Prudential 2006 Annual Report Download - page 5

PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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2003 vaulted us to a top-10 position in the variable annuities
market in both sales and assets under management, and has
generated an outstanding return on equity. In addition to
increasing dramatically our scale in this market, this acquisition
also provided us with access to independent financial planners,
an important distribution channel.
In 2006, we again increased the scale and distribution
opportunities of this operation by acquiring Allstate’s variable
annuity business. Through this transaction, we gained
exclusive distribution rights to sell variable annuity products
through Allstate’s proprietary distribution force of
approximately 13,700 independent contractors and financial
professionals, as well as an opportunity to enhance
relationships with national wirehouses and regional securities
firms. Since the end of 2004, our total individual annuity
account values have grown by 53 percent, from $51 billion to
$78 billion.
In 2006, we also continued our record of product innovation,
introducing a spousal version of our popular Lifetime FiveSM
living benefit option, as well as Highest Daily Lifetime FiveSM ,
adding new options to this suite of products, which are
designed to help investors grow and protect their retirement
savings. We now hold a leading position in the variable
annuity market, and have a distinct competitive advantage
with our growing multi-channel distribution network.
Through the third quarter of 2006, we were the fourth-largest
variable annuity company in terms of assets under
management in the advisor-sold market and we were the
No. 1 seller of variable annuities in the independent
broker-dealer channel.
The second component of our retirement and savings market
presence is our retirement business, which we refer to as
Prudential Retirement. Our acquisition of CIGNA’s retirement
business in 2004 helped us develop a leading position in this
area. As part of the acquisition, we moved approximately
$50 billion in assets from the CIGNA platform into the new
Prudential Retirement environment. In the first quarter of 2006,
we completed the integration of CIGNA’s retirement business
into our operations.
We’re now bringing the full force of this combined operation to
bear in the retirement marketplace. Our account values have
grown from $62 billion at the end of 2002 to
$148 billion at the end of 2006. We are one of only a few
companies that can claim broad retirement market coverage in
terms of products, distribution and a full range of services. And we
are confident that we have sufficient scale to compete effectively.
In building both our retirement and annuities businesses, we
focused on creating important strategic links and collaborative
efforts that will help support both areas as they grow. For
example, our retirement business has the potential to benefit
from our annuities capabilities. We believe this combination of
complementary strengths will create a sustainable value
proposition and be an important differentiator for us in the
marketplace. We’re confident that we have the necessary
capabilities to be a leader in this arena.
We’ve also seen impressive progress in our domestic
individual life insurance business. We’ve continued our focus
on generating attractive margins and returns by developing a
higher-quality business model, in terms of our products and
distribution methods, with less focus on market share. And
we’re continuing to place more emphasis on third-party
distribution, where historically we’ve been underrepresented.
In 2006, for the first time, more than half of our individual
life insurance sales were generated through third-party
channels. While we’ve made substantial progress in our
penetration of these channels, we still see opportunity for
further growth.
Group Insurance is a similar story, where we continue to focus
on controlled growth, not on gaining market share. Under this
strategy, we’ve established a strong track record of high
persistency of quality business, attractive returns and growth in
line with the market.
Our asset management business is both an impressive
stand-alone operation and an important complementary
capability for our other businesses. Our results in 2006
again point to the breadth and depth of our capabilities
across a wide variety of asset classes, and the attractive
diversification in the sources of the funds we manage.
Before-tax adjusted operating income grew 28 percent in
2006. We will continue our dual focus in this operation,
growing both its capacity as an individual business and its
ability to support our other product offerings.
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.