Prudential 2003 Annual Report Download - page 38

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the degree to which policyholders are maintaining their in force business with us, a driver of future profitability. Our
term life insurance products do not provide for cash surrender values.
Year ended December 31,
2003 2002 2001
(in millions)
Cash value of surrenders ........................................................................... $653 $692 $637
Cash value of surrenders as a percentage of mean future benefit reserves, policyholders’ account balances, and separate
account balances ............................................................................... 3.8% 4.2% 3.8%
2003 to 2002 Annual Comparison. The total cash value of surrenders decreased $39 million from 2002 to 2003.
The level of surrenders as a percentage of mean future policy benefit reserves, policyholders’ account balances and
separate account balances decreased from 2002 to 2003, reflecting a higher level of lapses in 2002 associated with
declines in variable life insurance account values due to adverse equity market conditions.
2002 to 2001 Annual Comparison. The total cash value of surrenders increased $55 million in 2002 from 2001.
The level of surrenders as a percentage of mean future policy benefit reserves, policyholders’ account balances and
separate account balances increased from 2001 to 2002, reflecting an increase in lapses associated with declines in
variable life insurance account values.
Group Insurance
Operating Results
The following table sets forth the Group Insurance segment’s operating results for the periods indicated.
Year ended December 31,
2003 2002 2001
(in millions)
Operating results:
Revenues ................................................................................. $3,690 $3,586 $3,248
Benefits and expenses ....................................................................... 3,521 3,431 3,178
Adjusted operating income ................................................................... 169 155 70
Realized investment losses, net, and related adjustments(1) ..................................... (52) (129) (72)
Income (loss) from continuing operations before income taxes ....................................... $ 117 $ 26 $ (2)
(1) Revenues exclude realized investment gains (losses), net, and related adjustment. For a discussion of these items see “—Realized Investment
Gains and General Account Investments—Realized Investment Gains.”
Adjusted Operating Income
2003 to 2002 Annual Comparison. Adjusted operating income increased $14 million from 2002 to 2003.
Adjusted operating income for 2003 included a net favorable effect of $8 million from refinements in group life
reserves for waiver of premium features and estimates of amounts due policyholders on experience rated cases, while
the prior year benefited $19 million from refinements in reserves relating to our group long-term disability product.
Excluding the $11 million net negative impact of these refinements, adjusted operating income increased $25 million
in 2003 from 2002, reflecting more favorable group life benefits experience in 2003 and a greater contribution from
investment results.
2002 to 2001 Annual Comparison. Adjusted operating income increased $85 million from 2001 to 2002.
Adjusted operating income for 2001 included a charge of approximately $36 million reflecting a refinement in our
reserve for group life incurred but not reported claims. Adjusted operating income for 2002 benefited $19 million from
refinements in reserves relating to our group long-term disability product. Excluding these reserve refinements,
adjusted operating income increased $30 million from 2001 due primarily to growth in both group life and disability
premiums and a lower benefits ratio on group disability products.
Growing and Protecting Your Wealth36