Prudential 2001 Annual Report Download - page 68

Prudential Financial, Inc.
sales-based compensation costs related to the increase in sales of our group life and group disability products, and
volume related costs to administer the increased business in force.
The group life benefits ratio for 2000 improved by 2.5 percentage points from 1999 primarily as a result of
improved mortality experience. The group disability benefits ratio improved by 0.8 percentage points from 1999 to
2000 reflecting better morbidity experience, which we attribute to our ongoing efforts to improve the quality of our
underwriting and claims management processes. The group life administrative operating expense ratio was
relatively unchanged, while the group disability insurance administrative operating expense ratio improved 2.5
percentage points, reflecting the impact of our efforts to improve operational efficiencies, including a reduction in
our estimate of the administrative costs associated with settlement of pending claims.
Sales Results
The following table sets forth the Group Insurance segment’s new annualized premiums for the periods indicated. In
managing our group insurance business, we analyze new annualized premiums, which do not correspond to
revenues under GAAP, as well as revenues, because new annualized premiums measure the current sales
performance of the business unit, while revenues reflect the renewal persistency and aging of in force policies
written in prior years and net investment income in addition to current sales.
Year Ended December 31,
2001 2000 1999
(in millions)
New annualized premiums:
Group life(1) .......................................................................... $483 $321 $262
Group disability(2) ...................................................................... 147 162 105
Total ............................................................................. $630 $483 $367
(1) Amounts do not include excess premiums, which are premiums that build cash value but do not purchase face amounts of group universal
life insurance.
(2) Includes long-term care products.
2001 to 2000 Annual Comparison. Total new annualized premiums increased $147 million, or 30%, from 2000 to
2001, with an increase of $162 million in group life sales partially offset by a $15 million decline in group disability
sales. The group life sales increase included $46 million in premiums in 2001 from additional coverage under an
insurance program for the United States armed forces under which our retained risk, and consequently the risk
charge we include in the premiums charged, are limited. The remainder of the group life sales increase came from a
small number of large sales to new and existing customers, including annualized premiums of $99 million from one
sale. The group disability sales decrease reflected the benefit to 2000 results from sales opportunities resulting from
the well-publicized financial difficulties of a competitor.
2000 to 1999 Annual Comparison. Total new annualized premiums increased $116 million, or 32%, from 1999 to
2000, with increases of $59 million in group life sales and $57 million in group disability sales. Sales for 1999
benefited from annualized premiums of $40 million from one sale. We believe the sales increase reflected improved
competitiveness of our products as well as sales opportunities resulting from the well-publicized financial
difficulties of a competitor.
Other Employee Benefits
Operating Results
The following table sets forth the Other Employee Benefits segment’s operating results for the periods indicated.
Year Ended December 31,
2001 2000 1999
(in millions)
Operating results:
Revenues(1) ....................................................................... $2,664 $2,885 $3,014
Benefits and expenses(2) ............................................................. 2,551 2,656 2,742
Adjusted operating income ........................................................... $ 113 $ 229 $ 272
(1) Revenues exclude realized investment gains, net of losses.
(2) Benefits and expenses exclude the impact of net realized investment gains on reserves and deferred acquisition cost amortization.
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