Prudential 2003 Annual Report Download - page 26

• our cost of administering insurance contracts and providing asset management products and services;
• our returns on invested assets, net of the amounts we credit to policyholders’ accounts;
• our ability to earn commissions and fees from the distribution and servicing of mutual funds, annuities, defined
contribution and other investment products at a level that enables us to earn a margin over the expense of
providing such services;
• the performance of our investment in Wachovia Securities;
• the amount of our assets under management and changes in their fair value, which affect the amount of asset
management fees we receive; and
• our ability to generate favorable investment results through asset-liability management and strategic and tactical
asset allocation.
In addition, factors such as regulation, competition, interest rates, taxes, foreign exchange rates, securities market
conditions and general economic conditions affect our profitability. In some of our product lines, particularly those in
the Closed Block Business, we share experience on mortality, morbidity, persistency and investment results with our
customers, which can offset the impact of these factors on our profitability from those products.
Historically, the participating products included in the Closed Block have yielded lower returns on capital
invested than many of our other businesses. As we have ceased offering domestic participating products, we expect that
the proportion of the traditional participating products in our in force business will gradually diminish as these older
policies age, and we grow other businesses. However, the relatively lower returns to us on this existing block of
business will continue to affect our consolidated results of operations for many years. Our Common Stock reflects the
performance of our Financial Services Businesses, but there can be no assurance that the market value of the Common
Stock will reflect solely the performance of these businesses.
Executive Summary
Prudential Financial is one of the largest financial services firms in the U.S., offering clients a wide array of
financial products and services, including individual life insurance, annuities, group life and disability insurance and
pension and retirement services. We also offer mutual funds, asset management, real estate and relocation services and,
through our investment in Wachovia Securities, securities brokerage services. We serve individual and institutional
customers in over 30 countries through a variety of channels, including one of the largest proprietary distribution forces
in the life insurance industry.
The significant developments and events in 2003 reflected our efforts to effectively redeploy capital to seek
enhanced returns. These developments included:
• The acquisition of American Skandia, completed May 1, 2003, for a total purchase price of $1.184 billion, the
results of which are included in our Individual Life and Annuities segment.
• The combination of our retail securities brokerage and clearing operations with those of Wachovia, forming a
joint venture, Wachovia Securities, in which we retained a 38% ownership interest.
• The sale of our property and casualty insurance business.
• The repurchase of 29.1 million shares of Common Stock during the year, at a total cost of $1.0 billion.
•A25% increase in our Common Stock dividend, to 50 cents per share.
It is our intention to continue strategies to redeploy capital to enhance returns in 2004, with specific focus on the
following:
• Completion of the previously announced acquisition of CIGNA’s retirement business, expected to close in the
first half of 2004.
Growing and Protecting Your Wealth24