Prudential 2012 Annual Report Download - page 45

The table below presents the carrying value of non-yen denominated insurance liabilities within our Japanese insurance operations as
of the periods indicated.
December 31,
2012 2011
(in billions)
U.S. dollar-denominated products .................................................................................... $19.9 $18.9
Australian dollar-denominated products ................................................................................ 7.9 6.2
Euro-denominated products ......................................................................................... 0.4 0.2
Total ....................................................................................................... $28.2 $25.3
1. Excludes $5.7 billion and $4.5 billion of insurance liabilities for U.S. dollar-denominated products as of December 31, 2012 and 2011, respectively, that
are associated with Prudential of Japan. These liabilities are coinsured to our U.S. domiciled insurance entities and supported by U.S. dollar-
denominated assets and are not subject to the remeasurement mismatch described above.
International Insurance
Operating Results
The results of our International Insurance operations are translated on the basis of weighted average monthly exchange rates, inclusive
of the effects of the intercompany arrangement discussed above. To provide a better understanding of operating performance within the
International Insurance segment, where indicated below, we have analyzed our results of operations excluding the effect of the year over
year change in foreign currency exchange rates. Our results of operations excluding the effect of foreign currency fluctuations were derived
by translating foreign currencies to U.S. dollars at uniform exchange rates for all periods presented, including for constant dollar
information discussed below. The exchange rates used were Japanese yen at a rate of 80 yen per U.S. dollar and Korean won at a rate of
1160 won per U.S. dollar, both of which were determined in connection with the foreign currency income hedging program discussed
above. In addition, for constant dollar information discussed below, activity denominated in U.S. dollars is generally reported based on the
amounts as transacted in U.S. dollars. Annualized new business premiums presented on a constant exchange rate basis in the “Sales
Results” section below reflect translation based on these same uniform exchange rates.
The following table sets forth the International Insurance segment’s operating results for the periods indicated.
Year ended December 31,
2012 2011 2010
(in millions)
Operating results:
Revenues:
Life Planner operations ........................................................................... $ 9,002 $ 8,202 $ 7,252
Gibraltar Life and Other operations ................................................................. 20,584 11,365 4,819
29,586 19,567 12,071
Benefits and expenses:
Life Planner operations ........................................................................... 7,521 6,956 6,103
Gibraltar Life and Other operations ................................................................. 19,361 10,348 4,081
26,882 17,304 10,184
Adjusted operating income:
Life Planner operations ........................................................................... 1,481 1,246 1,149
Gibraltar Life and Other operations ................................................................. 1,223 1,017 738
2,704 2,263 1,887
Realized investment gains (losses), net, and related adjustments(1) ........................................ (1,989) 596 (281)
Related charges ................................................................................. (60) (18) (13)
Investment gains (losses) on trading account assets supporting insurance liabilities, net ........................ 204 (160) 33
Change in experience-rated contractholder liabilities due to asset value changes .............................. (204) 160 (33)
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests ................ (58) (244) (65)
Income from continuing operations before income taxes and equity in earnings of operating joint ventures ................. $ 597 $ 2,597 $ 1,528
(1) Includes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that are economically
matched, as discussed above.
Acquisition and Integration of the former Star and Edison Businesses
On February 1, 2011, Prudential Financial completed the acquisition from AIG of the Star and Edison Businesses pursuant to the stock
purchase agreement dated September 30, 2010 between Prudential Financial and AIG. The Star and Edison companies were merged into
Gibraltar Life on January 1, 2012. See Note 3 to the Consolidated Financial Statements for further information.
We have made significant progress integrating the acquired former Star and Edison businesses with Gibraltar Life and, as a result,
anticipate incurring approximately $450 million of total integration costs, which is lower than our original expectations. In aggregate, we
have incurred $312 million of pre-tax integration costs, of which, $138 million was in 2012 and $174 million was in 2011. After integration
is complete, we continue to expect annual cost savings of approximately $250 million and, as of December 31, 2012, have already achieved
approximately 80% of this annual savings. Actual integration costs may exceed, and actual cost savings may fall short of, such
expectations.
Prudential Financial, Inc. 2012 Annual Report 43