Prudential 2002 Annual Report Download - page 36
Download and view the complete annual report
Please find page 36 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.expenses are reported separately in our consolidated income statements within income from continuing operations
before income taxes. Demutualization expenses consisted primarily of the costs of engaging independent
accounting, actuarial, investment banking, legal and other consultants that advised us and insurance regulators in
the demutualization process and related matters as well as printing and postage for communication with
policyholders.
Taxes
Shown below is our income tax provision (benefit) for the years ended December 31, 2002, 2001 and 2000,
separately reflecting the impact of certain significant items. Also presented below is the income tax provision
(benefit) that would have resulted from application of the statutory 35% federal income tax rate in each of these
periods.
For the Year Ended
December 31,
2002 2001 2000
(in millions)
Tax provision (benefit) $(192) $ (34) $ 398
Impact of:
Favorable tax resolution pertaining to 1995 disposition .............................................. 183 — —
Adjustments to mutual life insurance company tax estimated liability .................................. — 200 (100)
Tax provision (benefit) excluding these items ......................................................... $ (9) $166 $ 298
Tax provision (benefit) at statutory rate .............................................................. $ 23 $(49) $253
For the year ended December 31, 2001, the difference between taxes recorded excluding the items shown
above and taxes that would have resulted from the application of the statutory rate is attributable, in part, to the
inclusion of non-deductible demutualization costs and expenses in income from continuing operations.
Discontinued Operations
In the fourth quarter of 2002, we announced our decision to exit certain of the international securities
operations of Prudential Securities Group Inc. in Europe. The exited operations include the European retail
transaction-oriented stockbrokerage and related activities. Upon exiting these activities, the primary business of
Prudential Securities Group Inc. in Europe is the provision of private banking and wealth management services to
high net worth individuals. Institutional services in Europe are limited primarily to the sale of U.S. equities. The
loss for the discontinued businesses for the year ended December 31, 2002 includes a pre-tax charge of $43
million relating primarily to severance and termination benefits, and office closure costs. Also, in the fourth
quarter of 2002, we decided to sell our retail broker-dealer operations in Tokyo and have included such in
discontinued operations.
In the third quarter of 2002, we discontinued our web-based business for the workplace distribution of
voluntary benefits. Results of this business, previously reflected in the results of Corporate and Other operations
and now reflected as discontinued operations, were losses of $37 million, net of tax, and $13 million, net of tax,
for 2002 and 2001, respectively. For 2002, these amounts include an impairment charge of $32 million on our
investment in a vendor of that distribution platform, as well as a charge of $7 million related to severance and
contract termination costs. The foregoing amounts are before related income taxes.
Results for discontinued operations also include a reduction in reserves pertaining to our discontinued
healthcare business, primarily in connection with the favorable resolution of certain legal and regulatory matters,
of $45 million, $16 million and $77 million, net of tax, for the years ended December 31, 2002, 2001 and 2000,
respectively. See Note 3 to the Consolidated Financial Statements for a discussion of our retained obligations for
litigation pertaining to this business.
Prudential Financial 2002 Annual Report 35