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Prudential Financial, Inc. (PRU)
March 06, 2013 9:50 am ET
Previous Statements by PRU
» Prudential Financial Management Discusses Q4 2012 Results - Earnings Call Transcript
» Prudential Financial Management Discusses Q3 2012 Results - Earnings Call Transcript
» Prudential Financial, Inc. - Analyst/Investor Day
We could spend the 40 minutes, if we wanted to, reading the fine print from the lawyers, so why don't we skip through that and get to the investor value proposition. And I want to talk about sort of how we think about things these days. We have a portfolio of businesses that we have intentionally constructed over the past 15 years or so. There've been a lot of changes in Prudential, divestitures and acquisitions, that have fairly dramatically changed the profile of capital deployment within Prudential. And one of the consistent themes is quality. We don't want to be a flavor-of-the-month club. We want to be a company that offers sustained value-added products in places where we find good, attractive market opportunities.
We balance the portfolio of risks that we take and we view the risk management challenge as starting with the first decision of our capital deployment into a business model. And with that business model will come intrinsic risks and will come operating risks and will come strategic business risks. And I -- this is an important point for us, because we do all the after-the-fact analytics and allocations and attributions and value-at-risk work, but the fact is in a company like Prudential, the risk profile reflects the businesses in which capital has been deployed and the intrinsic risks in those businesses, equity risk, currency risk, mortality risk, longevity risk, the core drivers of the things that underlie our ability to package and deliver products, and ultimately, rationalize the deployment of capital and the profitability of what we're doing.
We have serious growth engines in international and in U.S. retirement and you'll see a little bit more about that in little while. We've done extremely well, with respect to the sales side of international, again, with quality business model, selling good products. And with respect to U.S. retirement, we've been an innovative leader and have made substantial progress not just because of the sales management capabilities that we have but more around our product skills and the ability to bring solutions to important and large complex customer challenges.
We're a market leader in most of what we do. And one of the areas in which our leadership has emerged, over the past 10 years, is in distribution. You might have thought of Prudential historically as more of a product company. And in a lot of ways, by the way 10 or 15 years ago, maybe it's more of a traditional life company. But you'll see from some of the exhibits, particularly in international, we've become what I describe as a distribution powerhouse across multiple channels, again selling attractive products.
Next bullet is really important. And it's the emphasis that we place on balancing the deployment of capital between investments in businesses and distribution to shareholders. We are acutely aware of the importance of paying dividends, and where we can, buying back stock. And you've seen, I think, a pretty good record since we went public of striking the right balance between acquisitions and organic growth on the one hand and the distribution of capital to shareholders on the other. And I'm emphasizing this a little bit differently today, because our view is that in the market, given particularly some of the challenges around valuation metrics and the way stocks trade and quote these days, the distribution of capital is a very, very important consideration. And the message I want to put behind this bullet is that we recognize how important that is. You've seen the dividend actions that we've taken, and you've seen our share repurchase plans. And I'm going to talk about capital deployment in a minute, but the headline over doing deals even relates to capital discipline and the ability of business investments to return cash.
We have a proven acquisition and integration track record. We've been spectacularly successful in Japan with very large deals going back to the original Kyoei transaction, more recently, the Star and the Edison deals that we did with AIG. We're in the midst now of integrating the Life Insurance business that we bought from Hartford. And we're careful about diligence. We're conservative on valuation, and I think we're pretty effective on execution and realizing the expense saves that we target.
And finally, we have a senior management team -- a seasoned management team. We've been active for a while together. We work very well together. We complement each other nicely and continuity and consistency of the messages that you see on this page and the things that we say and do in the market reflects at least, in part, the continuity and consistency of the leadership of the company.
This slide portrays the deployment of capital. This is one of those after-the-fact attributions that I mentioned. And it shows you where our money is invested in terms of the businesses. You see 40% of our capital invested in International Insurance, the big green slice of the pie on the northeast part of the circle. And then you see the U.S. Life businesses on the bottom, Group Insurance and Individual Life. This is as of last year end, 12/31/2012, so it does not reflect the capital that's been invested in Hartford Life. You'll see that updated when we publish first quarter results, but you ought to think that the 3% in Individual Life there has been tilted up a bit as a result of the investment in Hartford. Then you see the Retirement slice of the pie, the Asset Management slice of the pie and the Individual Annuities slice of the pie. And this is kind of the quantitative underpinning behind those statements about the mix of our businesses, combination of stable, combination of more market sensitive or less market sensitive and a variety of risks portrayed as you go around the circle, equity and fixed-income market sensitivities and individual annuities, longevity risks and retirement, and then, primarily, mortality risk on the entire right-hand half of the circle.