Prudential 2006 Annual Report Download - page 46

Dual Currency Investments
The table below presents as of December 31, 2006, the yen-denominated earnings subject to our dual currency and synthetic dual
currency investments and the related weighted average exchange rates resulting from these investments.
Year
(1)
Interest component
of dual currency
investments
Cross-currency
coupon swap element
of synthetic dual
currency investments
Yen-denominated
earnings subject to
these investments
Weighted average
exchange rate per
U.S. Dollar
(in billions) (Yen per $)
2007 ............................................. ¥ 3.6 ¥ 6.7 ¥10.3 90.8
2008 ............................................. 3.5 6.5 10.0 90.4
2009 ............................................. 3.4 5.9 9.3 89.2
2010-2034 ......................................... 42.3 65.3 107.6 80.4
Total ......................................... ¥52.8 ¥84.4 ¥137.2 82.3
(1) Yen amounts are imputed from the contractual U.S. dollar denominated interest cash flows.
The table above does not reflect the currency hedging program discussed above. Our Japanese insurance operations also hold U.S.
dollar denominated securities in their investment portfolio, which are discussed in further detail in “—Realized Investment Gains and
General Account Investments—General Account Investments.”
International Investments
Operating Results
The following table sets forth the International Investments segment’s operating results for the periods indicated.
Year ended December 31,
2006 2005 2004
(in millions)
Operating results:
Revenues ......................................................................................... $590 $487 $446
Expenses ......................................................................................... 447 381 369
Adjusted operating income ........................................................................... 143 106 77
Realized investment gains (losses), net, and related adjustments(1) ........................................ 61 — (48)
Related charges(2) .............................................................................. — — —
Equity in earnings of operating joint ventures(3) ...................................................... (28) (22) (14)
Income from continuing operations before income taxes, equity in earnings of operating joint ventures, extraordinary gain
on acquisition and cumulative effect of accounting change ................................................ $176 $ 84 $ 15
(1) Revenues exclude Realized investment gains (losses), net, and related adjustments. See “—Realized Investment Gains and General Account
Investments—Realized Investment Gains.”
(2) Benefits and expenses exclude related charges which represent the unfavorable (favorable) impact of Realized investment gains (losses), net, on
minority interest.
(3) Equity in earnings of operating joint ventures are included in adjusted operating income but excluded from income from continuing operations before
income taxes, equity in earnings of operating joint ventures, extraordinary gain on acquisition and cumulative effect of accounting change as they are
reflected on a U.S. GAAP basis on an after-tax basis as a separate line on our Consolidated Statements of Operations.
In the first quarter of 2006, the results of certain international market initiatives were reclassified in all periods for segment reporting
purposes only, from Corporate and Other operations to the International Investments segment.
On February 27, 2004, we acquired an 80 percent interest in Hyundai Investment and Securities Co., Ltd. and its subsidiary Hyundai
Investment Trust Management Co., Ltd., a Korean asset management firm, from an agency of the Korean government for $301 million in
cash, including $210 million used to repay debt assumed. As part of the acquisition, we can choose to acquire, or be required to acquire, the
remaining 20 percent interest three to six years after closing. On February 28, 2007, we notified the Korean government of our intention to
purchase the remaining 20 percent. Subsequent to the acquisition, the company was renamed Prudential Investment & Securities Co., Ltd,
or PISC. The results of these operations are included in our consolidated results beginning March 1, 2004. See Note 3 to the Consolidated
Financial Statements for further discussion of this acquisition.
Adjusted Operating Income
2006 to 2005 Annual Comparison. Adjusted operating income increased $37 million, from $106 million in 2005 to $143 million in
2006. This increase reflects income recognized in 2006 from market value changes on securities held, principally relating to trading
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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