Prudential 2001 Annual Report Download - page 125

Prudential Financial, Inc.
Notes to Consolidated Financial Statements
9. Closed Block (continued)
Closed Block revenues and benefits and expenses for the period from the date of demutualization through December
31, 2001 were as follows:
Closed Block Revenues and Benefits and Expenses
December 18, 2001
through
December 31, 2001
(In Millions)
Revenues
Premiums ...................................................................................... $293
Net investment income ........................................................................... 129
Realized investment gains, net ..................................................................... 24
Other income ................................................................................... 3
Total Closed Block revenues ................................................................... 449
Benefits and Expenses
Policyholders’ benefits ........................................................................... 288
Interest credited to policyholders’ account balances ..................................................... 5
Dividends to policyholders ........................................................................ 100
General and administrative expense charge ........................................................... 33
Total Closed Block benefits and expenses ........................................................ 426
Closed Block benefits and expenses, net of Closed Block revenues before income taxes ............................ 23
Income taxes ....................................................................................... 2
Closed Block benefits and expenses, net of Closed Block revenues and income taxes .............................. $ 21
10. Reinsurance
The Company participates in reinsurance in order to provide additional capacity for future growth and limit the
maximum net loss potential arising from large risks. Life reinsurance is accomplished through various plans of
reinsurance, primarily yearly renewable term and coinsurance. Property and casualty reinsurance is placed on a pro-
rata basis and excess of loss, including stop loss, basis. Reinsurance ceded arrangements do not discharge the
Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the
reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements.
Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured long-
duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent
with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is
accounted for over the reinsurance contract period. Amounts recoverable from reinsurers, for both short and long-
duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits
associated with the reinsured policies.
The tables presented below exclude amounts pertaining to the Company’s discontinued healthcare operations. See
Note 3 for a discussion of the Company’s coinsurance agreement with Aetna.
Reinsurance amounts included in the Consolidated Statements of Operations for the years ended December 31, were
as follows:
2001 2000 1999
(In Millions)
Direct premiums ............................................................................ $13,066 $10,686 $10,121
Reinsurance assumed .................................................................... 95 86 66
Reinsurance ceded ...................................................................... (684) (591) (659)
Premiums ................................................................................. $12,477 $10,181 $ 9,528
Policyholders’ benefits ceded .................................................................. $ 845 $ 642 $ 483
Prudential Financial 2001 Annual Report 123