Share Repurchase Authorization
Today, the Company is announcing that its Board of Directors has authorized the repurchase of up to $1.5 billion of its outstanding Common Stock during
the period from January 1, 2018 through December 31, 2018.
The timing and amount of any share repurchases under the Company’s share
repurchase authorization will be determined by management based on market conditions and other considerations, and such repurchases may be effected in the open market, through derivative, accelerated repurchase and other negotiated transactions and
through plans designed to comply with Rule
10b5-1(c)
under the Securities Exchange Act of 1934, as amended.
NON-GAAP
MEASURES
Consolidated adjusted operating income and adjusted book value are
non-GAAP
measures. Adjusted operating income
excludes “Realized investment gains (losses), net,” as adjusted, and related charges and adjustments. A significant element of realized investment gains and losses are impairments and credit-related and interest rate-related gains and
losses. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as
interest rate-related gains or losses, is largely subject to our discretion and influenced by market opportunities as well as our tax and capital profile.
Realized investment gains (losses) within certain of our businesses for which such gains (losses) are a principal source of earnings, and those associated
with terminating hedges of foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income generally excludes realized investment gains and losses from products that contain
embedded derivatives, and from associated derivative portfolios that are part of an asset- liability management program related to the risk of those products. However, the effectiveness of our hedging program will ultimately be reflected in adjusted
operating income over time. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our
capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are classified as other trading account assets.
3
Adjusted operating income also excludes investment gains and losses on trading account assets supporting
insurance liabilities and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately accrue to contractholders. In addition, adjusted
operating income excludes the results of divested businesses, which are not relevant to our ongoing operations. Discontinued operations and earnings attributable to noncontrolling interests, each of which is presented as a separate component of net
income under GAAP, are also excluded from adjusted operating income. The tax effect associated with
pre-tax
adjusted operating income is based on applicable IRS and foreign tax regulations inclusive of
pertinent adjustments.
Adjusted book value is calculated as total equity (GAAP book value) excluding both accumulated other comprehensive income (loss)
and the cumulative effect of foreign currency exchange rate remeasurements and currency translation adjustments corresponding to realized investment gains and losses. These items are excluded in order to highlight the book value attributable to our
core business operations separate from the portion attributable to external and potentially volatile capital and currency market conditions.
We believe
that our use of these
non-GAAP
measures helps investors understand and evaluate the Company’s performance and financial position. The presentation of adjusted operating income as we measure it for
management purposes enhances the understanding of the results of operations by highlighting the results from ongoing operations and the underlying profitability of our businesses. Trends in the underlying profitability of our businesses can be more
clearly identified without the fluctuating effects of the items described above. Adjusted book value augments the understanding of our financial position by providing a measure of net worth that is primarily attributable to our business operations
separate from the portion that is affected by capital and currency market conditions and by isolating the accounting impact associated with insurance liabilities that are generally not marked to market and the supporting investments that are marked
to market through accumulated other comprehensive income under GAAP. However, adjusted operating income and adjusted book value are not substitutes for income and equity determined in accordance with GAAP, and the adjustments made to derive these
measures are important to an understanding of our overall results of operations and financial position.
A reconciliation of adjusted operating income to
income from continuing operations in accordance with GAAP and a reconciliation of adjusted book value to GAAP book value are included in Exhibit 99.1 to this Current Report. Additional historic information relating to our financial performance is
located on our Web site at www.investor.prudential.com.
4
FORWARD-LOOKING STATEMENTS
Certain of the statements included in this report constitute forward-looking statements within the meaning of the U. S. Private Securities Litigation Reform
Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,”
“will,” “shall,” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and
their potential effects upon Prudential Financial, Inc. and its subsidiaries. There can be no assurance that future developments affecting Prudential Financial, Inc. and its subsidiaries will be those anticipated by management. These forward-looking
statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such
forward-looking statements, including, among others: (1) general economic, market and political conditions, including the performance and fluctuations of fixed income, equity, real estate and other financial markets; (2) the availability
and cost of additional debt or equity capital or external financing for our operations; (3) interest rate fluctuations or prolonged periods of low interest rates; (4) the degree to which we choose not to hedge risks, or the potential
ineffectiveness or insufficiency of hedging or risk management strategies we do implement; (5) any inability to access our credit facilities; (6) reestimates of our reserves for future policy benefits and claims; (7) differences
between actual experience regarding mortality, morbidity, persistency, utilization, interest rates or market returns and the assumptions we use in pricing our products, establishing liabilities and reserves or for other purposes; (8) changes in
our assumptions related to deferred policy acquisition costs, value of business acquired or goodwill; (9) changes in assumptions for our pension and other postretirement benefit plans; (10) changes in our financial strength or credit
ratings; (11) statutory reserve requirements associated with term and universal life insurance policies under Regulation XXX, Guideline AXXX and principles-based reserving requirements; (12) investment losses, defaults and counterparty
non-performance;
(13) competition in our product lines and for personnel; (14) difficulties in marketing and distributing products through current or future distribution channels; (15) changes in tax
law including the developing U.S. federal tax reform proposals; (16) economic, political, currency and other risks relating to our international operations; (17) fluctuations in foreign currency exchange rates and foreign securities
markets; (18) regulatory or legislative changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the U.S. Department of Labor’s fiduciary rules; (19) inability to protect our intellectual property rights or
claims of infringement of the intellectual property rights of others; (20) adverse determinations in litigation or regulatory matters, and our exposure to contingent liabilities, including related to the remediation of certain securities
lending activities administered by the Company; (21) domestic or international military actions, natural or
man-made
disasters including terrorist activities or pandemic disease, or other events resulting
in catastrophic loss of life; (22) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; (23) possible difficulties in executing, integrating and realizing projected results of
acquisitions, divestitures and restructurings; (24) interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems;
(25) changes in statutory or U.S. GAAP accounting principles, practices or policies; (26) Prudential Financial, Inc.’s primary reliance, as a holding company, on dividends or distributions from its subsidiaries to meet debt payment
obligations and the ability of the subsidiaries to pay such dividends or distributions in light of our ratings objectives and/or applicable regulatory restrictions; and (27) the possibility that our dividend level will not increase as expected
due to changes in our financial condition, economic conditions or otherwise.
Prudential Financial, Inc. does not intend, and is under no obligation, to
update any particular forward-looking statement included in this document. See “Risk Factors” included in Prudential Financial, Inc.’s Annual Report on Form
10-K
for discussion of certain risks
relating to our businesses and investment in our securities.
5