Prudential 2001 Annual Report Download - page 120

Prudential Financial, Inc.
Notes to Consolidated Financial Statements
6. Investments (continued)
In the normal course of its business activities, the Company accepts collateral that can be sold or repledged. The
primary sources of this collateral are securities in customer accounts, securities purchased under agreements to
resell and securities borrowed transactions. At December 31, 2001, the fair value of this collateral was
approximately $18,163 million versus $19,329 million in 2000 of which $13,933 million versus $13,099 million in
2000 had either been sold or repledged.
Assets of $2,315 million and $2,538 million at December 31, 2001 and 2000, respectively, were on deposit with
governmental authorities or trustees as required by certain insurance laws. Additionally, assets valued at $960
million and $1,227 million at December 31, 2001 and 2000, respectively, were held in voluntary trusts. Of these
amounts, $244 million and $470 million at December 31, 2001 and 2000, respectively, related to the multi-state
policyholder settlement described in Note 21. The remainder relates to trusts established to fund guaranteed
dividends to certain policyholders and to fund certain employee benefits. Assets valued at $158 million and
$48 million at December 31, 2001 and 2000, respectively, were pledged as collateral for bank loans and other
financing agreements. Letter stock or other securities restricted as to sale amounted to $183 million and
$779 million at December 31, 2001 and 2000, respectively. Restricted cash and securities of $1,930 million and
$2,196 million at December 31, 2001 and 2000, respectively, were included in “Other assets.” The restricted cash
represents funds deposited by clients and funds accruing to clients as a result of trades or contracts.
7. Deferred Policy Acquisition Costs
The balances of and changes in deferred policy acquisition costs as of and for the years ended December 31, are as
follows:
2001 2000 1999
(In Millions)
Balance, beginning of year ..................................................................... $7,063 $ 7,324 $ 6,462
Capitalization of commissions, sales and issue expenses .............................................. 1,385 1,324 1,333
Amortization ................................................................................ (1,126) (1,096) (1,155)
Change in unrealized investment gains and losses ................................................... (270) (356) 566
Foreign currency translation .................................................................... (184) (154) 118
Acquisition of subsidiary ...................................................................... — 21 —
Balance, end of year .......................................................................... $6,868 $ 7,063 $ 7,324
8. Policyholders’ Liabilities
Future Policy Benefits
Future policy benefits at December 31, are as follows:
2001 2000
(In Millions)
Life insurance ....................................................................................... $71,276 $53,453
Annuities ........................................................................................... 14,500 13,398
Other contract liabilities ............................................................................... 1,215 1,008
Total future policy benefits ............................................................................. $86,991 $67,859
The Company’s participating insurance is included within the Closed Block Business. Participating insurance
represented 37% and 40% of domestic individual life insurance in force at December 31, 2001 and 2000,
respectively, and 92%, 94% and 95% of domestic individual life insurance premiums for 2001, 2000 and 1999,
respectively.
Life insurance liabilities include reserves for death and endowment policy benefits, terminal dividends and certain
health benefits. Annuity liabilities include reserves for life contingent immediate annuities and life contingent group
annuities. Other contract liabilities primarily consist of unearned premium and benefit reserves for group health
products.
Growing and Protecting Your Wealth118