Building on our core strengths, we intend to pursue strategies to deliver consistent earnings growth with attractive risk-adjusted returns while maintaining a strong balance sheet. The immediate focus of our strategy is to improve the operating return on equity (“ROE”) of our ongoing business. The cornerstones of our prudent ROE-expansion strategy are the following strategies:

  • Improve the profitability of our existing franchises.
    We have identified and are actively pursuing several initiatives to improve profitability across our businesses. These initiatives include maintaining strict pricing discipline for new sales, re-pricing existing blocks of business that do not meet our return hurdles, allowing the run-off of unprofitable books that cannot be re-priced and adjusting policyholder crediting rates. We are working to reduce our operating and information technology overhead by leveraging our procurement capabilities to reduce expenses, increasing our use of business process outsourcing services and employing lean management techniques.
  • Focus on capital management across all businesses.
    We are highly focused on effectively managing the demands for capital across our businesses. We have prioritized growth in our higher return, less capital intensive Retirement and Investment Management businesses. We are also focused on selling capital-efficient products such as indexed solutions in Individual Life and voluntary products in Employee Benefits. The overall objective of these policies is to realign our businesses in a manner that will maximize free cash flow generation.
  • Leverage leading market positions, investment performance, and distribution strength to drive profitable growth in select markets.
    Within Retirement, we are focused on expanding in the corporate, government, healthcare, K-12, and higher education retirement plan markets, all of which offer strong growth and return potential. We are uniquely positioned with the expertise to serve all market and client segments, from the smallest employers up to the largest school districts, state and municipal governments and companies on the Fortune list. Within Investment Management, we are focused on leveraging our strong investment track record and historical performance to attract new institutional and individual customers in our third party business and to increase the share of proprietary assets under the management of Retirement. Given our scalable operating platform we believe our growth will produce margin expansion in these segments. Also, it provides key capabilities, broad distribution and seasoned underwriting that complement Retirement and Investment Management in helping customers attain their financial goals.
  • Transcend boundaries between workplace benefits and personal financial products.
    We aim to deliver comprehensive solutions across our customer base by combining the capabilities of our Ongoing Business. This combination of capabilities differentiates us from other financial services firms and allows us to capitalize on favorable demographic and social trends. For individuals, we intend to provide value-added services and increase the number of our products they consume. In Retirement, we have been seeking greater access to employees in employer-sponsored plans. We believe that such direct access will allow us to convert institutional relationships into individual ones and enable us to offer individuals entering retirement or exiting their current employer-sponsored plan for any other reason suitable products in which they can invest their retirement plan assets. In Employee Benefits, we have been working with employer clients to offer a broader array of voluntary products to address the needs of their workforce. Ultimately, we aspire to bridge the gap between workplace benefits and personal financial products in order to benefit our customers.
  • Protect our balance sheet by prudently managing risks.
    Risk management is pervasive in everything we do as a company. The coordination of our strategic, financial and risk functions has been critical to helping us focus on risk-reduction initiatives as well as determining where to invest for the future. We have substantially reduced the risk of our investment portfolio since 2008 and intend to continue managing it conservatively. On the liability side, we have significantly deleveraged our capital structure, are keenly focused on managing tail risks and have implemented a hedging program designed to substantially mitigate the effect of market shocks on our regulatory and rating agency capital adequacy, especially as it relates to the Closed Block Variable Annuity segment. Our hedging program is constantly evaluated and revised in light of changing market conditions and to manage the trade-offs between capital preservation, cash flow, earnings and underlying economics.

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Darin Arita
Senior Vice President, Investor Relations
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