P RUDENTIAL F INANCIAL , INC . F OURTH Q UARTER 2016 E ARNINGS C - - PowerPoint PPT Presentation

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P RUDENTIAL F INANCIAL , INC . F OURTH Q UARTER 2016 E ARNINGS C - - PowerPoint PPT Presentation

Nov 17, 2023 10 likes •283 views

P RUDENTIAL F INANCIAL , INC . F OURTH Q UARTER 2016 E ARNINGS C ONFERENCE C ALL P RESENTATION F EBRUARY 9, 2017 F OURTH Q UARTER F INANCIAL H IGHLIGHTS (1) Fourth Quarter 2016 2015 Pre-Tax Adjusted Operating Income (AOI) Reported $ 1,459 $

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SLIDE 1

PRUDENTIAL FINANCIAL, INC.

FOURTH QUARTER 2016 EARNINGS CONFERENCE CALL PRESENTATION

FEBRUARY 9, 2017

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SLIDE 2

FOURTH QUARTER FINANCIAL HIGHLIGHTS(1)

2016 2015 Fourth Quarter Reported 1,459 $ 1,182 $ Market driven and discrete items

(2)

20 (93) Excluding market driven and discrete items 1,439 $ 1,275 $ Pre-Tax Adjusted Operating Income (AOI) Reported 2.46 $ 1.94 $ Market driven and discrete items

(2)

0.03 (0.13) Earnings Per Share (EPS) Excluding market driven and discrete items 2.43 $ 2.07 $ Reported 284 $ 735 $ Net Income

2

1) Dollar amounts in millions except per share amounts. Per share amounts on diluted basis. 2) Market driven and discrete items as disclosed on page 4; based on application of 35% tax rate for purposes of EPS calculation.

4Q16 Earnings Conference Call

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SLIDE 3

FULL YEAR FINANCIAL HIGHLIGHTS(1)

2016 2015 Reported 5,399 $ 6,231 $ Year Ended December 31, Pre-Tax Adjusted Operating Income (AOI) Market driven and discrete items

(2)

(360) 123 Excluding market driven and discrete items 5,759 $ 6,108 $ Reported 9 13 $ 10 04 $ Earnings Per Share (EPS) Reported 9.13 $ 10.04 $ Market driven and discrete items

(2)

(0.52) 0.18 Excluding market driven and discrete items 9.65 $ 9.86 $ December 31, 2016 2015 Reported (including Accumulated Other Comprehensive Income, "AOCI") 104.91 $ 92.39 $ Adjusted(3) 78.95 $ 73.59 $ Year Ended December 31, Book Value Per Share of Common Stock

1) Dollar amounts in millions except per share amounts. Per share amounts on diluted basis. 2) Market driven and discrete items as disclosed on page 24; based on application of 35% tax rate for EPS and operating return on average equity calculations

2016 2015 Reported 12.0% 14.5% Excluding impact of market driven and discrete items on AOI 12.7% 14.2% , Operating Return on Average Equity(4)

3 4Q16 Earnings Conference Call

2) Market driven and discrete items as disclosed on page 24; based on application of 35% tax rate for EPS and operating return on average equity calculations. 3) See reconciliation on page 25. 4) Based on after-tax adjusted operating income and average attributed equity excluding accumulated other comprehensive income. Average attributed equity adjusted to remove amounts included for foreign currency exchange rate remeasurement. Impact of latter adjustment on attributed equity represents cumulative impact of gains and losses resulting from foreign currency exchange rate remeasurement included in net income; based on application of 35% tax rate.

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SLIDE 4

AOI IMPACT OF MARKET DRIVEN AND DISCRETE ITEMS

Pre-tax AOI(1) EPS(2) Pre-tax AOI(1) EPS(2)

2016 2015 Fourth Quarter Reported Results 1,459 $ 2.46 $ 1,182 $ 1.94 $ Market driven and discrete items:

Individual Annuities - Market unlockings and experience true-ups(3)

  • 7

0.01

Retirement - Settlement of legal matters

20 0.03

  • Individual Life - Reserve refinements
  • (20)

(0.03)

Corporate & Other - Charge related to the administration of certain separate account investments

  • (80)

(0.11) Subtotal 20 0.03 (93) (0.13) Results excluding market driven and discrete items 1,439 $ 2.43 $ 1,275 $ 2.07 $ 4

1) In millions. 2) Diluted; based on after-tax AOI; tax effect for market driven and discrete items at 35%. 3) Includes adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions in each period.

4Q16 Earnings Conference Call

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SLIDE 5

FOURTH QUARTER NON-AOI ITEMS(1)

($ millions) ( )

2016 2015

Pre-tax realized investment gains (losses), net, and related charges and adjustments included in net income:

Fourth Quarter

Product related embedded derivatives and associated hedging activities (1,283) $ (534) $ Impairments and credit losses (53) (92) Risk management activities including changes in market value of derivatives used in asset/liability duration management 165 (125) General investment portfolio and related activities(2) 347 555

Subtotal (824) $ (196) $

. Results of divested businesses (218) (120) Other Non-AOI pre-tax items: ( ) ( ) Other(3) (95) (21)

Subtotal (313) $ (141) $ Total Non-AOI items(4) (1,137) $ (337) $

1) Certain prior period items have been reclassified to conform to current period presentation. 2) Includes amounts for foreign currency exchange rate remeasurement

Total Non AOI items (1,137) $ (337) $

5

2) Includes amounts for foreign currency exchange rate remeasurement. 3) Includes changes in recorded asset values and liabilities representing changes in value which are expected to ultimately accrue to contractholders, primarily from mark to market adjustments. Excludes pre-tax reconciling item between AOI and U.S. GAAP for equity in earnings of operating joint ventures and earnings attributable to non-controlling interests. 4) See earnings release tables for related tax effect.

4Q16 Earnings Conference Call

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SLIDE 6

INDIVIDUAL ANNUITIES – EARNINGS TREND(1) AND RETURN ON ASSETS

Earnings Return on Assets Earnings ($ millions) Return on Assets (bps)

449 104 103 98 114 107 100 120 $500 $600

~10 ~10

403 381 375 449 422 80 100 $300 $400 40 60 $100 $200

~(5)

20 $(100) $‐ 4Q15 1Q16 2Q16 3Q16 4Q16 Average Account Values ($ billions) $155 $148 $154 $158 $156 AOI excluding market driven and discrete items and "Trend Considerations" Return on Assets (ROA)

(2)

Trend Considerations(3) 6

1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 26. 2) Annualized pre-tax AOI excluding market driven and discrete items divided by average account values based on daily averages for separate accounts. 3) Trend considerations do not include seasonality impacts or quarterly expense patterns and are described on page 22.

4Q16 Earnings Conference Call Trend Considerations

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SLIDE 7

INDIVIDUAL ANNUITIES – SALES AND PRODUCT MIX

Gross Sales

17% 41%

0.3 $2.1 $2.0 $2.3 $2.1

Gross Sales

($ billions) Year Ended 12/31/16 Gross Sales $8.1 billion

31% 11%

0.5 0 3 0.6 0.5 0.3 0.3 $1.7

67% 66%

18%

0.7 0.6 0.3 4Q15 1Q16 2Q16 3Q16 4Q16

33% 34% Year Ended 12/31/15 Gross Sales $8.8 billion Net Sales $173 million

18% 42% 14% 26%

Net Sales ($ millions) $68 $238 $341 $87 ($493)

Gross Sales

No optional living benefit risk(1) Prudential Defined Income (PDI) Reinsured Highest Daily Income (HDI) risk(2) HDI risk retained by Prudential(3)

Net Sales $365 million 7

1) Includes Prudential Premier Investment contracts, and other annuities without optional living benefit guarantees. 2) Includes portion of account values for certain variable annuities for which living benefits are covered under an external reinsurance agreement which was effective from April 1, 2015 through December 31, 2016. 3) Includes predecessor product optional living benefits.

4Q16 Earnings Conference Call

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SLIDE 8

RETIREMENT – EARNINGS TREND(1)

($ millions)

~35 ~40

168 219 230 273 298

~(20) ~(20) ~(10)

4Q15 1Q16 2Q16 3Q16 4Q16

Trend Considerations(2)

8

1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 26. 2) Trend considerations do not include seasonality impacts or quarterly expense patterns and are described on page 22.

4Q16 Earnings Conference Call

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SLIDE 9

RETIREMENT – SALES AND ACCOUNT VALUES

12.3

Gross Sales and Deposits

($ billions)

Account Values(1)

($ billions) 368.9 386.2 8.3 8.7 8.1 8.9 183.4 180.0 3.4 3.8 2015 2016 4Q15 1Q16 2Q16 3Q16 4Q16 Net Flows ($ billions) ($1.4) $0.6 $0.5 $5.0 ($0.3) $4.3 $5.8

Investment Only Stable Value Full Service Longevity Reinsurance Group Annuities and Other Products

Institutional Investment Products 9

1) As of end of period.

4Q16 Earnings Conference Call

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SLIDE 10

ASSET MANAGEMENT – EARNINGS TREND(1) AND KEY BUSINESS DRIVERS

104 105 964 1,065 1,071

Average Assets Under Management

Earnings

($ millions) ($ billions) 182 173 172 98 104 105 964

37 22 33 16 22

198 165 207 191 224 684 788 794 4Q15 3Q16 4Q16 Other Related Revenues(4) Earnings primarily driven by core asset management fees

Real Estate(2) Equity Fixed Income(3)

4Q15 1Q16 2Q16 3Q16 4Q16 10

1) Pre-tax AOI. 2) Includes real estate related assets managed by PGIM. 3) Includes International Investments. 4) Earnings contribution from incentive, transaction, strategic investing and commercial mortgage activities, net of expenses.

4Q16 Earnings Conference Call

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SLIDE 11

INDIVIDUAL LIFE – EARNINGS TREND(1)

($ millions)

~5

119 120 130 111 138

~(10) ~(45) ~(25) ~(40) (45) (40)

4Q15 1Q16 2Q16 3Q16 4Q16 Trend Considerations(2)

11

1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 26. 2) Trend considerations do not include seasonality impacts or quarterly expense patterns and are described on page 22.

4Q16 Earnings Conference Call

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SLIDE 12

INDIVIDUAL LIFE – SALES

($ millions)

Annualized New Business Premiums

52 50 50 179 145 159 143 183 77 32 20 23 21 31 48 50 52 22 26 25 16 25 73 51 61 54 77 4Q15 1Q16 2Q16 3Q16 4Q16 Variable Guaranteed Universal Life (GUL) Other Universal Life Term

12 4Q16 Earnings Conference Call

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SLIDE 13

GROUP INSURANCE – EARNINGS TREND(1) AND BENEFITS RATIOS

88 1% 88 0%

100% Earnings ($ millions) Total Benefits Ratio

~10

48 62 43

86.8% 88.1% 86.6% 87.1% 88.0%

60% 80% $60 $80

~5

27 26 43 40% 60% $20 $40

~(5) ~(10)

0% 20% $(20) $- 4Q15 1Q16 2Q16 3Q16 4Q16 4Q15 1Q16 2Q16 3Q16 4Q16

AOI excluding market driven and discrete items and "Trend Considerations" Group Life and Disability benefits ratio

(2)

Trend Considerations

(3)

13

1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 26. 2) Benefits ratios excluding impact of market driven and discrete items as disclosed on page 26. 3) Trend considerations do not include seasonality impacts or quarterly expense patterns and are described on page 22.

4Q16 Earnings Conference Call

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SLIDE 14

INTERNATIONAL INSURANCE DIVISION – LIFE PLANNER OPERATIONS – EARNINGS TREND(1)

($ millions)

~10 ~10 ~15 ~20

367 410 381 391 395

~(5)

4Q15 1Q16 2Q16 3Q16 4Q16 Trend Considerations(2)

14

1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 27. 2) Trend considerations do not include seasonality impacts or quarterly expense patterns and are described on page 22.

4Q16 Earnings Conference Call

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SLIDE 15

INTERNATIONAL INSURANCE DIVISION – GIBRALTAR LIFE & OTHER OPERATIONS – EARNINGS TREND(1)

($ millions)

494

~75 ~5 ~5

371 369 389 360

~(15)

4Q15 1Q16 2Q16 3Q16 4Q16

Trend Considerations(2)

15

1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 27. 2) Trend considerations do not include seasonality impacts or quarterly expense patterns and are described on page 22.

4Q16 Earnings Conference Call

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SLIDE 16

INTERNATIONAL INSURANCE DIVISION – SALES

($ millions)

Annualized New Business Premiums(1)

692 781 747 771 727

Year Ended 12/31/16 Japan Sales $2.6 billion

172 157 57 63 121 125

692

241 340

44% 52%

181 208 161 174 293 241

571

249 340

Year Ended 12/31/15 Japan Sales $2.4 billion

4% 602

Japan

Life Planner Operations - Excluding Japan

181

4Q15 1Q16 2Q16 3Q16 4Q16

4Q15 4Q16

4Q16 4Q15 54% 37%

Other Currencies U.S. Dollar Japanese Yen

Japan

Independent Agency Bank Channel Gibraltar Life Consultants Life Planners - Japan 9% 16

1) Foreign denominated activity translated to U.S. dollars at uniform exchange rates for all periods presented, including Japanese yen 106 per U.S. dollar, and Korean won 1,100 per U.S. dollar. U.S. dollar-denominated activity is included based on the amounts as transacted in U.S. dollars.

4Q16 Earnings Conference Call

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SLIDE 17

CORPORATE & OTHER OPERATIONS – RESULTS TREND(1)

($ millions) $100 $(100) $- $100

(40)

(312) $(300) $(200)

~(40)

(378) (312) (376) (413) (441) $(500) $(400) 4Q15 1Q16 2Q16 3Q16 4Q16 Trend Considerations(2)

17

1) Pre-tax AOI excluding market driven and discrete items as disclosed on page 27. 2) Trend considerations do not include seasonality impacts or quarterly expense patterns and are described on page 22.

4Q16 Earnings Conference Call

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SLIDE 18

FINANCIAL STRENGTH HIGHLIGHTS INSURANCE OPERATIONS

Risk Based Capital Ratio (RBC)(1)

December 31, 2015

Target Estimated December 31, 2016

Prudential Insurance 484% PALAC(2) 550% Composite Major U.S.(3) 486% 400% W ll Ab T t p j Insurance Subsidiaries 486% 400% Well Above Target

Solvency Margin Ratio Target September 30, 2016

Prudential of Japan(4) 700% 858% Gibraltar Life(4) 700% 975%

1) The inclusion of RBC measures is intended solely for the information of investors and is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities. Indicated target is for purposes of evaluating on balance sheet capital capacity. 2) Prudential Annuities Life Assurance Corporation. 3) I l d P d ti l I d it b idi i (P Lif f A i P Lif f N J P d ti l L I C P d ti l R ti t

Gibraltar Life 700% 975%

3) Includes Prudential Insurance and its subsidiaries (Pruco Life of Arizona, Pruco Life of New Jersey, Prudential Legacy Insurance Co., Prudential Retirement Insurance and Annuity Co.) and PALAC. Composite RBC is not reported to regulators and is based on summation of total adjusted capital and risk charges for the included companies as determined under statutory accounting and RBC guidance to calculate a composite numerator and denominator, respectively, for purposes

  • f calculating the composite ratio.

4) Based on Japanese statutory accounting and risk measurement standards applicable to regulatory filings. On a consolidated basis.

18 4Q16 Earnings Conference Call

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SLIDE 19

LIQUIDITY, LEVERAGE, AND CAPITAL DEPLOYMENT

  • Parent company cash, short term investments, and U.S.

Treasury fixed maturities, $4.5 billion(2)

Liquidity Position(1)

~ > > > >

  • Financial leverage ratio within our 25% target(3)
  • Total leverage ratio within our 40% target(3)

Leverage(1)

  • $3.2 billion returned to shareholders through dividends

and share repurchases in 2016

  • Fourth quarter common stock dividends $307 million,

share repurchases $625 million

Capital Deployment Hi hli ht

1) Liquidity position and leverage ratios as of December 31, 2016. 2) Net of outstanding commercial paper and cash held in an intra-company liquidity account at parent company. ) f % % f

share repurchases $625 million

  • Share repurchase authorization of $1.25 billion for 2017
  • Quarterly dividend increase of 7% in 1Q17(4)

Highlights

3) Financial leverage ratio represents capital debt divided by sum of capital debt and equity. Junior subordinated debt treated as 25% equity, 75% capital debt for purposes of calculation. Total leverage ratio represents total debt excluding non-recourse debt divided by sum of total such debt and equity. Equity in each calculation excludes non-controlling interest, AOCI (except for pension and postretirement unrecognized costs), and impact of foreign currency exchange rate remeasurement. 4) $0.75 per share of Common Stock payable on March 16, 2017 to shareholders of record as of February 22, 2017.

19 4Q16 Earnings Conference Call

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SLIDE 20

PRUDENTIAL FINANCIAL, INC.

FOURTH QUARTER 2016 EARNINGS CONFERENCE CALL PRESENTATION QUESTIONS AND ANSWERS

FEBRUARY 9, 2017

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SLIDE 21

FORWARD-LOOKING STATEMENTS AND NON-GAAP MEASURES

C t i f th t t t i l d d i thi t ti tit t f d l ki t t t ithi th i f th U S P i t Certain of the statements included in this presentation 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. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the “Risk Factors” section included in Prudential Financial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015. Prudential Financial, Inc. does not intend, and is under no obligation, to update any particular forward-looking statement included in this presentation. This presentation also includes references to adjusted operating income and adjusted book value, as well as return on equity, which is based on adjusted operating income and adjusted book value. Consolidated adjusted operating income and adjusted book value are not calculated based on accounting principles generally accepted in the United States of America (GAAP). For additional information about adjusted operating income, adjusted book value and the comparable GAAP measures, including a reconciliation between the comparable measures, please refer to our quarterly results news releases, which are available on our Web site at www.investor.prudential.com. Reconciliations are also included as part of this presentation. ______________________________________________________________________________ Prudential Financial, Inc. of the United States is not affiliated with Prudential PLC which is headquartered in the United Kingdom.

21 4Q16 Earnings Conference Call

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SLIDE 22

TREND CONSIDERATIONS

“Trend considerations” represent the approximate impact on results attributable to variances from the Company’s long-term average expectations for the items described below and for the period indicated. These items, where significant, are individually identified for the respective periods in the Company’s earnings releases, available at www.investor.prudential.com. Trend considerations for the reporting periods shown herein include variances as applicable, for the following items, organized by business unit:

– Individual Annuities: earnings from non-coupon investments and prepayment fees; – Retirement: earnings from non-coupon investments and prepayment fees, and case experience; – Individual Life: claims experience (including mortality, reserve updates and related amortization), earnings from non-coupon investments and prepayment fees, updates and refinements of reserves and related items, and higher than typical legal costs where significant; – Group Insurance: earnings from non-coupon investments and prepayment fees; Group Insurance: earnings from non coupon investments and prepayment fees; – Life Planner Operations: earnings from non-coupon investments and prepayment fees, and claims experience; – Gibraltar Life & Other Operations: earnings from non-coupon investments and prepayment fees, claims experience, and income from a fixed asset sale; and – Corporate & Other operations: charges related to a tax-advantaged investment.

The Company chooses to highlight the impact of these items because it believes their contribution to results in a given period may not be indicative of future performance. These trend considerations do not include seasonality impacts or quarterly expense patterns and may not encompass all items that could affect earnings trends. Average expectations used for comparison herein are those in effect for the respective periods shown at the time of original reporting and are not adjusted for subsequent changes in the Company’s expectations. _____________________________________________________________________________ Prudential Financial, Inc. of the United States is not affiliated with Prudential PLC which is headquartered in the United Kingdom.

22 4Q16 Earnings Conference Call

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SLIDE 23

RECONCILIATIONS BETWEEN ADJUSTED OPERATING INCOME

AND THE COMPARABLE GAAP MEASURE

($ millions)

2016 2015 2016 2015 Net income attributable to Prudential Financial, Inc. 284 $ 735 $ 4,368 $ 5,642 $ Income attributable to noncontrolling interests 9 5 51 70 Fourth Quarter December 31, Year Ended Income attributable to noncontrolling interests 9 5 51 70 Net income 293 740 4,419 5,712 Less: Income from discontinued operations, net of taxes

  • Income from continuing operations (after-tax)

293 740 4,419 5,712 Less: Earnings attributable to noncontrolling interests 9 5 51 70 Income from continuing operations attributable to Prudential Financial, Inc. 284 735 4,368 5,642 Less: Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling intere 2 2 (2) (55) q y g p g j , g g ( ) ( ) Income from continuing operations (after-tax) before equity in earnings of operating joint ventures 282 733 4,370 5,697 Less: Reconciling items: Realized investment gains (losses), net, and related charges and adjustments (824) (196) 523 1,579 Investment gains (losses) on trading account assets supporting insurance liabilities, net (378) (159) (17) (524) Change in experience-rated contractholder liabilities due to asset value changes 283 138 21 433 Divested businesses: Closed Block division (58) (80) (132) 58 Other divested businesses (160) (40) (84) (66) Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests (5) (2) (5) 58 Total reconciling items, before income taxes (1,142) (339) 306 1,538 Less: Income taxes, not applicable to adjusted operating income (334) (181) 43 490 Total reconciling items, after income taxes (808) (158) 263 1,048 After-tax adjusted operating income 1,090 891 4,107 4,649 Income taxes, applicable to adjusted operating income 369 291 1,292 1,582 Adjusted operating income before income taxes 1,459 $ 1,182 $ 5,399 $ 6,231 $ 23 4Q16 Earnings Conference Call

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SLIDE 24

RECONCILIATIONS FOR PRE-TAX AOI EXCLUDING MARKET DRIVEN

AND DISCRETE ITEMS

Pre-tax AOI(1) EPS(2) Pre-tax AOI(1) EPS(2)

Reported Results 5,399 $ 9.13 $ 6,231 $ 10.04 $ Year Ended December 31, 2016 2015 p 5,399 $ 9 3 $ 6, 3 $ 0 0 $ Market driven and discrete items:

Annual review of actuarial assumptions and reserve refinements(3)

(444) (0.64) 117 0.17

Individual Annuities - Primarily market unlockings and experience true-ups(4)

134 0.19 103 0.14

Retirement Costs relating to legal matters

(14) (0 02)

Retirement - Costs relating to legal matters

(14) (0.02)

  • Individual Life - Integration costs for Hartford Life acquisition
  • (17)

(0.02)

Corporate & Other - Early debt extinguishment costs

(36) (0.05)

  • Corporate & Other - Charge related to the administration of certain separate account investments
  • (80)

(0.11) Subtotal (360) (0.52) 123 0.18 Results excluding market driven and discrete items 5,759 $ 9.65 $ 6,108 $ 9.86 $

1) In millions. 2) Diluted; based on after tax adjusted operating income; tax effect for market driven and discrete items at 35%

24

2) Diluted; based on after-tax adjusted operating income; tax effect for market driven and discrete items at 35%. 3) Includes amortization of deferred policy acquisition and other costs. 4) Includes adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions in each period and charge for potential contract cancellations in third quarter 2015.

4Q16 Earnings Conference Call

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SLIDE 25

RECONCILIATIONS BETWEEN ADJUSTED BOOK VALUE AND COMPARABLE GAAP MEASURE

($ millions, except per share data)

2016 2015 December 31, GAAP book value 45,863 $ 41,890 $ Less: Accumulated other comprehensive income (AOCI) 14,621 12,285 GAAP book value excluding AOCI 31,242 29,605 Less: Cumulative effect of foreign exchange remeasurement and currency translation adjustments corresponding to realized gains/losses (3,199) (3,747) Adjusted book value 34,441 33,352 Number of diluted shares 436.2 453.2 GAAP book value per common share - diluted

(1)

104.91 92.39 GAAP book value excluding AOCI per share - diluted 71.62 65.32 Adjusted book value per common share - diluted 78.95 73.59

1) Book value per share of Common Stock including accumulated other comprehensive income as of December 31, 2015 includes a $500 million increase in equity $

25 4Q16 Earnings Conference Call

and a 5.6 million increase in diluted shares reflecting the dilutive impact of exchangeable surplus notes when book value per share is greater than $88.90, and as

  • f December 31, 2016 includes a $500 million increase in equity and a 5.75 million increase in diluted shares reflecting the dilutive impact of exchangeable surplus

notes when book value per share is greater than $86.92.

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SLIDE 26

RECONCILIATIONS FOR PRE-TAX ADJUSTED OPERATING INCOME

EXCLUDING MARKET DRIVEN AND DISCRETE ITEMS

($ millions) Q Q Q Q Q 4Q15 1Q16 2Q16 3Q16 4Q16 Individual Annuities pre-tax AOI 410 $ 328 $ 427 $ 588 $ 422 $ Reconciling items: Market unlockings and experience true-ups(1) 7 (53) 48 139

  • Annual review of actuarial assumptions and reserve refinements(2)
  • 4
  • Subtotal

7 (53) 52 139

  • Individual Annuities pre-tax AOI

excluding market driven and discrete items 403 $ 381 $ 375 $ 449 $ 422 $ Retirement pre-tax AOI 168 $ 219 $ 236 $ 239 $ 318 $ Reconciling items: Annual review of actuarial assumptions and reserve refinements(2) 6 Annual review of actuarial assumptions and reserve refinements( )

  • 6
  • Costs relating to legal matters
  • (34)

20 Subtotal

  • 6

(34) 20 Retirement pre-tax AOI excluding market driven and discrete items 168 $ 219 $ 230 $ 273 $ 298 $ $ $ $ $ $ Individual Life pre-tax AOI 99 $ 120 $ (290) $ 111 $ 138 $ Reconciling items: Annual review of actuarial assumptions and reserve refinements(2) (20)

  • (420)
  • Subtotal

(20)

  • (420)
  • Individual Life pre-tax AOI

excluding market driven and discrete items 119 $ 120 $ 130 $ 111 $ 138 $ excluding market driven and discrete items 119 $ 120 $ 130 $ 111 $ 138 $ Group Insurance pre-tax AOI 27 $ 26 $ 89 $ 62 $ 43 $ Reconciling items: Annual review of actuarial assumptions and reserve refinements(2)

  • 41
  • Subtotal
  • 41
  • 26

1) Includes adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions in each period. 2) Includes amortization of deferred policy acquisition and other costs.

4Q16 Earnings Conference Call

Group Insurance pre-tax AOI excluding market driven and discrete items 27 $ 26 $ 48 $ 62 $ 43 $

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SLIDE 27

RECONCILIATIONS FOR PRE-TAX ADJUSTED OPERATING INCOME

EXCLUDING MARKET DRIVEN AND DISCRETE ITEMS (CONTINUED)

($ millions) 4Q15 1Q16 2Q16 3Q16 4Q16 Life Planner Operations pre-tax AOI 367 $ 410 $ 343 $ 391 $ 395 $ Reconciling items: Annual review of actuarial assumptions and reserve refinements(2)

  • (38)
  • Subtotal
  • (38)
  • Life Planner Operations pre-tax AOI

excluding market driven and discrete items 367 $ 410 $ 381 $ 391 $ 395 $ Gibraltar Life & Other Operations pre-tax AOI 371 $ 369 $ 460 $ 389 $ 360 $ Reconciling items: Annual review of actuarial assumptions and reserve refinements(2)

  • (34)
  • Subtotal
  • (34)
  • Gibraltar Life & Other pre-tax AOI

excluding market driven and discrete items 371 $ 369 $ 494 $ 389 $ 360 $ excluding market driven and discrete items 371 $ 369 $ 494 $ 389 $ 360 $ Corporate & Other Operations pre-tax AOI (458) $ (312) $ (415) $ (413) $ (441) $ Reconciling items: Annual review of actuarial assumptions and reserve refinements(2)

  • (3)
  • Charge related to administration of certain separate account investments

(80)

  • Charge related to administration of certain separate account investments

(80) Costs associated with early debt extinguishment

  • (36)
  • Subtotal

(80)

  • (39)
  • Corporate & Other Operations pre-tax AOI

excluding market driven and discrete items (378) $ (312) $ (376) $ (413) $ (441) $ 27

1) Includes adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions in each period. 2) Includes amortization of deferred policy acquisition and other costs.

4Q16 Earnings Conference Call