Prudential 2002 Annual Report Download - page 41
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Please find page 41 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.our additional amortization of deferred acquisition costs during the second and third quarters of 2002. The equity
rate of return used in the immediate four year look-forward period varies by product, but was under 15% for all of
our variable annuity products for our evaluation of deferred policy acquisition costs as of December 31, 2002. For
the average remaining life of our variable annuity contracts in force as of December 31, 2002, our evaluation of
deferred policy acquisition costs is based on a 9.25% annual blended rate of return that reflects an assumed rate of
return of 11.5% for equity type assets. Continuation of current market conditions or additional deterioration in
market conditions may result in further increases in the amortization of deferred policy acquisition costs, while a
significant improvement in market conditions may result in a decrease in the amortization of deferred policy
acquisition costs.
2001 to 2000 Annual Comparison. Adjusted operating income increased $119 million in 2001 from 2000.
The increase reflected a $159 million increase from individual life insurance and a $40 million decrease from
individual annuities.
The segment’s individual life insurance business reported adjusted operating income of $273 million in
2001, compared to $114 million in the prior year. The increase came primarily from a $183 million decrease in
operating expenses primarily from savings that we began to realize from our field management and agency
restructuring program and lower program implementation costs, which amounted to $90 million in 2001 and $107
million in 2000. Additionally, in 2000 we recorded a $23 million one-time increase in reserves related to a portion
of our variable life insurance business in force. However, amortization of deferred policy acquisition costs
increased $60 million in 2001 from 2000, and we recorded net losses of $25 million from insurance claims arising
from the September 11, 2001 terrorist attacks on the U.S.
The segment’s individual annuity business reported adjusted operating income of $107 million in 2001,
compared to $147 million in the prior year. Adjusted operating income for 2000 benefited $21 million from
refinements in our calculations of deferred policy acquisition costs. Excluding this change, adjusted operating
income of our individual annuity business decreased $19 million, or 15%, primarily due to lower fee revenues.
Revenues
2002 to 2001 Annual Comparison. Revenues, as shown in the table above under “—Operating Results,”
decreased $16 million, or 1%, from 2001 to 2002. The decrease reflects a $60 million decrease from individual
annuities, partially offset by a $44 million increase from individual life insurance.
The segment’s individual life insurance business reported revenues of $1.963 billion in 2002, compared to
$1.919 billion in 2001. Net investment income increased $27 million, or 7%, from $391 million in 2001 to $418
million in 2002, primarily from an increase in the level of invested assets. Commissions and other income
increased $12 million, from $124 million in 2001 to $136 million in 2002, primarily due to an increased level of
reinsurance activity. Premiums amounted to $395 million in 2002, essentially unchanged from the prior year.
Revenues from our individual annuity business declined $60 million, from $801 million in 2001 to $741
million in 2002. Policy charges and fees and asset management fees decreased $48 million from $315 million in
2001 to $267 million in 2002, driven primarily from our variable annuity products, reflecting a decline in the
average market value of customer accounts on which our fees are based. Net investment income declined $25
million, from $440 million in 2001 to $415 million in 2002, primarily due to lower yields on our investment
portfolio. These declines were partially offset by higher premiums resulting from increased sales of our
immediate income annuity product.
2001 to 2000 Annual Comparison. Revenues decreased $21 million, or 1%, in 2001 from 2000. The
decrease reflects a $112 million decline from individual annuities, partially offset by an increase in revenues of
$91 million from individual life insurance.
The segment’s individual life insurance business reported revenues of $1.919 billion in 2001, an increase of
$91 million, or 5%, from 2000. Premiums increased $117 million, or 43%, from $270 million in 2000 to $387
million in 2001, reflecting increased premiums on term insurance we issued, under policy provisions, to
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