Prudential [LOGO] Financial
Prudential Financial, Inc. (PRU)
-------------------------------------
Quarterly Financial Supplement
FINANCIAL SERVICES BUSINESSES
FIRST QUARTER 2002
-------------------------------------------------------------------------------
Reference is made to Prudential Financial, Inc.'s filings with the Securities
and Exchange Commission for general information, and consolidated financial
information, regarding Prudential Financial, Inc., including its Closed Block
Business.
- --------------------------------------------------------------------------------
i May 7, 2002
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
CONTENTS
Page
--------
HIGHLIGHTS
Financial Highlights 1-2
Operations Highlights 3
FINANCIAL SERVICES BUSINESSES
Combined Statements of Operations 4
Combined Balance Sheets 5
Combining Statements of Operations by Division 6
Combining Balance Sheets by Division 7
Short-Term Debt 8
Long-Term Debt 9
U.S. CONSUMER DIVISION
Combined Statements of Operations 10
Combining Statements of Operations 11
Life Insurance Sales and Retail Investments Segment Mutual Funds, Wrap-fee Products and Annuity Sales and Assets Under
Management 12
Life Insurance, Retail Investments Segment Mutual Funds, Wrap-fee Products and Annuity Sales by Distribution Channel 13
Account Value Activity 14
Deferred Policy Acquisition Costs 15
Supplementary Information for Individual Life Insurance and Private Client Group 16
Supplementary Information for Property and Casualty Insurance 17
EMPLOYEE BENEFITS DIVISION
Combined Statements of Operations 18
Combining Statements of Operations 19
Sales Results and Assets Under Management 20
Supplementary Information 21
INTERNATIONAL DIVISION
Combined Statements of Operations 22
Combining Statements of Operations 23
Sales Results and Supplementary Information 24-25
ASSET MANAGEMENT DIVISION
Combined Statements of Operations 26
Combining Statements of Operations 27
Assets Under Management - Investment Management and Advisory Services Segment 28
INVESTMENT PORTFOLIO
Investment Portfolio Composition 29
Financial Services Businesses Investment Portfolio Composition - Japanese Insurance Operations and Excluding Japanese
Insurance Operations 30
Financial Services Businesses Investment Results 31
Financial Services Businesses Investment Results - Japanese Insurance Operations 32
Financial Services Businesses Investment Results - Excluding Japanese Insurance Operations 33
KEY DEFINITIONS AND FORMULAS 34-36
RATINGS AND INVESTOR INFORMATION 37
ii
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
FINANCIAL HIGHLIGHTS
(in millions, except per share data)
Year-to-date % 2001 2002
------------ ---------------------------------- -------
2002 2001 Change 1Q 2Q 3Q 4Q 1Q
---- ---- -------- -------- -------- ------- -------
Financial Services Businesses:
Pre-tax adjusted operating income by division:
171 194 -12% U. S. Consumer Division 194 82 47 (13) 171
66 104 -37% Employee Benefits Division 104 52 3 24 66
200 98 104% International Division 98 120 180 125 200
63 78 -19% Asset Management Division 78 32 45 64 63
23 (1) 2428% Corporate and other operations (1) 75 (19) (27) 23
- ----- ----- ----- ----- ----- ----- -----
523 473 11% Total pre-tax adjusted operating income 473 361 256 173 523
191 177 3% Income taxes (1) 177 101 153 68 191
- ----- ----- ----- ----- ----- ----- -----
Financial Services Businesses after-tax
332 296 15% adjusted operating income 296 260 103 105 332
- ----- ----- ----- ----- ----- ----- -----
Items excluded from adjusted operating income:
(96) 243 -140% Realized investment gains (losses), net of related charges 243 75 (322) (132) (96)
(8) (22) 64% Divested businesses (22) (60) (40) (25) (8)
- (45) 100% Demutualization costs and expenses (2) (45) (117) (37) (389) -
- ----- ----- ----- ----- ----- ----- -----
Total items excluded from adjusted operating income,
(104) 176 -159% before income taxes 176 (102) (399) (546) (104)
(35) 69 -139% Income taxes, including mutual insurance company tax 69 (92) (348) (22) (35)
- ----- ----- ----- ----- ----- ----- -----
Total items excluded from adjusted operating income,
(69) 107 -172% after income taxes 107 (10) (51) (524) (69)
- ----- ----- ----- ----- ----- ----- -----
Income (loss) from continuing operations (after-tax)
263 403 -35% of Financial Services Businesses 403 250 52 (419) 263
- - - Income from discontinued operations, net of taxes - - - 16 -
- ----- ----- ----- ----- ----- ----- -----
263 403 -35% Net income (loss) of Financial Services Businesses 403 250 52 (403) 263
===== ===== ===== ===== ===== ===== =====
Earnings per share of Common Stock (diluted):
0.58 0.51 Adjusted operating income 0.51 0.45 0.18 0.18 0.58
0.46 0.69 Income (loss) from continuing operations 0.69 0.43 0.09 (0.72) 0.46
0.46 0.69 Net income (loss) 0.69 0.43 0.09 (0.69) 0.46
Weighted average number of outstanding Common shares
585.1 583.6 (diluted basis) 583.6 583.6 583.6 583.7 585.1
7.17% Operating Return on Average Equity (3) 7.17%
Reconciliation to Consolidated Net Income of
Prudential Financial, Inc:
263 403 Net Income (loss) of Financial Services Businesses (above) 403 250 52 (403) 263
(110) 34 Net Income (loss) of Closed Block Business (4) 34 (55) (332) (103) (110)
- ----- ----- ----- ----- ----- ----- -----
153 437 Consolidated net income (loss) 437 195 (280) (506) 153
===== ===== ===== ===== ===== ===== =====
7 Direct equity adjustments for earnings per share calculation 7
(1) Income taxes applicable to pre-tax adjusted operating income, which
excludes the mutual insurance company tax for periods prior to
demutualization.
(2) Demutualization costs and expenses for the quarter ended December 31, 2001,
include demutualization consideration of $340 million paid to former
Canadian branch policyholders.
(3) As a result of the establishment of the Closed Block Business concurrently
with the demutualization on December 18, 2001, attributed equity as of the
end of periods prior to December 31, 2001 is not comparable to attributed
equity at that date and thereafter and, therefore, Operating Return on
Average Equity is not presented for periods prior to 2002.
(4) Amounts shown for the Closed Block Business represent results of the
Traditional Participating Products segment for periods prior to effective
date of demutualization.
Page 1
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
FINANCIAL HIGHLIGHTS
(in millions, except per share data)
Year-to-date 2001 2002
- -------------------- -------------------------------------- ------
2002 2001 1Q 2Q 3Q 4Q 1Q
- -------- -------- ------- ------- ------- ------- ------
----------- -----------
Financial Services Businesses Capitalization Data (1):
Short-term debt 11,922 9,440 9,720 5,405 6,515
Long-term debt 2,058 3,047 2,983 3,554 3,350
Equity Security Units (2) - - - 690 690
Attributed Equity:
Total Attributed Equity 14,661 14,787 14,683 19,646 19,453
Excluding unrealized gains and losses on investments 13,704 13,822 13,433 18,803 19,034
Excluding accumulated other comprehensive income 13,908 13,960 13,581 19,083 19,289
Total Capitalization:
Excluding accumulated other comprehensive income 15,966 17,007 16,564 23,327 23,329
Including accumulated other comprehensive income 16,719 17,834 17,666 23,890 23,493
Book value per share of Common Stock:
Excluding unrealized gains and losses on investments 32.15 32.53
Excluding accumulated other comprehensive income 32.63 32.97
Including accumulated other comprehensive income 33.59 33.25
Number of diluted shares at end of period 584.8 585.1
Common Stock Price Range:
32.09 High 33.19 32.09
30.05 Low 29.30 30.05
31.05 Close 33.19 31.05
Common Stock market capitalization ($ millions) (1) 19,369 18,143
----------- -----------
(1) As of end of period.
(2) Guaranteed minority interest in Trust holding solely debentures
of parent, as reported in combined balance sheet.
Page 2
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002
Prudential [LOGO] Financial
OPERATIONS HIGHLIGHTS
Year-to-date 2001 2002
- -------------- -------------------------------------- --------
2002 2001 1Q 2Q 3Q 4Q 1Q
- ----- ------ -------- -------- ------- ------- --------
Assets Under Management and Administration ($billions)(1) (2):
Assets Under Management :
Managed by Asset Management Division(3):
Retail customers(4) 97.2 99.8 92.8 96.5 92.3
Institutional customers 89.5 90.7 84.9 89.1 86.2
General account 111.0 109.3 110.1 113.8 111.7
------- ------- ------- ------ -----
Total proprietary (4) 297.7 299.8 287.8 299.4 290.2
Managed by Retail Investments or Private Client
Group segments:
Non-proprietary wrap-fee and other
domestic assets under management 49.8 51.3 45.0 49.3 50.6
International (5) 8.9 42.4 40.5 39.3 38.0
------- ------- ------- ------ -----
Total assets under management 356.4 393.5 373.3 388.0 378.8
Client assets under administration (6) 203.5 212.3 190.9 201.6 201.2
------- ------- ------- ------ -----
Total assets under management and administration 559.9 605.8 564.2 589.6 580.0
======= ======= ======= ====== =====
Distribution Representatives(1):
Prudential Agents 5,382 5,049 4,928 4,387 4,469
Financial Advisors (domestic and international) 6,628 6,497 6,366 6,159 5,859
International Life Planners 3,434 3,690 3,999 4,104 4,098
Gibraltar Life Advisors -- 7,230 6,596 6,121 5,726
Distribution Representative Productivity:
34 25 Prudential Agent productivity ($ thousands) 25 30 28 37 34
367 364 Financial Advisor Productivity (domestic; $ thousands) 364 338 316 327 367
Third Party Distribution ($ millions):
25 55 Individual Life Insurance sales (7) 55 43 123 31 25
467 494 Retail Investments gross sales (8) 494 1,525 494 546 467
(1) As of end of period.
(2) At fair market value.
(3) Reflects reclassification of amounts by client category as of January 1,
2002, based on internal management criteria, which reduced the amount attributed
to retail customers by $3.3 billion and increased the amounts attributed to
institutional customers and the general account by $2.8 billion and $0.5
billion, respectively.
(4) Includes International retail customer assets.
(5) Includes $26.1 billion of Gibraltar Life assets at February 28, 2002.
(6) Includes International customer client assets.
(7) Statutory first year premiums and deposits for Individual Life Insurance
segment products by third-party channel.
(8) Gross sales of mutual funds, wrap-fee products, and annuities by third party
channel.
Page 3
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
COMBINED STATEMENTS OF OPERATIONS - FINANCIAL SERVICES BUSINESSES
(in millions)
Year-to-date % 2001 2002
- --------------- -------------------------------------- --------
2002 2001 Change 1Q 2Q 3Q 4Q 1Q
- ------ ----- -------- -------- -------- -------- --------
Revenues (1):
2,278 1,611 41% Premiums 1,611 2,014 2,241 2,361 2,278
434 392 11% Policy charges and fee income 392 483 474 454 434
1,259 1,297 -3% Net investment income 1,297 1,352 1,288 1,302 1,259
1,085 1,108 -2% Commissions, investment management fees, and other income 1,108 1,164 992 1,092 1,085
----- ----- ----- ----- ----- ----- -----
5,056 4,408 15% Total revenues 4,408 5,013 4,995 5,209 5,056
----- ----- ----- ----- ----- ----- -----
Benefits and Expenses (1):
2,206 1,611 37% Insurance and annuity benefits 1,611 2,073 2,279 2,296 2,206
414 382 8% Interest credited to policyholders' account balances 382 422 432 434 414
56 108 -48% Interest expense 108 100 70 48 56
(340) (313) -9% Deferral of acquisition costs (313) (343) (325) (344) (340)
239 242 -1% Amortization of acquisition costs 242 212 255 224 239
722 817 -12% Securities operations non-interest expenses 817 875 771 816 722
1,236 1,088 14% General and administrative expenses 1,088 1,313 1,257 1,562 1,236
----- ----- ----- ----- ----- ----- -----
4,533 3,935 15% Total benefits and expenses 3,935 4,652 4,739 5,036 4,533
----- ----- ----- ----- ----- ----- -----
523 473 11% Adjusted operating income before income taxes 473 361 256 173 523
----- ----- ----- ----- ----- ----- -----
Items excluded from adjusted operating
income before income taxes:
(101) 247 -141% Realized investment gains (losses) 247 82 (326) (165) (101)
5 (4) 225% Related charges (4) (7) 4 33 5
----- ----- ----- ----- ----- ----- -----
Total realized investment gains (losses), net
(96) 243 -140% of related charges 243 75 (322) (132) (96)
----- ----- ----- ----- ----- ----- -----
(8) (22) 64% Divested businesses (22) (60) (40) (25) (8)
- (45) 100% Demutualization costs and expenses (45) (117) (37) (389) -
----- ----- ----- ----- ----- ----- -----
Total items excluded from adjusted operating income
(104) 176 -159% before income taxes 176 (102) (399) (546) (104)
----- ----- ----- ----- ----- ----- -----
419 649 -35% Income (loss) from continuing operations before income taxes 649 259 (143) (373) 419
156 246 -37% Income tax expense (benefit) 246 9 (195) 46 156
----- ----- ----- ----- ----- ----- -----
263 403 -35% Income (loss) from continuing operations, after-tax 403 250 52 (419) 263
===== ===== ===== ===== ===== ===== =====
(1) Revenues exclude realized investment gains, net of losses, and revenues of
divested businesses. Benefits and expenses exclude charges related to realized
investment gains, net of losses, benefits and expenses of divested businesses,
and demutualization costs and expenses.
Page 4
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
COMBINED BALANCE SHEETS - FINANCIAL SERVICES BUSINESSES
(in millions)
03/31/2001 06/30/2001 09/30/2001 12/31/2001 03/31/2002
---------- ---------- ---------- ---------- ----------
Assets:
Investments:
Fixed maturity securities available for sale, at fair value
(amortized cost $52,549; $67,706; $66,031; $67,276; $69,840) 54,018 68,768 68,018 68,880 70,687
Fixed maturity held to maturity, at amortized cost
(fair value $381; $562; $555; $395; $373) 354 538 532 374 354
Trading account assets, at fair value 9,103 5,752 5,199 5,043 6,286
Equity securities available for sale, at fair value
(cost $1,017; $3,462; $2,072; $1,671; $1,620) 1,050 3,634 2,026 1,688 1,687
Commercial loans 8,074 13,977 12,756 13,624 13,011
Policy loans 2,459 3,033 3,008 2,812 2,854
Securities purchased under agreements to resell 4,526 6,169 4,480 4,421 7,137
Cash collateral for borrowed securities 3,541 3,422 3,963 5,210 5,628
Other long-term investments 3,095 4,023 3,811 4,336 4,253
Short-term investments 782 2,960 2,773 2,972 3,095
--------- ---------- --------- -------- ---------
Total investments 87,002 112,276 106,566 109,360 114,992
Cash and cash equivalents 7,297 11,555 13,209 16,900 10,282
Accrued investment income 930 975 977 1,059 1,027
Broker-dealer related receivables 10,004 8,773 9,119 7,802 7,017
Deferred policy acquisition costs 5,284 5,445 5,525 5,538 5,660
Other assets 11,654 11,500 13,798 13,488 15,692
Separate account assets 79,066 79,697 74,523 77,158 78,515
--------- ---------- --------- -------- ---------
Total assets 201,237 230,221 223,717 231,305 233,185
========= ========== ========= ======== =========
Liabilities:
Future policy benefits 21,758 40,756 40,729 39,752 38,403
Policyholders' account balances 27,404 38,498 37,936 37,944 37,559
Unpaid claims and claim adjustment expenses 3,519 3,516 3,478 3,408 3,353
Securities sold under agreements to repurchase 11,169 10,262 9,479 9,280 11,704
Cash collateral for loaned securities 8,611 7,626 6,264 7,650 8,256
Income taxes payable 1,468 1,006 1,550 1,085 1,102
Broker-dealer related payables 5,130 5,206 6,571 6,445 5,581
Securities sold but not yet purchased 5,186 3,979 3,057 2,791 4,561
Short-term debt 11,922 9,440 9,720 5,405 6,515
Long-term debt 2,058 3,047 2,983 3,554 3,350
Other liabilities 9,285 12,401 12,744 16,497 14,143
Separate account liabilities 79,066 79,697 74,523 77,158 78,515
--------- ---------- --------- -------- ---------
Total liabilities 186,576 215,434 209,034 210,969 213,042
--------- ---------- --------- -------- ---------
Guaranteed minority interest in Trust holding solely debentures of
Parent - - - 690 690
Attributed Equity:
Accumulated other comprehensive income 753 827 1,102 563 164
Attributed equity 13,908 13,960 13,581 19,083 19,289
--------- ---------- --------- -------- ---------
Total attributed equity 14,661 14,787 14,683 19,646 19,453
--------- ---------- --------- -------- ---------
Total liabilities and attributed equity 201,237 230,221 223,717 231,305 233,185
========= ========== ========= ======== =========
Page 5
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002
Prudential [LOGO] Financial
FINANCIAL SERVICES BUSINESSES COMBINING STATEMENTS OF OPERATIONS - BY DIVISION
(in millions)
Quarter Ended March 31, 2002
------------------------------------------------------------------------------
Total
Financial U.S. Employee Asset Corporate
Services Consumer Benefits International Management and Other
Businesses Division Division Division Division Operations
---------- -------- -------- -------- -------- ----------
Revenues (1):
Premiums 2,278 558 702 1,016 - 2
Policy charges and fee income 434 306 71 57 - -
Net investment income 1,259 289 645 164 16 145
Commissions, investment management fees, and
other income 1,085 688 106 149 275 (133)
------- ------ ------ ----- ----- -----
Total revenues 5,056 1,841 1,524 1,386 291 14
------- ------ ------ ----- ----- -----
Benefits and Expenses(1):
Insurance and annuity benefits 2,206 525 871 783 - 27
Interest credited to policyholders' account
balances 414 93 297 24 - -
Interest expense 56 - 1 - 2 53
Deferral of acquisition costs (340) (202) (6) (151) - 19
Amortization of acquisition costs 239 194 - 65 - (20)
Securities operations non-interest expenses 722 539 - 114 63 6
General and administrative expenses 1,236 521 295 351 163 (94)
------- ------ ------ ----- ----- -----
Total benefits and expenses 4,533 1,670 1,458 1,186 228 (9)
------- ------ ------ ----- ----- -----
Adjusted operating income before income taxes 523 171 66 200 63 23
======= ====== ====== ===== ===== =====
Quarter Ended March 31, 2001
------------------------------------------------------------------------------
Total
Financial U.S. Employee Asset Corporate
Services Consumer Benefits International Management and Other
Businesses Division Division Division Division Operations
---------- -------- -------- -------- -------- ----------
Revenues (1):
Premiums 1,611 545 610 454 - 2
Policy charges and fee income 392 315 53 24 - -
Net investment income 1,297 333 705 50 19 190
Commissions, investment management fees, and
other income 1,108 755 93 144 310 (194)
------- ------ ------ ----- ----- -----
Total revenues 4,408 1,948 1,461 672 329 (2)
------- ------ ------ ----- ----- -----
Benefits and Expenses (1):
Insurance and annuity benefits 1,611 456 811 337 - 7
Interest credited to policyholders' account
balances 382 103 279 1 - (1)
Interest expense 108 2 2 2 4 98
Deferral of acquisition costs (313) (219) (6) (114) - 26
Amortization of acquisition costs 242 222 3 38 - (21)
Securities operations non-interest expenses 817 603 - 127 73 14
General and administrative expenses 1,088 587 268 183 174 (124)
------- ------ ------ ----- ----- -----
Total benefits and expenses 3,935 1,754 1,357 574 251 (1)
------- ------ ------ ----- ----- -----
Adjusted operating income before income taxes 473 194 104 98 78 (1)
======= ====== ====== ===== ===== =====
(1) Revenues exclude realized investment gains, net of losses, and revenues of
divested businesses. Benefits and expenses exclude charges related to
realized investment gains, net of losses, benefits and expenses of divested
businesses, and demutualization cost and expenses.
Page 6
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002
Prudential [LOGO] Financial
FINANCIAL SERVICES BUSINESSES COMBINING BALANCE SHEETS - BY DIVISION
(in millions)
As of March 31, 2002
--------------------------------------------------------------------------
Total
Financial U.S. Employee Asset Corporate
Services Consumer Benefits International Management and Other
Businesses Division Division Division Division Operations
---------- -------- -------- -------- -------- -----------
Assets:
Total investments 114,992 26,679 38,404 31,124 8,806 9,979
Broker-dealer related receivables 7,017 5,332 - 1,079 277 329
Deferred policy acquisition costs 5,660 3,944 112 1,675 - (71)
Other assets 27,001 5,950 5,482 4,345 4,992 6,232
Separate account assets 78,515 28,651 30,463 436 19,617 (652)
------- ------ ------ ------ ------ ------
Total assets 233,185 70,556 74,461 38,659 33,692 15,817
======= ====== ====== ====== ====== ======
Liabilities:
Future policy benefits 38,403 3,165 13,978 20,800 - 460
Policyholders' account balances 37,559 9,054 19,538 8,948 - 19
Debt 9,865 3,067 1,078 1,170 1,788 2,762
Other liabilities 48,700 19,709 6,956 4,718 11,443 5,874
Separate account liabilities 78,515 28,651 30,463 436 19,617 (652)
------- ------ ------ ------ ------ ------
Total liabilities 213,042 63,646 72,013 36,072 32,848 8,463
------- ------ ------ ------ ------ ------
Guaranteed minority interest in Trust holding solely
debentures of Parent 690 - - - - 690
Attributed Equity:
Accumulated other comprehensive income (loss) 164 412 195 (321) - (122)
Attributed equity 19,289 6,498 2,253 2,908 844 6,786
------- ------ ------ ------ ------ ------
Total attributed equity 19,453 6,910 2,448 2,587 844 6,664
------- ------ ------ ------ ------ ------
Total liabilities and attributed equity 233,185 70,556 74,461 38,659 33,692 15,817
======= ====== ====== ====== ====== ======
As of December 31, 2001
------------------------------------------------------------------------
Total
Financial U.S. Employee Asset Corporate
Services Consumer Benefits International Management and Other
Businesses Division Division Division Division Operations
---------- -------- -------- -------- -------- ----------
Assets:
Total investments 109,360 26,065 38,279 29,841 5,462 9,713
Broker-dealer related receivables 7,802 6,103 - 1,069 318 312
Deferred policy acquisition costs 5,538 3,893 93 1,615 - (63)
Other assets 31,447 6,638 5,223 8,454 2,898 8,234
Separate account assets 77,158 28,532 29,172 422 19,679 (647)
------- ------ ------ ------ ------ ------
Total assets 231,305 71,231 72,767 41,401 28,357 17,549
======= ====== ====== ====== ====== ======
Liabilities:
Future policy benefits 39,752 3,158 14,084 22,041 - 469
Policyholders' account balances 37,944 8,873 19,238 9,808 - 25
Debt 8,959 2,888 779 1,058 1,767 2,467
Other liabilities 47,156 20,910 6,732 5,429 5,966 8,119
Separate account liabilities 77,158 28,532 29,172 422 19,679 (647)
------- ------ ------ ------ ------ ------
Total liabilities 210,969 64,361 70,005 38,758 27,412 10,433
------- ------ ------ ------ ------ ------
Guaranteed minority interest in Trust holding solely
debentures of Parent 690 - - - - 690
Attributed Equity:
Accumulated other comprehensive income (loss) 563 453 518 (171) 2 (239)
Attributed equity 19,083 6,417 2,244 2,814 943 6,665
------- ------ ------ ------ ------ ------
Total attributed equity 19,646 6,870 2,762 2,643 945 6,426
------- ------ ------ ------ ------ ------
Total liabilities and attributed equity 231,305 71,231 72,767 41,401 28,357 17,549
======= ====== ====== ====== ====== ======
Page 7
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
SHORT TERM DEBT - FINANCIAL SERVICES BUSINESSES
(in millions)
As of March 31, 2002
-------------------------------------------------------------------
The Prudential
Prudential Insurance Co. Other
Financial, Inc. of America(a) Affiliates Total
--------------- ---------------- --------------- ---------------
Borrowings by use of proceeds:
General corporate purposes - 549 - 549
Investment related - 1,495 - 1,495
Securities business related - 1,194 2,277 3,471
Specified other businesses - 920 53 973
Limited recourse and non-recourse borrowing - - 27 27
--------------- ---------------- --------------- ---------------
Total short-term debt - 4,158 2,357 6,515
=============== ================ =============== ===============
Borrowings by type:
Long-term debt due within one year - 347 - 347
Commercial paper - 3,750 - 3,750
Bank borrowings - - 1,657 1,657
Other short-term debt - 61 673 734
--------------- ---------------- --------------- ---------------
Total general obligations - 4,158 2,330 6,488
Limited recourse and non-recourse borrowing - - 27 27
--------------- ---------------- --------------- ---------------
Total short-term debt - 4,158 2,357 6,515
=============== ================ =============== ===============
As of December 31, 2001
-------------------------------------------------------------------
The Prudential
Prudential Insurance Co. Other
Financial, Inc. of America(a) Affiliates Total
--------------- --------------- --------------- ---------------
Borrowings by use of proceeds:
General corporate purposes - 222 - 222
Investment related - 834 - 834
Securities business related - 1,639 1,484 3,123
Specified other businesses - 1,141 14 1,155
Limited recourse and non-recourse borrowing - - 71 71
--------------- --------------- --------------- ---------------
Total short-term debt - 3,836 1,569 5,405
=============== =============== =============== ===============
Borrowings by type:
Long-term debt due within one year - 753 - 753
Commercial paper - 3,022 - 3,022
Bank borrowings - - 1,324 1,324
Other short-term debt - 61 174 235
--------------- --------------- --------------- ---------------
Total general obligations - 3,836 1,498 5,334
Limited recourse and non-recourse borrowing - - 71 71
--------------- --------------- --------------- ---------------
Total short-term debt - 3,836 1,569 5,405
=============== =============== =============== ===============
(a) Includes Prudential Funding, LLC.
Page 8
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
LONG TERM DEBT
(in millions)
As of March 31, 2002
------------------------------------------------------------------------------------
Limited
General Securities Specified Total Recourse
Corporate Investment Business Other General and non- Total
Purposes Related Related Businesses Obligations Recourse Borrowing
----------- ------------ ---------- ----------- ------------- ---------- -----------
Financial Services Businesses:
Prudential Financial, Inc.:
Long-term fixed and floating rate notes - - - - - - -
Hybrid notes - - - - - - -
----------- ------------ ---------- ----------- ------------- ---------- -----------
Total - - - - - - -
----------- ------------ ---------- ----------- ------------- ---------- -----------
The Prudential Insurance Company of America
(a):
Surplus notes 990 - - - 990 - 990
Long-term fixed and floating rate notes 1,100 731 - - 1,831 - 1,831
Commercial paper backed by long-term credit
agreements - - - - - - -
----------- ------------ ---------- ----------- ------------- ---------- -----------
Total 2,090 731 - - 2,821 - 2,821
----------- ------------ ---------- ----------- ------------- ---------- -----------
Long-term debt of other affiliated companies - - - - - 529 529
----------- ------------ ---------- ----------- ------------- ---------- -----------
Total long-term debt of Financial Services
Businesses 2,090 731 - - 2,821 529 3,350
=========== ============ ========== =========== ============= ========== ===========
Ratio of long-term and short-term corporate
debt to capitalization 12.4%
===========
Closed Block Business:
Limited recourse notes of Prudential
Holdings, LLC - - - - - 1,750 1,750
=========== ============ ========== =========== ============= ========== ===========
As of December 31, 2001
------------------------------------------------------------------------------------
Limited
General Securities Specified Total Recourse
Corporate Investment Business Other General and non- Total
Purposes Related Related Businesses Obligations Recourse Borrowing
----------- ------------ ---------- ----------- ------------- ---------- -----------
Financial Services Businesses:
Prudential Financial, Inc.:
Long-term fixed and floating rate notes - - - - - - -
Hybrid notes - - - - - - -
----------- ------------ ---------- ----------- ------------- ---------- -----------
Total - - - - - - -
----------- ------------ ---------- ----------- ------------- ---------- -----------
The Prudential Insurance Company of America
(a):
Surplus notes 989 - - - 989 - 989
Long-term fixed and floating rate notes 1,456 586 - - 2,042 - 2,042
Commercial paper backed by long-term credit
agreements - - - - - - -
----------- ------------ ---------- ----------- ------------- ---------- -----------
Total 2,445 586 - - 3,031 - 3,031
----------- ------------ ---------- ----------- ------------- ---------- -----------
Long-term debt of other affiliated companies - - - - - 523 523
----------- ------------ ---------- ----------- ------------- ---------- -----------
Total long-term debt of Financial Services
Businesses 2,445 586 - - 3,031 523 3,554
=========== ============ ========== =========== ============= ========== ===========
Ratio of long-term and short-term corporate
debt to capitalization 12.7%
===========
Closed Block Business:
Limited recourse notes of Prudential
Holdings, LLC - - - - - 1,750 1,750
========== ============ ========== =========== ============= ========== ===========
(a) Includes Prudential Funding, LLC.
Page 9
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
COMBINED STATEMENTS OF OPERATIONS - U. S. CONSUMER DIVISION
(in millions)
Year-to-date 2001 2002
- ---------------- % --------------------------------- ------
2002 2001 Change 1Q 2Q 3Q 4Q 1Q
- ------- ------ ----- ----- ----- ----- ------
Revenues (1):
558 545 2% Premiums 545 575 561 636 558
306 315 -3% Policy charges and fee income 315 321 305 318 306
289 333 -13% Net investment income 333 303 304 295 289
688 755 -9% Commissions, investment management fees, and other income 755 713 689 676 688
----- ----- ----- ----- ----- ----- -----
1,841 1,948 -5% Total revenues 1,948 1,912 1,859 1,925 1,841
----- ----- ----- ----- ----- ----- -----
Benefits and Expenses(1):
525 456 15% Insurance and annuity benefits 456 527 555 605 525
93 103 -10% Interest credited to policyholders' account balances 103 99 96 98 93
- 2 -100% Interest expense 2 3 2 - -
(202) (219) 8% Deferral of acquisition costs (219) (216) (202) (201) (202)
194 222 -13% Amortization of acquisition costs 222 193 230 192 194
539 603 -11% Securities operations non-interest expenses 603 645 577 595 539
521 587 -11% General and administrative expenses 587 579 554 649 521
----- ----- ----- ----- ----- ----- -----
1,670 1,754 -5% Total benefits and expenses 1,754 1,830 1,812 1,938 1,670
----- ----- ----- ----- ----- ----- -----
171 194 -12% Adjusted operating income before income taxes 194 82 47 (13) 171
===== ===== ===== ===== ===== ===== =====
(1) Revenues exclude realized investment gains, net of losses. Benefits and
expenses exclude charges related to realized investment gains, net of
losses.
Page 10
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
COMBINING STATEMENTS OF OPERATIONS - U. S. CONSUMER DIVISION
(in millions)
Quarter Ended March 31, 2002
--------------------------------------------------------------------------------------
Retail Investments
Total U.S. Individual Property & ----------------------
Consumer Life Private Retail Casualty Mutual
Division Insurance Client Group Investments Insurance Funds(2) Annuities
---------- ----------- -------------- ------------- ----------- ---------- -----------
Revenues (1):
Premiums 558 56 - 9 493 - 9
Policy charges and fee income 306 250 - 56 - - 56
Net investment income 289 105 45 100 39 - 100
Commissions, investment management fees, and
other income 688 32 482 175 (1) 157 18
---------- ----------- -------------- ------------- ----------- ---------- -----------
Total revenues 1,841 443 527 340 531 157 183
---------- ----------- -------------- ------------- ----------- ---------- -----------
Benefits and Expenses (1):
Insurance and annuity benefits 525 129 - 28 368 - 28
Interest credited to policyholders' account
balances 93 33 - 60 - - 60
Interest expense - - - - - - -
Deferral of acquisition costs (202) (66) - (38) (98) (10) (28)
Amortization of acquisition costs 194 53 - 41 100 18 23
Securities operations non-interest expenses 539 - 539 - - - -
General and administrative expenses 521 177 7 198 139 128 70
---------- ----------- -------------- ------------- ----------- ---------- -----------
Total benefits and expenses 1,670 326 546 289 509 136 153
---------- ----------- -------------- ------------- ----------- ---------- -----------
Adjusted operating income before income taxes 171 117 (19) 51 22 21 30
========== =========== ============== ============= =========== ========== ===========
Quarter Ended March 31, 2001
--------------------------------------------------------------------------------------
Retail Investments
Total U.S. Individual Property & ----------------------
Consumer Life Private Retail Casualty Mutual
Division Insurance Client Group Investments Insurance Funds(2) Annuities
---------- ----------- -------------- ------------- ----------- ---------- -----------
Revenues (1):
Premiums 545 87 - 13 445 - 13
Policy charges and fee income 315 251 - 64 - - 64
Net investment income 333 99 70 121 43 1 120
Commissions, investment management fees, and
other income 755 30 536 188 1 168 20
---------- ----------- -------------- ------------- ----------- ---------- -----------
Total revenues 1,948 467 606 386 489 169 217
---------- ----------- -------------- ------------- ----------- ---------- -----------
Benefits and Expenses (1):
Insurance and annuity benefits 456 157 - 24 275 - 24
Interest credited to policyholders' account
balances 103 35 - 68 - - 68
Interest expense 2 - - 2 - 1 1
Deferral of acquisition costs (219) (76) - (43) (100) (17) (26)
Amortization of acquisition costs 222 62 - 60 100 19 41
Securities operations non-interest expenses 603 - 603 - - - -
General and administrative expenses 587 210 9 214 154 141 73
---------- ----------- -------------- ------------- ----------- ---------- -----------
Total benefits and expenses 1,754 388 612 325 429 144 181
---------- ----------- -------------- ------------- ----------- ---------- -----------
Adjusted operating income before income taxes 194 79 (6) 61 60 25 36
========== =========== ============== ============= =========== ========== ===========
(1) Revenues exclude realized investment gains, net of losses. Benefits and
expenses exclude charges related to realized investment gains, net of
losses.
(2) Includes wrap-fee products and unit investment trusts.
Page 11
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
U. S. CONSUMER DIVISION - LIFE INSURANCE SALES AND RETAIL INVESTMENTS SEGMENT
MUTUAL FUNDS, WRAP-FEE PRODUCTS AND ANNUITY SALES AND ASSETS UNDER MANAGEMENT
(in millions)
Year-to-date 2001 2002
- ----------------- -------------------------------------- --------
2002 2001 1Q 2Q 3Q 4Q 1Q
- -------- -------- ------- -------- -------- -------- --------
INDIVIDUAL LIFE INSURANCE SALES (1):
55 65 Variable and universal life 65 58 51 54 55
10 37 Corporate-owned life insurance 37 28 117 17 10
13 10 Term life 10 11 11 11 13
- -------- -------- -------- -------- -------- -------- --------
78 112 Total 112 97 179 82 78
======== ======== ======== ======== ======== ======== ========
RETAIL INVESTMENTS SEGMENT MUTUAL FUNDS, WRAP-FEE PRODUCTS
AND ANNUITY SALES AND ASSETS UNDER MANAGEMENT:
Mutual Funds:
57,809 57,764 Beginning total mutual funds assets 57,764 58,168 59,618 56,951 57,809
914 1,324 Sales (other than money market) 1,324 2,106 907 936 914
(1,116) (1,202) Redemptions (other than money market) (1,202) (1,103) (1,110) (1,282) (1,116)
32 (1,254) Reinvestment of distributions and change in market value (1,254) 1,056 (3,840) 2,144 32
(896) 1,536 Net money market sales 1,536 (609) 1,376 (940) (896)
- --------- ------- -------- -------- -------- -------- --------
56,743 58,168 Ending total mutual funds assets 58,168 59,618 56,951 57,809 56,743
========= ======= ======== ======== ======== ======== ========
(202) 122 Net Mutual Funds sales (redemptions) other than money market 122 1,003 (203) (346) (202)
========= ======= ======== ======== ======== ======== ========
Wrap-fee Products:
17,955 19,621 Beginning total wrap-fee product assets 19,621 17,335 18,714 16,141 17,955
1,667 2,295 Sales 2,295 1,968 1,626 1,563 1,667
(1,361) (1,878) Redemptions (1,878) (1,378) (1,462) (1,342) (1,361)
(69) (2,703) Reinvestment of distributions and change in market value (2,703) 789 (2,737) 1,593 (69)
- --------- ------- -------- -------- -------- -------- -------
18,192 17,335 Ending total wrap-fee product assets 17,335 18,714 16,141 17,955 18,192
1,056 1,552 Unit investment trust assets at end of period 1,552 1,420 1,168 1,157 1,056
- --------- ------- -------- -------- -------- ------- --------
19,248 18,887 Total wrap-fee and unit investment trust assets at end of period 18,887 20,134 17,309 19,112 19,248
========= ======= ======== ======== ======== ======== ========
306 417 Net wrap-fee product sales (redemptions) 417 590 164 221 306
========= ======= ======== ======== ======== ======== ========
Variable Annuities:
18,689 21,059 Beginning total account value 21,059 19,118 19,523 17,190 18,689
374 339 Sales 339 328 274 330 374
(597) (665) Surrenders, withdrawals and exchange redemptions (665) (591) (552) (548) (597)
Change in market value, interest credited, and other
(31) (1,615) activity(2) (1,615) 668 (2,055) 1,717 (31)
- -------- -------- -------- -------- -------- -------- --------
18,435 19,118 Ending total account value 19,118 19,523 17,190 18,689 18,435
======== ======== ======== ======== ======== ======== ========
(223) (326) Net sales (redemptions) (326) (263) (278) (218) (223)
======== ======== ======== ======== ======== ======== ========
Fixed Annuities:
2,975 2,926 Beginning total account value 2,926 2,889 2,872 2,865 2,975
37 30 Sales 30 27 32 31 37
(50) (69) Surrenders, withdrawals and exchange redemptions (69) (55) (48) (44) (50)
(53) 2 Interest credited and other activity (2) 2 11 9 123 (53)
- -------- -------- -------- -------- -------- -------- --------
2,909 2,889 Ending account value 2,889 2,872 2,865 2,975 2,909
======== ======== ======== ======== ======== ======== ========
(13) (39) Net sales (redemptions) (39) (28) (16) (13) (13)
======== ======== ======== ======== ======== ======== ========
(1) Statutory first year premiums and deposits.
(2) The quarter ended March 31, 2002 includes decreases in policyholder account
balances of $45 million for variable annuities and $56 million for fixed
annuities due to the distribution of policy credits, subsequently paid out
in cash, as demutualization consideration in connection with the Company's
demutualization. The quarter ended December 31, 2001 includes increases in
policyholder account values of $429 million for variable annuities and $157
million for fixed annuities as a result of policyholder credits issued in
connection with the Company's demutualization, as well as a decrease in
policyholder account values of $50 million in fixed annuities transferred
to the Closed Block Business upon its establishment.
Page 12
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
U.S. CONSUMER DIVISION - LIFE INSURANCE, RETAIL INVESTMENTS
SEGMENT MUTUAL FUNDS, WRAP-FEE PRODUCTS, AND ANNUITY SALES BY
DISTRIBUTION CHANNEL
(in millions)
2001 2002
Year-to-date ---------------------------------------------- -------
- ------------------
2002 2001 1Q 2Q 3Q 4Q 1Q
- ------ ----- ------ ------ ------ ------ ------
INDIVIDUAL LIFE INSURANCE SALES(1) BY
DISTRIBUTION CHANNEL
53 57 Prudential Agents 57 54 56 51 53
25 55 Third party distribution 55 43 123 31 25
----- ----- ------ ------ ------ ------ ------
78 112 Total 112 97 179 82 78
===== ====== ====== ====== ====== ====== ======
RETAIL INVESTMENTS SEGMENT MUTUAL FUNDS, WRAP-FEE
PRODUCTS AND ANNUITY SALES BY DISTRIBUTION CHANNEL
Mutual funds, excluding wrap-fee products (2):
----------------------------------------------
156 233 Prudential Agents 233 199 161 150 156
339 575 Financial Advisors 575 429 298 300 339
387 445 Third-party distributors 445 1,470 457 479 387
32 71 Other 71 8 (9) 7 32
----- ----- ------ ------ ------ ------ ------
914 1,324 Total 1,324 2,106 907 936 914
===== ====== ====== ====== ====== ====== ======
Wrap-fee products:
------------------
115 109 Prudential Agents 109 110 104 101 115
1,483 2,138 Financial Advisors 2,138 1,807 1,488 1,404 1,483
69 48 Third-party distributors 48 51 34 58 69
----- ----- ------ ------ ------ ------ ------
1,667 2,295 Total 2,295 1,968 1,626 1,563 1,667
===== ====== ====== ====== ====== ====== ======
Variable and Fixed Annuities:
-----------------------------
337 296 Prudential Agents 296 293 257 298 337
63 72 Financial Advisors 72 58 46 54 63
11 1 Third-party distributors 1 4 3 9 11
----- ----- ------ ------ ------ ------ ------
411 369 Total 369 355 306 361 411
===== ====== ====== ====== ====== ====== ======
(1) Statutory first year premiums and deposits.
(2) Other than money market.
Page 13
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
U. S. CONSUMER DIVISION - ACCOUNT VALUE ACTIVITY
(in millions)
Year-to-date 2001 2002
- ------------------ --------------------------------------- --------
2002 2001 1Q 2Q 3Q 4Q 1Q
- ------- ------- ------ ------ ------ ------ -------
INDIVIDUAL LIFE INSURANCE:
Policyholders' Account Balances:
3,826 3,526 Beginning balance 3,526 3,578 3,628 3,664 3,826
227 191 Premiums and deposits 191 181 194 206 227
20 24 Interest credited 24 21 20 25 20
(135) (172) Surrenders and withdrawals (172) (174) (159) (201) (135)
14 32 Net transfers (to) from separate account 32 26 24 7 14
(16) (14) Policy charges (14) (14) (17) (14) (16)
(12) (9) Benefits and other (9) 10 (26) 139 (12)
------ ----- ------ ------ ------ ------ ------
3,924 3,578 Ending balance 3,578 3,628 3,664 3,826 3,924
====== ===== ===== ===== ===== ===== =====
Separate Account Liabilities:
13,010 13,892 Beginning balance 13,892 12,849 13,391 12,021 13,010
396 447 Premiums and deposits 447 417 491 419 396
111 (1,059) Change in market value and interest credited (1,059) 531 (1,418) 1,031 111
(124) (172) Surrenders and withdrawals (172) (179) (117) (209) (124)
(38) (20) Net transfers (to) from general account (20) 19 (96) (10) (38)
(211) (216) Policy charges (216) (215) (210) (223) (211)
(15) (23) Benefits and other (23) (31) (20) (19) (15)
------ ----- ------ ------ ------ ------ ------
13,129 12,849 Ending balance 12,849 13,391 12,021 13,010 13,129
====== ====== ====== ====== ====== ====== ======
INDIVIDUAL ANNUITIES:
Account Values in General Account:
6,152 5,677 Beginning balance 5,677 5,624 5,587 5,566 6,152
411 369 Premiums and deposits 369 355 306 361 411
72 78 Interest credited 78 79 76 77 72
(647) (734) Surrenders and withdrawals (734) (646) (600) (592) (647)
(7) 283 Net transfers (to) from separate account (1) 283 235 240 243 (7)
(1) (1) Policy charges (1) (1) (1) (2) (1)
(155) (48) Benefits and other (2) (48) (59) (42) 499 (155)
------ ------ ------ ------ ------ ------ ------
5,825 5,624 Ending balance 5,624 5,587 5,566 6,152 5,825
====== ====== ====== ====== ====== ====== ======
Account Values in Separate Account:
15,512 18,308 Beginning balance 18,308 16,383 16,808 14,489 15,512
183 265 Premiums and deposits 265 246 206 188 183
51 (1,584) Change in market value and interest credited (1,584) 717 (2,027) 1,316 51
(514) (569) Surrenders and withdrawals (569) (536) (481) (478) (514)
338 21 Net transfers (to) from general account (1) 21 55 35 47 338
(51) (58) Policy charges (58) (57) (52) (50) (51)
-- -- Benefits and other -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
15,519 16,383 Ending balance 16,383 16,808 14,489 15,512 15,519
====== ====== ====== ====== ====== ====== ======
(1) The quarter ended March 31, 2002 includes $314 million of policyholder
credits, issued in connection with the Company's demutualization, applied to
customer account balances held in the separate account.
(2) The quarter ended March 31, 2002 includes a decrease in policyholder account
balances of $101 million due to the distribution of policy credits, subsequently
paid out in cash, as demutualization consideration in connection with the
Company's demutualization. The quarter ended December 31, 2001 includes an
increase in policyholder account values of $586 million as a result of
policyholder credits issued in connection with the Company's demutualization, as
well as a decrease in policyholder account values of $50 million transferred to
the Closed Block Business upon its establishment.
Page 14
Prudential Financial, Inc. Prudential [LOGO] FINANCIAL
Quarterly Financial Supplement
First Quarter 2002
U.S. CONSUMER DIVISION - DEFERRED POLICY ACQUISITION COSTS
(in millions)
Year-to-date 2001 2002
- --------------- ------------------------------------ ------
2002 2001 1Q 2Q 3Q 4Q 1Q
- ------ ------ ------ ------ ------ ------ ------
INDIVIDUAL LIFE INSURANCE:
3,133 3,090 Beginning balance 3,090 3,088 3,117 3,115 3,133
66 76 Capitalization 76 77 74 74 66
(53) (62) Amortization - operating results (62) (55) (60) (55) (53)
-- -- Amortization - realized investment gains and losses -- -- -- -- --
14 (16) Impact of unrealized (gains) or losses on AFS securities (16) 7 (16) (1) 14
-- -- Other -- -- -- -- --
- ------ ------ ------ ------ ------ ------ ------
3,160 3,088 Ending balance 3,088 3,117 3,115 3,133 3,160
====== ====== ====== ====== ====== ====== ======
INDIVIDUAL ANNUITIES:
628 682 Beginning balance 682 648 655 612 628
28 26 Capitalization 26 24 24 25 28
(23) (41) Amortization - operating results (41) (21) (51) (21) (23)
1 (1) Amortization - realized investment gains and losses (1) (2) 2 15 1
20 (18) Impact of unrealized (gains) or losses on AFS securities (18) 6 (18) (3) 20
-- -- Other -- -- -- -- --
- ------ ------ ------ ------ ------ ------ ------
654 648 Ending balance 648 655 612 628 654
====== ====== ====== ====== ====== ====== ======
PROPERTY & CASUALTY INSURANCE:
132 137 Beginning balance 137 137 141 137 132
98 100 Capitalization 100 102 95 93 98
(100) (100) Amortization - operating results (100) (98) (99) (98) (100)
-- -- Amortization - realized investment gains and losses -- -- -- -- --
-- -- Impact of unrealized (gains) or losses on AFS securities -- -- -- -- --
-- -- Other -- -- -- -- --
- ------ ------ ------ ------ ------ ------ ------
130 137 Ending balance 137 141 137 132 130
====== ====== ====== ====== ====== ====== ======
TOTAL U. S. CONSUMER DIVISION:
3,893 3,909 Beginning balance 3,909 3,873 3,913 3,864 3,893
192 202 Capitalization 202 203 193 192 192
(176) (203) Amortization - operating results (203) (174) (210) (174) (176)
1 (1) Amortization - realized investment gains and losses (1) (2) 2 15 1
34 (34) Impact of unrealized (gains) or losses on AFS securities (34) 13 (34) (4) 34
-- -- Other -- -- -- -- --
- ------- ------ ------ ------ ------ ------ ------
3,944 3,873 Ending balance 3,873 3,913 3,864 3,893 3,944
====== ====== ====== ====== ====== ====== ======
Page 15
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
U.S. CONSUMER DIVISION - SUPPLEMENTARY INFORMATION FOR INDIVIDUAL
LIFE INSURANCE AND PRIVATE CLIENT GROUP
(dollar amounts in millions)
Year-to-date 2001 2002
- ------------------ ------------------------------------- -------
2002 2001 1Q 2Q 3Q 4Q 1Q
- ------- ------- ------- -------- -------- -------- -------
Individual Life Insurance:
--------- ---------
Policy Surrender Experience:
162 180 Cash value of surrenders 180 149 132 176 162
Cash value of surrenders as a percentage of mean future
policy benefits, policyholders' account balances,
3.9% 4.3% and separate account balances 4.3% 3.5% 3.2% 4.4% 3.9%
Death claims per $1,000 of in-force: (1)
2.06 2.22 Variable and universal life 2.22 1.65 2.53 2.01 2.06
1.43 1.07 Term life 1.07 1.25 2.78 0.86 1.43
1.87 1.88 Total, Individual Life Insurance Segment 1.88 1.55 2.61 1.65 1.87
--------- ---------
Year-to-date 2001 2002
- ------------------ ------------------------------------- -------
2002 2001 1Q 2Q 3Q 4Q 1Q
- ------- --------- ------- -------- -------- -------- -------
Private Client Group:
--------- ---------
Non-Interest Revenues:
270 320 Commissions 320 296 252 287 270
177 182 Fees 182 168 178 156 177
35 34 Other non-interest revenues 34 35 37 28 35
- ------- --------- ------- -------- -------- -------- -------
482 536 Total non-interest revenues 536 499 467 471 482
======= ========= ======= ======== ======== ======== =======
Recurring revenue as a percentage of total
non-interest revenue (2) 34.0% 34.4% 35.5% 34.8% 35.5%
3,262 5,223 Average customer margin lending balances 5,223 4,376 4,200 3,470 3,262
--------- ---------
(1) Annualized, for interim reporting periods.
(2) Calculated on a trailing 12 month basis excluding Consumer Banking revenue.
Page 16
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
U.S. CONSUMER DIVISION - SUPPLEMENTARY INFORMATION FOR PROPERTY AND CASUALTY INSURANCE
(dollar amounts in millions)
Year-to-date 2001 2002
- --------------- --------------------------- ------
2002 2001 1Q 2Q 3Q 4Q 1Q
- ------- ------ ------ ------ ------ ------ ------
------ ------
Earned premium:
372 328 Automobile 328 346 356 373 372
113 109 Homeowners' 109 112 113 114 113
8 8 Other 8 8 9 8 8
- ------- ------ ------ ------ ------ ------ ------
493 445 Total earned premium 445 466 478 495 493
======= ====== ====== ====== ====== ====== ======
Loss ratio(1)(2):
75.8% 56.9% Automobile 56.9% 74.1% 69.1% 81.0% 75.8%
72.1% 79.5% Homeowners' 79.5% 60.2% 97.3% 69.0% 72.1%
74.8% 61.8% Overall 61.8% 70.5% 75.6% 74.5% 74.8%
Expense ratio(1) (3):
28.5% 32.0% Automobile 32.0% 31.2% 30.3% 29.5% 28.5%
35.3% 43.3% Homeowners' 43.3% 34.8% 34.3% 35.9% 35.3%
29.8% 34.3% Overall 34.3% 32.0% 31.3% 31.0% 29.8%
Combined ratio(4):
104.3% 88.9% Automobile 88.9% 105.3% 99.4% 110.5% 104.3%
107.4% 122.8% Homeowners' 122.8% 95.0% 131.6% 104.9% 107.4%
104.6% 96.1% Overall 96.1% 102.5% 106.9% 105.5% 104.6%
4.2 1.0 Current accident year catastrophe losses (5) 1.0 24.0 12.8 4.2 4.2
0.9% 0.2% Effect of current accident year catastrophic losses on combined ratio 0.2% 5.1% 2.7% 0.9% 0.9%
Accident year combined ratio (6) 108.9% 106.0% 106.9% 107.0% 105.0%
------ ------
(1) Based on statutory data.
(2) Represents ratio of incurred losses and loss adjustment expenses to net
earned premium.
(3) Represents ratio of operating expenses to net written premium.
(4) Represents the sum of loss ratio and expense ratio above.
(5) Represents losses and loss adjustment expenses attributable to catastrophes
that are included in the combined ratio. We classify catastrophes as those
events that are declared catastrophes by Property Claims Services, which is
an industry organization that declares and tracks all property-related
catastrophes causing insured property damage in the United States.
(6) Accident year combined ratios for annual periods reflect the combined
ratios for accidents that occur in the indicated calendar year, restated to
reflect subsequent changes in loss estimates for those claims based on
cumulative loss data through the most recent balance sheet date. Accident
year combined ratios for interim periods reflect the combined ratios for
policies written in those periods, based on cumulative loss data through
the respective balance sheet date of the indicated year. These ratios
reflect any recoveries from stop-loss reinsurance contracts during the
indicated periods.
Page 17
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
COMBINED STATEMENTS OF OPERATIONS - EMPLOYEE BENEFITS DIVISION
(in millions)
Year-to-date % 2001 2002
- --------------- ---------------------------- ------
2002 2001 Change 1Q 2Q 3Q 4Q 1Q
- ------- ------ -------- ----- ------ ------ ------
Revenues (1):
702 610 15% Premiums 610 622 650 650 702
71 53 34% Policy charges and fee income 53 55 68 68 71
645 705 -9% Net investment income 705 688 671 664 645
Commissions, investment management fees, and other
106 93 14% income 93 106 110 99 106
- ------- ------ -------- ----- ------ ------ ------
1,524 1,461 4% Total revenues 1,461 1,471 1,499 1,481 1,524
- ------- ------ -------- ----- ------ ------ ------
Benefits and Expenses (1):
871 811 7% Insurance and annuity benefits 811 835 919 838 871
297 279 6% Interest credited to policyholders' account balances 279 304 307 311 297
1 2 -49% Interest expense 2 4 3 2 1
(6) (6) 0% Deferral of acquisition costs (6) (7) (7) (10) (6)
- 3 -100% Amortization of acquisition costs 3 4 2 5 -
295 268 10% General and administrative expenses 268 279 272 311 295
- ------- ------ -------- ----- ------ ------ ------
1,458 1,357 7% Total benefits and expenses 1,357 1,419 1,496 1,457 1,458
- ------- ------ -------- ----- ------ ------ ------
66 104 -37% Adjusted operating income before income taxes 104 52 3 24 66
======= ====== ======== ===== ====== ====== ======
(1) Revenues exclude realized investment gains, net of losses. Benefits and
expenses exclude charges related to realized investment gains, net of
losses.
Page 18
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
COMBINING STATEMENTS OF OPERATIONS - EMPLOYEE BENEFITS DIVISION
(in millions)
Quarter Ended March 31, 2002
---------------------------------
Total
Employee Other
Benefits Group Employee
Division Insurance Benefits
---------- ----------- ----------
Revenues (1):
Premiums 702 694 8
Policy charges and fee income 71 52 19
Net investment income 645 136 509
Commissions, investment management fees, and other income 106 8 98
---------- ----------- ----------
Total revenues 1,524 890 634
---------- ----------- ----------
Benefits and Expenses (1):
Insurance and annuity benefits 871 674 197
Interest credited to policyholders' account balances 297 54 243
Interest expense 1 - 1
Deferral of acquisition costs (6) (2) (4)
Amortization of acquisition costs - (3) 3
General and administrative expenses 295 130 165
---------- ----------- ----------
Total benefits and expenses 1,458 853 605
---------- ----------- ----------
Adjusted operating income before income taxes 66 37 29
========== =========== ==========
Quarter Ended March 31, 2001
---------------------------------
Total
Employee Other
Benefits Group Employee
Division Insurance Benefits
---------- ----------- ----------
Revenues (1):
Premiums 610 592 18
Policy charges and fee income 53 34 19
Net investment income 705 136 569
Commissions, investment management fees, and other income 93 6 87
---------- ----------- ----------
Total revenues 1,461 768 693
---------- ----------- ----------
Benefits and Expenses (1):
Insurance and annuity benefits 811 562 249
Interest credited to policyholders' account balances 279 53 226
Interest expense 2 (3) 5
Deferral of acquisition costs (6) (3) (3)
Amortization of acquisition costs 3 - 3
General and administrative expenses 268 112 156
---------- ----------- ----------
Total benefits and expenses 1,357 721 636
---------- ----------- ----------
Adjusted operating income before income taxes 104 47 57
========== =========== ==========
(1) Revenues exclude realized investment gains, net of losses. Benefits and
expenses exclude charges related to realized investment gains, net of
losses.
Page 19
Prudential [LOGO] Financial
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002
EMPLOYEE BENEFITS DIVISION - SALES RESULTS AND ASSETS UNDER MANAGEMENT
(in millions)
Year-to-date 2001 2002
----------------- ---------------------------------- -------
2002 2001 1Q 2Q 3Q 4Q 1Q
------- ------- ------- ------- ------- ------- -------
GROUP INSURANCE NEW ANNUALIZED PREMIUMS: (1)
162 288 Group life 288 33 64 50 162
53 69 Group disability (2) 69 20 33 17 53
------- ------- ------- ------- ------- ------- -------
215 357 Total 357 53 97 67 215
======= ======= ======= ======= ======= ======= =======
OTHER EMPLOYEE BENEFITS - SALES AND
ASSETS UNDER MANAGEMENT:
Defined Contribution:
24,640 26,046 Beginning total account value 26,046 24,473 25,319 22,710 24,640
1,010 1,255 Sales 1,255 923 729 782 1,010
(817) (1,035) Withdrawals (1,035) (1,021) (728) (638) (817)
504 (1,793) Change in market value and interest credited (3) (1,793) 944 (2,610) 1,786 504
------- ------- ------- ------- ------- ------- -------
25,337 24,473 Ending total account value 24,473 25,319 22,710 24,640 25,337
======= ======= ======= ======= ======= ======= =======
193 220 Net sales 220 (98) 1 144 193
======= ======= ======= ======= ======= ======= =======
Asset management of ending total account value:
Proprietary 17,941 18,287 16,501 17,665 18,107
Non-proprietary 6,532 7,032 6,209 6,975 7,230
------- ------- ------- ------- -------
Total 24,473 25,319 22,710 24,640 25,337
======= ======= ======= ======= =======
Guaranteed Products:
39,825 41,577 Beginning total account value 41,577 40,461 39,920 39,008 39,825
259 400 Sales 400 1,181 285 433 259
(864) (1,569) Withdrawals and benefits (1,569) (877) (1,123) (803) (864)
355 326 Change in market value and interest income 326 646 388 838 355
(175) (273) Other (4) (273) (1,491) (462) 349 (175)
------- ------- ------- ------- ------- ------- -------
39,400 40,461 Ending total account value 40,461 39,920 39,008 39,825 39,400
======= ======= ======= ======= ======= ======= =======
(605) (1,169) Net sales (1,169) 304 (838) (370) (605)
======= ======= ======= ======= ======= ======= =======
Product composition of ending total account value:
Spread-lending products 19,069 19,020 18,841 18,887 18,915
Fee-based products 21,392 20,900 20,167 20,938 20,485
------- ------- ------- ------- -------
Total 40,461 39,920 39,008 39,825 39,400
======= ======= ======= ======= =======
(1) Sales results for periods prior to 2002 give effect to quarterly allocation
consistent with our current reporting practices.
(2) Includes long-term care products.
(3) The quarter ended March 31, 2002 includes increases to account values of
$101 million due to the addition to customer accounts of Common Stock
received as demutualization consideration and $448 million added to
customer accounts from inclusion of products now included in this segment
The quarter ended December 31, 2001 includes an increase in account values
of $433 million as a result of policyholder credits issued in connection
with the Company's demutualization.
(4) Represents changes in asset balances for externally managed accounts. In
addition, the quarter ended December 31, 2001 includes an increase in
account values of $181 million representing cumulative conversions of
client account balances to products currently included in this division as
well as $2 million of policyholder credits issued in connection with the
Company's demutualization.
Page 20
Prudential [LOGO] Financial
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002
EMPLOYEE BENEFITS DIVISION - SUPPLEMENTARY INFORMATION
(dollar amounts in millions)
2001 2002
------------------------------ ------
1Q 2Q 3Q 4Q 1Q
------ ------ ------ ------ ------
Future Policy Benefits (1):
Group life 1,414 1,452 1,623 1,664 1,617
Group disability (2) 96 101 98 103 137
Other employee benefits 12,595 12,446 12,498 12,317 12,224
------ ------ ------ ------ ------
Total 14,105 13,999 14,219 14,084 13,978
====== ====== ====== ====== ======
Policyholder Account Balances (1):
Group life 3,424 3,664 3,764 3,805 3,928
Group disability (2) 45 41 57 61 58
Other employee benefits 15,288 15,305 15,208 15,372 15,552
------ ------ ------ ------ ------
Total 18,757 19,010 19,029 19,238 19,538
====== ====== ====== ====== ======
Separate Account Liabilities (1):
Group life 6,897 7,156 7,246 7,634 8,097
Group disability (2) - - - - -
Other employee benefits 23,591 22,808 22,189 21,538 22,366
------ ------ ------ ------ ------
Total separate account 30,488 29,964 29,435 29,172 30,463
====== ====== ====== ====== ======
Group Life Insurance:
Gross premiums, policy charges and fee income(3) 565 596 637 641 667
Earned premiums, policy charges and fee income 501 529 579 551 603
Benefits ratio 90.0% 94.7% 96.6% 88.6% 91.8%
Administrative operating expense ratio 10.4% 9.7% 8.8% 11.2% 10.0%
Persistency ratio 98.8% 98.7% 97.9% 97.4% 97.2%
Group Disability Insurance (2):
Gross premiums, policy charges and fee income(3) 129 131 141 142 150
Earned premiums, policy charges and fee income 125 125 129 137 143
Benefits ratio 88.5% 97.8% 99.2% 94.9% 84.6%
Administrative operating expense ratio 23.3% 25.2% 22.0% 25.4% 22.7%
Persistency ratio 92.4% 91.3% 89.4% 88.8% 94.7%
(1) As of end of period.
(2) Group disability amounts include long-term care products.
(3) Before returns of premiums to participating policyholders for favorable
claims experience.
Page 21
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
COMBINED STATEMENTS OF OPERATIONS - INTERNATIONAL DIVISION
(in millions)
Year-to-date % 2001 2002
- ----------------- ------------------------------------------ --------
2002 2001 Change 1Q 2Q 3Q 4Q 1Q
- -------- -------- -------- -------- -------- -------- --------
Revenues (1):
------------ ------------
1,016 454 124% Premiums 454 817 1,020 1,046 1,016
57 24 137% Policy charges and fee income 24 111 102 70 57
164 50 228% Net investment income 50 129 170 162 164
Commissions, investment management fees,
149 144 3% and other income 144 134 118 143 149
- -------- -------- -------- -------- -------- -------- --------
1,386 672 106% Total revenues 672 1,191 1,410 1,421 1,386
- -------- -------- -------- -------- -------- -------- --------
Benefits and Expenses (1):
783 337 132% Insurance and annuity benefits 337 702 794 841 783
Interest credited to policyholders' account
24 1 2305% balances 1 18 28 25 24
- 2 -100% Interest expense 2 2 2 (2) -
(151) (114) -32% Deferral of acquisition costs (114) (143) (133) (149) (151)
65 38 71% Amortization of acquisition costs 38 35 44 47 65
114 127 -10% Securities operations non-interest expenses 127 131 125 147 114
351 183 92% General and administrative expenses 183 326 370 387 351
- -------- -------- -------- -------- -------- -------- --------
1,186 574 107% Total benefits and expenses 574 1,071 1,230 1,296 1,186
- -------- -------- -------- -------- -------- -------- --------
200 98 104% Adjusted operating income before income taxes 98 120 180 125 200
======== ======== ======== ======== ======== ======== ========
------------ ------------
(1) Revenues exclude realized investment gains, net of losses. Benefits and
expenses exclude charges related to realized investment gains, net of
losses.
Page 22
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
COMBINING STATEMENTS OF OPERATIONS - INTERNATIONAL DIVISION
(in millions)
Quarter Ended March 31, 2002
-----------------------------------------------------------------------
International
Total Insurance International International
International excl.Gibraltar Insurance- Securities and
Division Life Gibraltar Life(2) Investments
-------------- ---------------- ----------------- ----------------
Revenues (1):
Premiums 1,016 486 530 -
Policy charges and fee income 57 29 28 -
Net investment income 164 41 109 14
Commissions, investment management fees, and
other income 149 10 16 123
-------------- ---------------- ----------------- ----------------
Total revenues 1,386 566 683 137
-------------- ---------------- ----------------- ----------------
Benefits and Expenses (1):
Insurance and annuity benefits 783 356 427 -
Interest credited to policyholders' account balances 24 1 23 -
Interest expense - 1 (1) -
Deferral of acquisition costs (151) (113) (38) -
Amortization of acquisition costs 65 52 13 -
Securities operations non-interest expenses 114 - - 114
General and administrative expenses 351 169 155 27
-------------- ---------------- ----------------- ----------------
Total benefits and expenses 1,186 466 579 141
-------------- ---------------- ----------------- ----------------
Adjusted operating income before income taxes 200 100 104 (4)
============== ================ ================= ================
Quarter Ended March 31, 2001
-----------------------------------------------------------------------
International
Total Insurance International International
International excl.Gibraltar Insurance- Securities and
Division Life Gibraltar Life(2) Investments
-------------- ---------------- ----------------- ----------------
Revenues (1):
Premiums 454 454 - -
Policy charges and fee income 24 24 - -
Net investment income 50 34 - 16
Commissions, investment management fees, and
other income 144 9 - 135
-------------- ---------------- ----------------- ----------------
Total revenues 672 521 - 151
-------------- ---------------- ----------------- ----------------
Benefits and Expenses (1):
Insurance and annuity benefits 337 337 - -
Interest credited to policyholders' account balances 1 1 - -
Interest expense 2 2 - -
Deferral of acquisition costs (114) (114) - -
Amortization of acquisition costs 38 38 - -
Securities operations non-interest expenses 127 - - 127
General and administrative expenses 183 162 - 21
-------------- ---------------- ----------------- ----------------
Total benefits and expenses 574 426 - 148
-------------- ---------------- ----------------- ----------------
Adjusted operating income before income taxes 98 95 - 3
============== ================ ================= ================
(1) Revenues exclude realized investment gains, net of losses. Benefits and
expenses exclude charges related to realized investment gains, net of
losses.
(2) Results of our International Division for 2002 include the results of
Gibraltar Life, which we acquired in April 2001.
Page 23
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
INTERNATIONAL DIVISION - SALES RESULTS AND SUPPLEMENTARY INFORMATION
(dollar amounts in millions unless otherwise noted)
Year-to-date 2001 2002
- ---------------- ---------------------------------- -------
2002 2001 1Q 2Q 3Q 4Q 1Q
- -------- ------- ------- ------ ------ ------ -------
INTERNATIONAL INSURANCE OPERATING DATA:
Actual exchange rate basis (1):
Net premiums, policy charges and fee income:
395 394 Japan, excluding Gibraltar Life 394 361 376 395 395
558 - Gibraltar Life (2) - 467 639 604 558
120 84 All other countries 84 100 107 117 120
- ------- ------- ------- ------- ------- ------- -------
1,073 478 Total 478 928 1,122 1,116 1,073
======= ======= ======= ======= ======= ======= =======
Annualized new business premiums:
77 114 Japan, excluding Gibraltar Life 114 92 77 87 77
49 - Gibraltar Life (2) - 10 44 56 49
53 48 All other countries 48 60 51 53 53
- ------- ------- ------- ------- ------- ------- -------
179 162 Total 162 162 172 196 179
======= ======= ======= ======= ======= ======= =======
Constant exchange rate basis (3):
Net premiums, policy charges and fee income:
431 384 Japan, excluding Gibraltar Life 384 365 376 401 431
603 - Gibraltar Life (2) - 472 645 602 603
124 81 All other countries 81 102 106 119 124
- ------- ------- ------- ------- ------- ------- -------
1,158 465 Total 465 939 1,127 1,122 1,158
======= ======= ======= ======= ======= ======= =======
Annualized new business premiums:
84 111 Japan, excluding Gibraltar Life 111 93 77 89 84
53 - Gibraltar Life (2) - 10 44 56 53
55 47 All other countries 47 61 51 53 55
- ------- ------- ------- ------- ------- ------- -------
192 158 Total 158 164 172 198 192
======= ======= ======= ======= ======= ======= =======
Face amount of individual policies in force at end of period
(in billions):
Japan, excluding Gibraltar Life 117 120 124 127 130
Gibraltar Life (2) - 265 244 232 224
All other countries 27 32 34 38 41
------- ------- ------- ------- -------
Total 144 417 402 397 395
======= ======= ======= ======= =======
Number of individual policies in force at end of period (in
thousands):
Japan, excluding Gibraltar Life 858 892 918 946 973
Gibraltar Life (2) - 5,322 5,047 4,911 4,787
All other countries 410 452 492 536 571
------- ------- ------- ------- -------
Total 1,268 6,666 6,457 6,393 6,331
======= ======= ======= ======= =======
(1) Translated based on applicable average exchange rate for the period shown.
(2) Results of Gibraltar Life are included from April 2, 2001, the date of
reorganization, through February 28, 2002.
(3) Translated based on average exchange rates for the year ended December 31,
2001.
Page 24
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
INTERNATIONAL DIVISION - SALES RESULTS AND SUPPLEMENTARY INFORMATION
(dollar amounts in millions unless otherwise noted)
2001 2002
----------------------------------------------------------- -------------
1Q 2Q 3Q 4Q 1Q
------------- ------------- ------------ ------------ -------------
International insurance policy persistency (1):
13 months 93.6% 93.1% 93.1% 93.2% 93.4%
25 months 88.2% 88.9% 88.9% 88.1% 87.8%
Number of Life Planners at end of period (2):
Japan 1,802 1,853 1,944 1,992 1,994
All other countries 1,632 1,837 2,055 2,112 2,104
------------- ------------- ------------ ------------ -------------
Total 3,434 3,690 3,999 4,104 4,098
============= ============= ============ ============ =============
Number of International Retail Financial Advisors
at end of period 643 632 646 633 632
Assets managed or administered for customers
outside of the United States at end of period 32,802 66,388 62,642 64,280 63,595
(1) Excluding Gibraltar Life.
(2) Excluding Gibraltar Life Advisors.
Page 25
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
COMBINED STATEMENTS OF OPERATIONS - ASSET MANAGEMENT DIVISION
(in millions)
Year-to-date % 2001 2002
- ----------------------- -------------------------------------- --------
2002 2001 Change 1Q 2Q 3Q 4Q 1Q
- ----------- ---------- -------- -------- -------- -------- --------
Revenues (1):
16 19 -16% Net investment income 19 24 19 28 16
Commissions, investment management fees,
275 310 -11% and other income 310 286 273 313 275
- ----------- ---------- -------- -------- -------- -------- --------
291 329 -12% Total revenues 329 310 292 341 291
- ----------- ---------- -------- -------- -------- -------- --------
Expenses:
2 4 -50% Interest expense 4 4 3 4 2
63 73 -14% Securities operations non-interest expenses 73 85 70 64 63
163 174 -6% General and administrative expenses 174 189 174 209 163
- ----------- ---------- -------- -------- -------- -------- --------
228 251 -9% Total expenses 251 278 247 277 228
- ----------- ---------- -------- -------- -------- -------- --------
63 78 -19% Adjusted operating income before income taxes 78 32 45 64 63
=========== ========== ======== ======== ======== ======== ========
Analysis of revenues by source:
Investment Management and Advisory Services
segment:
49 53 -8% Retail customers 53 54 52 51 49
84 97 -13% Institutional customers 97 104 93 89 84
65 55 18% General account 55 51 59 77 65
- ----------- ---------- -------- -------- -------- -------- --------
198 205 -3% Subtotal 205 209 204 217 198
93 124 -25% Other Asset Management segment revenues 124 101 88 124 93
- ----------- ---------- -------- -------- -------- -------- --------
291 329 -12% Total revenues 329 310 292 341 291
=========== ========== ======== ======== ======== ======== ========
Analysis of commissions, investment management
fees and other revenues by type:
Investment Management and Advisory Services
segment:
176 183 -4% Asset-based fees 183 188 186 184 176
16 14 14% Transaction-based and other revenues 14 10 12 16 16
- ----------- ---------- -------- -------- -------- -------- --------
192 197 -3% Subtotal 197 198 198 200 192
83 113 -27% Other Asset Management 113 88 75 113 83
- ----------- ---------- -------- -------- -------- -------- --------
275 310 -11% Total 310 286 273 313 275
=========== ========== ======== ======== ======== ======== ========
(1) Revenues exclude realized investment gains, net of losses.
Page 26
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
COMBINING STATEMENTS OF OPERATIONS - ASSET MANAGEMENT DIVISION
(in millions)
Quarter Ended March 31, 2002
-----------------------------------------------
Investment
Management
Total Asset & Advisory Other Asset
Management Services Management
-------------- -------------- --------------
Revenues (1):
Net investment income 16 6 10
Commissions, investment management fees, and other income 275 192 83
-------------- -------------- --------------
Total revenues 291 198 93
-------------- -------------- --------------
Expenses:
Interest expense 2 2 -
Securities operations non-interest expenses 63 - 63
General and administrative expenses 163 157 6
-------------- -------------- --------------
Total expenses 228 159 69
-------------- -------------- --------------
Adjusted operating income before income taxes 63 39 24
============== ============== ==============
Quarter Ended March 31, 2001
-----------------------------------------------
Investment
Management
Total Asset & Advisory Other Asset
Management Services Management
-------------- -------------- --------------
Revenues (1):
Net investment income 19 8 11
Commissions, investment management fees, and other income 310 197 113
-------------- -------------- --------------
Total revenues 329 205 124
-------------- -------------- --------------
Expenses:
Interest expense 4 4 -
Securities operations non-interest expenses 73 - 73
General and administrative expenses 174 167 7
-------------- -------------- --------------
Total expenses 251 171 80
-------------- -------------- --------------
Adjusted operating income before income taxes 78 34 44
============== ============== ==============
(1) Revenues exclude realized investment gains, net of losses.
Page 27
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002
PRUDENTIAL [LOGO] FINANCIAL
ASSETS UNDER MANAGEMENT - INVESTMENT MANAGEMENT AND ADVISORY SERVICES SEGMENT
(in billions)
March 31, 2002
----------------------------------
Fixed Real
Equity Income Estate Total
------ ------ ------ -----
Retail customers (1) 44.5 47.7 0.1 92.3
Institutional customers (1) 33.0 43.3 9.9 86.2
General account (1) 2.3 108.0 1.4 111.7
---- ----- ---- -----
Total 79.8 199.0 11.4 290.2
==== ===== ==== =====
March 31, 2001
----------------------------------
Fixed Real
Equity Income Estate Total
------ ------ ------ -----
Retail customers 45.4 51.8 - 97.2
Institutional customers 40.8 38.7 10.0 89.5
General account 2.6 106.9 1.5 111.0
---- ----- ---- -----
Total 88.8 197.4 11.5 297.7
==== ===== ==== =====
Year-to-date 2001 2002
------------------ -----------------------------------
2002 2001 1Q 2Q 3Q 4Q 1Q
---- ---- ------ ----- ----- ----- ------
Institutional Assets Under Management: (1)
Assets gathered by Asset Management division sales force: (2)
67.9 74.5 Beginning assets under management 74.5 70.5 70.4 65.3 67.9
3.0 3.9 Additions to managed portfolio 3.9 3.2 2.4 4.2 3.0
(8.4) (3.0) Withdrawals (3.0) (5.0) (4.2) (5.6) (8.4)
0.1 (4.9) Change in market value (4.9) 1.7 (3.3) 3.9 0.1
4.0 - Net money market flows - - - 0.1 4.0
(4.0) - Other (2) - - - - (4.0)
----- ----- ----- ----- ----- ----- -----
62.6 70.5 Ending assets under management 70.5 70.4 65.3 67.9 62.6
23.6 19.0 Other institutional assets under management (2) 19.0 20.3 19.6 21.2 23.6
----- ----- ----- ----- ----- ----- -----
86.2 89.5 Total assets managed for institutional customers at end of period 89.5 90.7 84.9 89.1 86.2
===== ===== ===== ===== ===== ===== =====
(1) Reflects reclassification of amounts by client category as of January 1,
2002, based on internal management criteria, which reduced the amount attributed
to retail customers by $3.3 billion and increased the amounts attributed to
institutional customers and the general account by $2.8 billion and $0.5
billion, respectively.
(2) Reflects reclassification of amounts by asset gatherer category as of
January 1, 2002, based on internal management criteria, which reduced the amount
attributed to assets gathered by Asset Management division sales force and
increased the amount attributed to other institutional assets under management
by $4.0 billion.
Page 28
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
INVESTMENT PORTFOLIO COMPOSITION
(in millions)
March 31, 2002 December 31, 2001
--------------------------------------------- -----------------------------------------
Financial Services Financial Services
Closed Businesses Closed Businesses
Consolidated Block ------------------- Consolidated Block -------------------
Portfolio(1) Business Amount % of Total Portfolio(1) Business Amount % of Total
------------ -------- -------- ---------- ------------ -------- -------- ----------
Fixed maturities:
Public available for sale, at fair value 80,950 27,304 53,646 56.4% 77,807 26,634 51,173 54.5%
Public held to maturity, at amortized cost 306 - 306 0.3% 318 - 318 0.3%
Private available for sale, at fair value 31,389 14,408 16,981 17.9% 32,040 14,428 17,612 18.8%
Private held to maturity, at amortized cost 46 - 46 0.0% 53 - 53 0.1%
Trading account assets, at fair value 139 - 139 0.1% 112 - 112 0.1%
Equity securities, at fair value 2,930 1,261 1,669 1.8% 2,259 584 1,675 1.8%
Commercial loans 18,636 6,183 12,453 13.1% 19,176 6,106 13,070 13.9%
Other long-term investments (2) 5,100 1,181 3,919 4.1% 5,095 1,082 4,013 4.3%
Policy loans, at outstanding balance 8,588 5,734 2,854 3.0% 8,570 5,758 2,812 3.0%
Short term investments, at amortized cost 5,158 2,063 3,095 3.3% 4,854 1,882 2,972 3.2%
---------- ------- ------- -------- ---------- -------- --------- --------
Subtotal 153,242 58,134 95,108 100.0% 150,284 56,474 93,810 100.0%
======== ========
Invested assets of other entities and
operations (3) 19,884 - 19,884 15,550 - 15,550
---------- -------- -------- ----------- -------- ---------
Total invested assets 173,126 58,134 114,992 165,834 56,474 109,360
========== ======== ======== ========== ======== =========
Fixed Maturities by Credit Quality(1):
March 31, 2002 December 31, 2001
------------------------------------- ----------------------------------
Financial Services Businesses Financial Services Businesses
------------------------------------- ----------------------------------
Amortized Estimated Amortized Estimated
Cost % of Total Fair Value Cost % of Total Fair Value
--------- ---------- ---------- --------- ---------- ----------
Public Fixed Maturities:
NAIC Rating Agency
Rating Equivalent
1 Aaa, Aa, A 40,040 74.7% 40,335 36,706 72.6% 37,502
2 Baa 11,166 20.8% 11,181 11,286 22.3% 11,484
3 Ba 1,499 2.8% 1,516 1,501 3.0% 1,518
4 B 643 1.2% 663 683 1.4% 646
5 C and lower 58 0.1% 59 112 0.2% 116
6 In or near default 212 0.4% 213 246 0.5% 241
------- ------- ------- ------- ------- --------
Total 53,618 100.0% 53,967 50,534 100.0% 51,507
======= ======= ======= ======= ======= ========
Private Fixed Maturities:
NAIC Rating Agency
Rating Equivalent
1 Aaa, Aa, A 5,433 32.9% 5,749 5,982 35.1% 6,337
2 Baa 7,966 48.2% 8,128 8,148 47.8% 8,399
3 Ba 1,669 10.1% 1,706 1,487 8.7% 1,529
4 B 798 4.8% 771 917 5.4% 883
5 C and lower 439 2.7% 456 390 2.3% 401
6 In or near default 210 1.3% 220 112 0.7% 121
------- ------- ------- ------- ------- --------
Total 16,515 100.0% 17,030 17,036 100.0% 17,670
======= ======= ======= ======= ======= ========
(1) Excludes investments of securities brokerage, securities trading, banking
operations, assets of our asset management operations managed for third
parties, and separate account assets for which the customer assumes risks
of ownership.
(2) Other long-term investments consist of real estate and non-real estate
related investments in joint ventures and partnerships, investment real
estate held through direct ownership, our interest in separate account
investments and other miscellaneous investments.
(3) Includes invested assets of securities brokerage, securities trading, and
banking operations. Excludes assets of our asset management operations
managed for third parties, and separate account assets for which the
customer assumes risks of ownership.
Page 29
Prudential Financial, Inc. Prudential [LOGO] Financial
Quarterly Financial Supplement
First Quarter 2002
FINANCIAL SERVICES BUSINESSES INVESTMENT PORTFOLIO COMPOSITION
(in millions)
March 31, 2002 December 31, 2001
-------------------- -----------------------
Amount % of Total Amount % of Total
-------- ---------- -------- ----------
Japanese Insurance Operations:
Fixed maturities:
Public available for sale, at fair value 22,447 76.2% 20,883 73.8%
Public held to maturity, at amortized cost 306 1.0% 318 1.1%
Private available for sale, at fair value 189 0.6% 98 0.4%
Private held to maturity, at amortized cost 46 0.2% 53 0.2%
Trading account assets, at fair value 69 0.2% 74 0.3%
Equity securities, at fair value 1,013 3.5% 1,032 3.6%
Commercial loans 3,682 12.5% 4,255 15.0%
Other long-term investments (2) 944 3.2% 1,001 3.5%
Policy loans, at outstanding balance 584 2.0% 605 2.1%
Short term investments, at amortized cost 162 0.6% 2 0.0%
-------- ---------- -------- ----------
Total 29,442 100.0% 28,321 100.0%
======== ========== ======== ==========
March 31, 2002 December 31, 2001
-------------------- -----------------------
Amount % of Total Amount % of Total
-------- ---------- -------- ----------
Financial Services Businesses excluding Japanese Insurance Operations (1):
Fixed maturities:
Public available for sale, at fair value 31,199 47.5% 30,290 46.2%
Public held to maturity, at amortized cost - 0.0% - 0.0%
Private available for sale, at fair value 16,792 25.6% 17,514 26.7%
Private held to maturity, at amortized cost - 0.0% - 0.0%
Trading account assets, at fair value 70 0.1% 38 0.1%
Equity securities, at fair value 656 1.0% 643 1.0%
Commercial loans 8,771 13.3% 8,815 13.5%
Other long-term investments (2) 2,975 4.5% 3,012 4.6%
Policy loans, at outstanding balance 2,270 3.5% 2,207 3.4%
Short term investments, at amortized cost 2,933 4.5% 2,970 4.5%
-------- ---------- -------- ----------
Total 65,666 100.0% 65,489 100.0%
======== ========== ======== ==========
(1) Excludes investments of securities brokerage, securities trading, banking
operations, assets of our asset management operations managed for third
parties, and separate account assets for which the customer assumes risks
of ownership.
(2) Other long-term investments consist of real estate and non-real estate
related investments in joint ventures and partnerships, investment real
estate held through direct ownership, our interest in separate account
investments and other miscellaneous investments.
Page 30
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002
Prudential [LOGO] Financial
FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS
(in millions)
Quarter Ended March 31
--------------------------------------------------------------------------------
2002 2001
--------------------------------------- ---------------------------------------
Investment Income Realized Investment Income Realized
-------------------------- Gains / -------------------------- Gains /
Yield(3) Amount (Losses) Yield(3) Amount (Losses)
------------ ---------- ------------ ------------ ---------- ------------
Financial Services Businesses (1):
Fixed maturities 5.27% 901 (108) 7.55% 1,019 112
Equity securities 1.48% 6 (62) 0.99% 3 46
Commercial loans 6.67% 216 1 8.10% 155 1
Policy loans 5.52% 39 - 6.48% 39 -
Short-term investments and cash equivalents 1.74% 58 17 4.21% 56 5
Other investments 4.37% 45 52 8.12% 53 83
--------- --------- --------- --------- --------- ---------
Gross investment income before investment
expenses 4.90% 1,265 (100) 7.25% 1,325 247
Investment expenses -0.27% (68) - -0.64% (113) -
--------- --------- --------- --------- --------- ---------
Subtotal 4.63% 1,197 (100) 6.61% 1,212 247
========= =========
Investment results of other entities and operations (2) 64 (1) 92 -
Less amount relating to divested businesses (2) - (7) -
--------- --------- --------- ---------
Total 1,259 (101) 1,297 247
========= ========= ========= =========
(1) Excludes investments of securities brokerage, securities trading, banking
operations, assets of our asset management operations managed for third
parties, and separate account assets for which the customer assumes risks
of ownership.
(2) Investment income of securities brokerage, securities trading, and banking
operations.
(3) Yields are annualized and based on quarterly average carrying values except
for fixed maturities, equity securities and commercial loans. Yields for
fixed maturities are based on amortized cost. Yields for equity securities
are based on cost. Yields for commercial loans are calculated gross of any
allowance for losses on commercial loans. Results for 2002 period reflect
investments of Gibraltar Life, which was acquired in April 2001.
Page 31
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS - JAPANESE INSURANCE OPERATIONS
(in millions)
Quarter Ended March 31
--------------------------------------------------------------------------
2002 2001
-------------------------------------- ----------------------------------
Investment Income Realized Investment Income Realized
----------------------- Gains / ---------------------- Gains /
Yield(1) Amount (Losses) Yield(1) Amount (Losses)
---------- ---------- ---------- ---------- ---------- ----------
Japanese Insurance Operations:
Fixed maturities 1.83% 98 20 2.82% 22 22
Equity securities 1.03% 3 (56) 1.31% 1 (1)
Commercial loans 4.30% 44 2 0.00% -- --
Policy loans 2.57% 4 - 5.41% 3 --
Short-term investments and cash equivalents 0.55% 4 18 0.17% -- --
Other investments -0.85% (3) (75) 4.11% 1 (12)
---------- ---------- ---------- ---------- ---------- ----------
Gross investment income before investment expenses 1.95% 150 (91) 2.82% 27 9
Investment expenses -0.11% (8) -- -0.09% (1) --
---------- ---------- ---------- ---------- ---------- ----------
Total 1.84% 142 (91) 2.73% 26 9
========== ========== ========== ========== ========== ==========
(1) Yields are annualized and based on quarterly average carrying values except
for fixed maturities, equity securities and commercial loans. Yields for
fixed maturities are based on amortized cost. Yields for equity securities
are based on cost. Yields for commercial loans are calculated gross of any
allowance for losses on commercial loans. Results for 2002 period reflect
investments of Gibraltar Life, which was acquired in April 2001.
Page 32
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS - EXCLUDING JAPANESE
INSURANCE OPERATIONS
(in millions)
Quarter Ended March 31
---------------------------------------------------------------------
2002 2001
---------------------------------- ---------------------------------
Investment Income Realized Investment Income Realized
---------------------- Gains / ---------------------- Gains /
Yield(2) Amount (Losses) Yield(2) Amount (Losses)
----------- --------- ---------- ----------- --------- ----------
Financial Services Businesses excluding Japanese Insurance
Operations (1):
Fixed maturities 6.91% 803 (128) 7.86% 997 90
Equity securities 2.32% 3 (6) 0.93% 2 47
Commercial loans 7.77% 172 (1) 8.10% 155 1
Policy loans 6.31% 35 - 6.57% 36 -
Short-term investments and cash equivalents 2.02% 54 (1) 4.33% 56 5
Other investments 6.17% 48 127 8.34% 52 95
---------- -------- --------- ---------- -------- ---------
Gross investment income before investment expenses 6.19% 1,115 (9) 7.50% 1,298 238
Investment expenses -0.33% (60) - -0.67% (112) -
---------- -------- --------- ---------- -------- ---------
Total 5.86% 1,055 (9) 6.83% 1,186 238
========== ======== ========= ========== ======== =========
(1) Excludes investments of securities brokerage, securities trading, banking
operations, assets of our asset management operations managed for third
parties, and separate account assets for which the customer assumes risks
of ownership.
(2) Yields are annualized and based on quarterly average carrying values except
for fixed maturities, equity securities and commercial loans. Yields for
fixed maturities are based on amortized cost. Yields for equity securities
are based on cost. Yields for commercial loans are calculated gross of any
allowance for losses on commercial loans.
Page 33
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
KEY DEFINITIONS AND FORMULAS
1. Attributed Equity:
- ---------------------
Amount of capital assigned to each of the Company's segments for purposes of
measuring segment adjusted operating income before income taxes, established at
a level which management considers necessary to support the segment's risks.
Attributed equity for the Financial Services Businesses represents all of the
Company's equity that is not included in the Closed Block Business.
2. Adjusted operating income before income taxes:
- -------------------------------------------------
Adjusted operating income is a non-GAAP measure that excludes realized
investment gains, net of losses and related charges; results of divested
businesses; and demutualization costs and expenses. Revenues and benefits and
expenses shown as components of adjusted operating income, and for the
divisions of the Financial Services Businesses, are presented on the same basis
as pre-tax adjusted operating income and exclude these items as well. Adjusted
operating income should not be viewed as a substitute for net income determined
in accordance with GAAP, and our definition of adjusted operating income may
differ from that used by other companies. The excluded items are important to
an understanding of our overall results of operations. However, we believe that
the presentation of adjusted operating income as we measure it for management
purposes enhances the understanding of our results of operations by
highlighting the results from ongoing operations and the underlying
profitability factors of our businesses.
3. After-tax adjusted operating income:
- ---------------------------------------
Adjusted operating income before taxes, as defined above, less the income tax
effect applicable to adjusted operating income before taxes.
4. Assets Under Management:
- ---------------------------
Fair market value or account value of assets which Prudential manages directly
in proprietary products, such as mutual funds and variable annuities, in
separate accounts, wrap-fee products and the general account, and assets
invested in investment options included in the Company's products that are
managed by third party sub-managers (i.e., the non-proprietary investment
options in the Company's products).
5. Book value per share of Common Stock:
- ----------------------------------------
Equity attributed to Financial Services Businesses divided by number of Common
shares outstanding at end of period, on a diluted basis.
6. Borrowings - General Corporate Purposes:
- -------------------------------------------
Amounts used for corporate purposes including uses for cash flow timing
mismatches, and investments in equity and debt securities of subsidiaries
including amounts needed for regulatory capital purposes.
7. Borrowings - Investment Related:
- -----------------------------------
Debt issued to finance specific investment assets or portfolios of investment
assets, including real estate, real estate related assets held in consolidated
joint ventures, and institutional spread lending portfolios.
8. Borrowings - Securities Business Related:
- --------------------------------------------
Debt issued to finance primarily the liquidity of our broker-dealers, and our
capital markets and other securities business related operations.
9. Borrowings - Specified Other Businesses:
- -------------------------------------------
Borrowings associated with consumer banking activities, real estate franchises,
and relocation services.
10. Client Assets:
- ------------------
Fair market value of assets in client accounts of Prudential Securities and
Prudential Bank, and trust client accounts, that are not included in Assets
Under Management. Prudential does not receive a management or administrative
fee on these assets, but may receive a fee for executing trades, custody or
recordkeeping services.
Page 34
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
KEY DEFINITIONS AND FORMULAS
11. Earned Premiums:
- -------------------
The portion of a premium, net of any amount ceded, that represents coverage
already provided or that belongs to the insurer based on the part of the policy
period that has passed.
12. Earnings Per Share of Common Stock:
- --------------------------------------
Prudential Financial, Inc.'s initial public offering and the demutualization of
The Prudential Insurance Company of America became effective on December 18,
2001. For the 2001 periods, earnings per share data are presented on a pro
forma basis that assumes that shares issued in the initial public offering,
including those issued as a result of the subsequent exercise by underwriters
of options to acquire additional shares, and shares distributed as
demutualization consideration to policyholders, were outstanding for all such
periods. Earnings used in per-share calculations for those periods have not
been adjusted to reflect the demutualization or related transactions,
including the establishment of the Closed Block Business. For periods
subsequent to 2001, earnings per share is based on the weighted average number
of diluted shares outstanding. Stock options are included in the number of
diluted shares for the periods they are outstanding based on the treasury
stock method. Net income for the Financial Services Businesses and the Closed
Block Business is determined in accordance with GAAP and includes general and
administrative expenses charged to each of the businesses based on the
Company's methodology for allocation of such expenses. For periods subsequent
to the date of demutualization, the net income of each business is modified
for cash flows between the Financial Services Businesses and the Closed Block
Business related to administrative expenses, which are determined by a policy
servicing fee arrangement that is based upon insurance in force and statutory
cash premiums. To the extent actual administrative expenses vary from these
cash flow amounts, these differences are recorded, on an after-tax basis, as
direct equity adjustments to the equity balances of each business. The direct
equity adjustments are used to adjust net income to determine the earnings
available to the Common Stock and the Class B Stock for earnings per share
purposes.
13. Financial Advisors (Domestic and International):
- ----------------------------------------------------
Financial advisors and securities brokers in our securities operations.
14. Financial Advisor Productivity (Domestic):
- ----------------------------------------------
Private Client Group total non-interest revenues, excluding revenues generated
by the consumer bank and by the segment's retail trading operation divided by
the average number of domestic Financial Advisors for the period. For interim
reporting periods, the productivity measures are annualized.
15. General Account:
- --------------------
Invested assets and policyholder liabilities and reserves for which the Company
bears the investment risk. Excludes assets recognized for statutory purposes
that are specifically allocated to a separate account. General account assets
also include assets of the parent company, Prudential Financial, Inc.
16. Gibraltar Life Advisors:
- ----------------------------
Insurance representatives for Gibraltar Life.
17. Group Life Insurance and Group Disability Insurance Administrative Operating
- --------------------------------------------------------------------------------
Expense Ratios:
---------------
Ratio of administrative operating expenses (excluding commissions) to gross
premiums, policy charges and fee income.
18. Group Life Insurance and Group Disability Insurance Benefits Ratios:
- ------------------------------------------------------------------------
Ratio of policyholder benefits to earned premiums, policy charges and fee
income.
19. Insurance and Annuity Benefits
- -----------------------------------
Total death benefits, annuity benefits, disability benefits, other policy
benefits, losses and loss adjustment expenses paid or incurred, under insurance
and annuity contracts, plus the change in reserves for future policy benefits,
losses and loss adjustment expenses.
20. International Life Planners:
- --------------------------------
Insurance agents in our insurance operations outside the United States,
excluding Gibraltar Life Advisors.
Page 35
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
KEY DEFINITIONS AND FORMULAS
21. New annualized premiums:
- ----------------------------
Premiums from new sales that are expected to be collected over a one year
period. Group insurance new annualized premiums exclude new premiums resulting
from rate changes on existing policies, from additional coverage under our
Servicemembers' Group Life Insurance contract, and from excess premiums on
group universal life insurance that build cash value but do not purchase face
amounts.
22. Non-recourse and Limited-recourse Debt:
- -------------------------------------------
Limited and non-recourse borrowing is where the holder is entitled to collect
only against the assets pledged to the debt as collateral or has only very
limited rights to collect against other assets.
23. Operating return on average equity:
- ---------------------------------------
Adjusted operating income after tax (giving effect to the direct equity
adjustment for earnings per share calculation), annualized for interim periods,
divided by average attributed equity for the Financial Services Businesses
excluding unrealized gains and losses on investments.
24. Policy Persistency - Group Insurance:
- -----------------------------------------
Percentage of the premiums in force at the end of the prior year that are still
in force at the end of the period (excluding Servicemembers' Group Life
Insurance and Prudential Employee Benefit Plan).
25. Policy Persistency - International Insurance:
- -------------------------------------------------
13 month persistency represents the percentage of policies issued that are still
in force at the beginning of their second policy year. 25 month persistency
represents the percentage of policies issued that are still in force at the
beginning of their third policy year.
26. Prudential Agents:
- ----------------------
Insurance agents in our insurance operations in the United States.
27. Prudential Agent productivity:
- ----------------------------------
Commissions on new sales of all products by Prudential Agents under contract for
the entire period, divided by the number of those Prudential Agents. Excludes
commissions on new sales by Prudential Agents hired or departed during the
period. For interim reporting periods, the productivity measures are
annualized.
28. Ratio of corporate debt to total capitalization:
- ----------------------------------------------------
For purposes of this ratio, we measure "debt" as the sum of borrowings for
general corporate purposes and 20% of the stated aggregate liquidation amount
of the Equity Security Units, and we measure "total capitalization" as the sum
of equity excluding unrealized gains and losses on available-for-sale
securities, corporate debt and the stated aggregate liquidation amount of the
Equity Security Units. The ratio is calculated by dividing debt by total
capitalization.
29. Redeemable Capital Securities:
- ----------------------------------
Capital Trust Certificates of Prudential Financial Capital Trust I (element of
Equity Security Units).
30. Separate Accounts:
- ----------------------
Assets of our insurance companies allocated under certain policies and contracts
that are segregated from the general account and other separate accounts. The
policyholder or contractholder predominantly bears the risk of investments held
in a separate account.
31. Wrap-Fee Products:
- ----------------------
Investment products generating asset-based fees in which the funds of the
customer are generally invested in other investment products such as mutual
funds.
Page 36
Prudential Financial, Inc.
Quarterly Financial Supplement
First Quarter 2002 Prudential [LOGO] Financial
RATINGS AND INVESTOR INFORMATION
INSURANCE CLAIMS PAYING RATINGS
as of May 7, 2002
Standard & Fitch
A.M.Best Poor's Moody's Ratings
---------- -------- --------- ---------
The Prudential Insurance Company of America A A+ A1 AA-
PRUCO Life Insurance Company A A+ A1 NR*
PRUCO Life Insurance Company of New Jersey A A+ A1 NR
Prudential Property and Casualty Insurance Company A- A A1 NR
The Prudential Property & Casualty Insurance Company of New Jersey A- NR A1 NR
The Prudential Life Insurance Co., Ltd. (Prudential of Japan) A+ AA- NR NR
Gibraltar Life Insurance Company, Ltd. NR A A2 NR
CREDIT RATINGS:
as of May 7, 2002
Prudential Financial, Inc.:
Short-Term Borrowings AMB-1 A2 P2 F1
Long-Term Senior Debt a- A- A3 A
Redeemable Capital Securities a- A- A3 A
The Prudential Insurance Company of America:
Capital and surplus notes, due 2003-2025 a- A- A3 NR
Prudential Funding,LLC:
Commercial Paper AMB-1 A1 P1 NR
Long-Term Senior Debt a A+ A2 NR
Prudential Securities Group, Inc NR BBB NR NR
* NR indicates not rated.
INVESTOR INFORMATION:
Corporate Offices: Investor Information Hotline:
Prudential Financial, Inc. Dial 877-998-ROCK for additional printed information or
751 Broad Street inquiries.
Newark, New Jersey 07102
Web Site:
www.prudential.com
Publicly Traded Securities:
Common Stock of Prudential Financial, Inc. is traded on the New
York Stock Exchange under the symbol PRU.
Equity Security Units of Prudential Financial, Inc. are traded on the New
York Stock Exchange under the symbol PFA.
Page 37