Prudential 2012 Annual Report Download - page 224

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
24. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (continued)
(1) Quarterly earnings per share amounts may not add to the full year amounts due to the averaging of shares.
The quarterly historical information presented in the table above has been revised to reflect the impact of the retrospective adoption of
the amended guidance related to the deferral of acquisition costs as well as the impact of retrospective application of a change in method of
applying an accounting principle for the Company’s pension plans. The pension plan accounting change resulted in an increase in net income
of $24 million for each quarter of 2012 ($0.05 diluted earnings per share of Common stock). For further information, see Notes 2 and 18.
Results for the second quarter of 2012 include a total pre-tax charge of $122 million related to two out of period adjustments recorded
by the Company. The first adjustment related to a decline in the value of a real estate-related investment. Based on a review of the
underlying collateral and a related guarantee, the Company determined that impairments of $75 million should have been recognized, $61
million of which related to prior periods. The second adjustment consisted of an increase of $61 million in reserves for estimated payments
arising from use of new Social Security Master Death File matching criteria to identify deceased policy and contract holders. The initial
calculation of the reserve excluded certain life policies in extended term status from the analysis used to identify potential claims.
Results for the fourth quarter of 2012 include a total pre-tax charge of $54 million related to an out of period adjustment recorded by
the Company due to an understatement of recorded liabilities for certain employee benefits based on a review of the consistency of
recognition of such liabilities.
Results for the first quarter of 2011 include a pre-tax charge of $95 million related to an out of period adjustment recorded by the
Company. The adjustment is related to the amortization of unrealized losses associated with U.S. dollar-denominated collateralized
mortgage-backed securities held by the Gibraltar Life Insurance Company, Ltd. consolidated operations (“Gibraltar Life operations”), that
were reclassified from available-for-sale to held-to-maturity in December 2008. The adjustment, which had no impact on the carrying value
of these securities, resulted from using the contractual maturities of the securities rather than the expected effective duration of the
securities as the basis for the amortization of the unrealized losses that existed when the securities were reclassified.
222 Prudential Financial, Inc. 2012 Annual Report