Prudential 2003 Annual Report Download - page 53

settlements related to prior individual life sales practices remediation, as compared to $96 million in 2002. The lower
costs in 2003 were primarily attributable to improved equity market conditions in 2003. The costs in 2002 were
partially offset by a $26 million reduction of a liability we established in 2001 for death and other benefits due with
respect to policies for which we had not received a death claim but where death had occurred, due to a change in our
estimate.
Other businesses included in Corporate and Other operations resulted in adjusted operating income of $51 million
in 2003 compared to $39 million in 2002. The improvement relates to our real estate and relocation business, which
benefited from decreased expenses in the current period.
2002 to 2001 Annual Comparison. Corporate and Other operations resulted in adjusted operating income of
$160 million in 2002 and a loss of $25 million in 2001, an increase of $185 million. Corporate-level activities resulted
in adjusted operating income of $121 million in 2002 and $1 million in 2001. The increase was primarily due to higher
investment income, net of interest expense, of $44 million. Corporate-level activities benefited from the impact of the
transfer of net assets from the Traditional Participating Products segment at the date of our demutualization and from
cash and short-term investments held at the parent company. This additional investment income was offset by lower
returns from joint venture and limited partnership investments and reduced investment income, net of interest expense,
from the wind-down of a debt-financed portfolio and lower yields on corporate-level invested assets.
Corporate-level general and administrative expenses were $626 million in 2002, before qualified pension income,
compared to $727 million in 2001. Lower expenses, reflecting in part the impact of previous expense reduction
initiatives, more than offset expenses incurred in the 2002 period associated with servicing our stockholder base and
expenses associated with the implementation of our organizational changes announced in August 2002. Income from
our own qualified pension plan amounted to $502 million in 2002, compared to $540 million in 2001. The $38 million
decline reflects changes in pension plan assumptions, primarily a decrease in the discount rate from 7.75% to 7.25%.
Corporate-level activities in 2002 included expenses of $96 million related to supplemental benefits paid to
policyholders whom we had previously agreed to provide insurance for reduced or no premium in accordance with
contractual settlements related to prior individual life sales practices remediation. These expenses were partially offset
by a $26 million reduction, in 2002, of a liability we established in 2001 for death and other benefits due with respect
to policies for which we had not received a death claim but where death had occurred, due to a change in our estimate.
In 2001 Corporate-level activities included a $20 million charge offsetting the income earned by Prudential
Securities as co-manager in the initial public offering of our Common Stock, which was included in adjusted operating
income of our Financial Advisory segment.
Other businesses included in Corporate and Other operations resulted in adjusted operating income of $39 million
in 2002, as compared to a loss, on an adjusted operating income basis, of $26 million in 2001. The improvement relates
primarily to our real estate and relocation business, which reported adjusted operating income of $46 million in 2002
compared to a loss, on an adjusted operating income basis, of $11 million in 2001. The loss in 2001 reflected expenses
of $35 million incurred by this business to consolidate its operating facilities, while 2002 results benefited from
increased transaction volume, lower expense levels and activities of a subsidiary acquired in the fourth quarter of 2001.
In addition, losses from the remaining operations included in other businesses decreased $8 million, on an adjusted
operating income basis, from $15 million in 2001 to $7 million in 2002, primarily reflecting the write-off of goodwill
in our international ventures unit in 2001.
Prudential Financial 2003 Annual Report 51