Prudential 2002 Annual Report Download - page 143
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Please find page 143 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
21. SEGMENT INFORMATION (continued)
and Canadian life insurance. The divested businesses consist primarily of the lead-managed equity underwriting
for corporate issuers and institutional fixed income businesses of Prudential Securities Group Inc. (see Note 4),
and also include Gibraltar Casualty, residential first mortgage banking and certain Canadian businesses.
Corporate-level activities include corporate-level income and expenses not allocated to any business segments,
including the cost of company-wide initiatives, investment returns on capital not deployed in any segments,
returns from investments not allocated to any business segments including a debt-financed investment portfolio,
transactions with other segments and consolidating adjustments. Corporate-level activities also include certain
obligations, relating to policyholders whom the Company had previously agreed to provide insurance for reduced
or no premium in accordance with contractual settlements related to prior sales practices remediation.
The Closed Block Business, which is managed separately from the Financial Services Businesses, was
established on the date of demutualization. It includes the Closed Block (as discussed in Note 10); assets held
outside the Closed Block necessary to meet insurance regulatory capital requirements related to products included
within the Closed Block; deferred policy acquisition costs related to the Closed Block policies; the principal
amount of the IHC debt (as discussed in Note 12) and related unamortized debt issuance costs and an interest rate
swap related to the IHC debt; and certain other related assets and liabilities. For the periods prior to the date of
demutualization, the results of the Closed Block Business are those of the former Traditional Participating
Products segment, which historically sold primarily participating insurance and annuity products that the
Company ceased offering in connection with demutualization. Upon the establishment of the Closed Block
Business, $5.6 billion of net assets previously associated with the former Traditional Participating Products
segment was transferred to the Financial Services Businesses. Consequently, the results of the Financial Services
Businesses for the year ended December 31, 2002 and the period December 18, 2001 through December 31, 2001
include returns on these assets. A minor portion of the former Traditional Participating Products segment
consisted of other traditional insurance products that are now included in the Financial Services Businesses and
not in the Closed Block Business.
The accounting policies of the segments are the same as those described in Note 2, “Summary of Significant
Accounting Policies.” Segment results reflect certain reclassifications of historical revenues and expenses to
conform to the Company’s current presentation. These reclassifications have no impact on adjusted operating
income (defined below) of any of the Company’s divisions or segments. Results for each segment include
earnings on attributed equity established at a level which management considers necessary to support the
segment’s risks. Operating expenses specifically identifiable to a particular segment are allocated to that segment
as incurred. Operating expenses not identifiable to a specific segment that are incurred in connection with the
generation of segment revenues are generally allocated based upon the segment’s historical percentage of general
and administrative expenses.
Adjusted Operating Income
In managing the Financial Services Businesses, the Company analyzes the operating performance of each
segment using “adjusted operating income,” which is a non-GAAP measure. Adjusted operating income is
calculated by adjusting income from continuing operations before income taxes to exclude certain items. The
items excluded are realized investment gains, net of losses and related charges and adjustments (as discussed
further below); sales practices remedies and costs; the contribution to income/loss of divested businesses that
were sold or exited that did not qualify for “discontinued operations” accounting treatment under GAAP; and
demutualization costs and expenses.
The excluded items are important to an understanding of overall results of operations. Adjusted operating
income is not a substitute for net income determined in accordance with GAAP, and the Company’s definition of
adjusted operating income may differ from that used by other companies. However, the Company believes that
the presentation of adjusted operating income as measured for management purposes enhances the understanding
of results of operations by highlighting the results from ongoing operations and the underlying profitability factors
of the Financial Services Businesses.
Growing and Protecting Your Wealth142