Prudential Financial Inc.
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Case Code: BSTR114 Case Length: 31 Pages Period: 1875 - 2002 Pub Date: 2002 Teaching Note: Not Available |
Price: Rs.500 Organization: Prudential Financial Inc. Industry: Financial Services Countries : USA Themes: Corporate Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
"I wouldn't say they are as lean and mean as John Hancock was when it went public, but they have come a tremendous way. I think in terms of corporate culture, Prudential needs to get organized to decide with whom it competes - other financial services such as Merrill Lynch and [Charles] Schwab, not just MetLife, New York Life and other insurance companies."
- Colin W. Devine, vice-president of Salomon Smith Barney, New York (January 2001).
"Prudential remains a highly respected name in insurance. The company's biggest challenge now is to change its corporate culture to one that reports to shareholders every 90 days."
- Thomas Upton, Analyst, Standard & Poor's (January 2001).
Introduction
With revenues of $27.18 billion in 2001, Prudential Financial Incorporation (Prudential) was the second largest individual life insurance company in the US. Founded in 1875, Prudential had emerged as the leading life insurance company in the US and one of the largest providers of financial services in the world. The company had more than 15 million individual and institutional customers across the globe, in more than 30 countries. In the Fortune 2002 Survey, Prudential was ranked 62, up from its rank of 80, in the Fortune 2001 Survey. Prudential offered a variety of products and services, such as life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement-related services. Prudential also offered administration services, asset management, securities brokerage, banking services, real estate brokerage franchises, and relocation services.
Before December 2001, Prudential was known as Prudential Insurance Company of America. In December 2001, Prudential embarked on a demutualization program, with an initial public offering (IPO) worth $3.48 billion. After demutualization, the shares were traded in the name of Prudential Financial Incorporation. The IPO transformed most of the Prudential Insurance's 11 million policyholders into shareholders. In August 2002, Prudential reported a 62% drop in its profit for the first quarter from $250 million in 2001 to $95 million in 2002. The company had huge losses on bad investments particularly in telecommunications and energy companies. Prudential put its losses from bad investments at about $343 million, including losses of $83 million arising out of its holdings in WorldCom.6 As the stock markets were sliding, Prudential announced that it expected very low full-year earnings per share - between $2.10 and $2.30
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