Prudential 2006 Annual Report Download - page 17

Significant developments and events in 2006 reflect our continued efforts to redeploy capital effectively to seek enhanced returns.
These developments included:
• The continuation of our share repurchase program. In 2006, we repurchased 32.4 million shares of Common Stock at a total cost of
$2.5 billion. In November 2006, Prudential Financial’s Board of Directors authorized us, under a new stock repurchase program, to
repurchase up to $3.0 billion of our outstanding Common Stock during 2007.
• A 22% increase in our annual Common Stock dividend, to $0.95 per share.
• On June 1, 2006, we acquired the variable annuity business of The Allstate Corporation, or Allstate, through a reinsurance
transaction for $635 million of total consideration, consisting primarily of a $628 million ceding commission. Our initial investment
in the business is approximately $600 million, consisting of the total consideration, offset by the related tax benefits, plus an
additional contribution of $94 million to meet regulatory capital requirements. See Note 3 to the Consolidated Financial Statements
for further discussion of this acquisition.
We analyze performance of the segments and Corporate and Other operations of the Financial Services Businesses using a measure
called adjusted operating income. See “—Consolidated Results of Operations” for a definition of adjusted operating income and a
discussion of its use as a measure of segment operating performance.
Shown below are the contributions of each segment and Corporate and Other operations to our adjusted operating income for the years
ended December 31, 2006, 2005 and 2004 and a reconciliation of adjusted operating income of our segments and Corporate and Other
operations to income from continuing operations before income taxes, equity in earnings of operating joint ventures, extraordinary gain on
acquisition and cumulative effect of accounting change.
Year ended
December 31,
2006 2005 2004
(in millions)
Adjusted operating income before income taxes for segments of the Financial Services Businesses:
Individual Life ..................................................................................... $ 544 $ 498 $ 390
Individual Annuities ................................................................................. 586 505 427
Group Insurance .................................................................................... 229 224 174
Asset Management .................................................................................. 593 464 266
Financial Advisory .................................................................................. 61 (255) (245)
Retirement ......................................................................................... 509 498 334
International Insurance ............................................................................... 1,423 1,310 917
International Investments ............................................................................. 143 106 77
Corporate and Other ................................................................................. 86 202 176
Realized investment gains (losses), net, and related adjustments ............................................... 73 669 62
Charges related to realized investment gains (losses), net .................................................... 17 (108) (58)
Investment gains (losses) on trading account assets supporting insurance liabilities, net ............................ 35 (33) (55)
Change in experience-rated contractholder liabilities due to asset value changes .................................. 11 (44) 1
Divested businesses ................................................................................. 12 (16) (24)
Equity in earnings of operating joint ventures ............................................................. (322) (214) (72)
Income from continuing operations before income taxes, equity in earnings of operating joint ventures, extraordinary gain on
acquisition and cumulative effect of accounting change for Financial Services Businesses ............................ 4,000 3,806 2,370
Income from continuing operations before income taxes for Closed Block Business ................................... 403 482 915
Consolidated income from continuing operations before income taxes, equity in earnings of operating joint ventures,
extraordinary gain on acquisition and cumulative effect of accounting change ...................................... $4,403 $4,288 $3,285
Results for 2006 presented above reflect the following:
• Individual Life segment results for 2006 improved in comparison to the prior year. Results benefited in the current year from a net
reduction in amortization of deferred policy acquisition costs and other costs, reflecting updates and refinements of our actuarial
assumptions based on an annual review, and from compensation received based on multi-year profitability of third-party products
we distribute. The benefits of these items to 2006 results, together with higher fees reflecting higher asset balances were partially
offset by less favorable mortality experience, net of reinsurance, compared to the prior year.
• Individual Annuities segment results for 2006 improved in comparison to the prior year due to higher fee income reflecting higher
average asset balances as well as a contribution from the variable annuity business acquired from The Allstate Corporation on
June 1, 2006. Results for both the current and prior years benefited from reductions in amortization of deferred policy acquisition
costs and other costs, reflecting increased estimates of profitability based on an annual review.
• Group Insurance segment results for 2006 improved slightly from the prior year as more favorable claims experience in our group
disability business, together with a greater benefit from refinements in group disability reserves and an increased contribution from
investment results, were largely offset by less favorable claims experience in our group life business and higher expenses.
• Asset Management segment results in 2006 improved in comparison to the prior year primarily due to greater incentive fees, and
income from our proprietary investing business, mainly related to real estate investments. In addition, 2006 segment results
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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