Prudential 2007 Annual Report Download - page 47

Dual Currency Investments
The table below presents as of December 31, 2007, 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 $)
2008 ............................................. ¥3.5 ¥6.5 ¥10.0 90.5
2009 ............................................. 3.4 5.8 9.2 88.7
2010 ............................................. 3.2 4.9 8.1 87.4
2011-2034 ......................................... 39.1 60.2 99.3 79.9
Total ......................................... ¥49.2 ¥77.4 ¥126.6 81.7
(1) Yen amounts are imputed from the contractual U.S. dollar denominated interest cash flows.
The table above does not reflect the currency income hedging program discussed above. In establishing the level of yen-denominated
earnings that will be hedged through the currency income hedging program we take into account the anticipated level of U.S. dollar
denominated earnings that will be generated by dual currency and synthetic dual currency investments, as well as the anticipated level of
U.S. dollar denominated earnings that will be generated by U.S. dollar denominated products and 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,
2007 2006 2005
(in millions)
Operating results:
Revenues ......................................................................................... $769 $590 $487
Expenses ......................................................................................... 510 447 381
Adjusted operating income ........................................................................... 259 143 106
Realized investment gains (losses), net, and related adjustments (1) ....................................... 1 61 —
Related charges(2) .............................................................................. (3) — —
Equity in earnings of operating joint ventures(3) ...................................................... (30) (28) (22)
Income from continuing operations before income taxes and equity in earnings of operating joint ventures ............ $227 $176 $ 84
(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 and equity in earnings of operating joint ventures 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 2004, we acquired an 80 percent interest in Hyundai Investment and Securities Co., Ltd., a Korean asset management firm, from an
agency of the Korean government. We subsequently renamed the company Prudential Investment & Securities Co., Ltd, or PISC. On
January 25, 2008, we completed the acquisition of the remaining 20 percent for $90 million and PISC is now a wholly owned operation.
On July 12, 2007, we sold our 50% interest in our operating joint ventures Oppenheim Pramerica Fonds Trust GmbH and Oppenheim
Pramerica Asset Management S.a.r.l., which we accounted for under the equity method, to our partner Oppenheim S.C.A. for $121 million.
These businesses establish, package and distribute mutual fund products to German and other European retail investors. We recorded a
pre-tax gain on the sale of $37 million, which is reflected in the adjusted operating income of our International Investments segment in
2007. These businesses contributed $3 million, $4 million and $1 million of adjusted operating income to the results of the International
Investments segment for the years ended December 31, 2007, 2006 and 2005, respectively.
On January 18, 2008, we made an additional investment of $154 million in our UBI Pramerica operating joint venture in Italy, which
we account for under the equity method. This additional investment was necessary to maintain our ownership interest at 35% and was a
result of the merger of our joint venture partner with another Italian bank, and their subsequent consolidation of their asset management
companies into the UBI Pramerica joint venture.
Prudential Financial 2007 Annual Report 45