Prudential 2002 Annual Report Download - page 117
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Please find page 117 of the 2002 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
10. CLOSED BLOCK (continued)
of the Closed Block from its inception through the end of any given period are less than the expected cumulative
earnings of the Closed Block, the Company will recognize only the actual earnings in income. However, the
Company may reduce policyholder dividend scales in the future, which would be intended to increase future
actual earnings until the actual cumulative earnings equaled the expected cumulative earnings. As of December
31, 2002, the Company has not recognized a policyholder dividend obligation for the excess of actual cumulative
earnings over the expected cumulative earnings. However, net unrealized investment gains that have arisen
subsequent to the establishment of the Closed Block have been reflected as a policyholder dividend obligation of
$1,606 million at December 31, 2002, to be paid to Closed Block policyholders unless otherwise offset by future
experience, with an offsetting amount reported in “Accumulated other comprehensive income (loss).”
On December 11, 2002 and November 13, 2001, Prudential Insurance’s Board of Directors acted to reduce
dividends, effective January 1, 2003 and 2002, respectively, on Closed Block policies to reflect unfavorable
investment experience that had emerged since July 1, 2000, the date the Closed Block was originally funded.
These actions resulted in a $56 million and $104 million reduction of the liability for policyholder dividends
recognized in the years ended December 31, 2002 and 2001, respectively.
Closed Block Liabilities and Assets designated to the Closed Block at December 31, as well as maximum
future earnings to be recognized from Closed Block Liabilities and Closed Block Assets, are as follows:
2002 2001
(in millions)
Closed Block Liabilities
Future policy benefits .............................................................. $48,247 $47,239
Policyholders’ dividends payable ..................................................... 1,151 1,171
Policyholder dividend obligation ..................................................... 1,606 —
Policyholders’ account balances ...................................................... 5,481 5,394
Other Closed Block liabilities ........................................................ 9,760 4,603
Total Closed Block Liabilities .................................................... 66,245 58,407
Closed Block Assets
Fixed maturities:
Available for sale, at fair value ..................................................... 42,402 37,933
Equity securities, available for sale, at fair value ......................................... 1,521 584
Commercial loans ................................................................. 6,457 5,572
Policy loans ...................................................................... 5,681 5,758
Other long-term investments ......................................................... 1,008 1,018
Short-term investments ............................................................. 2,374 1,627
Total investments .............................................................. 59,443 52,492
Cash and cash equivalents ........................................................... 2,526 1,810
Accrued investment income ......................................................... 715 716
Other Closed Block assets ........................................................... 528 635
Total Closed Block Assets ....................................................... 63,212 55,653
Excess of reported Closed Block Liabilities over Closed Block Assets ............................ 3,033 2,754
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains ...................................................... 2,720 780
Allocated to policyholder dividend obligation ........................................... (1,606) —
Future earnings to be recognized from Closed Block Assets and Closed Block Liabilities ............. $ 4,147 $ 3,534
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