Prudential 2003 Annual Report Download - page 154
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PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
15. EMPLOYEE BENEFIT PLANS (continued)
The Company applied the same approach to the determination of the expected long term rate of return in 2004.
The expected long term rate of return for 2004 is 8.75% and 7.75%, respectively, for the pension and postretirement
plans.
The Company, with respect to pension benefits, uses market related value to determine the components of net
periodic benefit cost. Market related value is a measure of asset value that reflects the difference between actual and
expected return on assets over a 5 year period.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A
one-percentage point increase and decrease in assumed health care cost trend rates would have the following effects:
Other Postretirement
Benefits
2003
(in millions)
One percentage point increase
Increase in total service and interest costs ...................................................... $ 11
Increase in postretirement benefit obligation .................................................... 230
One percentage point decrease
Decrease in total service and interest costs ...................................................... $ 9
Decrease in postretirement benefit obligation ................................................... 197
Pension and postretirement plan asset allocation as of September 30, 2003 and September 30, 2002, are as
follows:
Pension Percentage
of Plan Assets as of
September 30
Postretirement Percentage
of Plan Assets as of
September 30
2003 2002 2003 2002
Asset category
U.S. Stocks ..................................................... 49% 42% 52% 55%
International Stocks ............................................... 9% 9% 5% 3%
U.S. Bonds ...................................................... 32% 30% 20% 14%
International Bonds ............................................... 2% 5% 0% 0%
Short Term Investments ........................................... 2% 3% 3% 1%
Real Estate ...................................................... 6% 8% 0% 0%
Municipal Bonds ................................................. 0% 0% 20% 27%
Other .......................................................... 0% 3% 0% 0%
Total ........................................................... 100% 100% 100% 100%
Growing and Protecting Your Wealth152