Prudential 2007 Annual Report Download - page 3

Dear Fellow Shareholders:
2007 marked my final year as CEO of Prudential Financial.
As I reflect on my time with the company, I am reminded of
our rich 132-year history of helping people achieve financial
security. Over the last 13 years, I am proud to say we not only
added to that legacy, we have also established a foundation for
Prudential’s continued growth in the future.
We have the right mix of businesses to capitalize on
opportunities in the marketplace. We have grown our high-
return businesses—our domestic retirement and annuities
businesses and our international businesses—both organically
and through acquisitions. We have significantly expanded our
distribution channels in the United States, as well as in the
international markets where we operate. We believe the
diverse mix of businesses we have now not only
differentiates us in the marketplace, but will
also help us grow at above-market rates.
We have made risk management a core
competency. Our global operations diversify
our business risk across a broad range
of both geographic and
demographic profiles. Our
risks are diversified by
market because we serve
both individual and
institutional clients. And
they are diversified by
exposure because we
manage a broad range of
insurance and market
risks—such as interest
rate, equity market and mortality risks—that are, to a large
extent, uncorrelated. Our ability to take appropriate risks and
manage those risks effectively enabled us to perform well despite
the highly unsettled market conditions in the second half
of 2007.
We have strengthened our financial position. We have
done so through a rigorous capital management strategy and
an unwavering commitment to meet our performance
objectives. In 2006, we set a return on equity (ROE*) goal of
between 15 percent and 17 percent by year-end 2009. For
2007, our ROE was 15.7 percent—already well within our
target range. We also pledged to deliver double-digit growth
in earnings per share on an adjusted operating income basis,*
and we have. From 2002 through 2007, our earnings per
share have grown at a compound annual rate of 30 percent.
We have developed a very strong talent base. We
recently completed a multi-year succession planning
process and, as a result, we are confident we have the right
leaders in place to help align the company with the growth
opportunities we see in the marketplace.
In 2007, we delivered solid earnings
and shareholder value.
The improvements we have made to our business
mix and capabilities, combined with our risk
management, capital management and talent
management skills, are reflected in our financial
performance. We once again delivered solid
earnings and value for our shareholders in 2007.
On an after-tax adjusted operating income
basis, our Financial Services Businesses earned
$3.37 billion in 2007 and posted earnings per
share of Common Stock of $7.31, a year-
over-year increase of 21 percent.
MESSAGE FROM THE CHAIRMAN
Prudential Financial 2007 Annual Report 1
*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.