management fees by source: 187 115 84 386 174 104 78 356 7% 11% 8% 8% Institutional customers Retail customers General account Total asset management fees 174 104 78 356 178 108 82 368 178 107 82 367 184 107 85 376 187 115 84 386
Supplementary Assets Under Management Information (in billions): March 31, 2012 Fixed Equity Income Real Estate Total
Institutional customers Retail customers General account Total
51.0 82.9 4.6 138.5
202.4 39.3 224.0 465.7
29.8 1.4 1.4 32.6
283.2 123.6 230.0 636.8
March 31, 2011 Fixed Equity Income Real Estate Total
Institutional customers Retail customers General account Total
52.6 79.3 4.4 136.3
168.5 27.9 208.4 404.8
25.1 1.6 1.0 27.7
246.2 108.8 213.8 568.8
Page 17
Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012 U.S. RETIREMENT SOLUTIONS AND INVESTMENT MANAGEMENT DIVISION - SUPPLEMENTARY ASSETS UNDER MANAGEMENT AND ADMINISTRATION INFORMATION FOR ASSET MANAGEMENT SEGMENT (in billions) Year-to-date 2012 2011 Institutional Assets Under Management: 1Q 2Q 2011 3Q 4Q 2012 1Q
Assets gathered by Investment Management & Advisory Services sales force: 231.5 13.9 (8.5) 7.6 0.1 244.6 38.6 283.2 197.6 12.4 (6.5) 5.4 (0.1) 0.4 209.2 37.0 246.2 Beginning assets under management Additions Withdrawals Change in market value Net money market flows Other (1) Ending assets under management Affiliated institutional assets under management Total assets managed for institutional customers at end of period 197.6 12.4 (6.5) 5.4 (0.1) 0.4 209.2 37.0 246.2 209.2 10.8 (5.8) 4.7 218.9 37.3 256.2 218.9 10.6 (8.5) 0.8 (0.2) 221.6 37.2 258.8 221.6 14.2 (10.5) 5.9 0.3 231.5 37.6 269.1 231.5 13.9 (8.5) 7.6 0.1 244.6 38.6 283.2
5.4
5.9
Net institutional additions, excluding money market activity
5.9
5.0
2.1
3.7
5.4
Retail Assets Under Management:
Assets gathered by Investment Management & Advisory Services sales force: 64.2 8.7 (5.5) 7.6 75.0 48.6 123.6 61.6 6.1 (4.1) 3.0 (0.4) 66.2 42.6 108.8 Beginning assets under management Additions Withdrawals Change in market value Net money market flows Other (2) Ending assets under management Affiliated retail assets under management Total assets managed for retail customers at end of period 61.6 6.1 (4.1) 3.0 (0.4) 66.2 42.6 108.8 66.2 5.0 (5.2) 0.8 66.8 42.5 109.3 66.8 6.2 (5.7) (8.4) 58.9 51.2 110.1 58.9 6.6 (5.4) 4.1 64.2 53.7 117.9 64.2 8.7 (5.5) 7.6 75.0 48.6 123.6
3.2
2.0
Net retail additions (withdrawals), excluding money market activity
2.0
(0.2)
0.5
1.2
3.2
(1) "Other" activity during the first quarter of 2011 represents transfers from the Retirement Segment as a result of a change in client contract form. (2) Amounts in the first quarter 2011 represent a reclassification of certain fund balances to affiliated retail assets under management.
Page 18
COMBINED STATEMENTS OF OPERATIONS - U.S. INDIVIDUAL LIFE AND GROUP INSURANCE DIVISION (in millions)
2011 3Q 4Q
2012 1Q
1,389 391 432 111 2,323
1,360 385 407 79 2,231
2% 2% 6% 41% 4%
1,360 385 407 79 2,231
1,361 384 418 86 2,249
1,382 319 421 81 2,203
1,375 384 418 108 2,285
1,389 391 432 111 2,323
Benefits and Expenses (1): 1,603 133 77 (106) 64 478 2,249 1,510 128 45 (84) 73 422 2,094 6% 4% 71% -26% -12% 13% 7% Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses 1,510 128 45 (84) 73 422 2,094 1,453 130 48 (92) 82 444 2,065 1,538 134 48 (94) (50) 454 2,030 1,468 135 73 (97) 53 460 2,092 1,603 133 77 (106) 64 478 2,249
74
137
-46%
137
184
173
193
74
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.
Page 19
COMBINING STATEMENTS OF OPERATIONS - U.S. INDIVIDUAL LIFE AND GROUP INSURANCE DIVISION (in millions) Three Months Ended March 31, 2012 Total U.S. Individual Life & Group Insurance Division Revenues (1): Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses Adjusted operating income (loss) before income taxes 1,603 133 77 (106) 64 478 2,249 74 294 77 77 (89) 56 249 664 112 1,309 56 (17) 8 229 1,585 (38) 1,389 391 432 111 2,323 175 265 254 82 776 1,214 126 178 29 1,547 Individual Life Group Insurance
Three Months Ended March 31, 2011 Total U.S. Individual Life & Group Insurance Division Revenues (1): Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses Adjusted operating income before income taxes 1,510 128 45 (84) 73 422 2,094 137 297 71 45 (72) 67 219 627 98 1,213 57 (12) 6 203 1,467 39 1,360 385 407 79 2,231 172 264 236 53 725 1,188 121 171 26 1,506 Individual Life Group Insurance
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments. Benefits and expenses exclude charges related to realized investment gains, net of losses.
Page 20
Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012 U.S. INDIVIDUAL LIFE AND GROUP INSURANCE DIVISION - INDIVIDUAL LIFE ANNUALIZED NEW BUSINESS PREMIUMS, ACCOUNT VALUE ACTIVITY, AND FACE AMOUNT IN FORCE (in millions)
Year-to-date 2012 2011 ANNUALIZED NEW BUSINESS PREMIUMS (1) : 4 34 41 79 7 23 35 65 Variable life Universal life Term life Total 7 23 35 65 1Q 2Q
2011 3Q 4Q
2012 1Q
6 22 40 68
8 21 41 70
4 29 42 75
4 34 41 79
ANNUALIZED NEW BUSINESS PREMIUMS BY DISTRIBUTION CHANNEL (1): 20 59 79 20 45 65 Prudential Agents Third party distribution Total 20 45 65 21 47 68 21 49 70 22 53 75 20 59 79
ACCOUNT VALUE ACTIVITY: Policyholders' Account Balances (2): 9,500 480 (196) 284 (57) 227 88 70 (93) 9,792 8,773 402 (180) 222 (51) 171 62 61 (93) 8,974 Beginning balance Premiums and deposits Surrenders and withdrawals Net sales Benefit payments Net flows Interest credited and other Net transfers from separate account Policy charges Ending balance Separate Account Liabilities: 16,491 208 (145) 63 (7) 56 1,530 (70) (165) 17,842 17,156 220 (161) 59 (13) 46 777 (61) (169) 17,749 Beginning balance Premiums and deposits Surrenders and withdrawals Net sales (redemptions) Benefit payments Net flows Change in market value, interest credited and other Net transfers to general account Policy charges Ending balance 17,156 220 (161) 59 (13) 46 777 (61) (169) 17,749 17,749 215 (255) (40) (11) (51) 90 (74) (170) 17,544 17,544 246 (128) 118 (5) 113 (1,890) (93) (168) 15,506 15,506 215 (150) 65 (8) 57 1,151 (59) (164) 16,491 16,491 208 (145) 63 (7) 56 1,530 (70) (165) 17,842 8,773 402 (180) 222 (51) 171 62 61 (93) 8,974 8,974 374 (217) 157 (49) 108 20 74 (90) 9,086 9,086 401 (184) 217 (70) 147 126 93 (88) 9,364 9,364 454 (199) 255 (51) 204 (44) 59 (83) 9,500 9,500 480 (196) 284 (57) 227 88 70 (93) 9,792
FACE AMOUNT IN FORCE (3): Variable life Universal life Term life Total 117,538 38,190 460,683 616,411 116,024 38,896 466,129 621,049 113,349 39,644 471,453 624,446 113,039 41,063 477,235 631,337 113,118 42,751 483,890 639,759
(1) Excludes corporate-owned life insurance. (2) Includes fixed rate funds, alliance deposits, supplementary contracts and deferred revenues on variable products. (3) At end of period; before reinsurance ceded.
Page 21
U.S. INDIVIDUAL LIFE AND GROUP INSURANCE DIVISION - SUPPLEMENTARY INFORMATION FOR INDIVIDUAL LIFE INSURANCE (dollar amounts in millions)
Year-to-date 2012 2011 Individual Life Insurance: Policy Surrender Experience: 170 189 Cash value of surrenders Cash value of surrenders as a percentage of mean future policy benefits, policyholders' account balances, 2.8% 3.1% and separate account balances 3.1% 189 1Q 2Q
2011 3Q 4Q
2012 1Q
286
148
155
170
4.7%
2.5%
2.7%
2.8%
Death benefits per $1,000 of in force (1): 4.35 1.42 2.86 5.15 1.12 3.05 Variable and universal life Term life Total, Individual Life Insurance 5.15 1.12 3.05 3.73 1.06 2.34 5.00 1.21 3.03 4.18 0.99 2.49 4.35 1.42 2.86
(1) Annualized, for interim reporting periods. Amounts are stated net of reinsurance.
Page 22
U.S. INDIVIDUAL LIFE AND GROUP INSURANCE DIVISION - SUPPLEMENTARY INFORMATION FOR GROUP INSURANCE (dollar amounts in millions) Year-to-date 2012 2011 1Q 2Q 2011 3Q 4Q 2012 1Q
GROUP INSURANCE ANNUALIZED NEW BUSINESS PREMIUMS: 211 102 313 392 108 500 Group life Group disability (1) Total 392 108 500 22 30 52 23 29 52 49 37 86 211 102 313
Future Policy Benefits (2): Group life Group disability (1) Total 2,233 1,560 3,793 2,202 1,621 3,823 2,184 1,676 3,860 2,418 1,751 4,169 2,325 1,896 4,221
Policyholders' Account Balances (2): Group life Group disability (1) Total 6,943 174 7,117 7,075 179 7,254 7,027 187 7,214 7,127 189 7,316 7,188 178 7,366
Separate Account Liabilities (2): Group life Group disability (1) Total 19,292 19,292 20,027 20,027 19,148 19,148 19,174 19,174 19,826 19,826
Group Life Insurance: 1,064 990 95.4% 8.9% 1,066 1,010 92.3% 8.1% Gross premiums, policy charges and fee income (3) Earned premiums, policy charges and fee income Benefits ratio Administrative operating expense ratio Persistency ratio 1,066 1,010 92.3% 8.1% 97.2% 1,046 992 90.4% 7.9% 96.6% 1,050 1,064 89.3% 8.5% 96.2% 1,040 999 86.0% 8.8% 95.8% 1,064 990 95.4% 8.9% 95.4%
Group Disability Insurance (1): 352 350 104.6% 21.6% 301 299 94.3% 21.9% Gross premiums, policy charges and fee income (3) Earned premiums, policy charges and fee income Benefits ratio Administrative operating expense ratio Persistency ratio 301 299 94.3% 21.9% 93.3% 304 296 97.0% 22.4% 91.6% 304 299 95.0% 21.7% 89.7% 327 323 103.4% 21.4% 88.5% 352 350 104.6% 21.6% 93.9%
(1) Group disability amounts include long-term care and dental products. (2) As of end of period. (3) Before returns of premiums to participating policyholders for favorable claims experience.
Page 23
Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012 DEFERRED POLICY ACQUISITION COSTS & DEFERRED SALES INDUCEMENTS - INDIVIDUAL ANNUITIES, INDIVIDUAL LIFE AND GROUP INSURANCE (in millions)
2011 3Q 4Q
2012 1Q
DEFERRED POLICY ACQUISITION COSTS INDIVIDUAL ANNUITIES: 2,390 254 (86) 675 19 3,252 3,019 345 (83) 14 (1) (16) 3,278 Beginning balance Capitalization Amortization - operating results Amortization - realized investment gains and losses Impact of unrealized (gains) or losses on AFS securities Other (1) Ending balance 3,019 345 (83) 14 (1) (16) 3,278 3,278 235 (131) (81) (1) 3,300 3,300 230 (233) (1,138) (28) 2,131 2,131 228 (89) 73 47 2,390 2,390 254 (86) 675 19 3,252
INDIVIDUAL LIFE INSURANCE: 3,192 89 (56) 17 3,242 3,214 72 (67) 6 3,225 Beginning balance Capitalization Amortization - operating results Amortization - realized investment gains and losses Impact of unrealized (gains) or losses on AFS securities Ending balance 3,214 72 (67) 6 3,225 3,225 78 (77) (39) 3,187 3,187 82 56 (62) 3,263 3,263 85 (47) (109) 3,192 3,192 89 (56) 17 3,242
GROUP INSURANCE: 371 17 (8) 380 344 12 (6) 350 Beginning balance Capitalization Amortization - operating results Amortization - realized investment gains and losses Impact of unrealized losses on AFS securities Ending balance 344 12 (6) 350 350 14 (5) 359 359 12 (6) 365 365 12 (6) 371 371 17 (8) 380
DEFERRED SALES INDUCEMENTS INDIVIDUAL ANNUITIES: 1,000 82 (45) 262 7 1,306 1,348 121 (56) 6 (4) 16 1,431 Beginning balance Capitalization Amortization - operating results Amortization - realized investment gains and losses Impact of unrealized (gains) or losses on AFS securities Other (1) Ending balance 1,348 121 (56) 6 (4) 16 1,431 1,431 86 (60) (44) 2 1,415 1,415 72 (105) (455) (12) 915 915 79 (41) 29 18 1,000 1,000 82 (45) 262 7 1,306
(1) "Other" activity for the first quarter of 2011 reflects a reclassification between the balances, as of January 1, 2011, of deferred policy acquisition costs and deferred sales inducements for Individual Annuities due to a refinement in methodology for allocating such balances.
Page 24
COMBINED STATEMENTS OF OPERATIONS - INTERNATIONAL INSURANCE DIVISION (in millions)
2011 3Q 4Q
2012 1Q
4,605 152 1,023 69 5,849
3,256 113 765 187 4,321
41% 35% 34% -63% 35%
3,256 113 765 187 4,321
3,903 143 961 41 5,048
3,838 150 1,026 116 5,130
4,018 146 1,025 101 5,290
4,605 152 1,023 69 5,849
Benefits and Expenses (1): 3,752 278 1 (470) 260 1,422 5,243 2,706 161 (321) 186 961 3,693 39% 73% -46% 40% 48% 42% Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses 2,706 161 (321) 186 961 3,693 3,170 249 1 (446) 219 1,355 4,548 3,034 292 (467) 235 1,376 4,470 3,175 276 (450) 240 1,454 4,695 3,752 278 1 (470) 260 1,422 5,243
606
628
-4%
628
500
660
595
606
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on trading account assets supporting insurance liabilities and include revenues representing equity in earnings of operating joint ventures. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to non controlling interests.
Page 25
COMBINING STATEMENTS OF OPERATIONS - INTERNATIONAL INSURANCE DIVISION (in millions)
Three Months Ended March 31, 2012
Total International Insurance Division Revenues (1): Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses Adjusted operating income before income taxes 3,752 278 1 (470) 260 1,422 5,243 606 4,605 152 1,023 69 5,849
International Insurance - Life Planner Operations
International Insurance Gibraltar Life & Other Operations
1,826 94 386 11 2,317
2,779 58 637 58 3,532
1,490 68 (212) 126 463 1,935 382
2,262 210 1 (258) 134 959 3,308 224
Three Months Ended March 31, 2011
Total International Insurance Division
International Insurance - Life Planner Operations
International Insurance Gibraltar Life & Other Operations
Revenues (1): Premiums Policy charges and fee income Net investment income Asset management fees, commissions and other income Total revenues 3,256 113 765 187 4,321 1,655 90 351 1 2,097 1,601 23 414 186 2,224
Benefits and Expenses (1): Insurance and annuity benefits Interest credited to policyholders' account balances Interest expense Deferral of acquisition costs Amortization of acquisition costs General and administrative expenses Total benefits and expenses Adjusted operating income before income taxes 2,706 161 (321) 186 961 3,693 628 1,389 62 (192) 113 425 1,797 300 1,317 99 (129) 73 536 1,896 328
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on trading account assets supporting insurance liabilities and include revenues representing equity in earnings of operating joint ventures. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to non controlling interests.
Page 26
INTERNATIONAL INSURANCE SEGMENT - SUPPLEMENTARY INCOME STATEMENT INFORMATION (Yen and Dollars in millions)
2011 3Q 4Q
2012 1Q
Japanese Yen Basis Results: Revenues (1): 147,405 278,352 425,757 137,936 172,254 310,190 Japanese insurance operations excluding Gibraltar Life Gibraltar Life and Other Operations Total revenues, yen basis 137,936 172,254 310,190 122,770 257,446 380,216 128,529 256,646 385,175 126,311 248,953 375,264 147,405 278,352 425,757
Benefits and Expenses (1): 119,981 261,945 381,926 115,092 155,267 270,359 Japanese insurance operations excluding Gibraltar Life Gibraltar Life and Other Operations Total benefits and expenses, yen basis 115,092 155,267 270,359 98,342 240,754 339,096 104,866 222,238 327,104 103,898 230,519 334,417 119,981 261,945 381,926
Adjusted operating income (2): 27,424 16,407 43,831 22,844 16,987 39,831 Japanese insurance operations excluding Gibraltar Life Gibraltar Life and Other Operations Total adjusted operating income, yen basis 22,844 16,987 39,831 24,428 16,692 41,120 23,663 34,408 58,071 22,413 18,434 40,847 27,424 16,407 43,831
U.S. Dollar adjusted operating income (3): $ 331 224 555 51 $ 266 328 594 34 Japanese insurance operations excluding Gibraltar Life and Other Operations Gibraltar Life and Other Operations Total adjusted operating income, U.S. dollar basis All other (4) Total adjusted operating income, International Insurance $ 606 $ 628 segment, U.S. dollar basis $ 628 $ 500 $ 660 $ 595 $ 606 $ 266 328 594 34 $ 281 185 466 34 $ 277 329 606 54 $ 267 295 562 33 $ 331 224 555 51
(1) Revenues exclude realized investment gains, net of losses and related charges and adjustments, investment gains, net of losses, on trading account assets supporting insurance liabilities and include revenues representing equity in earnings of operating joint ventures. Benefits and expenses exclude charges related to realized investment gains, net of losses and change in experience-rated contractholder liabilities due to asset value changes and include charges for income attributable to non controlling interests. Revenues and benefits and expenses exclude non-Japanese operations. (2) Adjusted operating income on yen basis excludes impact of currency hedging and non-Japanese operations. (3) U.S. dollar adjusted operating income includes impact of currency hedging. (4) Results include corporate management and development expenses incurred in the U.S. related to Japanese Insurance operations excluding Gibraltar Life.
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INTERNATIONAL INSURANCE DIVISION - SALES RESULTS AND SUPPLEMENTARY INFORMATION (in millions)
2011 3Q 4Q
2012 1Q
INTERNATIONAL INSURANCE OPERATING DATA:
Actual exchange rate basis (1): Net premiums, policy charges and fee income: 1,531 2,837 389 4,757 1,375 1,624 370 3,369 Japan, excluding Gibraltar Life Gibraltar Life All other countries Total Annualized new business premiums: 305 469 89 863 224 373 83 680 Japan, excluding Gibraltar Life Gibraltar Life All other countries Total 224 373 83 680 176 544 82 802 209 570 82 861 207 555 87 849 305 469 89 863 1,375 1,624 370 3,369 1,208 2,443 395 4,046 1,310 2,278 400 3,988 1,317 2,440 407 4,164 1,531 2,837 389 4,757
Annualized new business premiums by distribution channel: 394 193 193 83 863 307 160 135 78 680 Life Planners Gibraltar Life Consultants Banks Independent Agency Total 307 160 135 78 680 258 270 143 131 802 291 269 173 128 861 294 280 152 123 849 394 193 193 83 863
Constant exchange rate basis (2): Net premiums, policy charges and fee income: 1,460 2,633 378 4,471 1,340 1,585 351 3,276 Japan, excluding Gibraltar Life Gibraltar Life All other countries Total Annualized new business premiums: 294 439 86 819 218 363 79 660 Japan, excluding Gibraltar Life Gibraltar Life All other countries Total 218 363 79 660 171 524 76 771 198 537 75 810 194 519 86 799 294 439 86 819 1,340 1,585 351 3,276 1,171 2,363 364 3,898 1,225 2,135 371 3,731 1,227 2,268 404 3,899 1,460 2,633 378 4,471
Annualized new business premiums by distribution channel: 380 181 182 76 819 297 155 132 76 660 Life Planners Gibraltar Life Consultants Banks Independent Agency Total 297 155 132 76 660 247 258 139 127 771 273 253 165 119 810 280 262 144 113 799 380 181 182 76 819
(1) Translated based on applicable average exchange rates for the period shown. (2) Foreign denominated activity translated to U.S. dollars at uniform exchange rates for all periods presented, including Japanese yen 85 per U.S. dollar; Korean won 1180 per U.S. dollar. U.S. denominated activity is included based on the amounts as transacted in U.S. dollars.
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INTERNATIONAL INSURANCE DIVISION - SALES RESULTS AND SUPPLEMENTARY INFORMATION
2011 1Q 2Q 3Q 4Q
2012 1Q
Face amount of individual policies in force at end of period (in billions) (1)(2): (Constant exchange rate basis) Japan, excluding Gibraltar Life Gibraltar Life All other countries Total 322 377 102 801 324 375 102 801 326 378 103 807 328 380 105 813 332 378 105 815
Number of individual policies in force at end of period (in thousands) (2): Japan, excluding Gibraltar Life Gibraltar Life (3) All other countries Total 2,590 7,457 1,522 11,569 2,616 7,430 1,536 11,582 2,647 7,459 1,555 11,661 2,678 7,477 1,575 11,730 2,725 7,453 1,606 11,784
International life insurance policy persistency: (3) Excluding Gibraltar Life: 13 months 25 months Gibraltar Life: 13 months 25 months 92.4% 85.3% 92.7% 85.5% 93.0% 85.8% 93.1% 85.8% 93.0% 85.8% 92.1% 84.6% 92.2% 84.7% 92.7% 85.1% 92.8% 85.4% 93.0% 85.2%
Number of Life Planners at end of period: Japan All other countries Total life planners 3,150 3,431 6,581 3,106 3,462 6,568 3,144 3,555 6,699 3,137 3,655 6,792 3,165 3,654 6,819
Gibraltar Life Consultants
13,227
13,353
12,936
12,791
12,219
(1) Foreign denominated activity translated to U.S. dollars at uniform exchange rates for all periods presented, including Japanese yen 85 per U.S. dollar; Korean won 1180 per U.S. dollar. U.S. denominated activity is included based on the amounts as transacted in U.S. dollars. (2) Direct business only; policy count includes annuities. (3) Excludes acquired Star/Edison business.
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INVESTMENT PORTFOLIO COMPOSITION (in millions) March 31, 2012 Closed Financial Services Block Businesses Business Amount % of Total December 31, 2011 Closed Financial Services Block Businesses Business Amount % of Total
Consolidated Portfolio Fixed maturities: Public, available-for-sale, at fair value Public, held-to-maturity, at amortized cost Private, available-for-sale, at fair value Private, held-to-maturity, at amortized cost Trading account assets supporting insurance liabilities, at fair value Other trading account assets, at fair value Equity securities, available-for-sale, at fair value Commercial mortgage and other loans, at book value Policy loans, at outstanding balance Other long-term investments (1) Short-term investments Subtotal (2) Invested assets of other entities and operations (3) Total investments 208,609 3,502 43,960 1,273 19,679 2,201 8,013 34,649 11,419 6,145 6,075 345,525 9,175 354,700
Consolidated Portfolio
29,565 16,607 321 3,397 9,418 5,228 1,964 729 67,229 67,229
179,044 3,502 27,353 1,273 19,679 1,880 4,616 25,231 6,191 4,181 5,346 278,296 9,175 287,471
64.3% 1.3% 9.8% 0.4% 7.1% 0.7% 1.7% 9.1% 2.2% 1.5% 1.9% 100.0%
209,297 3,743 43,243 1,364 19,481 2,421 7,523 34,113 11,559 6,471 6,137 345,352 10,895 356,247
30,211 16,305 317 3,122 9,040 5,296 1,990 528 66,809 66,809
179,086 3,743 26,938 1,364 19,481 2,104 4,401 25,073 6,263 4,481 5,609 278,543 10,895 289,438
64.3% 1.3% 9.7% 0.5% 7.0% 0.8% 1.6% 9.0% 2.2% 1.6% 2.0% 100.0%
Fixed Maturities by Credit Quality (2):
March 31, 2012 Financial Services Businesses Gross Amortized Cost Unrealized Gains Gross Unrealized Losses Fair Value % of Total Amortized Cost
December 31, 2011 Financial Services Businesses Gross Unrealized Gains Gross Unrealized Losses Fair Value % of Total
Public Fixed Maturities: NAIC Rating (4) 1 2 Subtotal - High or Highest Quality Securities 3 4 5 6 Subtotal - Other Securities Total Private Fixed Maturities: NAIC Rating (4) 1 2 Subtotal - High or Highest Quality Securities 3 4 5 6 Subtotal - Other Securities Total 7,022 15,977 22,999 2,516 710 535 115 3,876 26,875 702 1,303 2,005 165 24 9 25 223 2,228 65 275 340 40 9 24 2 75 415 7,659 17,005 24,664 2,641 725 520 138 4,024 28,688 26.7% 59.3% 86.0% 9.2% 2.5% 1.8% 0.5% 14.0% 100.0% 7,018 15,847 22,865 2,532 715 490 130 3,867 26,732 730 1,273 2,003 134 14 5 31 184 2,187 84 362 446 43 20 42 3 108 554 7,664 16,758 24,422 2,623 709 453 158 3,943 28,365 27.0% 59.1% 86.1% 9.2% 2.5% 1.6% 0.6% 13.9% 100.0% 149,730 16,694 166,424 3,435 1,228 375 106 5,144 171,568 11,909 1,323 13,232 85 53 10 16 164 13,396 991 496 1,487 387 216 126 33 762 2,249 160,648 17,521 178,169 3,133 1,065 259 89 4,546 182,715 87.9% 9.6% 97.5% 1.7% 0.6% 0.1% 0.1% 2.5% 100.0% 151,700 17,017 168,717 3,446 1,328 443 219 5,436 174,153 11,143 1,298 12,441 66 34 6 15 121 12,562 1,756 797 2,553 574 296 174 105 1,149 3,702 161,087 17,518 178,605 2,938 1,066 275 129 4,408 183,013 88.0% 9.6% 97.6% 1.6% 0.6% 0.1% 0.1% 2.4% 100.0%
(1) Other long-term investments consist of real estate and non-real estate-related investments in joint ventures and partnerships, investment real estate held through direct ownership, and other miscellaneous investments. (2) Excludes (i) assets of our trading and banking operations, (ii) assets of our asset management operations, including assets managed for third parties, and (iii) those assets classified as "Separate account assets" on our balance sheet. (3) Includes invested assets of trading and banking operations, and asset management operations. Excludes assets of our asset management operations managed for third parties and those assets classified as "Separate account assets" on our balance sheet. (4) Reflects equivalent ratings for investments of the international insurance operations. Includes, as of March 31, 2012 and December 31, 2011, respectively, 111 securities with amortized cost of $714 million (fair value $725 million) and 110 securities with amortized cost of $817 million (fair value, $852 million) that have been categorized based on expected NAIC designations pending receipt of SVO ratings.
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FINANCIAL SERVICES BUSINESSES INVESTMENT PORTFOLIO COMPOSITION (in millions) March 31, 2012 Amount Japanese Insurance Operations (1): Fixed maturities: Public, available-for-sale, at fair value Public, held-to-maturity, at amortized cost Private, available-for-sale, at fair value Private, held-to-maturity, at amortized cost Trading account assets supporting insurance liabilities, at fair value Other trading account assets, at fair value Equity securities, available-for-sale, at fair value Commercial mortgage and other loans, at book value Policy loans, at outstanding balance Other long-term investments (2) Short-term investments Total 111,925 3,502 5,236 1,273 1,796 1,454 1,954 5,495 2,735 2,245 731 138,346 80.9% 2.5% 3.8% 0.9% 1.3% 1.1% 1.4% 4.0% 2.0% 1.6% 0.5% 100.0% 111,857 3,743 5,020 1,364 1,732 1,496 1,932 5,672 2,873 2,892 702 139,283 80.3% 2.7% 3.6% 1.0% 1.2% 1.1% 1.4% 4.1% 2.0% 2.1% 0.5% 100.0% % of Total December 31, 2011 Amount % of Total
March 31, 2012 Amount Financial Services Businesses excluding Japanese Insurance Operations (1): Fixed maturities: Public, available-for-sale, at fair value Public, held-to-maturity, at amortized cost Private, available-for-sale, at fair value Private, held-to-maturity, at amortized cost Trading account assets supporting insurance liabilities, at fair value Other trading account assets, at fair value Equity securities, available-for-sale, at fair value Commercial mortgage and other loans, at book value Policy loans, at outstanding balance Other long-term investments (2) Short-term investments Total 67,119 22,117 17,883 426 2,662 19,736 3,456 1,936 4,615 139,950 48.0% 0.0% 15.8% 0.0% 12.8% 0.3% 1.9% 14.1% 2.4% 1.4% 3.3% 100.0% % of Total
December 31, 2011 Amount % of Total
67,229 21,918 17,749 608 2,469 19,401 3,390 1,589 4,907 139,260
48.3% 0.0% 15.7% 0.0% 12.8% 0.4% 1.8% 13.9% 2.4% 1.2% 3.5% 100.0%
(1) Excludes assets classified as "Separate account assets" on our balance sheet. (2) Other long-term investments consist of real estate and non-real estate-related investments in joint ventures and partnerships, investment real estate held through direct ownership, derivatives and other miscellaneous investments.
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FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS (in millions) Three Months Ended March 31 2012 Realized Investment Income Yield (3) Financial Services Businesses (1): Fixed maturities Equity securities Commercial mortgage and other loans Policy loans Short-term investments and cash equivalents Other investments Gross investment income before investment expenses Investment expenses Subtotal Investment results of other entities and operations (2) Less, investment income related to adjusted operating income reconciling items Total (1) Excludes assets of our trading and banking operations, commercial loans and trading account assets supporting insurance liabilities where the investment results generally accrue to contractholders, assets of our asset management operations, including assets managed for third parties, and those assets classified as "Separate account assets" on our balance sheet. Realized gains / (losses) for Other investments includes changes in fair value of product-related and other derivatives and embedded derivatives. (2) Includes investment income of trading and banking operations, asset management operations, commercial loans, and trading account assets supporting insurance liabilities where the investment results generally accrue to contractholders. (3) Yields are annualized, for interim periods, and are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for fixed maturities and short term investments and cash equivalents are calculated net of liabilities and rebate expenses corresponding to securities lending activity. Yields exclude investment income and assets related to commercial loans and trading account assets supporting insurance liabilities where the investment results generally accrue to contractholders and investment income on assets other than those included in invested assets. Prior period's yields are presented on a basis consistent with the current presentation. (4) Yields are weighted for one month of income and assets related to the Star and Edison businesses. 3.74% 5.55% 5.20% 4.56% 0.25% 2.83% 3.71% -0.12% 3.59% 1,841 56 270 71 8 46 2,292 (61) 2,231 298 3 2,532 (14) (55) 3 (1,313) (1,379) (1,379) 5 (1,374) 4.02% 5.04% 5.54% 4.69% 0.37% 5.48% 4.03% -0.13% 3.90% 1,598 54 249 64 11 65 2,041 (53) 1,988 320 (4) 2,304 4 3 10 (102) (85) (85) 5 (80) Amount Gains / (Losses) Investment Income Yield (3)(4) Amount 2011 Realized Gains / (Losses)
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FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS - JAPANESE INSURANCE OPERATIONS (in millions)
Three Months Ended March 31 2012 Realized Investment Income Yield (1) Japanese Insurance Operations: Fixed maturities Equity securities Commercial mortgage and other loans Policy loans Short-term investments and cash equivalents Other investments (3) Gross investment income before investment expenses Investment expenses Total 2.70% 3.16% 3.99% 3.36% 0.17% 2.93% 2.72% -0.12% 2.60% 794 16 55 23 1 31 920 (40) 880 (11) (61) 4 (204) (272) (272) 2.70% 2.29% 4.27% 3.40% 0.59% 6.84% 2.83% -0.11% 2.72% 541 13 48 19 4 46 671 (26) 645 (49) 5 (134) (178) (178) Amount Gains / (Losses) Investment Income Yield (1)(2) Amount 2011 Realized Gains / (Losses)
(1) Yields are annualized, for interim periods, and are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for fixed maturities and short term investments and cash equivalents are calculated net of liabilities and rebate expenses corresponding to securities lending activity. Yields exclude investment income and assets related to commercial loans and trading account assets supporting insurance liabilities where the investment results generally accrue to contractholders and investment income on assets other than those included in invested assets. Prior period's yields are presented on a basis consistent with the current presentation. (2) Yields are weighted for one month of income and assets related to the Star and Edison businesses. (3) Realized gains / (losses) for Other investments includes changes in fair value of product-related and other derivatives and embedded derivatives.
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FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS - EXCLUDING JAPANESE INSURANCE OPERATIONS (in millions)
Three Months Ended March 31 2012 Realized Investment Income Yield (2) Financial Services Businesses excluding Japanese Insurance Operations (1): Fixed maturities Equity securities Commercial mortgage and other loans Policy loans Short-term investments and cash equivalents Other investments Gross investment income before investment expenses Investment expenses Total 5.27% 7.83% 5.64% 5.54% 0.28% 2.68% 4.91% -0.13% 4.78% 1,047 40 215 48 7 15 1,372 (21) 1,351 (3) 6 (1) (1,109) (1,107) (1,107) 5.38% 8.12% 5.96% 5.60% 0.31% 3.75% 5.07% -0.14% 4.93% 1,057 41 201 45 7 19 1,370 (27) 1,343 53 3 5 32 93 93 Amount Gains / (Losses) Investment Income Yield (2) Amount 2011 Realized Gains / (Losses)
(1) Excludes assets of our trading and banking operations, commercial loans and trading account assets supporting insurance liabilities where the investment results generally accrue to contractholders, assets of our asset management operations, including assets managed for third parties, and those assets classified as "Separate account assets" on our balance sheet. Realized gains / (losses) for Other investments includes changes in fair value of product-related and other derivatives and embedded derivatives. (2) Yields are annualized, for interim periods, and are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for fixed maturities and short term investments and cash equivalents are calculated net of liabilities and rebate expenses corresponding to securities lending activity. Yields exclude investment income and assets related to commercial loans and trading account assets supporting insurance liabilities where the investment results generally accrue to contractholders and investment income on assets other than those included in invested assets. Prior period's yields are presented on a basis consistent with the current presentation.
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Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012 KEY DEFINITIONS AND FORMULAS 1. Adjusted operating income before income taxes: Adjusted operating income is a non-GAAP measure of performance of our Financial Services Businesses that excludes "Realized investment gains (losses), net", as adjusted, and related charges and adjustments; net investment gains and losses on trading account assets supporting insurance liabilities; change in experience-rated contractholder liabilities due to asset value changes; results of divested businesses and discontinued operations; earnings attributable to noncontrolling interests; and the related tax effects thereof. Adjusted operating income includes equity in earnings of operating joint ventures and the related tax effects thereof. Revenues and benefits and expenses shown as components of adjusted operating income, are presented on the same basis as pre-tax adjusted operating income and are adjusted for the items above as well. Realized investment gains (losses) within certain of our businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income excludes realized investment gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of a hedging program related to the risk of those products. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are classified as other trading account assets. Adjusted operating income does not equate to "Income from continuing operations" as determined in accordance with GAAP but is the measure of profit or loss we use to evaluate segment performance. Adjusted operating income is not a substitute for income determined in accordance with GAAP, and our definition of adjusted operating income may differ from that used by other companies. The items above are important to an understanding of our overall results of operations. However, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability factors of our businesses.
2. After-tax adjusted operating income: Adjusted operating income before taxes, as defined above, less the income tax effect applicable to adjusted operating income before taxes. 3. Annualized New Business Premiums: Premiums from new sales that are expected to be collected over a one year period. Group insurance annualized new business premiums exclude new premiums resulting from rate changes on existing policies, from additional coverage issued under our Servicemembers' Group Life Insurance contract, and from excess premiums on group universal life insurance that build cash value but do not purchase face amounts. Group insurance annualized new business premiums include premiums from the takeover of claim liabilities. Group disability amounts include long-term care products and dental products. Excess (unscheduled) and single premium business for the company's domestic individual life and international insurance operations are included in annualized new business premiums based on a 10% credit. 4. Assets Under Management: Fair market value or account value of assets which Prudential manages directly in proprietary products, such as mutual funds and variable annuities, in separate accounts, wrap-fee products and the general account, and assets invested in investment options included in the Company's products that are managed by third party sub-managers (i.e., the non-proprietary investment options in the Company's products). 5. Attributed Equity: Amount of capital assigned to each of the Company's segments for purposes of measuring segment adjusted operating income before income taxes, established at a level which management considers necessary to support the segment's risks. Attributed equity for the Financial Services Businesses represents all of the Company's equity that is not included in the Closed Block Business or attributable to noncontrolling interests. 6. Book value per share of Common Stock: Equity attributed to Financial Services Businesses divided by the number of Common shares outstanding at end of period, on a diluted basis. 7. Borrowings - Capital Debt: Borrowings that are or will be used for capital requirements at Prudential Financial, Inc as well as borrowings invested in equity or debt securities of direct or indirect subsidiaries of Prudential Financial, Inc., and subsidiary borrowings, utilized for capital requirements.
8. Borrowings - Investment Related: Debt issued to finance specific investment assets or portfolios of investment assets, including institutional spread lending investment portfolios, real estate, and real estate related investments held in consolidated joint ventures, as well as institutional and insurance company portfolio cash flow timing differences.
9. Borrowings - Securities Business Related: Debt issued to finance primarily the liquidity of our broker-dealers, and our capital markets and other securities business related operations including our discontinued commercial mortgage conduit related activities. 10. Borrowings - Specified Other Businesses: Borrowings associated with consumer banking activities, the individual annuity business, real estate franchises, and relocation services.
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KEY DEFINITIONS AND FORMULAS
11. Client Assets: Fair market value of assets in client accounts of International brokerage operations, Prudential Bank and mortgage loan servicing business, that are not included in Assets Under Management. Prudential does not receive a management or administrative fee on these assets, but may receive a fee for executing trades, custody or recordkeeping services. 12. Earned Premiums: The portion of a premium, net of any amount ceded, that represents coverage already provided or that belongs to the insurer based on the part of the policy period that has passed. 13. Earnings Per Share of Common Stock: Net income (loss) for the Financial Services Businesses and the Closed Block Business is determined in accordance with GAAP and includes general and administrative expenses charged to each of the businesses based on the Company's methodology for the allocation of such expenses. Cash flows between the Financial Services Businesses and the Closed Block Business related to administrative expenses are determined by a policy servicing fee arrangement that is based upon insurance and policies in force and statutory cash premiums. To the extent reported administrative expenses vary from these cash flow amounts, the differences are recorded, on an after-tax basis, as direct equity adjustments to the equity balances of each business. The direct equity adjustments modify earnings available to holders of Common Stock and Class B Stock for earnings per share purposes. Earnings per share of Common Stock based on adjusted operating income (loss) of the Financial Services Businesses reflects these adjustments as well.
14. Full Service: The Full Service line of business provides retirement plan products and services to public, private and not-for-profit organizations. This business provides recordkeeping, plan administration, actuarial advisory services, participant education and communication services, trustee services and institutional and retail investment funds. This business mainly services defined contribution and defined benefit plans; non-qualified plans are also serviced. For clients with both defined contribution and defined benefit plans, integrated recordkeeping services are available. For participants leaving these plans, a range of rollover products are provided through a broker-dealer bank. 15. Full Service Stable Value: Our Full Service Stable Value products represent fixed rate options on investment funds offered to customers. These products contain an obligation to pay interest at a specified rate for a specific period of time. Upon termination these products repay account balances at market value immediately or may be liquidated at book value over time. Substantially all of these products are either fully or partially participating, with annual or semi-annual resets giving effect to previous investment experience. These products are issued through the general account, separate accounts or client-owned trusts. Profits from partially participating general account products result from the spread between the rate of return on investment assets and the interest rates credited to the customer, less expenses. For fully participating products, generally subject to a minimum interest rate guarantee, we earn fee income. 16. General Account: Invested assets and policyholder liabilities and reserves for which the Company bears the investment risk. Excludes assets recognized for statutory purposes that are specifically allocated to a separate account. General account assets also include assets of the parent company, Prudential Financial, Inc. 17. Gibraltar Life Consultants: Insurance representatives for Gibraltar Life, previously identified as Life Advisors. 18. Group Life Insurance and Group Disability Insurance Administrative Operating Expense Ratios: Ratio of administrative operating expenses (excluding commissions) to gross premiums, policy charges and fee income. 19. Group Life Insurance and Group Disability Insurance Benefits Ratios: Ratio of policyholder benefits to earned premiums, policy charges and fee income. 20. Individual Annuity Account Values in General Account and Separate Account: Amounts represent the breakdown of invested customer funds in annuities either written or reinsured by the Company. 21. Individual Annuities - Net Amounts at Risk: Living Benefit Features - For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance.
Death Benefit Features - Net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date.
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Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012 KEY DEFINITIONS AND FORMULAS 22. Insurance and Annuity Benefits: Total death benefits, annuity benefits, disability benefits, other policy benefits, and losses paid or incurred, under insurance and annuity contracts, plus the change in reserves for future policy benefits, losses and loss adjustment expenses.
23. International Life Planners: Insurance agents in our insurance operations outside the United States, excluding Gibraltar Life Advisors. 24. Non-recourse and Limited-recourse Debt: Limited and non-recourse borrowing is where the holder is entitled to collect only against the assets pledged to the debt as collateral or has only very limited rights to collect against other assets. 25. Operating return on average equity (based on adjusted operating income): Adjusted operating income after-tax (giving effect to the direct equity adjustment for earnings per share calculation), annualized for interim periods, divided by average attributed equity for the Financial Services Businesses excluding accumulated other comprehensive income. An alternative measure to operating return on average equity (based on adjusted operating income) is return on average equity (based on income from continuing operations). Return on average equity (based on income from continuing operations) represents income from continuing operations after-tax , for the Financial Services Businesses, attributable to Prudential Financial, Inc. as determined in accordance with GAAP (giving effect to the direct equity adjustment for earnings per share calculation), annualized for interim periods, divided by average total attributed equity for the Financial Services Businesses. Return on average equity (based on income from continuing operations) is (11.90)% for the three months ended March 31, 2012, 6.1% for the three months ended December 31, 2011, 19.8% for the three months ended September 30, 2011, 10.4% for the three months ended June 30, 2011 and 7.5% for the three months ended March 31, 2011.
26. Policy Persistency - Group Insurance: Percentage of the premiums in force at the end of the prior year that are still in force at the end of the period (excluding Servicemembers' Group Life Insurance and Prudential Employee Benefit Plan). 27. Policy Persistency - International Insurance: 13 month persistency represents the percentage of policies issued that are still in force at the beginning of their second policy year. 25 month persistency represents the percentage of policies issued that are still in force at the beginning of their third policy year.
28. Prudential Agents: Insurance agents in our insurance operations in the United States. 29. Prudential Agent productivity: Commissions on new sales of all products by Prudential Agents under contract for the entire period, divided by the number of those Prudential Agents. Excludes commissions on new sales by Prudential Agents hired or departed during the period. For interim reporting periods, the productivity measures are annualized. 30. Separate Accounts: Assets of our insurance companies allocated under certain policies and contracts that are segregated from the general account and other separate accounts. The policyholder or contractholder predominantly bears the risk of investments held in a separate account.
31. Wrap-Fee Products: Investment products generating asset-based fees in which the funds of the customer are generally invested in other investment products such as mutual funds.
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RATINGS AND INVESTOR INFORMATION
FINANCIAL STRENGTH RATINGS as of May 2, 2012 Standard & A.M. Best The Prudential Insurance Company of America PRUCO Life Insurance Company PRUCO Life Insurance Company of New Jersey Prudential Annuities Life Assurance Corporation Prudential Retirement Insurance and Annuity Company The Prudential Life Insurance Co., Ltd. (Prudential of Japan) Gibraltar Life Insurance Company, Ltd. A+ A+ A+ A+ A+ NR NR Poor's AAAAAAAAAAAAAAMoody's A2 A2 NR * NR A2 NR NR Fitch Ratings A+ A+ A+ A+ A+ NR NR
CREDIT RATINGS: as of May 2, 2012
Prudential Financial, Inc.: Short-Term Borrowings Long-Term Senior Debt (1) Junior Subordinated Long-Term Debt AMB-1 abbb A-1 A BBB+ P-2 Baa2 Baa3 F2 BBB+ BBB-
The Prudential Insurance Company of America : Capital and surplus notes a A Baa1 A-
Prudential Funding, LLC: Short-Term Debt Long-Term Senior Debt AMB-1 a+ A-1+ AAP-2 A3 F1 A
PRICOA Global Funding I Long-Term Senior Debt aaAAA2 A+
* NR indicates not rated. (1) Includes the retail medium-term notes program.
INVESTOR INFORMATION:
Corporate Offices:
Investor Information Hotline:
Prudential Financial, Inc. 751 Broad Street Newark, New Jersey 07102
Dial 877-998-ROCK for additional printed information or inquiries.
Web Site: www.prudential.com
Common Stock: Common Stock of Prudential Financial, Inc. is traded on the New York Stock Exchange under the symbol PRU.
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Prudential Financial, Inc.

Quarterly Financial Supplement

FIRST QUARTER 2012

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

KEY DEFINITIONS AND FORMULAS

RATINGS AND INVESTOR INFORMATION

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

FINANCIAL HIGHLIGHTS (in millions, except per share data)

2,152 21,309 1,519

2,899 20,651 1,519

2,336 21,353 1,519

3,655 21,110 1,519

Number of diluted shares at end of period (2)

Common Stock market capitalization (1)

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

Year-to-date 2012 2011 1Q 2Q

Prudential Agent productivity ($ thousands)

(1) As of end of period. (2) At fair market value.

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

COMBINED STATEMENTS OF OPERATIONS - FINANCIAL SERVICES BUSINESSES (in millions)

Year-to-date 2012 2011

-7% Adjusted operating income before income taxes

234 (246) 1 5 (1,844)

(17) 34 (9) (133) (500)

1476% -824% 111% 104% -269%

(17) 34 (9) (133) (500)

234 (246) 1 5 (1,844)

(829) 162 (991)

596 150 446

596 150 446

1,071 289 782

2,360 846 1,514

631 122 509

(829) 162 (991)

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

COMBINED BALANCE SHEETS - FINANCIAL SERVICES BUSINESSES (in millions)

Noncontrolling Interest Total Equity

Total liabilities and equity

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

Adjusted operating income (loss) before income taxes

Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2012

U.S. Retirement Solutions & Investment Management Division

116,721 128,038 26,284 26,099 236,567 533,709

19,003 57,287 6,113 9,771 199,926 292,100

11,465 17,158 7,691 4,335 37,668 78,317

85,864 54,099 100 10,145 1,256 151,464

389 (506) 12,380 1,848 (2,283) 11,828

7,073 26,436 33,509 596 34,105 567,814

2,089 12,523 14,612 638 15,250 307,350

1,503 3,883 5,386 5,386 83,703

4,695 12,048 16,743 50 16,793 168,257

(1,214) (2,018) (3,232) (92) (3,324) 8,504

119,248 129,074 25,208 25,685 218,380 517,595

20,451 57,878 4,704 10,379 183,785 277,197

11,194 16,816 7,045 3,944 35,665 74,664

87,199 54,908 18 10,280 1,118 153,523

404 (528) 13,441 1,082 (2,188) 12,211

5,250 27,567 32,817 588 33,405 551,000

2,072 12,754 14,826 625 15,451 292,648

1,550 3,830 5,380 5,380 80,044

3,089 12,298 15,387 51 15,438 168,961