Prudential 2003 Annual Report Download - page 57

for death and other benefits due with respect to policies for which we had not received a death claim but where death
had occurred. Lastly, we benefited from our expense reduction efforts, for which the Closed Block Business incurred
$48 million of implementation costs in 2001.
Revenues
2003 to 2002 Annual Comparison. Revenues, as shown in the table above under “—Operating Results,”
increased $861 million, or 12%, in 2003 from 2002. Realized investment gains (losses), net, increased $1.013 billion,
from net realized investment losses of $587 million in 2002 to net realized investment gains of $426 million in 2003.
Premiums decreased $162 million from $4.022 billion in 2002 to $3.860 billion in 2003. We expect the decline in
premiums for this business to continue as the policies in force mature or terminate in this closed block of traditional
participating insurance.
2002 to 2001 Annual Comparison. Revenues decreased $607 million, or 8%, from 2001 to 2002. Net investment
income declined $279 million, from $3.897 billion in 2001 to $3.618 billion in 2002, for the reasons discussed above.
Premiums decreased $228 million, or 5%, from $4.250 billion in 2001 to $4.022 billion in 2002, reflecting a decline in
first year and renewal premiums as well as paid-up additions, which represent additional insurance purchased with
policyholder dividends. Realized investment losses, net of gains, increased $44 million, from $543 million in 2001 to
$587 million in 2002.
Benefits and Expenses
2003 to 2002 Annual Comparison. Benefits and expenses, as shown in the table above under “—Operating
Results,” decreased $266 million, or 3%, in 2003 from 2002. Policyholder benefits and related changes in reserves,
including interest credited to policyholders’ accounts, decreased $131 million, from $4.444 billion in 2002 to $4.313
billion in 2003, consistent with the discontinuation of sales of traditional products, as discussed above. Dividends to
policyholders amounted to $2.452 billion in 2003, a decrease of $54 million, from $2.506 billion in 2002, reflecting
reductions in the dividend scale for 2003 based on evaluations of the experience underlying the dividend scale.
Operating expenses, including distribution costs that we charge to expense, decreased $49 million in 2003 from 2002,
reflecting lower distribution costs as we have discontinued sales of traditional products as well as our continued efforts
to reduce operating cost levels.
2002 to 2001 Annual Comparison. Benefits and expenses decreased $469 million, or 6%, from 2001 to 2002.
Operating expenses, including distribution costs that we charge to expense, decreased $136 million, from 2001 to 2002,
reflecting our efforts to reduce operating cost levels and $48 million of implementation costs for this program incurred
by the Closed Block Business in 2001. An increase in interest expense associated with the IHC debt we issued in
December 2001 was a partial offset. Policyholder benefits and related changes in reserves, including interest credited to
policyholders’ accounts, decreased $278 million, from $4.722 billion in 2001 to $4.444 billion in 2002. Policyholder
benefits for 2001 included $144 million of reserves established for death and other benefits due with respect to policies
for which we had not received a death claim but where death has occurred. Reserves established for new and renewal
business decreased in 2002, consistent with our expectations and reflecting our discontinuation of sales of traditional
products discussed above, partially offset by growth in reserves due to aging of policies in force. Dividends to
policyholders amounted to $2.506 billion in 2002, a decrease of $127 million, or 5%, from $2.633 billion in 2001. The
decline reflects reductions in the dividend scales for 2002 and 2003 based on evaluations of the experience underlying
the dividend scale.
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