Prudential 2003 Annual Report Download - page 4

2Growing and Protecting Your Wealth
Fellow Shareholders:
Prudential Financial’s life as a public company began
with a historic and very successful IPO in 2001. In 2003,
our second full year under public ownership, we con-
tinued our positive momentum, delivering solid financial
results and created substantial value for shareholders.
On a before-tax adjusted operating income basis—a
financial measure we use to analyze operating perfor-
mance*—our Financial Services
Businesses (FSB) earned $2.0 billion.
Based on after-tax adjusted operating
income, earnings per share of Common
Stock were $2.54, an increase of 23 per-
cent over the previous year.
On a generally accepted accounting
principles (GAAP) basis, our FSB gener-
ated net income of $1.0 billion, or $1.98
in earnings per share of Common Stock.
Again, a substantial year-over-year
increase.
Throughout 2003, we continued to
demonstrate efficient capital manage-
ment that sustained our already strong
balance sheet and capital position. We
repurchased $1 billion in Common
Stock, while maintaining the firm’s
financial flexibility. A buyback of $1.5
billion was approved by the Board of
Directors for 2004. In November, we
raised our dividend to $0.50 per share of
Common Stock, a 25-percent increase,
which was an important expression of
our commitment and ability to distribute
income to investors.
Our financial strength is reflected in
our credit ratings. In November,
Standard & Poor’s affirmed all ratings on Prudential
Financial, including its positive outlook on Prudential
Insurance. In early 2004, A.M. Best upgraded
Prudential Insurance’s financial strength rating to A+
(Superior) from A (Excellent).
Prudential’s overall appeal—as measured by
investors—is expressed in our stock price. Shares of
Prudential Financial Common Stock rose 31.6 percent
over the 12-month period, significantly outperforming
the broad market, which rose 26.4 percent as measured
by the S&P 500. It was the second consecutive year that
Prudential has outperformed the S&P 500.
Growing our core domestic
businesses through acquisition
In May of 2003, Prudential Financial finalized the acqui-
sition of American Skandia. This transaction propelled
us into the top-10 of annuity providers, and established
Prudential Financial as a leading distributor of variable
annuities through independent financial planners in the
United States. The company is now poised to become a
leader in the annuity market by vir-
tually any measure.
In November, we announced an
agreement to acquire CIGNA
Corp.’s retirement business. When
complete, this transaction will posi-
tion Prudential Financial as one of
the nation’s leading providers of
retirement products and services. It
will add significantly to the com-
pany’s assets under management,
further strengthening our position
as a global asset manager.
Making necessary changes
in underperforming
businesses
In July, we combined the retail bro-
kerage business of Prudential
Securities with Wachovia Securities,
and retained a 38-percent owner-
ship in the combined business. This
created the nation’s third-largest
retail financial advisory organiza-
tion. The combined entity offers
greater scale and profit potential,
and it presents significant product
distribution capability.
In May, we also made the difficult decision to divest
our property and casualty companies. We are pleased
that the buyers are fully committed to the property and
casualty business, plan to continue offering auto and
homeowners insurance through Prudential agents, and
offered continued employment to most of our employees.
These two transactions underscore an important
Prudential Financial commitment: We want to be in busi-
nesses that contribute to our return-on-equity goals—and
that present us with an opportunity to achieve market
leadership. If a business does not fit this profile, we will
evaluate it and take necessary actions.
Message from the Chairman
* See footnote (A) on page 5.
“Our goal is to be a
worldwide financial
services leader in
both the growth
and protection of
our clients’ assets.”
ART RYAN
Chairman and
Chief Executive Officer