Prudential 2006 Annual Report Download - page 9

PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
7
(A) Adjusted operating income is a non-
GAAP measure of performance of our
Financial Services Businesses that excludes
“Realized investment gains (losses), net,”
as adjusted, and related charges and
adjustments; net investment gains and
losses on trading account assets supporting
insurance liabilities; change in experience-
rated contractholder liabilities due to
asset value changes; results of divested
businesses and discontinued operations;
cumulative effect of accounting change;
extraordinary gain on acquisition; and
the related tax effects thereof. Adjusted
operating income includes equity in
earnings of operating joint ventures and
the related tax effects thereof. Revenues
and benefits and expenses shown as
components of adjusted operating
income, are presented on the same basis
as pre-tax adjusted operating income and
are adjusted for the items above as well.
See Management’s Discussion and
Analysis of Financial Condition and
Results of Operations for further
discussion of adjusted operating results
and the Consolidated Financial
Statements for a reconciliation of results
based on adjusted operating income to
GAAP results.
(B) Operating return on average equity
is calculated by dividing adjusted
operating income after income taxes
by average attributed equity for the
Financial Services Businesses excluding
accumulated other comprehensive income
related to unrealized gains and losses
on investments and pension and
postretirement benefits. An alternative
measure to operating return on average
equity is return on average equity.
Return on average equity is calculated
by dividing income from continuing
operations (after-tax) before extraordinary
gain on acquisition and cumulative
effect of accounting change by average
total attributed equity for the Financial
Services Businesses. Both income amounts
above give effect to the direct equity
adjustment for earnings per share
calculation.
$100
$200
$300
$400
$500
$600
$700
2004 2005 2006
5%
10%
15%
2004 2005 2006
$5
$10
$15
$20
$25
2004 2005 2006
$1,000
$2,000
$3,000
2004 2005 2006
$4,000
Adjusted operating income
Income from continuing operations
before income taxes, equity in earnings
of operating joint ventures, extraordinary
gain on acquisition and cumulative effect
of accounting change (GAAP)
Adjusted operating revenues
Revenues (GAAP)
Financial Services Businesses
Adjusted Operating Income(A) and
Income from Continuing Operations
(pre-tax, in millions)
Financial Services Businesses
Adjusted Operating Revenues(A)
and GAAP Revenues
(in billions)
Assets Under Management
(in billions)
Financial Services Businesses
Operating Return on Average Equity(B)
and Return on Average Equity(B)
Operating return on average equity
Return on average equity