Prudential 2002 Annual Report Download - page 72
Download and view the complete annual report
Please find page 72 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.Revenues
2002 to 2001 Annual Comparison. Revenues, as shown in the table above under “—Operating Results,”
decreased $607 million, or 8%, from 2001 to 2002. Net investment income declined $279 million, from $3.897
billion in 2001 to $3.618 billion in 2002, for the reasons discussed above. Premiums decreased $228 million, or
5%, from $4.250 billion in 2001 to $4.022 billion in 2002, reflecting a decline in first year and renewal premiums
as well as paid-up additions, which represent additional insurance purchased with policyholder dividends. We
discontinued sales of traditional products in connection with our demutualization and expect the decline in first
year and renewal premiums to continue as the policies in force mature or terminate over time. The decline in paid
up additions is consistent with the decrease in the dividend scales discussed above. Realized investment losses,
net of gains, increased $44 million, from $543 million in 2001 to $587 million in 2002.
2001 to 2000 Annual Comparison. Revenues decreased $1.001 billion, or 11%, from 2000 to 2001.
Realized investment gains (losses), net decreased $634 million, as discussed above. Premiums decreased $105
million, from $4.355 billion in 2000 to $4.250 billion in 2001, as an increase in paid-up additions, which represent
additional insurance purchased with policyholder dividends, was more than offset by lower renewal premiums.
Net investment income decreased $275 million, from $4.172 billion in 2000 to $3.897 billion in 2001, reflecting a
decline in the general account invested assets supporting this business due to a lower level of borrowing activity
and a lower investment yield.
Benefits and Expenses
2002 to 2001 Annual Comparison. Benefits and expenses, as shown in the table above under “—Operating
Results,” decreased $469 million, or 6%, from 2001 to 2002. Operating expenses, including distribution costs that
we charge to expense, decreased $136 million, from 2001 to 2002, reflecting our continued efforts to reduce
operating cost levels and $48 million of implementation costs for this program incurred by the Closed Block
Business in 2001. An increase in interest expense associated with the IHC debt we issued in December 2001, was
a partial offset.
Policyholder benefits and related changes in reserves, including interest credited to policyholders’ accounts,
decreased $278 million, from $4.722 billion in 2001 to $4.444 billion in 2002. Policyholder benefits for 2001
included $144 million of reserves established for death and other benefits due with respect to policies for which
we had not received a death claim but where death has occurred. Reserves established for new and renewal
business decreased in 2002, consistent with our expectations and reflecting our discontinuation of sales of
traditional products discussed above, partially offset by growth in reserves due to aging of policies in force.
Dividends to policyholders amounted to $2.506 billion in 2002, a decrease of $127 million, or 5%, from
$2.633 billion in 2001. The decline reflects reductions in the dividend scales for 2002 and 2003 based on
evaluations of the experience underlying the dividend scale.
2001 to 2000 Annual Comparison. Benefits and expenses decreased $189 million, or 2%, from 2000 to
2001. Interest expense declined $118 million, from $152 million in 2000 to $34 million in 2001, primarily due to
a lower level of borrowing activity associated with the decrease in investment income. Amortization of deferred
policy acquisition costs decreased $56 million, from $269 million in 2000 to $213 million in 2001, as these costs
became fully amortized on a portion of this business. Operating expenses, including distribution costs that we
charge to expense, decreased $26 million, from $771 million in 2000 to $745 million in 2001, as a result of efforts
to reduce operating cost levels.
Policyholder benefits and related changes in reserves, including interest credited to policyholders’ accounts,
increased $84 million, from $4.638 billion in 2000 to $4.722 billion in 2001. The increase in benefits and reserves
resulted from death benefits, including $138 million of reserves recorded in 2001 for death and other benefits due
with respect to policies for which we had not received a death claim but where death has occurred, and the aging
of policies in force, as well as insurance claims relating to the September 11, 2001 terrorist attacks on the U.S.,
which resulted in net losses of approximately $10 million. Partially offsetting these items is a reduction in the
amount of reserves established for new and renewal business.
Prudential Financial 2002 Annual Report 71