Prudential 2002 Annual Report Download - page 17
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Prudential Financial 2002 Annual Report 15
is part of our capital management strategy. In 2002,
we bought back 26 million shares at a total cost of
$800 million. In 2003, the Board of Directors
approved a new program under which we are authorized
to repurchase up to $1 billion in Common Stock.
D riving toward our return on equity target
We classify our business groups into three categories
based on their return on equity contributions. The
first consists of businesses performing at or
above their return on equity hurdles. These busi-
nesses include our international operations and our
investment management and other asset manage-
ment businesses. We plan to invest in and further
grow these businesses going forward.
Those businesses we consider to be fundamentally
sound, including individual life and annuities, retire-
ment services and group insurance, form the second
group. Their performance is in line with our expecta-
tions, but they need some fine-tuning in order to
achieve their longer-term return objectives and make
the right contribution to our return on equity goal.
The third group encompasses businesses that are
underperforming. Our property and casualty insur-
ance business and our financial advisory business fall
into this category. We are working to resolve the
challenges we are facing in these two areas.
While we evaluate our options—including the
possibility of a sale—with respect to our property and
casualty insurance area, our priority is on reducing the
risks and volatility associated with this business and
improving profitability. We have taken a number of
steps to address both issues. We revised our under-
writing guidelines and placed a moratorium on
writing new business in areas that are more prone to
catastrophes. We implemented more than 80 rate
increases during the year. We cut expenses, which
resulted in improvements in our expense ratio.
With our financial advisory business, the story is
different. In fact, in the first quarter of 2003 we
announced that we are combining our retail securities
brokerage and clearing operations with Wachovia
Corporation’s securities and clearing operations to
form a new company that will be the third-largest
brokerage firm in the country based on revenue. We
believe the combined resources and expertise of the
new firm will give it the scale needed to better
compete in a consolidating market.
“We are now focused on redeploying
capital prudently to take full
advantage of growth opportunities
and boost shareholder value,
while maintaining or enhancing our
financial strength and credit ratings.”