Prudential 2003 Annual Report Download - page 45

2002 to 2001 Annual Comparison. Revenues decreased $19 million from 2001 to 2002. Net investment income
decreased $58 million, from $2.148 billion in 2001 to $2.090 billion in 2002, due to a decline in yields on invested
assets, partially offset by $30 million of income from a single mortgage loan prepayment in 2002. Policy charges and
fee income decreased $9 million from 2002 to 2001 reflecting a decrease associated with our full service defined
contribution business. Partially offsetting these lower revenues, were premium increases of $57 million on our
guaranteed products business primarily due to increased sales of structured settlement and single sum products and the
recording of increased estimates of policy liabilities for return premiums in 2001.
Benefits and Expenses
2003 to 2002 Annual Comparison. Benefits and expenses, as shown in the table above under “—Operating
Results,” decreased $145 million, or 6%, from 2002 to 2003. Policyholders’ benefits, together with the change in
policy reserves and interest credited to policyholders, decreased $121 million due to the decrease in premium activity
noted above, as well as more favorable investment results in 2003 and lower crediting rates on customer balances.
Operating expenses, excluding amortization of deferred acquisition costs and commission expense, decreased $16
million from 2002 to 2003 reflecting cost reduction measures implemented in prior periods.
2002 to 2001 Annual Comparison. Benefits and expenses decreased $50 million, or 2%, from 2001 to 2002.
Policyholders’ benefits, together with the change in policy reserves and interest credited to policyholders, decreased
$32 million from 2001 to 2002 reflecting the decline in yields and increased estimates on policy liabilities recorded in
2001 as discussed above. These items were partly offset by the increase in premium activity noted above. Operating
expenses, excluding amortization of deferred acquisition costs and commission expense, for our defined contribution
business decreased $21 million due primarily to cost reduction measures implemented in prior periods.
Sales Results and Account Values
The following table shows the changes in the account values and net sales of Retirement segment products for the
periods indicated. Net sales are total sales minus withdrawals or withdrawals and benefits, as applicable. Sales and net
sales do not correspond to revenues under GAAP, but are used as a relevant measure of business activity.
Year ended December 31,
2003 2002 2001
(in millions)
Defined Contribution:
Beginning total account value ..................................................................... $22,914 $24,640 $26,046
Sales ........................................................................................ 5,179 3,858 3,689
Withdrawals .................................................................................. (3,381) (3,248) (3,422)
Change in market value, interest credited and other activity(1) ........................................... 3,946 (2,336) (1,673)
Ending total account value ................................................................... $28,658 $22,914 $24,640
Net sales ..................................................................................... $ 1,798 $ 610 $ 267
Guaranteed Products(2):
Beginning total account value ..................................................................... $39,058 $39,825 $41,577
Sales ........................................................................................ 3,256 1,467 2,299
Withdrawals and benefits ........................................................................ (4,013) (3,590) (4,372)
Change in market value and interest income ......................................................... 3,281 2,166 2,198
Other(3) ...................................................................................... 373 (810) (1,877)
Ending total account value ................................................................... $41,955 $39,058 $39,825
Net withdrawals ............................................................................... $ (757) $ (2,123) $ (2,073)
(1) The year ended December 31, 2002 includes increases to account values of $360 million added to customer accounts due to Common Stock
received as demutualization consideration and increases to account values of $448 million added to customer accounts from inclusion of
amounts not previously reflected in this segment. The year ended December 31, 2001 includes increases to account values of $433 million added
to customer accounts due to Common Stock received as demutualization consideration.
(2) Prudential’s retirement plan accounted for 15%, 32% and 29% of sales for the years ended December 31, 2003, 2002 and 2001, respectively.
This sales activity predominantly represents repricing of scheduled maturities. These scheduled maturities are also reflected in withdrawals and
therefore have no impact on net sales. Ending total account value includes assets of Prudential’s retirement plan of $9.7 billion, $8.5 billion and
$9.1 billion as of December 31, 2003, 2002 and 2001, respectively.
(3) Represents changes in asset balances for externally managed accounts. The year ended December 31, 2001 includes an increase to policyholder
account values of $181 million representing cumulative conversions of client balances to products currently included in the business.
Prudential Financial 2003 Annual Report 43