Prudential 2002 Annual Report Download - page 53
Download and view the complete annual report
Please find page 53 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.Losses that we ceded through reinsurance, including stop-loss reinsurance, resulted in decreases in the total
combined ratio of 7.3 percentage points for 2001 and 8.3 percentage points for 2000.
Our overall expense ratio for 2001 decreased from 2000, as we incurred costs in 2000 to develop our
distribution channels and benefited in 2001 from staff reductions and the favorable impact of the increased
premium base.
The decrease in the accident year combined ratio resulted from the decline in the expense ratio. Recoveries
from stop-loss reinsurance resulted in decreases in the accident year combined ratio of 4.3 percentage points in
2001 and 4.8 percentage points in 2000.
Investment Division
Investment Management
Operating Results
The following table sets forth the Investment Management segment’s operating results for the periods
indicated.
Year Ended December 31,
2002 2001 2000
(in millions)
Operating results:
Revenues(1) ........................................................................... $1,235 $1,357 $1,467
Expenses .............................................................................. 1,096 1,216 1,262
Adjusted operating income ................................................................ 139 141 205
Realized investment gains (losses), net ...................................................... 64 (8) 1
Income from continuing operations before income taxes ........................................ $ 203 $ 133 $ 206
(1) Revenues exclude realized investment gains (losses), net, of $64 million, $(8) million and $1 million for the years ended December 31,
2002, 2001 and 2000, respectively. 2002 includes a gain of $59 million from the sale of a specialized asset management subsidiary.
Income From Continuing Operations Before Income Taxes
2002 to 2001 Annual Comparison. Income from continuing operations before income taxes increased $70
million, from $133 million in 2001 to $203 million in 2002. The increase reflects realized investment gains, net,
of $64 million in 2002, as compared to losses of $8 million in 2001. For a discussion of realized investment gains
(losses), net, see “—Consolidated Results of Operations—Realized Investment Gains.” Adjusted operating
income was essentially unchanged from 2001 to 2002, as discussed below.
2001 to 2000 Annual Comparison. Income from continuing operations before income taxes decreased $73
million, from $206 million in 2000 to $133 million in 2001. The decrease is primarily the result of a $64 million
decline in adjusted operating income, as discussed below. Realized investment gains, net, were $1 million in 2000
compared to realized investment losses, net, of $8 million in 2001.
Adjusted Operating Income
2002 to 2001 Annual Comparison. Adjusted operating income for 2002 was essentially unchanged from
2001. Lower fee revenues resulting from declines in market value of the underlying equity assets under
management as well as lower average mutual fund customer account balances on which our fees are based, and
lower mortgage loan origination and servicing revenue were largely offset by a decrease in expenses resulting
from the decline in revenue and cost saving measures implemented in 2001. We incurred $23 million and $55
million of employee termination and facilities consolidation costs in 2002 and 2001, respectively.
Growing and Protecting Your Wealth52