Prudential 2002 Annual Report Download - page 51
Download and view the complete annual report
Please find page 51 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.reduction in 2000 premiums from the provision for premium refunds or credits to certain New Jersey automobile
policyholders, as noted above.
Automobile earned premiums increased by $250 million, or 22%, from 2000 to 2001, including $89 million
from the non-standard automobile business and the effect of the $40 million reduction in 2000 premiums
mentioned above. The remaining $121 million increase came primarily from new distribution channels we
implemented during 1999 and 2000, including career agents focused on selling property and casualty insurance,
workplace and affinity marketing, direct distribution, and independent agents, many of whom were producers for
the acquired subsidiary. Improved persistency in 2001 also contributed to the growth in earned premiums.
Homeowners earned premiums increased $35 million, or 8%, from 2000 to 2001 due to lower reinsurance
premiums ceded, as the number of policies in force was relatively unchanged. This stabilization of our policies in
force represented an improvement compared with declines in prior years, which reflected intense rate competition
that attracted customers to other companies.
Net investment income decreased by $35 million, or 18%, from $193 million in 2000 to $158 million in
2001, and decreased by $41 million excluding the impact of the acquisition mentioned above. This decrease was
primarily a result of a lower average base of invested assets, reflecting lower attributed capital, and a decline in
investment yield.
Benefits and Expenses
The following table shows our calendar year loss, expense and combined ratios, the impact on these calendar
year ratios of catastrophic losses and our accident year combined ratios based on loss experience for the periods
indicated (all based on amounts determined under statutory accounting principles).
Year Ended December 31,
2002 2001 2000
Loss ratio(1):
Automobile .......................................................................... 78.3% 70.6% 64.0%
Homeowners......................................................................... 80.2 76.5 72.4
Overall ......................................................................... 78.7 70.8 65.8
Expense ratio(2):
Automobile .......................................................................... 28.0 30.8 35.3
Homeowners......................................................................... 32.2 36.6 45.3
Overall ......................................................................... 29.0 32.1 37.8
Combined ratio(3):
Automobile .......................................................................... 106.3 101.4 99.3
Homeowners......................................................................... 112.4 113.1 117.7
Overall ......................................................................... 107.7 102.9 103.6
Effect of catastrophic losses included in combined ratio(4): ........................................ 1.5 2.2 2.7
Accident year combined ratio(5): ............................................................. 107.4 110.2 114.5
(1) Represents ratio of incurred losses and loss adjustment expenses to earned premium. Ratios reflect the net development in the calendar
period from prior accident year reserves of $3 million (favorable) in the year ended December 31, 2002, $106 million (favorable) in 2001,
and $165 million (favorable) in 2000. Ratios also reflect recoveries from current accident year stop-loss reinsurance contracts of $41
million in the year ended December 31, 2002 and $80 million in each of the years ended December 31, 2001 and 2000.
(2) Represents ratio of operating expenses to net written premium.
(3) Represents the sum of (1) and (2).
(4) Represents losses and loss adjustment expenses attributable to catastrophes that are included in the combined ratio. Our calendar year
catastrophe losses include both current and prior accident year losses. We classify as catastrophes those events that are declared
catastrophes by Property Claims Services, which is an industry organization that declares and tracks all property-related catastrophes
causing insured property damage in the U.S. Property Claims Services declares an event a catastrophe if it causes in excess of a specified
dollar amount of insured property damage, which was $25 million throughout the periods presented, and affects a significant number of
policyholders and insurance companies.
(5) Accident year combined ratios reflect the combined ratios for accidents that occur in the indicated calendar year, restated to reflect
subsequent changes in loss estimates for those claims based on cumulative loss data through December 31, 2002. These ratios reflect the
recoveries from stop-loss reinsurance contracts as noted above. We analyze accident-year combined ratios because they reflect the actual
loss experience of accidents that occur in a given period excluding the effect of accidents that occur in other periods.
Growing and Protecting Your Wealth50