Prudential 2005 Annual Report Download - page 28

variable annuities. Individual variable annuity gross sales were $7.1 billion in 2005, an increase of $1.3 billion from 2004, reflecting the
introduction of new product features late in the first quarter of 2005.
2004 to 2003 Annual Comparison. Sales of new life insurance, excluding corporate-owned life insurance, measured as described
above, increased $50 million from 2003 to 2004. Sales of our universal life products, which were updated as to features and pricing in June
2003, increased $46 million.
Sales of life insurance by Prudential Agents increased $6 million from 2003 to 2004, reflecting an increase in agent productivity that
more than offset a decline in the number of agents from 4,320 at December 31, 2003 to 3,682 at December 31, 2004. Sales by the third
party distribution channel, excluding corporate-owned life insurance, increased $44 million from 2003 to 2004, reflecting increased
universal and term life sales through this distribution channel.
Total account values for fixed and variable annuities amounted to $51.3 billion as of December 31, 2004, an increase of $3.8 billion
from December 31, 2003. The increase came primarily from increases in the market value of customers’ variable annuities, as well as net
sales of $923 million. Individual variable annuity gross sales increased by $1.4 billion, from $4.4 billion in 2003 to $5.8 billion in 2004,
reflecting the inclusion of variable annuity sales from American Skandia for only the last eight months of 2003. Fixed annuities gross sales
increased by $285 million from 2003 to 2004, reflecting a new product introduced in 2004. Surrenders and withdrawals increased $1.6
billion from 2003 to 2004, reflecting the additional period of activity from American Skandia, as well as the impact of higher average
account values.
Policy Surrender Experience
The following table sets forth the individual life insurance business’s policy surrender experience for variable and universal life
insurance, measured by cash value of surrenders, for the periods indicated. These amounts do not correspond to expenses under GAAP. 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. Our term life insurance products do not provide for cash
surrender values.
Year ended December 31,
2005 2004 2003
(in millions)
Cash value of surrenders ................................................................................ $698 $633 $653
Cash value of surrenders as a percentage of mean future benefit reserves, policyholders’ account balances, and separate
account balances .................................................................................... 3.5% 3.3% 3.8%
2005 to 2004 Annual Comparison. The total cash value of surrenders increased $65 million, from $633 million in 2004 to $698
million in 2005, reflecting an increase in variable life surrenders in 2005. The level of surrenders as a percentage of mean future policy
benefit reserves, policyholders’ account balances and separate account balances increased from 2004 to 2005, reflecting a higher level of
surrenders in 2005 associated with variable life insurance account values due to less favorable market performance compared to the prior
year.
2004 to 2003 Annual Comparison. The total cash value of surrenders decreased $20 million, from $653 million in 2003 to $633
million in 2004. The level of surrenders as a percentage of mean future policy benefit reserves, policyholders’ account balances and
separate account balances decreased from 2003 to 2004, reflecting a lower level of surrenders in 2004 associated with increases in variable
life insurance account values due to market performance.
Group Insurance
Operating Results
The following table sets forth the Group Insurance segment’s operating results for the periods indicated.
Year ended December 31,
2005 2004 2003
(in millions)
Operating results:
Revenues ........................................................................................ $4,200 $3,892 $3,717
Benefits and expenses .............................................................................. 3,976 3,718 3,548
Adjusted operating income .......................................................................... 224 174 169
Realized investment gains (losses), net, and related adjustments(1) ....................................... 71 43 (52)
Related charges(2) ............................................................................. (2) — —
Income from continuing operations before income taxes, extraordinary gain on acquisition and cumulative effect of
accounting change ............................................................................... $ 293 $ 217 $ 117
(1) Revenues exclude Realized investment gains (losses), net, and related adjustments. For a discussion of these items see “—Realized Investment Gains
and General Account Investments—Realized Investment Gains.”
Prudential Financial 2005 Annual Report
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