Prudential 2003 Annual Report Download - page 118

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PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
3. ACQUISITIONS AND DISPOSITIONS (continued)
(c) The sale of the Company’s healthcare business to Aetna was completed in 1999. The loss the Company previously recorded upon the disposal of
its healthcare business was reduced in each of the years ended December 31, 2003, 2002 and 2001. The reductions were primarily the result of
favorable resolution of certain legal, regulatory and contractual matters. Although the Company no longer issues or renews healthcare policies, it
was required to issue and renew policies for specified periods of time after the closing date, in order to provide for uninterrupted operation and
growth of the business that Aetna acquired. All such policies were 100% coinsured by Aetna. Consequently, the following amounts pertaining to
the coinsurance agreement had no effect on the Company’s results of operations. Ceded premiums and benefits were $(2) million and $(7)
million, respectively for the year ended December 31, 2003. Ceded premiums and benefits were $27 million and $17 million, respectively for
the year ended December 31, 2002. Ceded premium and benefits were $966 million and $827 million, respectively, for the year ended December
31, 2001. Reinsurance recoverable under this agreement, included in “Other assets,” was $14 million at December 31, 2003 and $45 million at
December 31, 2002.
(d) Includes the results of the Company’s specialty automobile and work-place distribution property and casualty insurance operations, which the
Company sold in 2003 and early 2004, respectively.
(e) Other includes the results of the consumer banking operations, which the Company decided to exit in the third quarter of 2003, and the retail
broker-dealer operations in Tokyo which the Company decided to sell in the fourth quarter of 2002.
Charges recorded in connection with the disposals of businesses include estimates that are subject to subsequent
adjustment. It is possible that such adjustments might be material to future results of operations of a particular quarterly
or annual period.
Disposition of Other Property and Casualty Insurance Operations
In the fourth quarter of 2003, the Company completed the sale of its property and casualty insurance companies
that operated nationally in 48 states outside of New Jersey, and the District of Columbia, to Liberty Mutual Group, as
well as its New Jersey property and casualty insurance companies to Palisades Group. Results of these businesses are
included in “Income (loss) from continuing operations before income taxes” for all periods. For the year ended
December 31, 2003, the Company recognized a loss on disposition of $491 million ($319 million after taxes), recorded
within “Loss from disposition of property and casualty insurance operations,” which also includes management’s best
estimate of the cost of retained liabilities, including litigation pertaining to events before the closing and the estimated
value of indemnification coverage provided in connection with potential adverse claim experience and a $57 million
abandonment and impairment loss recorded in connection with certain long-lived assets.
4. INVESTMENTS
Fixed Maturities and Equity Securities
The following tables provide information relating to fixed maturities and equity securities (excluding trading
account assets) at December 31,
2003
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in millions)
Fixed maturities available for sale
U.S. Treasury securities and obligations of U.S. government corporations
and agencies ............................................... $ 7,023 $ 439 $ 30 $ 7,432
Obligations of U.S. states and their political subdivisions .............. 1,815 178 8 1,985
Foreign government bonds ...................................... 24,167 1,072 91 25,148
Corporate securities ........................................... 84,443 6,412 331 90,524
Mortgage-backed securities ..................................... 3,745 116 7 3,854
Total fixed maturities available for sale ............................ $121,193 $8,217 $467 $128,943
Equity securities available for sale .............................. $ 2,799 $ 691 $ 89 $ 3,401
Growing and Protecting Your Wealth116