Prudential 2006 Annual Report Download - page 35

2005 to 2004 Annual Comparison. Total new annualized premiums increased $126 million, or 32%, from $398 million in 2004 to
$524 million in 2005. This increase in sales was due to higher group life sales to new clients, including a significant large case sale in the
first quarter of 2005.
Investment Division
Asset Management
Operating Results
The following table sets forth the Asset Management segment’s operating results for the periods indicated.
Year ended December 31,
2006 2005 2004
(in millions)
Operating results:
Revenues ........................................................................................ $2,050 $1,696 $1,464
Expenses ........................................................................................ 1,457 1,232 1,198
Adjusted operating income .......................................................................... 593 464 266
Realized investment gains, net, and related adjustments(1) ............................................... (4) 1 8
Income from continuing operations before income taxes, equity in earnings of operating joint ventures, extraordinary
gain on acquisition and cumulative effect of accounting change ........................................... $ 589 $ 465 $ 274
(1) Revenues exclude Realized investment gains (losses), net, and related adjustments. See “—Realized Investment Gains and General Account
Investments—Realized Investment Gains.”
Adjusted Operating Income
2006 to 2005 Annual Comparison. Adjusted operating income increased $129 million, from $464 million in 2005 to $593 million in
2006. Results for 2006 benefited from an increase in performance based incentive fees of $61 million associated with appreciation and
gains on sale of real estate investments which we manage, and from income from our proprietary investing business, also associated with
appreciation and gains on sale of real estate related investments, including $23 million relating to a single investment in 2006. Proprietary
investing income in 2005 included $58 million relating to two sale transactions. Results for 2006 benefited from increased asset
management fees of $88 million, primarily from institutional and retail customer assets as a result of increased asset values due to market
appreciation and net asset inflows. Higher expenses, including performance-related compensation costs, partially offset the foregoing
increases.
2005 to 2004 Annual Comparison. Adjusted operating income increased $198 million, from $266 million in 2004 to $464 million in
2005, which includes a $10 million increase from the management of assets associated with the retirement business acquired from CIGNA
on April 1, 2004. Results for 2005 benefited from an increase of $84 million in fees primarily from the management of institutional
customer assets as a result of increased asset values due to net asset inflows during 2004 and 2005, as well as net market appreciation.
Improved results from our proprietary investing activities, including $58 million from two sale transactions completed in 2005, also
contributed to the increase in adjusted operating income. Results for 2005 benefited from an increase of $62 million in performance based
incentive and transaction fees primarily related to our real estate investment management business. Additionally, 2004 results include
charges totaling $28 million related to declines in value of intangible assets, expenses incurred in exiting an operating facility and
termination of activities related to certain of our international investment management operations. Increased performance-related
compensation costs in 2005 partially offset the foregoing factors.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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