For Immediate Release Contact: Bob DeFillippo
August 6, 2002 (973) 802-4149
After 4 p.m.
PRUDENTIAL FINANCIAL, INC. ANNOUNCES SECOND QUARTER 2002 RESULTS
Newark, NJ - Prudential Financial, Inc. (NYSE:PRU) today reported
second quarter 2002 after-tax adjusted operating income for its Financial
Services Businesses of $304 million, compared to $260 million for the second
quarter of 2001. Adjusted operating income was 54 cents per share of Common
Stock for the second quarter of 2002, compared to 45 cents per Common share in
the second quarter of 2001 on an equivalent share basis, which assumes that
shares issued in the Company's demutualization on December 18, 2001 and its
initial public offering of Common Stock were outstanding for the entire 2001
period. Second quarter 2002 results include the contribution of Gibraltar Life,
which the Company acquired in April 2001 and included in its results for two
months of last year's second quarter.
For the first half of 2002, after-tax adjusted operating income for the
Financial Services Businesses amounted to $636 million ($1.12 per Common share)
compared to $556 million (95 cents per equivalent Common share) for the first
half of 2001.
"Prudential Financial's diversity of earnings and expense reduction
efforts have helped keep our second quarter results on track," said Chairman and
CEO Arthur F. Ryan. "Our International division, including the contribution of
Gibraltar Life, continues to produce returns consistent with our goals. Expense
reductions, especially in our U.S. Consumer division, are mitigating the impact
of difficult equity market conditions on some of our businesses. Given current
equity market conditions, we believe that Prudential will achieve Common Stock
earnings per share at the low end of our previously expected range of $2.10 to
$2.30 for the year 2002, based on after-tax adjusted operating income. This
assumes that equity market conditions stabilize over the balance of the year,
including essentially no further decline in the S&P 500 index," Ryan said. This
expectation is subject to change if actual equity market conditions differ from
this assumption and as discussed under "Forward Looking Statements" below. Ryan
added, "We are also pursuing additional expense reduction opportunities in our
other divisions and will realign the management structure of some of our
businesses during the third quarter."
After-tax adjusted operating income excludes realized investment gains,
net of losses and related adjustments, and results from divested businesses, as
well as demutualization costs and expenses and the mutual insurance company tax
benefit for the year-ago quarter. Net income of the Financial Services
Businesses, which includes the
foregoing items, amounted to $95 million for the second quarter of 2002 compared
to $250 million for the year-ago quarter. Net income was 19 cents per Common
share for the second quarter of 2002, compared to 43 cents per equivalent Common
share in the year-ago quarter. Net income of the Financial Services Businesses
was $358 million (65 cents per Common share) for the first half of 2002,
compared to net income of $653 million ($1.12 per equivalent Common share) for
the first half of 2001.
In the following business-level discussion, adjusted operating income
refers to pre-tax results.
Financial Services Businesses
Prudential Financial's Common Stock (NYSE:PRU) reflects the performance of its
Financial Services Businesses, which consist of its U.S. Consumer, Employee
Benefits, International and Asset Management divisions and its Corporate and
Other operations.
U.S. Consumer division reported pre-tax adjusted operating income of $117
million for the second quarter of 2002, an increase of $35 million from $82
million in the year-ago quarter. Our Individual Life Insurance segment reported
adjusted operating income of $130 million for the current quarter, a $43 million
increase over the year-ago quarter, as we realized savings from our field
management and agency restructuring program. The year-ago quarter included $12
million of implementation costs for this program. Our Private Client Group
segment reported a loss, on an adjusted operating income basis, of $29 million
for the current quarter, compared to a $98 million loss in the year-ago quarter,
which includes $39 million of employee termination and facilities consolidation
costs. The decrease in the segment's loss resulted primarily from our cost
reduction measures, which more than offset declines in transaction revenue and
net investment income. Our Retail Investments segment reported a loss, on an
adjusted operating income basis, of $2 million in the current quarter compared
to adjusted operating income of $60 million in the year-ago quarter. Results for
the current quarter included a $48 million charge for additional amortization of
deferred policy acquisition costs to reflect our lower estimate of profitability
from annuities due to equity market conditions. Lower asset-based fees due to
market value declines also contributed to the decline in the segment's adjusted
operating income. Our Property and Casualty Insurance segment reported adjusted
operating income of $18 million in the current quarter, a $15 million decline
from the year-ago quarter. During the current quarter, the segment realized $43
million in stop-loss reinsurance recoveries, prior year reserve releases, and a
change in our estimate of refunds or credits due to certain New Jersey
automobile policyholders under that state's profit regulations, while the
benefit from these items in the year-ago quarter was $58 million.
International division pre-tax adjusted operating income for the second quarter
of 2002 increased $56 million, to $176 million from $120 million in the year-ago
quarter. The International Insurance segment reported adjusted operating income
of $187 million for the quarter, representing a $45 million increase over the
year-ago quarter, including a $42 million greater contribution from Gibraltar
Life, for which last year's second quarter
included its initial two months results. Gibraltar Life's $101 million adjusted
operating income for the current quarter reflects charges from refinements of
estimates, primarily of amounts due policyholders, and gains from policy
surrenders. The net effect of these items reduced adjusted operating income by
$20 million. Gibraltar Life's results also reflect continued favorable mortality
experience. Adjusted operating income from our international insurance
operations other than Gibraltar Life was $86 million, up $3 million from the
year-ago quarter, which benefited from an $8 million reserve refinement. The
current quarter's results reflect a negative impact of $6 million, versus the
year-ago quarter, from currency fluctuations. Excluding the impact of the
reserve refinement in last year's quarter and currency fluctuations, these
operations would have had a 23% increase in adjusted operating income versus the
year-ago quarter.
Employee Benefits division pre-tax adjusted operating income amounted to $94
million in the second quarter of 2002, an increase of $42 million from $52
million in the year-ago quarter. Our Group Insurance segment reported adjusted
operating income of $36 million in the current quarter and $9 million in the
year-ago quarter, which included a $13 million net charge for changes in our
estimates of incurred but unreported claims and return premiums. The segment's
current quarter results benefited from improved disability claims experience.
Adjusted operating income from our Other Employee Benefits segment increased $15
million, to $58 million from $43 million in the year-ago quarter, primarily from
our guaranteed products business, which benefited from income of $30 million
from a mortgage prepayment during the current quarter, partially offset by lower
margins from investment results.
Asset Management division pre-tax adjusted operating income amounted to $56
million in the second quarter of 2002, an increase of $24 million from $32
million in the year-ago quarter. Despite market value declines in our equity
assets under management, adjusted operating income of our Investment Management
and Advisory Services segment of $33 million in the current quarter increased
$10 million from the year-ago quarter, which reflected $6 million of employee
termination and facilities consolidation costs. The segment's current quarter
results reflected lower expense levels, primarily due to asset performance-based
compensation. Assets managed by the Asset Management division were $284 billion
at June 30, 2002, a decrease of $16 billion from a year earlier. The decrease
reflects the market value declines in our equity assets under management and our
sale, during the first quarter of 2002, of a portion of our quantitative-style
equity asset management to a third party. Adjusted operating income from our
Other Asset Management segment increased $14 million, to $23 million in the
current quarter from $9 million in the year-ago quarter, which reflected $12
million of employee termination and facilities consolidation costs.
Corporate and Other operations resulted in pre-tax adjusted operating income of
$35 million in the second quarter of 2002, a decrease of $40 million from $75
million in the year-ago quarter which included a benefit of $48 million from
hedging retained at the corporate level.
Assets under management and administration amounted to $557 billion at June 30,
2002, compared to $606 billion a year earlier and $590 billion at December 31,
2001.
Net income of the Financial Services Businesses for the second quarter of 2002
was $95 million and included $343 million of realized investment losses, net of
related adjustments, compared to realized investment gains, net of related
adjustments, of $75 million in the year-ago quarter. The realized losses in the
current quarter included losses of $254 million representing fluctuations in
value of hedging instruments covering our foreign currency and interest rate
risks. Our currency hedging program mitigates the risk that unfavorable rate
changes will reduce dollar equivalent earnings of our Japanese insurance
operations. The mark-to-market from this program, which is included in quarterly
earnings, is subject to volatility, particularly during periods of significant
exchange rate movements. Realized losses also included losses of $83 million on
the disposal of substantially all remaining WorldCom holdings. Additional
realized losses during the current quarter from impairments and sales of
credit-impaired securities amounted to $137 million. The realized losses during
the quarter were partially offset by realized gains from fixed maturities. Net
income of the Financial Services Businesses for the year-ago quarter, which
included demutualization costs and expenses of $117 million, was $250 million.
Closed Block Business
Prudential's Class B Stock, which is not traded on any exchange, reflects the
performance of its Closed Block Business.
The Closed Block Business, which represents results of our Traditional
Participating Products segment prior to the demutualization, includes our
in-force participating life insurance and annuity policies, and assets that are
being used for the payment of benefits and policyholder dividends on these
policies, as well as other assets and equity that support these policies. We
have ceased offering these participating policies.
The Closed Block Business reported losses from operations before income taxes of
$254 million for the second quarter of 2002 and $103 million for the year-ago
quarter. The increased loss was primarily due to declines in net investment
income and realized investment gains and losses. Closed Block Business results
included net realized investment losses of $177 million in the current quarter,
including losses of $77 million on disposal of substantially all remaining
WorldCom holdings, and $114 million in the year-ago quarter.
The Closed Block Business reported a second quarter 2002 net loss of $163
million, compared to a net loss of $55 million for the year-ago quarter.
For the first half of 2002, the Closed Block Business reported a $429 million
loss from operations before income taxes, compared to a $29 million loss for the
first half of 2001.
The Closed Block Business reported net losses of $273 million for the first half
of 2002 and $21 million for the first half of 2001.
Consolidated Results
There is no legal separation of the Financial Services Businesses and the Closed
Block Business, and holders of the Common Stock and the Class B Stock are both
common stockholders of Prudential Financial, Inc.
On a consolidated basis, which includes the results of both the Financial
Services Businesses and the Closed Block Business, Prudential Financial, Inc.
reported a net loss of $68 million for the second quarter of 2002 and net income
of $195 million for the year-ago quarter, and reported net income of $85 million
for the first half of 2002 and $632 million for the first half of 2001.
Share Repurchase Program
During the second quarter of 2002, the Company repurchased approximately 3.2
million shares of its Common Stock, at a total cost of $106 million. This
included 1.6 million shares repurchased and reissued directly to certain Company
deferred compensation plans.
Forward-Looking Statements
Certain of the statements included in this release, including (but not limited
to) those in the third paragraph hereof, constitute forward-looking statements
within the meaning of the U. S. Private Securities Litigation Reform Act of
1995. Words such as "expects," "believes," "anticipates," "intends," "plans,"
"assumes," "estimates," "projects," or variations of such words are generally
part of forward-looking statements. Forward-looking statements are made based on
management's current expectations and beliefs concerning future developments and
their potential effects upon Prudential Financial, Inc. and its subsidiaries.
There can be no assurance that future developments affecting Prudential
Financial, Inc. and its subsidiaries will be those anticipated by management.
These forward-looking statements are not a guarantee of future performance and
involve risks and uncertainties, and there are certain important factors that
could cause actual results to differ, possibly materially, from expectations or
estimates reflected in such forward-looking statements, including without
limitation: general economic, market and political conditions, including the
performance of financial markets, interest rate fluctuations and the continuing
impact of the events of September 11, 2001; volatility in the securities
markets; reestimates of our reserves for future policy benefits and claims; our
exposure to contingent liabilities; catastrophe losses; investment losses and
defaults; changes in our claims-paying or credit ratings; competition in our
product lines and for personnel; fluctuations in foreign currency exchange rates
and foreign securities markets; risks to our international operations; the
impact of changing regulation or adverse
litigation results; and changes in tax law. Prudential Financial, Inc. does not
intend, and is under no obligation to, update any particular forward-looking
statement included in this document. The information referred to above, as well
as the risks of our businesses described in our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002, should be considered by readers when
reviewing forward-looking statements contained in this release.
Earnings Conference Call
Members of Prudential's senior management will host a conference call on
Wednesday, August 7, 2002, at 11 a.m. ET, to discuss with the investment
community the Company's second quarter results. The conference call will be
broadcast live over the Company's Investor Relations Web site at:
http://www.investor.prudential.com. Please log on fifteen minutes early in the
event necessary software needs to be downloaded. The call will remain on the
Investor Relations Web site for replay through August 22. Institutional
investors, analysts, and other members of the professional financial community
are invited to listen to the call and participate in Q&A by dialing (888)
276-9996 (domestic callers) or (612) 288-0337 (international callers). All
others are encouraged to dial into the conference call in listen-only mode, by
dialing (800) 230-1766 (domestic callers) or (612) 332-0923 (international
callers). To listen to a replay of the conference call starting at 3:15 p.m. on
August 7, dial (800) 475-6701 (domestic callers) or (320) 365-3844
(international callers). The access code for the replay is 642874.
Prudential Financial companies serve individual and institutional customers
worldwide and include The Prudential Insurance Company of America, one of the
largest life insurance companies in the U.S. These companies offer a variety of
products and services, including life insurance, property and casualty
insurance, mutual funds, annuities, pension and retirement related services and
administration, asset management, securities brokerage, banking and trust
services, real estate brokerage franchises and relocation services. For more
information, visit www.prudential.com.
-Prudential-
Financial Highlights
(in millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- ---------
Financial Services Businesses (FSB) Income Statement Data:
Adjusted Operating Income (1):
Revenues:
Premiums $ 2,334 $ 2,014 $ 4,612 $ 3,625
Policy charges and fee income 412 483 846 875
Net investment income 1,356 1,352 2,605 2,649
Commissions, investment management fees and other income 1,057 1,164 2,152 2,272
-------- -------- -------- --------
Total revenues 5,159 5,013 10,215 9,421
-------- -------- -------- --------
Benefits and expenses:
Insurance and annuity benefits 2,317 2,073 4,523 3,684
Interest credited to policyholders' account balances 415 422 829 804
Interest expense 50 100 106 208
Other expenses 1,899 2,057 3,756 3,891
-------- -------- -------- --------
Total benefits and expenses 4,681 4,652 9,214 8,587
-------- -------- -------- --------
FSB adjusted operating income before income taxes 478 361 1,001 834
Income taxes (2) 174 101 365 278
-------- -------- -------- --------
FSB after-tax adjusted operating income 304 260 636 556
-------- -------- -------- --------
Items excluded from FSB adjusted operating income:
Realized investment gains (losses), net of related adjustments (343) 75 (439) 318
Divested businesses 10 (60) 2 (82)
Demutualization costs and expenses -- (117) -- (162)
-------- -------- -------- --------
Total items excluded from FSB adjusted operating income
before income taxes (333) (102) (437) 74
Income taxes, including mutual insurance company tax (124) (92) (159) (23)
-------- -------- -------- --------
Total items excluded from FSB adjusted operating income,
after income taxes (209) (10) (278) 97
-------- -------- -------- --------
Financial Services Businesses net income $ 95 $ 250 $ 358 $ 653
======== ======== ======== ========
Direct equity adjustment for earning per share calculation (3) $ 14 $ -- $ 21 $ --
Earnings per share of Common Stock (diluted) (3):
Net income $ 0.19 0.43 $ 0.65 $ 1.12
FSB after-tax adjusted operating income 0.54 0.45 1.12 0.95
Diluted shares (equivalent share basis prior to demutualization) 585.2 583.6 585.2 583.6
Financial Services Businesses Attributed Equity (as of end of period) (4):
Total attributed equity $ 20,258
Per share of Common Stock - diluted 34.72
Attributed equity excluding unrealized gains and losses on
investments $ 19,144
Per share of Common Stock - diluted 32.81
Number of diluted shares at end of period 583.4
See footnotes on page 4.
Page 1
Financial Services Businesses Division Highlights
(in millions)
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
2002 2001 2002 2001
-------- -------- -------- --------
Adjusted operating income before income taxes, by Division (1):
U.S. Consumer Division $ 117 $ 82 $ 288 $ 276
Employee Benefits Division 94 52 160 156
International Division (5) 176 120 376 218
Asset Management Division 56 32 119 110
Corporate and Other 35 75 58 74
-------- -------- -------- --------
Total FSB adjusted operating income before income taxes $ 478 $ 361 $ 1,001 $ 834
======== ======== ======== ========
Revenues, by Division (1):
U.S. Consumer Division $ 1,882 $ 1,912 $ 3,723 $ 3,860
Employee Benefits Division 1,597 1,471 3,121 2,932
International Division (5) 1,382 1,191 2,768 1,863
Asset Management Division 299 310 590 639
Corporate and Other (1) 129 13 127
-------- -------- -------- --------
Total $ 5,159 $ 5,013 $ 10,215 $ 9,421
======== ======== ======== ========
U.S. Consumer Division:
Individual Life Insurance Sales (6):
Variable and universal life $ 57 $ 58 $ 112 $ 123
Corporate-owned life insurance 76 28 86 65
Term life 15 11 28 21
-------- -------- -------- --------
Total $ 148 $ 97 $ 226 $ 209
======== ======== ======== ========
Retail Investments Sales and Assets Under Management:
Mutual Funds and Wrap-Fee Products:
Gross sales, other than money market $ 3,336 $ 4,074 $ 5,917 $ 7,693
======== ======== ======== ========
Net sales (redemptions) other than money market $ 379 $ 1,593 $ 483 $ 2,132
======== ======== ======== ========
Assets under management at end of period:
Mutual funds $ 52,459 $ 59,618
Wrap-fee products 16,676 18,714
Unit investment trusts 924 1,420
-------- --------
Total $ 70,059 $ 79,752
======== ========
Fixed and Variable annuities:
Gross sales $ 587 $ 355 $ 998 $ 724
======== ======== ======== ========
Net sales (redemptions) $ (85) $ (291) $ (321) $ (656)
======== ======== ======== ========
Total account value at end of period $ 19,850 $ 22,395
======== ========
Employee Benefits Division:
Group Insurance Sales (7):
Group life $ 27 $ 33 $ 189 $ 321
Group disability 33 20 86 89
-------- -------- -------- --------
Total $ 60 $ 53 $ 275 $ 410
======== ======== ======== ========
Other Employee Benefits Sales:
Defined Contribution:
Gross sales $ 904 $ 923 $ 1,914 $ 2,178
======== ======== ======== ========
Net sales (withdrawals) $ 149 $ (98) $ 342 $ 122
======== ======== ======== ========
Guaranteed Products:
Gross sales $ 506 $ 1,181 $ 765 $ 1,581
======== ======== ======== ========
Net sales (withdrawals) $ (487) $ 304 $ (1,092) $ (865)
======== ======== ======== ========
See footnotes on page 4.
Page 2
Financial Services Businesses Division Highlights
(in millions)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2002 2001 2002 2001
-------- ------- -------- -------
International Division:
International Insurance Sales (8):
Actual exchange rate basis $ 177 $ 162 $ 356 $ 324
======= ======= ======== ========
Constant exchange rate basis $ 181 $ 164 $ 373 $ 322
======= ======= ======== ========
Asset Management Division (as of end of period, in billions):
Assets managed by Asset Management Division (9):
Retail customers $ 84.8 $ 99.8
Institutional customers 83.5 90.7
General account (10) 116.0 109.3
------- -------
Total managed by Asset Management Division (10, 11) $ 284.3 $ 299.8
======= =======
Closed Block Business Data, in millions except per share data (12):
Income Statement Data (13):
Revenues $ 1,826 $ 2,086 $ 3,603 $ 4,170
Benefits and expenses 2,080 2,189 4,032 4,199
------- ------- -------- --------
Income (loss) from operations before income taxes (254) (103) (429) (29)
Income taxes (91) (48) (156) (8)
------- ------- -------- --------
Closed Block Business net income (loss) $ (163) $ (55) $ (273) $ (21)
======= ======= ======== ========
Direct equity adjustment for earning per share calculation (3) $ (14) $ -- $ (21) $ --
Net loss per share of Class B Stock $(88.50) $(147.00)
======= ========
Weighted average diluted shares outstanding during period 2.0 2.0
======= ========
Closed Block Business Attributed Equity (as of end of period) (4):
Total attributed equity $ 843
Per Share of Class B Stock 421.50
Attributed equity excluding unrealized gains and losses on investments $ 222
Per Share of Class B Stock 111.00
Number of Class B Shares at end of period 2.0
=======
Consolidated Data:
Consolidated Income Statement Data:
Total revenues $ 6,668 $ 7,168 $ 13,382 $ 13,915
Total benefits and expenses 6,777 7,012 13,247 13,036
------- ------- -------- --------
Income (loss) from operations before income taxes (109) 156 135 879
Income taxes (41) (39) 50 247
------- ------- -------- --------
Consolidated net income (loss) $ (68) $ 195 $ 85 $ 632
======= ======= ======== ========
Net income (loss):
Financial Services Businesses $ 95 $ 250 $ 358 $ 653
Closed Block Business (13) (163) (55) (273) (21)
------- ------- -------- --------
Consolidated net income (loss) $ (68) $ 195 $ 85 $ 632
======= ======= ========= ========
Assets and Asset Management Information (as of end of period, in billions)
Total assets $ 297.7 $ 303.1
Assets under management (at fair market value):
Managed by Asset Management Division (10, 11) $ 284.3 $ 299.8
Non-proprietary wrap-fee products and other domestic 46.2 51.3
International (10, 14) 37.9 42.4
------- -------
Total assets under management 368.4 393.5
Client assets under administration 188.4 212.3
------- -------
Assets under management and administration $ 556.8 $ 605.8
======= =======
See footnotes on page 4.
Page 3
(1) Adjusted operating income is a non-GAAP measure that excludes realized
investment gains, net of losses and related adjustments; 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.
(2) Income taxes applicable to pre-tax adjusted operating income, excluding
mutual insurance company tax.
(3) 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 the 2001 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 period 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.
(4) As a result of the establishment of the Closed Block Business
concurrently with the demutualization, 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, is not presented for periods
prior to 2002.
(5) International division results include Gibraltar Life from April 2, 2001,
the date of reorganization, through May 31, 2002.
(6) Statutory first year premiums and deposits.
(7) Amounts exclude new premiums resulting from rate changes on existing
policies, from additional coverage issued 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.
(8) Annualized new business premiums. Actual amounts reflect the impact of
currency exchange fluctuations. Constant exchange rate amounts are based
on the average exchange rates for the year ended December 31, 2001.
(9) Reflects reclassification of amounts by client category as of January 1,
2002, based upon 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.
(10) Reflects, as of June 30, 2002, Asset Management division's assumption of
management of $3.5 billion of assets of International Insurance
operations which were previously reflected in International assets.
(11) Includes assets of International Insurance operations and International
retail customers managed by the Asset Management division.
(12) Amounts shown for the Closed Block Business for the 2001 periods
represent results of the Traditional Participating Products segment.
Results for the 2002 periods for the Closed Block Business reflect the
transfer of $5.6 billion of net assets to the Financial Services
Businesses at the date of demutualization.
(13) Beginning in 2002, management no longer uses adjusted operating income as
the measure to assess operating performance of the Closed Block Business.
Consequently, only GAAP basis results of the Closed Block Business are
presented for all periods.
(14) Primarily general account assets of International Insurance operations
other than those managed by the Asset Management division.