Prudential 2001 Annual Report Download - page 124

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Prudential Financial, Inc.
Notes to Consolidated Financial Statements
9. Closed Block (continued)
timing of such maximum future earnings. If actual cumulative earnings in any given period are greater than the
expected cumulative earnings, only the expected earnings will be recognized in income. Any excess of actual
cumulative earnings over expected cumulative earnings will represent undistributed accumulated earnings
attributable to policyholders and will be recorded as a policyholder dividend obligation to be paid to Closed Block
policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance
that is less favorable than originally expected. As of December 31, 2001, no such additional policyholder dividends
were recorded. If over such period, the actual cumulative earnings of the Closed Block are less than the expected
cumulative earnings of the Closed Block, the Company will recognize only the actual earnings in income. However,
the Company may change policyholder dividend scales in the future, which would be intended to increase future
actual earnings until the actual cumulative earnings equal the expected cumulative earnings.
On November 13, 2001, Prudential Insurance’s Board of Directors acted to reduce dividends, effective January 1,
2002, on Closed Block policies to reflect unfavorable investment experience that has emerged since July 1, 2000,
the date the Closed Block was originally funded. This action resulted in a $104 million reduction of the liability for
policyholder dividends recognized in the year ended December 31, 2001.
Closed Block Liabilities and Assets designated to the Closed Block at December 31, 2001, as well as maximum
future earnings to be recognized from Closed Block Liabilities and Closed Block Assets, are as follows:
Closed Block Liabilities and Closed Block Assets December 31, 2001
(In Millions)
Closed Block Liabilities
Future policy benefits ............................................................................ $47,239
Policyholders’ dividends payable ................................................................... 1,171
Policyholders’ account balances .................................................................... 5,389
Other Closed Block liabilities ...................................................................... 4,603
Total Closed Block Liabilities .................................................................. $58,402
Closed Block Assets
Total investments ................................................................................ $52,492
Cash .......................................................................................... 1,810
Accrued investment income ....................................................................... 716
Other Closed Block assets ......................................................................... 635
Total Closed Block Assets ..................................................................... $55,653
Excess of reported Closed Block Liabilities over Closed Block Assets .......................................... $ 2,749
Portion of above representing other comprehensive income ................................................... 792
Maximum future earnings to be recognized from Closed Block Assets and Closed Block Liabilities ................... $ 3,541
Growing and Protecting Your Wealth122