Prudential 2007 Annual Report Download - page 5

Prudential Financial 2007 Annual Report 3
plans in the vast majority of the markets in which we choose
to compete. We’re also a leader in the total retirement services
space, meaning we’re one of only a handful of companies that
can offer broad retirement coverage in terms of products,
distribution and a full range of services.
And we added to those capabilities in 2007. We acquired a
portion of Union Bank of California’s book of retirement
business, comprising 20 defined benefit plans, and more than
600 defined contribution plans representing nearly 168,000
participants, with a total of more than $7.2 billion in account
values. We demonstrated our ability to effectively respond to the
market’s desire for risk management features in retirement
product portfolios with the introduction of IncomeFlex. This
new product is designed to help provide a lifetime stream of
income to participants in defined contribution plans. Our
combined asset management, risk management and product
development skills have earned us a best-in-class plan persistency
rate in our full-service retirement business of 96 percent.
Together, our retirement and annuities businesses are well
aligned to meet the marketplace’s increasing demand for
products that address individuals’ concerns about outliving
their assets. Through these two businesses, we offer innovative
solutions that span the retirement planning cycle, from the
early accumulation years to the income payout years.
Our Asset Management business represents the third of our
high-growth opportunities on the domestic front. We manage
$439 billion in assets across a wide range of asset classes for our
own general account, as well as for retail and institutional clients.
And we are a market leader in many investment disciplines, such
as commercial mortgages, real estate investment management,
fixed income—including private placements—and defined
benefit plan investments. With 8 percent growth in adjusted
operating income, our asset management business continues to
deliver solid earnings and is an important complementary
capability for our other businesses.
As I mentioned previously, we view our protection businesses
as important contributors to our earnings and cash flow, and
our individual life insurance business certainly performed
well in 2007. Adjusted operating income for our individual
life business was $614 million, a $70 million increase over
2006. We also posted 15 percent sales growth, excluding
corporate-owned life insurance. The increase was driven
mainly by sales of our term life products, which were up 43
percent in 2007. In December, we introduced a new term
life insurance policy called MyTerm, which offers customers
of select banks and other financial institutions term life
insurance over the Internet in just 10 minutes.
In 2006 and 2007, we made significant investments in the
recruitment, training and development of our career agent
force. As a result of those investments, we have increased our
penetration into high-potential diverse markets, and year-
over-year productivity among our agents was up 15 percent.
Third-party distribution is the real growth opportunity in the
individual life insurance business, and we continued to make
terrific progress here. In 2002, third-party sales represented just
26 percent of our individual life sales, excluding corporate-
owned life insurance. In 2007, that figure was 65 percent,
demonstrating that we are successfully offering products
through another avenue in which customers want to buy.
The group insurance market also offers growth prospects
for us, as more individuals are buying supplemental life
insurance through their employers. We are the second-
largest group life insurer in the United States, based on
premiums in force. While we are
committed to retaining our
market position, we will continue
to exercise discipline in order to
maintain our attractive returns,
including striving to acquire and
retain high-quality business.
Our strategy in the International
Insurance and Investments
Division has not changed either,
because it is working. We
concentrate on a limited number of
attractive countries. We emphasize
proprietary distribution but have
extended our distribution platform
to third parties where it makes
sense. We target the affluent and mass affluent markets, and we
are focused on growing organically and through opportunistic
acquisitions.
We believe this approach has made us a leader at selling
protection life insurance, and the results in our International
Insurance business bear that out. We had $1.15 billion in
annualized new business premium in 2007 and ended the year
with more than 7 million total policies in force. Our Life Planner
business, which relies on a distribution force of highly trained,
well-educated life insurance sales professionals in eight countries
Each of our
operating
divisions posted
double-digit
earnings growth
in 2007 on an
adjusted
operating income
basis.