Prudential 2003 Annual Report Download - page 58

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Policy Surrender Experience
The following table sets forth policy surrender experience for the Closed Block Business, measured by cash value
of surrenders, for the periods indicated. In managing this business, we analyze the cash value of surrenders because it is
a measure of the degree to which policyholders are maintaining their in force business with us, a driver of future
profitability.
Year ended December 31,
2003 2002 2001
(in millions)
Cash value of surrenders ........................................................................ $1,364 $1,234 $1,246
Cash value of surrenders as a percentage of mean future policy benefit reserves ............................ 2.9% 2.6% 2.7%
2003 to 2002 Annual Comparison. The total cash value of surrenders increased $130 million in 2003 from 2002.
The level of surrenders as a percentage of mean future policy benefit reserves increased to 2.9% in 2003 from 2.6% in
2002. The increase reflects the surrender of a few large cash value policies during 2003.
2002 to 2001 Annual Comparison. The total cash value of surrenders decreased $12 million in 2002 from 2001,
primarily as a result of our efforts during 2001 to locate policyholders in connection with our demutualization. The
level of surrenders as a percentage of mean future policy benefit reserves was relatively unchanged in 2002 from 2001.
Income Taxes
Shown below is our income tax provision (benefit) for the years ended December 31, 2003, 2002 and 2001,
separately reflecting the impact of certain significant items. Also presented below is the income tax provision (benefit)
that would have resulted from application of the statutory 35% federal income tax rate in each of these periods.
Year Ended December 31,
2003 2002 2001
(in millions)
Tax provision (benefit) .......................................................................... $650 $(189) $ (32)
Impact of:
Effect of change in repatriation assumption for certain international operations .......................... (120) — —
Disposition of subsidiaries ................................................................... 78 183 —
Adjustments to mutual life insurance company tax estimated liability ................................. — — 200
Tax provision (benefit) excluding these items ........................................................ $608 $ (6) $168
Tax provision (benefit) at statutory rate ............................................................. $685 $ 28 $(42)
For the year ended December 31, 2003, the difference between taxes excluding the items shown above and taxes
that would have resulted from the application of the statutory rate is attributable, in part, to nontaxable investment
income, reductions in foreign tax rates and an increase in tax credits, partially offset by an increase in state taxes.
For the year ended December 31, 2001, the difference between taxes excluding the items shown above and taxes
that would have resulted from the application of the statutory rate is attributable, in part, to the inclusion of
non-deductible demutualization costs and expenses in income from continuing operations.
Growing and Protecting Your Wealth56