Prudential 2006 Annual Report Download - page 3

PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
1
MESSAGE FROM THE CHAIRMAN
Dear Fellow Shareholders:
When Prudential went public on December 13, 2001, I said it
was one of the proudest days of my career. Looking back at all
that we have accomplished since then, I am even prouder of the
company today.
We have become one of the few companies that can help
people during every phase of life, from helping them save, to
protecting their assets, to converting their
money into a guaranteed stream of income
in retirement, to transferring their wealth
to loved ones.
During our first five years as a publicly
traded company, we have focused on
consistency—in our strategy, in our
execution and in our performance. We have
significantly strengthened our businesses,
improved our performance and established
leading positions in the markets where we
choose to concentrate:
• We reduced expenses by approximately
$600 million in our first three years as a
publicly traded company. And we
continue to look for opportunities to
reduce costs and increase our efficiency.
• We have divested low-growth, low-return and volatile businesses.
In 2003, we sold our property and casualty business and
combined our retail securities brokerage operations with
Wachovia Corporation’s in a joint venture called Wachovia
Securities, in which we have a 38 percent ownership interest and
from which we’re enjoying attractive returns.
• We have grown our high-return businesses, both organically and
through acquisitions, significantly increasing the breadth and
scale of our international businesses and our domestic retirement
and savings businesses. Since going public, we have successfully
completed five major acquisitions, which are generating
satisfactory returns.
• We have redeployed capital effectively, dedicating more to
businesses where we see potential for sustained growth. In
addition, we have repurchased $7.9 billion in Common Stock.
• We have significantly improved our financial position, an
accomplishment that has not gone unnoticed. Since the
beginning of 2004, we have earned ratings upgrades from all
four major rating agencies. This outcome reflects a
combination of the operating performance
of our company, as well as our
determination to maintain an appropriate
risk profile and employ effective capital
management, while generating the kind of
returns that are attractive to investors.
2006: A year of continued growth
By nearly any measure, 2006 was another
good year for Prudential.
One gauge of our success is the continued
improvement in our return on equity
(ROE*). For 2005, I reported to you that
we had exceeded our goal of 12 percent
ROE for the year. That was an ambitious
objective at the time we set it in 2001,
when our ROE was less than half
that amount. I’m pleased that our
progress in this area has continued. For 2006, our ROE
was 14.6 percent.
On an after-tax adjusted operating income basis,* our
Financial Services Businesses earned $2.97 billion in 2006
and posted earnings per share of Common Stock of $6.15.
Since the beginning of 2002, our first full year as a public
company, we’ve grown our earnings per share, on an after-tax
adjusted operating income basis, at a compounded annual
rate of 31 percent.
On a generally accepted accounting principles (GAAP) basis,
our Financial Services Businesses in 2006 reported net income of
$3.14 billion, or $6.50 per share of Common Stock.
*ROE is based on after-tax adjusted operating income for the Financial Services Businesses, a non-GAAP financial measure we use to analyze our operating
performance. See footnotes (A) and (B) on page 7 and footnote (1) on page 8 for a further description of adjusted operating income and ROE.