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Prudential Financial 2001 Annual Report - page 78 / 172

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Prudential Financial, Inc.

2001 to 2000 Annual Comparison. Adjusted operating income of our Asset Management division decreased $57 million, or 21%, in 2001 from 2000, due to declines from both segments in the division. Income from continuing operations before income taxes decreased $66 million, or 24%, primarily as a result of the decrease in adjusted

operating income. 2000 to 1999 Annual Comparison.

Adjusted operating income of our Asset Management division increased $24

million, or 10%, in 2000 from 1999, due to an increase from the Other Asset Management segment. Income from continuing operations before income taxes increased $24 million, or 9%, as a result of the increase in adjusted operating income.

Investment Management and Advisory Services

Operating Results The following table sets forth the Investment Management and Advisory Services segment’s operating results for the periods indicated.

Operating results: Revenues(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$835 730

$874 720

$768 613

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

$105

$154

$155

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

(1) Revenues exclude realized investment gains, net of losses.

Adjusted Operating Income 2001 to 2000 Annual Comparison.

Adjusted operating income decreased $49 million, or 32%, from 2000 to 2001,

due primarily to lower earnings from asset management resulting from declines in market value of the underlying assets on which our fees are based. Although 2000 adjusted operating income reflected expenses related to the consolidation of substantially all of our public equity management capabilities into our Jennison unit, these expenses were largely offset by revenues from performance incentive fees which exceeded those earned in 2001. Adjusted operating income in 2001 includes $6 million from the operations of a specialized asset management unit within this segment that we sold in the first quarter of 2002.

2000 to 1999 Annual Comparison. Adjusted operating income was flat from 1999 to 2000. Although revenues increased, the increase was essentially offset primarily by expenses related to the consolidation of substantially all of our public equity management capabilities into our Jennison unit.

Revenues The following table sets forth the Investment Management and Advisory Services segment’s revenues, as shown in the table above under “—Operating Results,” by source for the periods indicated.

Revenues: Retail customers(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Institutional customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$210 383 242

$244 409 221

$225 322 221

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$835

$874

$768

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

(1) Consists of individual mutual funds and both variable annuities and variable life insurance in our separate accounts. Fixed annuities and the fixed rate options of both variable annuities and variable life insurance are included in general account. Also includes funds invested in proprietary mutual funds through our defined contribution plan products.

2001 to 2000 Annual Comparison. Revenues, as shown in the table above under “—Operating Results,” decreased $39 million, or 4%, from 2000 to 2001. The decrease came primarily from declines of $34 million, or 14%, in revenues from management of retail customer assets and $26 million, or 6%, in revenues from management of institutional customer assets. The decrease in revenues from management of retail customer assets came primarily from market value declines on publicly traded equity securities which resulted in a lower level of average assets

76

Growing and Protecting Your Wealth

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