Prudential 2007 Annual Report Download - page 48

Adjusted Operating Income
2007 to 2006 Annual Comparison. Adjusted operating income increased $116 million, from $143 million in 2006 to $259 million in
2007. Adjusted operating income for 2007 includes the $37 million gain from the sale of our Oppenheim joint ventures as discussed above
and a $17 million benefit from recoveries related to a former investment of our Korean asset management operations. In addition, market
value changes on securities relating to exchange memberships benefited 2007 by $42 million, while benefiting 2006 by $21 million.
Excluding the benefit of the items discussed above, adjusted operating income increased by $41 million reflecting more favorable
results from our asset management businesses in Korea and China. The adjusted operating income of our Korean asset management
operations also includes $17 million and $21 million in 2007 and 2006, respectively, of fee revenue from the Korean government under an
agreement entered into in connection with the 2004 acquisition of PISC, related to the provision of asset management and brokerage
services, which agreement extends until February 27, 2009.
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, principally relating to exchange
memberships. Also contributing to the increase in adjusted operating income was improved results from the segment’s asset management
operations, principally reflecting higher performance fees and asset management fees in a joint venture, as well as more favorable sales and
trading results from our global commodities group business. Results for 2006 and 2005 include fee revenue from the Korean government
under the agreement discussed above of $21 million and $24 million, respectively.
Revenues
2007 to 2006 Annual Comparison. Revenues, as shown in the table above under “—Operating Results,” increased $179 million,
from $590 million in 2006 to $769 million in 2007. This increase reflects the gain from the sale of our Oppenheim joint ventures, gains
from market value changes on securities relating to exchange memberships, and the gain associated with the recovery of a former
investment, as well as higher revenue from our asset management operations.
2006 to 2005 Annual Comparison. Revenues increased $103 million, from $487 million in 2005 to $590 million in 2006. This
increase includes income recognized in 2006 from market value changes on securities, principally relating to exchange memberships. Also
contributing to this increase were higher revenues from our global commodities group business, our Korean asset management operations,
and a joint venture as discussed above.
Expenses
2007 to 2006 Annual Comparison. Expenses, as shown in the table above under “—Operating Results,” increased $63 million, from
$447 million in 2006 to $510 million in 2007, primarily due to higher expenses corresponding with the higher level of revenues generated
by our asset management operations.
2006 to 2005 Annual Comparison. Expenses increased $66 million, from $381 million in 2005 to $447 million in 2006, primarily
due to higher expenses corresponding with the higher level of revenues generated by our global commodities group business and our
Korean asset management operations.
Corporate and Other
Corporate and Other includes corporate operations, after allocations to our business segments, and real estate and relocation services.
Corporate operations consist primarily of: (1) corporate-level income and expenses, after allocations to any of our business segments,
including income and expense from our qualified pension and other employee benefit plans and investment returns on capital that is not
deployed in any of our segments; (2) returns from investments that we do not allocate to any of our business segments, including debt-
financed investment portfolios, as well as tax credit investments and other tax enhanced investments financed by our business segments;
and (3) businesses that we have placed in wind-down status but have not divested as well as the impact of transactions with other segments.
Year ended December 31,
2007 2006 2005
(in millions)
Operating Results:
Corporate Operations(1) ................................................................................ $ (78) $ (28) $ 83
Real Estate and Relocation Services ....................................................................... 28 75 105
Adjusted operating income .............................................................................. (50) 47 188
Realized investment gains (losses), net, and related adjustments(2) ........................................... (126) 108 359
Investment gains (losses) on trading account assets supporting insurance liabilities, net(1)(3) ...................... 2 (2) —
Divested businesses(4) .............................................................................. 37 76 (16)
Income (loss) from continuing operations before income taxes and equity in earnings of operating joint ventures .......... $(137) $229 $531
46 Prudential Financial 2007 Annual Report