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Prudential Financial 2001 Annual Report - page 65 / 172

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65 / 172

Prudential Financial, Inc.

Division operating results: Revenues(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits and expenses(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,912 5,729

$5,686 5,299

$5,442 5,042

Adjusted operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 183

$ 387

$ 400

Adjusted operating income by segment: Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

70 113

$ 158 229

$ 128 272

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Items excluded from adjusted operating income: Realized investment gains, net of losses and related charges: Realized investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related charges(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

183

387

400

(172) 14

(87) (31)

228 (143)

Total realized investment gains, net of losses and related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(158) 25

(118) $ 269

85 $ 485

operations by highlighting the results from ongoing operations and the underlying profitability factors of our businesses. We exclude realized investment gains, net of losses and related charges, from adjusted operating income because the timing of transactions resulting in recognition of gains or losses is largely at our discretion and the amount of these gains or losses is heavily influenced by and fluctuates in part according to the availability of market opportunities. Including the fluctuating effects of these transactions could distort trends in the underlying profitability of our business.

Year Ended December 31, 2001 2000 1999 (in millions)

  • (1)

    Revenues exclude realized investment gains, net of losses.

  • (2)

    Benefits and expenses exclude the impact of net realized investment gains on reserves and deferred acquisition cost amortization.

  • (3)

    Related charges consist of the following:

Reserves for future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred policy acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7 7

$(32) 1

$(147) 4

$14

$(31)

$(143)

Year Ended December 31, 2001 2000 1999 (in millions)

2001 to 2000 Annual Comparison. Adjusted operating income of our Employee Benefits division decreased $204 million, or 53%, from 2000 to 2001 as a result of a $116 million decrease in adjusted operating income from our Other Employee Benefits segment and an $88 million decrease from our Group Insurance segment. Income from continuing operations before income taxes decreased $244 million, or 91%, from 2000 to 2001, reflecting the decrease in adjusted operating income as well as a $40 million increase in realized investment losses, net of related charges. For a discussion of realized investment gains and losses and charges related to realized investment gains and losses, see “—Consolidated Results of Operations—Realized Investment Gains.”

2000

to

1999

Annual

Comparison.

Adjusted

operating

income

of

our

Employee

Benefits

division

decreased

$13

million, or 3%, from 1999 to 2000 as a result of a $43 million decrease in adjusted operating income from our Other Employee Benefits segment which was partially offset by a $30 million increase from our Group Insurance segment. Income from continuing operations before income taxes decreased $216 million, from $485 million in 1999 to $269

million in 2000. This decline resulted primarily from realized investment losses, net of related charges, million in 2000 compared to realized investment gains, net of related charges, of $85 million in 1999.

of

$118

Prudential Financial 2001 Annual Report

63

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