01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Prudential Financial, Inc. reported approximately $667 billiona of assets under management as of December 31, 2009, with operations in the United States, Asia, Europe and Latin America.
Its Financial Services Businesses and Closed Block Business are separated for financial reporting, though there is no legal separation between them. The Common Stock (NYSE: PRU) reflects the Financial Services Businesses, and the Class B Stock, held by private investors, reflects the Closed Block Business. For 2009, income from continuing operations attributable to Prudential Financial, Inc. was $3.071 billionb, compared with a loss of $1.099 billion in 2008.
Net income attributable to Prudential Financial, Inc. was $3.124 billionc, versus a $1.117 billion loss in 2008. Results include a $2.247 billion pre-tax gain from the sale of the minority joint venture interest in Wachovia Securities, completed December 31, 2009, and pre-tax net realized investment losses of $2.896 billion consolidated. Income tax expense was $21 million, which includes a $272 million benefit from the expiration of the statute of limitations.
The company raised approximately $4.4 billiond in capital markets during 2009, including a public common stock offering of 36.9 million shares at $39.00 per share for net proceeds of $1.391 billion. Management also reported that Prudential Insurance's RBC ratio was approximately 575% as of December 31, 2009, and that the Financial Services Businesses had $33.9 billion of capital. Ratings were downgraded during 2009 by several agencies, and the company disclosed that downgrades could increase borrowing costs and collateral requirements.
02—Key points
Key Highlights
- Consolidated net income attributable to Prudential Financial, Inc. was $3.124 billion in 2009, compared with a net loss of $1.117 billion in 2008.
- The $2.247 billion pre-tax gain on the sale of the Wachovia Securities joint venture interest, completed December 31, 2009, contributed to 2009 results; the company received $4.5 billion in cash for the interest.
- Consolidated pre-tax net realized investment losses were $2.896 billion in 2009, driven by other-than-temporary impairments of fixed maturity and equity securities.
- The company raised approximately $4.4 billion in capital markets during 2009, including $1.391 billion net proceeds from a common stock offering.
- Individual Annuity gross sales reached a record $16.3 billion in 2009, up from $10.3 billion in 2008.
- Closed Block Business reported a loss of $287 million in 2009, or $(165.00) per Class B share, versus income of $23 million in 2008.
- Rating agencies downgraded certain Prudential Financial and subsidiary ratings during 2009; the company warned that downgrades could raise borrowing costs and collateral requirements.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $32.38B$28.99B | +11.7% |
| SG&A Expenses | $8.99B$9.27B | −3.1% |
| Interest Expense | $1.10B$1.32B | −16.7% |
| Net Income | $3.12B-$1.12B | +379.7% |
| EPS (Basic) | $7.68$-2.53 | +403.6% |
| EPS (Diluted) | $7.63$-2.53 | +401.6% |
05—Questions
Frequently Asked Questions
What drove the swing from a 2008 loss to 2009 net income?
Results reflected a $2.247 billion pre-tax gain on the Wachovia Securities sale and improved market conditions beginning in late second quarter 2009, which produced favorable variances in variable annuity deferred acquisition cost amortization and reserves. These were partly offset by $2.896 billion of consolidated net realized investment losses.
How does the Closed Block Business affect Common Stock holders?
Common Stock reflects the Financial Services Businesses while Class B Stock reflects the Closed Block Business, but there is no legal separation between them. Net losses of the Closed Block Business, and any dividends or repurchases of Class B Stock, reduce assets legally available for dividends on Common Stock. The IHC debt of $1.75 billion, serviced by Closed Block cash flows, also affects consolidated results and borrowing costs.
What were the company's main capital actions in 2009?
The company sold 36.9 million Common Stock shares at $39.00, issued $2.5 billion of medium-term notes, and issued $500 million of exchangeable surplus notes. It also borrowed $1.5 billion from the Federal Home Loan Bank of New York and reduced commercial paper reliance. The company did not participate in the TARP Capital Purchase Program.
What dividend was declared on Common Stock for 2009?
On November 10, 2009, the Board declared an annual 2009 dividend of $0.70 per share of Common Stock, an increase of approximately 21% from the 2008 dividend of $0.58. The Class B Stock annual dividend was $9.625 per share.
What are the main risks flagged for investors?
Key risks include the recurrence of adverse capital markets conditions, further rating agency downgrades that could increase collateral requirements and borrowing costs, interest rate fluctuations affecting spread income, reserve and DAC adjustments, international operations risks, and proposed federal regulatory and tax changes, including a possible Financial Crisis Responsibility Fee.
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