Prudential 2011 Annual Report Download - page 56

The following table sets forth the International Insurance segment’s operating results for the periods indicated.
Year ended December 31,
2011 2010 2009
(in millions)
Operating results:
Revenues:
Life Planner operations ........................................................................ $ 8,214 $ 7,266 $ 6,443
Gibraltar Life and Other operations .............................................................. 11,574 4,954 4,149
19,788 12,220 10,592
Benefits and expenses:
Life Planner operations ........................................................................ 6,845 5,997 5,222
Gibraltar Life and Other operations .............................................................. 10,238 4,138 3,502
17,083 10,135 8,724
Adjusted operating income:
Life Planner operations ........................................................................ 1,369 1,269 1,221
Gibraltar Life and Other operations .............................................................. 1,336 816 647
2,705 2,085 1,868
Realized investment gains (losses), net, and related adjustments(1) ..................................... 575 (317) (790)
Related charges(2) ........................................................................... (17) (15) 56
Investment gains (losses) on trading account assets supporting insurance liabilities, net(3) ................... (160) 33 68
Change in experience-rated contractholder liabilities due to asset value changes(4) ......................... 160 (33) (68)
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests(5) .......... (277) (109) (39)
Income from continuing operations before income taxes and equity in earnings of operating joint ventures .......... $ 2,986 $ 1,644 $ 1,095
(1) Revenues exclude Realized investment gains (losses), net, and related adjustments. Realized investment gains (losses), net, and related adjustments
includes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been
economically hedged, as discussed above. See “—Realized Investment Gains and Losses and General Account Investments—Realized Investment
Gains and Losses.”
(2) Revenues exclude related charges resulting from payments related to market value adjustment features of certain of our annuity products and the impact
of Realized investment gains (losses), net, on the amortization of unearned revenue reserves. Benefits and expenses exclude related charges that
represent the element of “Dividends to policyholders” that is based on a portion of certain realized investment gains required to be paid to policyholders
and the impact of Realized investment gains (losses), net, on the amortization of deferred policy acquisition costs.
(3) Revenues exclude net investment gains and losses on trading account assets supporting insurance liabilities. See “—Experience-Rated Contractholder
Liabilities, Trading Account Assets Supporting Insurance Liabilities and Other Related Investments.”
(4) Benefits and expenses exclude changes in contractholder liabilities due to asset value changes in the pool of investments supporting these experience-
rated contracts. See “—Experience-Rated Contractholder Liabilities, Trading Account Assets Supporting Insurance Liabilities and Other Related
Investments.”
(5) Equity in earnings of operating joint ventures are included in adjusted operating income but excluded from income from continuing operations before
income taxes and equity in earnings of operating joint ventures as they are reflected on a U.S. GAAP basis on an after-tax basis as a separate line in our
Consolidated Statements of Operations. Earnings attributable to noncontrolling interests are excluded from adjusted operating income but included in
income from continuing operations before taxes and equity earnings of operating joint ventures as they are reflected on a U.S. GAAP basis as a separate
line in our Consolidated Statements of Operations. Earnings attributable to noncontrolling interests represent the portion of earnings from consolidated
entities that relates to the equity interests of minority investors.
On April 6, 2011, the Company entered into a stock and asset purchase agreement to sell all of the issued and outstanding shares of
capital stock of the Company’s subsidiaries that conduct its Global Commodities Business and certain assets that are primarily used in
connection with the Global Commodities Business. As a result, we have reflected the results of the Global Commodities Business as
discontinued operations for all periods presented. This sale was completed on July 1, 2011.
Acquisition of AIG Star Life Insurance Co., Ltd., AIG Edison Life Insurance Company and Related Entities
On February 1, 2011, Prudential Financial completed the acquisition from American International Group, Inc., or AIG, of AIG Star
Life Insurance Co., Ltd., or Star, AIG Edison Life Insurance Company, or Edison, and certain other AIG subsidiaries (collectively, the
“Star and Edison Businesses”) pursuant to the stock purchase agreement dated September 30, 2010 between Prudential Financial and AIG.
The total purchase price was $4,709 million, comprised of $4,213 million in cash and $496 million in assumed third party debt,
substantially all of which is expected to be repaid, over time, with excess capital of the acquired entities. All acquired entities are Japanese
corporations and their businesses are in Japan.
The addition of these operations increases our scale in the Japanese insurance market and provides complementary distribution
opportunities. We also expect these businesses to provide attractive returns primarily driven from in force business and cost synergies. Star
and Edison’s bank channel distribution will be transferred and integrated with the bank channel operations of Prudential Gibraltar. The Star
and Edison companies were merged into Gibraltar Life on January 1, 2012. We expect pre-tax integration costs of approximately $500
million to be incurred over a five-year period. We incurred $174 million of integration costs during 2011 and expect to incur approximately
$200 million during 2012. After the integration is completed, we expect annual cost savings of approximately $250 million, and expect to
achieve approximately two-thirds of the annual savings by the end of 2012. Actual integration costs may exceed, and actual costs savings
may fall short of, such expectations.
54 Prudential Financial, Inc. 2011 Annual Report