Prudential 2003 Annual Report Download - page 47

decreased adjusted operating income of the International Insurance segment by $46 million in 2003 and increased its
adjusted operating income by $32 million in 2002 and $45 million in 2001. An integral element in the management of
this exposure is our execution of forward currency transactions with independent counterparties, the results of which
are reflected in Corporate and Other operations. Unless otherwise stated, we have translated all information in this
section, including the impact of the currency hedging transactions, on the basis of actual exchange rates for the periods
indicated. To provide a better understanding of local operating performance, where indicated below, we have analyzed
local results both on the basis of actual exchange rates and on the basis of constant exchange rates. When we discuss
constant exchange rate information below, it is on the basis of the average exchange rates for the year ended December
31, 2003.
Operating Results
The following table sets forth the International Insurance segment’s operating results for the periods indicated.
Year ended December 31,
2003 2002 2001
(in millions)
Operating Results:
Revenues:
International Insurance, excluding Gibraltar Life ............................................... $2,935 $2,379 $2,120
Gibraltar Life ........................................................................... 2,720 2,694 2,026
5,655 5,073 4,146
Benefits and expenses:
International Insurance, excluding Gibraltar Life ............................................... 2,486 2,000 1,771
Gibraltar Life ........................................................................... 2,350 2,316 1,764
4,836 4,316 3,535
Adjusted operating income:
International Insurance, excluding Gibraltar Life ............................................... 449 379 349
Gibraltar Life ........................................................................... 370 378 262
819 757 611
Realized investment gains (losses), net(1) ..................................................... 21 (172) (57)
Related charges(2) ....................................................................... (35) (16) —
Income from continuing operations before income taxes ............................................. $ 805 $ 569 $ 554
(1) Revenues exclude realized investment gains (losses), net. For a discussion of these items see “—Realized Investment Gains and General
Account Investments—Realized Investment Gains.”
(2) Benefits and expenses for Gibraltar Life exclude related charges which represent the portion of dividends to policyholders that represents
realized investment gains required to be paid as dividends to policyholders. 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. The decrease in Gibraltar Life’s adjusted operating income reflected a $21
million negative impact of currency fluctuations. Excluding the impact of currency fluctuations, adjusted operating
income of Gibraltar Life increased $13 million in 2003 from 2002. This increase reflected improved investment results
in 2003 and the negative impact in 2002 of refinements in estimates, primarily related to amounts due to policyholders.
This increase was partially offset by a reduction in the amount of Gibraltar Life’s business in force as expected during
the period following its restructuring and a less favorable level of policy benefits and expenses in 2003 than the year-
ago period.
Adjusted operating income from our international insurance operations, other than Gibraltar Life, increased $70
million, from $379 million in 2002 to $449 million in 2003. Adjusted operating income of our operations in countries
other than Japan increased $56 million, from $37 million in 2002 to $93 million in 2003, including a $17 million
favorable impact of currency fluctuations. The $56 million increase came primarily from our operation in Korea,
reflecting strong sales and continued favorable persistency. The contribution from continued growth of our Japanese
Prudential Financial 2003 Annual Report 45