01—Abstract
Summary
Summary of the 10-K filed February 22, 2013. Cited figures are marked; the original filing is the authoritative source.
Prudential Financial, Inc. (NYSE: PRU) reported approximately $1.060 trilliona of assets under management as of December 31, 2012, with operations in the United States, Asia, Europe and Latin America.
Its Financial Services Businesses reported net income attributable to Prudential Financial, Inc. of $428 millionb for 2012, compared with $3,420 million in 2011, while pre-tax adjusted operating income rose to $3,949 million from $3,836 million. Consolidated net income attributable to Prudential Financial, Inc. was $469 million, versus $3,566 million in 2011. Management attributed the lower Financial Services results mainly to a $2,377 million pre-tax unfavorable impact from foreign currency movements on Japanese insurance liabilities, a $666 million pre-tax unfavorable variance on variable annuity embedded derivatives and hedges, and lower realized gains.
Revenue rose sharply to $84,815 millionc, largely because two significant pension risk transfer transactions (General Motors and Verizon) brought about $32 billion of premiums, which were largely offset by higher policyholders' benefits. The filing states the company faces a possible designation as a Designated Financial Company under the Dodd-Frank Act; it received notice on October 19, 2012 that it was under consideration by the Financial Stability Oversight Council. The company also closed the acquisition of The Hartford's individual life insurance business on January 2, 2013 for $615 million in cash consideration, and the CFO is retiring effective March 4, 2013.
For shareholders, the 2012 Common Stock dividend was $1.60d per share, and the Board moves to quarterly dividends beginning in 2013, with a first-quarter 2013 dividend of $0.40 per share declared February 12, 2013. The company repurchased $650 million of Common Stock in 2012 under its authorizations.
02—Key points
Key Highlights
- Assets under management of approximately $1.060 trillion as of December 31, 2012; general account investment portfolio of $330.7 billion for the Financial Services Businesses and $67.9 billion for the Closed Block Business.
- Consolidated revenues rose to $84,815 million from $49,030 million, driven by about $32 billion of premiums from two pension risk transfer transactions, which were largely offset by higher policyholders' benefits.
- Net income attributable to Prudential Financial, Inc. fell to $469 million from $3,566 million; Financial Services Businesses net income was $428 million versus $3,420 million, mainly due to foreign currency effects on Japanese operations and variable annuity hedging results.
- Pre-tax adjusted operating income for the Financial Services Businesses increased to $3,949 million from $3,836 million, led by International Insurance ($2,704 million versus $2,263 million).
- Under consideration by the Financial Stability Oversight Council for a proposed designation as a Designated Financial Company, which could subject the company to stricter prudential standards and Federal Reserve supervision.
- Acquired The Hartford's individual life insurance business on January 2, 2013 for $615 million cash consideration, covering approximately 700,000 policies with about $135 billion of net retained face amount in force.
- Common Stock dividend of $1.60 per share declared for 2012 (about 10% above 2011); the Board moves to quarterly dividends in 2013, with $0.40 declared for the first quarter of 2013.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 22, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $84.85B$49.09B | +72.9% |
| Net Income | $520.00M$3.63B | −85.7% |
05—Questions
Frequently Asked Questions
Why did net income fall so sharply in 2012?
Consolidated net income attributable to Prudential Financial, Inc. was $469 million in 2012 versus $3,566 million in 2011. The filing attributes the Financial Services Businesses decline (income from continuing operations down $2,968 million) mainly to a $2,377 million pre-tax unfavorable impact from foreign currency movements on non-yen assets and liabilities in Japanese insurance operations, a $666 million unfavorable variance from variable annuity embedded derivatives and related hedges, and lower net realized gains.
What drove the large increase in premiums and revenues?
Premiums rose to $65,354 million from $24,301 million, primarily from two significant pension risk transfer transactions completed in the fourth quarter of 2012 with General Motors and Verizon, which the filing says contributed about $32 billion of premiums. Corresponding increases in policyholders' benefits largely offset these premiums.
What regulatory risk does the filing highlight?
On October 19, 2012, Prudential Financial received notice that it is under consideration by the Financial Stability Oversight Council for a proposed determination that it should be designated a Designated Financial Company under the Dodd-Frank Act. The filing states that if designated, the company would face stricter prudential standards, including capital, liquidity, stress testing and resolution planning requirements, and that the company cannot predict whether designation will occur.
What are the company's capital return actions and dividend plans?
In 2012 the company repurchased $650 million of Common Stock and paid shareholder dividends of $749 million. The Board approved up to $1.0 billion of repurchases from July 2012 through June 2013, of which $150 million had been used as of December 31, 2012. The Common Stock dividend for 2012 was $1.60 per share, and beginning in 2013 the company will pay quarterly, with $0.40 declared on February 12, 2013.
What changes in management and acquisitions occurred around the filing date?
The filing says Chief Financial Officer Richard J. Carbone is retiring effective March 4, 2013, and will be succeeded by Robert M. Falzon, currently Senior Vice President and Treasurer. The company also completed the acquisition of The Hartford's individual life insurance business on January 2, 2013 for $615 million in cash, primarily a ceding commission for reinsuring about 700,000 policies.
06—Continue