Prudential 2006 Annual Report Download - page 40

with the increase in premiums discussed above, partially offset by reserve releases of $27 million mainly from updates of client census data
on a group annuity block of business. Interest credited to policyholders’ account balances increased $45 million, as interest credited on the
greater base of guaranteed investment products sold in the institutional and retail markets was partially offset by lower crediting rates on
full service general account liabilities. Interest expense increased $62 million primarily due to increased financing costs on increased
borrowings, the proceeds of which were used to purchase invested assets.
Sales Results and Account Values
The following table shows the changes in the account values and net additions (withdrawals) of Retirement segment products for the
periods indicated. Net additions (withdrawals) are deposits and sales or additions, as applicable, minus withdrawals and benefits. These
concepts do not correspond to revenues under U.S. GAAP, but are used as a relevant measure of business activity.
Year ended December 31,
2006 2005 2004
(in millions)
Full Service(2):
Beginning total account value ......................................................................... $88,385 $ 83,891 $ 32,911
Deposits and sales .................................................................................. 16,156 13,006 11,665
Withdrawals and benefits ............................................................................ (15,989) (13,918) (13,087)
Change in market value, interest credited and interest income ................................................ 8,878 5,406 5,592
Acquisition of CIGNA’s retirement business(1) .......................................................... — — 46,810
Ending total account value ....................................................................... $97,430 $ 88,385 $ 83,891
Net additions (withdrawals) .......................................................................... $ 167 $ (912) $ (1,422)
Year ended December 31,
2006 2005 2004
(in millions)
Institutional Investment Products(3):
Beginning total account value ........................................................................... $48,080 $47,680 $39,296
Additions ........................................................................................... 5,993 4,065 2,951
Withdrawals and benefits .............................................................................. (6,356) (5,533) (3,860)
Change in market value, interest credited and interest income .................................................. 2,247 2,319 2,691
Other(4) ............................................................................................ 305 (451) (640)
Acquisition of CIGNA’s retirement business(1) ............................................................ — — 7,242
Ending total account value ......................................................................... $50,269 $48,080 $47,680
Net withdrawals ..................................................................................... $ (363) $ (1,468) $ (909)
(1) Account values and activity related to the CIGNA retirement business include amounts acquired under reinsurance agreements.
(2) Ending total account value for the full service business includes assets of Prudential’s retirement plan of $5.6 billion, $5.3 billion and $4.9 billion as of
December 31, 2006, 2005 and 2004, respectively.
(3) Ending total account value for the institutional investment products business includes assets of Prudential’s retirement plan of $4.6 billion, $6.4 billion
and $6.9 billion as of December 31, 2006, 2005 and 2004, respectively.
(4) Primarily represents changes in asset balances for externally managed accounts.
2006 to 2005 Annual Comparison. Account values in our full service business amounted to $97.4 billion as of December 31, 2006,
an increase of $9.045 billion from December 31, 2005. The increase in account values was driven principally by an increase in the market
value of customer funds, together with the reinvestment of income. Net additions (withdrawals) improved $1.079 billion, from net
withdrawals of $912 million in 2005 to net additions of $167 million in 2006, primarily reflecting an increase in net plan sales, as an
increase in new plan sales was partially offset by an increase in plan lapses. Partially offsetting this increase were greater deposits in 2005
for existing defined benefit plans, including a significant deposit by a single client.
Account values in our institutional investment products business amounted to $50.3 billion as of December 31, 2006, an increase of
$2.189 billion from December 31, 2005, primarily reflecting interest on general account business and an increase in the market value of
customer funds. Net withdrawals improved $1.105 billion, from net withdrawals of $1.468 billion in 2005 to net withdrawals of $363
million in 2006, as higher sales of guaranteed investment products in the institutional and retail markets, were offset by transfers from the
Retirement segment to our Asset Management segment. These transfers were approximately $1.8 billion in 2006 compared to
approximately $1.2 billion in 2005.
2005 to 2004 Annual Comparison. Account values in our full service business amounted to $88.4 billion as of December 31, 2005,
an increase of $4.5 billion from December 31, 2004. The increase in account values was driven by an increase in the market value of
customer funds and interest on general account business, partially offset by net withdrawals. Net withdrawals improved $510 million
primarily reflecting the withdrawal of approximately $600 million in 2004 relating to retirement plans of our retail securities brokerage
operations as a result of the combination of those operations with Wachovia Securities. In addition, the prior year reflects only the initial
nine months of sales and withdrawal activity from the retirement business acquired from CIGNA.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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