NEWARK, N.J. - Prudential Insurance Co. of America's strategic reorganization paves the way for the insurance giant to make a greater push into the defined contribution, mutual fund and variable annuity markets.
The reorganization, viewed as positive by others in the industry, is likely to have a minimal effect on Prudential's existing money management units. But those units will have greater access to Prudential's resources in order to grow, officials said.
In a move announced Nov. 15, Prudential reorganized the firm into seven industry groups: money management; private asset management; individual insurance; international insurance; Prudential Securities; Prudential HealthCare; and a catch-all group.
Michael Caulfield, executive vice president, was selected to head Prudential's consolidated money management effort, which will have more than $160 billion under management. Previously, he headed the firm's high-net-worth insurance group; before that was in charge of Prudential's property and casualty group. He reports directly to Prudential Chairman Arthur F. Ryan.
Spiros Segalas, president of $27 billion Prudential subsidiary Jennison Associates Capital Corp., New York, said the reorganization had nothing to do with his firm.
A change that Prudential spokesman Tim Biggs said is unrelated to the restructuring, but was announced shortly after, was the hiring of John R. Hannon to be senior vice president of client relations for INTECH, a Palm Beach Gardens, Fla.-based money manager owned by Prudential. The position is a new one. Mr. Hannon previously worked as a senior managing director of Prudential Asset Management's private and international investors group. Mr. Biggs said. From 1992 to 1994, Mr. Hannon also previously worked for a unit overseeing INTECH.
Mr. Caulfield said that because the reorganization is so recent, Prudential's executives haven't come up with a "grand strategy" yet. But, he noted, one important change will be that Prudential's money management units are going to get better access to Prudential's resources. Generally speaking, Prudential previously didn't give money management as equal a call on capital as some of its other businesses, such as life insurance, he said. Under the reorganization, money management has been put on a par with the company's other units.
Mr. Caulfield did not rule out possible money management acquisitions as a means to further growth. It might make sense to buy a firm to fill a gap that Prudential might have in its offerings, and he said larger purchases shouldn't be ruled out. He noted that while Prudential plans on cutting $800 million in expenses over the next 18 months, the the company is likely to devote more resources to money management.
Mr. Caulfield said Prudential will devote significant efforts to defined contribution plans, mutual funds and variable annuities, since it is already well established in some areas of money management, such as the defined benefit market and the guaranteed investment contract markets.
Defined contribution services -which will continue to be run by Mark Fetting - now will report only to the money management group. Previously, the operation was run through both the investment management and benefits services groups. Mutual funds, formerly part of Prudential's brokerage operation, and variable annuities, which used to be run out of Pru's life insurance business, now both will be part of Mr. Caulfield'sresponsibilities.
Mr. Caulfield said Pru's defined contribution business generally has lagged other money management efforts. According to Pensions & Investments' 1995 money managers directory, Prudential was the largest insurance company manager of pension assets and the largest GIC provider to pension funds, but was ranked sixth in terms of 401(k)/457 assets under management (P&I, May 15). Prudential runs $63 billion in defined benefit assets; $12 billion in defined contribution; more than $40 billion in mutual funds (not including defined contribution); $40 billion in guaranteed products; and $13 billion in variable annuities.