Prudential 2001 Annual Report Download - page 70

Prudential Financial, Inc.
decreased $128 million in 2001 from 2000, excluding the effect of the 2000 refinement in annuity reserves. The
decrease reflected our maturing block of group annuity business and the decline in premiums mentioned above. In
addition, interest expense decreased $31 million from 2000 to 2001 as a result of a lower level of investment-related
borrowing and lower borrowing rates.
2000 to 1999 Annual Comparison. Benefits and expenses decreased $86 million, or 3%, from 1999 to 2000.
Interest credited to policyholders declined from $1.086 billion in 1999 to $1.024 billion in 2000, primarily as a
result of the runoff of our general account GIC business as noted above. This decrease was essentially offset by the
$56 million charge we recorded in 2000 to increase our reserves for structured settlement products. The remainder
of the decrease came primarily from a decrease in policyholders’ benefits, including the change in policy reserves,
reflecting our maturing block of group annuity business.
Sales Results and Assets Under Management
The following table shows the changes in the account values and net sales of Other Employee Benefits segment
products for the periods indicated. Net sales are total sales minus withdrawals or withdrawals and benefits, as
applicable. As noted above under “—U.S. Consumer Division—Retail Investments—Sales Results and Assets
Under Management,” neither sales nor net sales are revenues under GAAP.
Year Ended December 31,
2001 2000 1999
(in millions)
Defined Contribution:
Beginning total account value .................................................................. $26,046 $25,788 $21,527
Sales ..................................................................................... 3,689 5,439 4,736
Withdrawals ............................................................................... (3,422) (3,937) (3,287)
Change in market value, interest credited, and other activity(1) ....................................... (1,673) (1,244) 2,812
Ending total account value ................................................................ $24,640 $26,046 $25,788
Net sales .................................................................................. $ 267 $ 1,502 $ 1,449
Guaranteed Products(2):
Beginning total account value .................................................................. $41,577 $41,757 $45,560
Sales ..................................................................................... 2,299 2,024 1,951
Withdrawals and benefits ..................................................................... (4,372) (5,279) (7,244)
Change in market value and interest income ...................................................... 2,198 2,997 2,070
Other(3) ................................................................................... (1,877) 78 (580)
Ending total account value ................................................................ $39,825 $41,577 $41,757
Net sales .................................................................................. $(2,073) $ (3,255) $ (5,293)
(1) Includes an increase to policyholder account values as a result of policyholder credits issued in 2001 in connection with Prudential’s
demutualization, amounting to $433 million.
(2) Prudential’s retirement plan accounted for 29% of sales in the year ended December 31, 2001, 27% of sales for 2000, and 28% for 1999.
Ending total account value includes assets of Prudential’s retirement plan of $9.1 billion at December 31, 2001, $8.2 billion at December 31,
2000, and $8.2 billion at December 31, 1999.
(3) Represents changes in asset balances for externally managed accounts. Additionally, in 2001, includes an increase to policyholder account
values of $181 million representing cumulative conversions of client balances to products currently included in this business and a further
increase of $2 million as a result of policyholder credits issued in connection with Prudential’s demutualization.
2001 to 2000 Annual Comparison. Assets under management in our full service defined contribution business
amounted to $24.6 billion at December 31, 2001, a decrease of $1.4 billion, or 5%, from December 31, 2000. This
decrease is primarily due to a decline in market value of mutual funds reflecting the general downturn in the equity
markets. In addition, net sales decreased $1.2 billion in 2001 from 2000, reflecting a decrease in new institutional
clients.
Assets under management for guaranteed products amounted to $39.8 billion at December 31, 2001, a decrease of
$1.8 billion, or 4%, from December 31, 2000. The decrease from December 31, 2000 is primarily due to a decrease
in separate account annuity assets that reflected approximately $1.4 billion of annuity benefits.
As of December 31, 2001, our guaranteed products assets under management included $10.2 billion relating to non-
participating group annuities and structured settlements that were sold predominantly in a high interest rate
environment. Historically, we have actively managed the investment portfolios underlying these long-duration
Growing and Protecting Your Wealth68