Prudential 2002 Annual Report Download - page 50
Download and view the complete annual report
Please find page 50 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.continue to be compensated for sales of these products, although the extent of these revenues cannot be predicted.
In addition, certain expenses incurred at the corporate level are allocated to the Property and Casualty Insurance
segment. Although we would seek to reduce the level of these expenses in the event of a sale of our property and
casualty insurance business, these corporate level expenses would initially result in greater charges within
adjusted operating income reported for Corporate and Other operations.
2001 to 2000 Annual Comparison. Adjusted operating income decreased $55 million, or 37%, from 2000
to 2001. Results for 2001 reflected a $59 million lower benefit from prior accident-year development. Adjusted
operating income in 2000 reflected the negative impact of $40 million that we provided for premium refunds or
credits to certain New Jersey automobile policyholders under that state’s excess profits regulations. Partially
offsetting this was a $35 million decrease in net investment income in 2001 from 2000.
In May 2000, we completed the acquisition of the specialty automobile business of the St. Paul Companies,
which writes in the non-standard automobile insurance business. While, as discussed under “—Revenues” below,
this acquisition had an effect on the comparison of revenues for 2001 to 2000, it did not have a material impact on
adjusted operating income.
Revenues
The following table sets forth the Property and Casualty Insurance segment’s earned premiums, which are
net of reinsurance ceded, for the periods indicated.
Year Ended December 31,
2002 2001 2000
(in millions)
Automobile ................................................................................. $1,547 $1,403 $1,153
Homeowners................................................................................ 467 448 413
Other...................................................................................... 34 33 33
Total earned premiums .................................................................... $2,048 $1,884 $1,599
2002 to 2001 Annual Comparison. Revenues, as shown in the table above under “—Operating Results,”
increased $158 million, or 8%, from 2001 to 2002, as a result of an increase in earned premiums.
Total earned premiums, as shown in the immediately preceding table, increased by $164 million or 9% from
2001 to 2002. Automobile earned premiums increased $144 million, or 10%. The increases in automobile and
homeowners’ insurance earned premiums came primarily from rate increases. We plan to continue pursuing rate
increases, and expect to implement rate increases in 2003 at a level generally similar to those of 2002. As
discussed below under “—Benefits and Expenses,” commencing in the second half of 2001 we suspended our
mailing solicitations for the direct distribution channel and limited the growth of new business from certain
distribution channels other than Prudential Agents, based on our evaluation of the quality of the business from
these alternative channels. In October 2001, we announced that we would no longer write business through our
property and casualty insurance career agency channel except in a few selected markets. Since that time, we have
been in the process of re-underwriting and non-renewing of business that has produced adverse loss experience, to
the extent permitted contractually and by state insurance regulations.
2001 to 2000 Annual Comparison. Revenues increased $251 million, or 14%, from 2000 to 2001. The $251
million increase included an increase of $96 million in revenues from the subsidiary we acquired in May 2000
that specializes in non-standard automobile business, which is included in 2000 results only from the date of
acquisition. The remaining revenue increase of $155 million, from our existing business, came primarily from a
$196 million increase in earned premiums from automobile and homeowners’ insurance, partially offset by a $41
million decline in investment income.
Total earned premiums increased by $285 million, or 18%, from 2000 to 2001. Excluding the impact of the
acquisition mentioned above, earned premiums increased by $196 million, including the effect of a $40 million
Prudential Financial 2002 Annual Report 49