Prudential 2002 Annual Report Download - page 43
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Please find page 43 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.death benefit coverage in force represents the excess of the guaranteed benefit amount over the fair value of the
underlying mutual fund investments. Partially offsetting the increase in amortization of deferred policy
acquisition costs was lower asset management expense on our variable annuity products and a decrease in general
and administrative expenses reflecting our cost management efforts.
2001 to 2000 Annual Comparison. Benefits and expenses decreased $140 million, or 6%, from 2000 to
2001. The decline reflects decreases of $72 million from individual annuities and $68 million from our individual
life insurance business.
Benefits and expenses of our individual life insurance business decreased $68 million, or 4%, from $1.714
billion in 2000 to $1.646 billion in 2001. Operating expenses, including distribution costs that we charge to
expense, decreased $183 million, from $761 million in 2000 to $578 million in 2001, primarily as a result of
savings we began to realize from our program to restructure our field management and agency structure and lower
program implementation costs which amounted to $90 million in 2001 and $107 million in 2000. Amortization of
deferred policy acquisition costs increased $60 million, from $172 million in 2000 to $232 million in 2001,
primarily due to declines in market values of the underlying assets on which our fees are based. Policyholder
benefits and related changes in reserves increased $60 million, from $628 million in 2000 to $688 million in
2001, primarily as a result of term insurance we issued under policy provisions to customers who previously had
lapsing variable life insurance with us and insurance claims arising from the September 11, 2001 terrorist attacks
on the U.S. In 2000, policyholder benefits and the related changes in reserves included a reserve increase related
to a portion of our variable life insurance business as noted above amounting to $23 million.
Benefits and expenses of our individual annuity business decreased $72 million, from $766 million in 2000
to $694 million 2001. Benefits and expenses for 2000 include a $21 million reduction in amortization of deferred
policy acquisition costs from the refinements noted above. Excluding the impact of this change, benefits and
expenses decreased $93 million, or 12%, reflecting a decrease in general and administrative expenses due to our
expense management efforts. In addition, policyholder benefits and related changes in reserves decreased $43
million, from $152 million in 2000 to $109 million in 2001, primarily as a result of the $26 million reduction in
premiums noted above and a $12 million charge we recorded in 2000 to increase annuity reserves due to
investment portfolio restructuring to reduce the emphasis on equity investments. Amortization of deferred policy
acquisition costs, excluding the refinements noted above, decreased $20 million, primarily as a result of decreased
amortization associated with lower fee income.
Sales Results and Account Values
The following table sets forth the individual life insurance business sales, as measured by statutory first year
premiums and deposits, and changes in account value for annuities business, for the periods indicated. Sales of the
individual life insurance business do not correspond to revenues under GAAP; they are, however, a relevant
measure of business activity. In managing our individual life insurance business, we analyze statutory first year
premiums and deposits as well as revenues because statutory first year premiums and deposits measure the current
sales performance of the business, while revenues reflect, predominantly in our case, the renewal persistency and
aging of in force policies written in prior years and net investment income, as well as current sales. For our
individual annuity business, assets are reported at account value and net sales (redemptions) are gross sales minus
redemptions or surrenders and withdrawals, as applicable.
Year Ended December 31,
2002 2001 2000
(in millions)
Sales(1):
Excluding corporate-owned life insurance:
Variable life ......................................................................... $ 153 $ 216 $ 286
Universal life ........................................................................ 70 12 —
Term life ............................................................................ 62 43 59
Total excluding corporate-owned life insurance ........................................... 285 271 345
Corporate-owned life insurance ............................................................ 122 199 42
Total ........................................................................... $ 407 $ 470 $ 387
Growing and Protecting Your Wealth42