P RUDENTIAL F INANCIAL , INC . S ECOND Q UARTER 2015 A UGUST 6, 2015 - PDF document

E ARNINGS C ONFERENCE C ALL P RESENTATION P RUDENTIAL F INANCIAL , INC . S ECOND Q UARTER 2015 A UGUST 6, 2015

S ECOND Q UARTER F INANCIAL H IGHLIGHTS (1) Second Quarter 2015 2014 Pre-Tax Adjusted Operating Income (AOI) Reported $ 1,841 $ 1,623 (2) Market driven and discrete items 203 (12) Excluding market driven and discrete items Excluding market driven and discrete items $ $ 1,638 1 638 $ $ 1,635 1 635 Earnings Per Share (EPS) Reported $ 2.91 $ 2.49 (2) Market driven and discrete items 0.29 (0.02) Excluding market driven and discrete items $ 2.62 $ 2.51 Net Income Reported $ 1,406 $ 1,049 June 30, December 31, Book Value Per Share of Common Stock 2015 2014 Reported (including Accumulated Other Comprehensive Income, "AOCI") $ 91.17 $ 88.80 Excluding AOCI and adjusted to remove amounts included for foreign currency exchange rate remeasurement $ 71.09 $ 64.75 Year to Date June 30, Operating Return on Average Equity (3) 2015 2014 Reported 16.9% 16.0% Excluding impact of market driven and discrete items on AOI (2) 15.6% 16.3% 1) 1) Amounts attributable to Prudential Financial, Inc. (PFI); represents results of Financial Services Businesses for periods prior to first quarter 2015. Dollar amounts Amounts attributable to Prudential Financial, Inc. (PFI); represents results of Financial Services Businesses for periods prior to first quarter 2015. Dollar amounts in millions except per share amounts. Per share amounts on diluted basis. 2) Market driven and discrete items as disclosed on pages 4 and 26; based on application of 35% tax rate for EPS and operating return on average equity. 3) Annualized; based on after-tax adjusted operating income. Gives effect to direct equity adjustment for earnings per share calculation for periods prior to first quarter 2015. Based on average attributed equity excluding accumulated other comprehensive income and adjusted to remove amounts included for foreign currency exchange rate remeasurement. 2Q15 Earnings Conference Call 2

A NNUAL R EVIEW OF A CTUARIAL A SSUMPTIONS (1) Second Quarter 2015 Pre-tax Adjusted Earnings Per Operating Income (2) Share (3) Individual Annuities $ 31 $ 0.04 Individual Life 68 0.10 Group Insurance 28 0.04 International Insurance - Life Planner Operations p (11) ( ) (0.02) ( ) International Insurance - Gibraltar Life (10) (0.01) Corporate & Other 11 0.02 Total impact from annual review of actuarial assumptions $ 117 $ 0.17 1) Includes refinements of reserves and amortization of deferred policy acquisition and other costs. 2) In millions. 3) Diluted; based on after-tax impact; tax effect for market driven and discrete items at 35%. 2Q15 Earnings Conference Call 3

I MPACT OF M ARKET D RIVEN AND D ISCRETE I TEMS Second Quarter 2015 2014 Pre-tax Adjusted j Earnings Per g Pre-tax Adjusted j Earnings Per g Operating Income (1) Share (2) Operating Income (1) Share (2) Reported Results (3) $ 1,841 $ 2.91 $ 1,623 $ 2.49 Market driven and discrete items: Annual review of actuarial assumptions (4) 117 0.17 - - Individual Annuities - Market unlockings and experience true-ups (5) 94 0.13 (4) (0.01) (8) (0.01) (8) (0.01) Individual Life - Integration costs for Hartford Life acquisition 203 0.29 (12) (0.02) Subtotal Results excluding market driven and discrete items $ 1,638 $ 2.62 $ 1,635 $ 2.51 1) 1) In millions In millions. 2) Diluted; based on after-tax adjusted operating income; tax effect for market driven and discrete items at 35%. 3) Represents results of Financial Services Businesses for periods prior to first quarter 2015. 4) Includes refinements of reserves and amortization of deferred policy acquisition and other costs. 5) Includes adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions. 2Q15 Earnings Conference Call 4

S ECOND Q UARTER N ON -AOI I TEMS (1) ($ millions) Second Quarter 2015 2014 Pre-tax realized investment gains (losses), net, and related charges and adjustments included in net income: dj t t i l d d i t i Product related embedded derivatives and hedging activities $ 510 $ (365) General investment portfolio activities 405 255 Foreign currency exchange rate remeasurement 133 (231) Changes in market value of derivatives used in risk management activities including asset/liability duration management (728) 95 Impairments and credit losses (34) (27) Subtotal $ 286 $ ( (273) ) Other Non-AOI pre-tax items: Results of divested businesses (57) 47 Other (2) 14 36 Subtotal S b l $ $ (43) (43) $ $ 83 83 Total Non-AOI items (3) $ 243 $ (190) 1) 1) Certain prior period items have been reclassified to conform to current period presentation Certain prior period items have been reclassified to conform to current period presentation. 2) Includes changes in recorded asset values and liabilities representing changes in value which are expected to ultimately accrue to contractholders, primarily from interest related mark to market adjustments. Excludes pre-tax reconciling item between AOI and U.S. GAAP for equity in earnings of operating joint ventures and earnings attributable to non-controlling interests. 3) See earnings release tables for related tax effect. 2Q15 Earnings Conference Call 5

U.S. R ETIREMENT S OLUTIONS AND I NVESTMENT M ANAGEMENT D IVISION – I NDIVIDUAL A NNUITIES ($ millions) Individual Asset Annuities Retirement Management g Second Quarter 2015 Reported pre-tax adjusted operating income $ 548 $ 237 $ 196 Market driven and discrete items (1) (1) 125 - - Excluding impact of market driven and discrete items $ 423 $ 237 $ 196 Second Quarter 2014 Reported pre-tax adjusted operating income $ 390 $ 286 $ 200 Market driven and discrete items (1) (4) - - Excluding impact of market driven and discrete items $ 394 $ 286 $ 200 1) Market driven and discrete items as disclosed on pages 3 and 4. 2Q15 Earnings Conference Call 6

I NDIVIDUAL A NNUITIES – E ARNINGS AND R ETURN ON A SSETS Earnings (1) Return on Assets ($ millions) (bps) $500 120 107 105 101 101 98 100 $400 80 $300 60 423 423 $200 403 394 390 40 $100 20 $0 0 2Q14 3Q14 4Q14 1Q15 2Q15 Average Account Values $156.4 $158.8 $157.5 $160.0 $161.9 ($ billions) AOI excluding market driven and discrete items Return on Assets (ROA) (2) 1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 27. 2) Annualized pre-tax AOI excluding market driven and discrete items divided by average account values based on daily averages for separate accounts. 2Q15 Earnings Conference Call 7

I NDIVIDUAL A NNUITIES – S ALES AND P RODUCT M IX Gross Sales ($ billions) $2.7 $2.6 0.3 $2.4 $2.3 $2.3 $2.2 30% 0.5 0.3 0.6 64% 0.6 70% 1.9 36% 0.8 0.8 2Q14 3Q14 4Q14 1Q15 2Q15 Net Sales $443 $392 $193 $31 $138 ($ millions) No optional living benefit risk (1) Gross Sales Prudential Defined Income (PDI) Reinsured Highest Daily Income (HDI) risk (2) HDI risk retained by Prudential 1) Includes Prudential Premier Investment contracts, and other annuities without optional living benefit guarantees. 2) Includes portion of account values for certain variable annuities for which living benefits are covered under an external reinsurance agreement. 2Q15 Earnings Conference Call 8

U.S. R ETIREMENT S OLUTIONS AND I NVESTMENT M ANAGEMENT D IVISION – R ETIREMENT ($ millions) Individual Asset Annuities Retirement Management g Second Quarter 2015 Reported pre-tax adjusted operating income $ 548 $ 237 $ 196 Market driven and discrete items (1) (1) 125 - - Excluding impact of market driven and discrete items $ 423 $ 237 $ 196 Second Quarter 2014 Reported pre-tax adjusted operating income $ 390 $ 286 $ 200 Market driven and discrete items (1) (4) - - Excluding impact of market driven and discrete items $ 394 $ 286 $ 200 1) Market driven and discrete items as disclosed on pages 3 and 4. 2Q15 Earnings Conference Call 9

R ETIREMENT – S ALES AND A CCOUNT V ALUES Gross Deposits and Sales Gross Deposits and Sales ($ billions) 36.2 14.2 14.2 9.2 7.3 6.6 2.1 5.0 4.5 Account Values (1) ($ billions) 2Q14 3Q14 4Q14 1Q15 2Q15 372.6 363.8 365.3 356.1 330.5 183.8 148.9 Longevity Reinsurance Institutional Investment Group Annuities and Other Products Products Investment Only Stable Value 188.8 181.6 Full Service Full Service 2Q14 3Q14 4Q14 1Q15 2Q15 1) At end of period. 2Q15 Earnings Conference Call 10

U.S. R ETIREMENT S OLUTIONS AND I NVESTMENT M ANAGEMENT D IVISION – A SSET M ANAGEMENT ($ millions) Individual Asset Annuities Retirement Management g Second Quarter 2015 Reported pre-tax adjusted operating income $ 548 $ 237 $ 196 Market driven and discrete items (1) (1) 125 - - Excluding impact of market driven and discrete items $ 423 $ 237 $ 196 Second Quarter 2014 Reported pre-tax adjusted operating income $ 390 $ 286 $ 200 Market driven and discrete items (1) (4) - - Excluding impact of market driven and discrete items $ 394 $ 286 $ 200 1) Market driven and discrete items as disclosed on pages 3 and 4. 2Q15 Earnings Conference Call 11