Exhibit 99.0
For Immediate Release Contact: Bob DeFillippo
February 12, 2002 (973) 802-4149
After 4 p.m.
PRUDENTIAL FINANCIAL, INC. ANNOUNCES FOURTH
QUARTER 2001 RESULTS
Newark, NJ -- Prudential Financial, Inc. (NYSE:PRU) today reported
fourth quarter 2001 after-tax adjusted operating income for its Financial
Services Businesses of $105 million, compared to $41 million for the fourth
quarter of 2000. 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 all periods, adjusted operating
income was 18 cents per Common share for the fourth quarter of 2001 compared to
7 cents in the fourth quarter of 2000.
For the year ended December 31, 2001, after-tax adjusted operating
income for the Financial Services Businesses amounted to $764 million ($1.31
per equivalent Common share), compared to $1.116 billion ($1.91 per equivalent
Common share) for the year ended December 31, 2000.
"Prudential's results reflect a growing contribution from our
International division, including Gibraltar Life, which we acquired last April,
while difficult market conditions have had an adverse affect on our operations
in the U.S.," said Chairman and CEO Arthur F. Ryan. "In addition, fourth quarter
results included costs to implement our expense reduction strategies in several
operating units. These costs are now substantially behind us, and we are well
positioned to benefit from a more favorable cost structure in 2002. We expect
expense cuts and continued growth in International Insurance earnings will
provide impetus to improved financial performance this year. Assuming a modest
recovery in equity market conditions, including appreciation of 8 percent in the
S&P 500 index, we expect that Prudential will achieve Common Stock earnings per
share in the range of $2.10 to $2.30 for the year 2002, based on after-tax
adjusted operating income," 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.
Adjusted operating income excludes net realized investment gains, net
of losses and related charges, results from divested businesses, demutualization
costs and expenses, and the mutual insurance company tax. Net income of the
Financial Services Businesses, which includes the foregoing items, amounted to a
loss of $403 million for the fourth quarter of 2001 compared to a loss of $331
million for the year-ago period. On an equivalent share basis, the net loss per
Common share was 69 cents in the fourth quarter of 2001 compared to a net loss
of 57 cents per Common share in the year-ago
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period. Net income of the Financial Services Businesses was $302 million (52
cents per equivalent Common share) for the year ended December 31, 2001,
compared to net income of $311 million (53 cents per equivalent Common share)
for the year 2000.
On a consolidated basis, which includes the results of both the
Financial Services Businesses and the Closed Block Business, Prudential
Financial, Inc. reported net losses of $506 million for the fourth quarter of
2001 and $268 million for the year-ago quarter, and reported a net loss of $154
million for the year ended December 31, 2001, versus net income of $398 million
for the year 2000.
In the following business-level discussion, adjusted operating income
refers to pre-tax results.
Financial Services Businesses
- -----------------------------
U.S Consumer division reported a $13 million pre-tax loss, on an adjusted
operating income basis, for the fourth quarter of 2001 compared to a $62 million
loss for the year-ago quarter. Our Individual Life Insurance segment reported
adjusted operating income of $31 million for the fourth quarter of 2001,
compared to a loss of $31 million in the year-ago quarter, as we began to
realize savings from our field management and agency restructuring program. Our
Private Client Group segment reported a loss, on an adjusted operating income
basis, of $79 million for the current quarter compared to a $41 million loss in
the year-ago quarter, as our domestic securities brokerage operations continued
to be negatively affected by a decline in individual investor transaction
volume. Adjusted operating income of our Retail Investments segment was $38
million in the fourth quarter of 2001 compared to $25 million in the fourth
quarter of 2000. Our Property and Casualty Insurance segment reported losses of
$3 million in the fourth quarter of 2001 and $15 million in the year-ago
quarter. During the current quarter, the division's adjusted operating income
reflected charges for implementation costs of our expense reduction program
amounting to $78 million in the Individual Life Insurance segment and $21
million in the Private Client Group segment. During the year-ago quarter, the
division's adjusted operating income reflected implementation costs of our
expense reduction program amounting to $48 million in the Individual Life
Insurance segment.
Also during the current quarter, our Property and Casualty Insurance segment
realized $39 million in prior year reserve releases. During the year-ago
quarter, that segment realized $35 million in prior year reserve releases as
well as a $31 million stop-loss reinsurance recovery, and incurred a $40 million
charge to provide for refunds or credits to certain New Jersey automobile
policyholders.
International division pre-tax adjusted operating income for the fourth quarter
of 2001 increased $65 million, to $125 million from $60 million in the year-ago
quarter. The International Insurance segment reported $172 million of adjusted
operating income for the quarter, representing an $87 million increase over the
year-ago quarter, including a $77 million contribution from Gibraltar Life,
which we acquired in April 2001. Gibraltar
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Life's results for the fourth quarter included a modest negative impact from an
increase in our estimate of the reserve for incurred but unreported death
claims. Adjusted operating income from our international insurance operations
other than Gibraltar reflected strong performances in Japan and Korea, partly
offset by the negative impact of currency fluctuations. The International
Securities and Investments segment reported a loss of $47 million in the current
quarter, compared to a loss of $25 million in the year-ago fourth quarter, as
our international securities operations continued to be negatively affected by a
reduced level of investor activity.
During the current quarter, our international securities brokerage operations
incurred $24 million of expenses relating to staff reductions and facilities
consolidations, while the year-ago fourth quarter reflected about $9 million of
such costs.
Employee Benefits division pre-tax adjusted operating income amounted to $24
million in the fourth quarter of 2001, a decrease of $52 million from $76
million in the year-ago quarter. The decrease reflects less favorable mortality
results and increased expenses, including consulting costs, in the Group
Insurance segment, which reported adjusted operating income of $21 million in
the fourth quarter of 2001 and $68 million in the year-ago fourth quarter.
Results in our Other Employee Benefits segment declined $5 million, to $3
million from $8 million in the year-ago quarter. Lower investment income margins
during the current quarter were largely offset by the net effect in the year-ago
quarter of two unusual items. These included a $56 million charge to increase
our reserves for structured settlement products due to portfolio restructuring
and a $28 million benefit primarily from refinements in our annuity reserves.
Asset Management division pre-tax adjusted operating income increased $24
million, to $64 million in the fourth quarter of 2001 from $40 million in the
year-ago quarter. These results included $20 million that Prudential Securities
earned as co-manager in the initial public offering of our Common Stock during
the fourth quarter of 2001, which is offset by a corresponding charge in our
Corporate and Other results. Assets managed by the Asset Management division
were $299 billion at December 31, 2001, a decrease of $13 billion from a year
earlier. The decrease was driven primarily by declines in market value of
publicly traded equity securities managed by our Jennison unit.
Corporate and Other operations resulted in pre-tax losses, on an adjusted
operating income basis, of $27 million in the fourth quarter of 2001 and $81
million in the year-ago quarter. The $54 million decrease in the loss came
primarily from $31 million greater income from our own qualified pension plan in
the current quarter and from greater investment income including the transfer of
assets to the Financial Services Businesses in connection with the formation of
the Closed Block Business in mid-December.
Assets under management and administration amounted to $590 billion at December
31, 2001, including approximately $30 billion relating to Gibraltar Life,
compared to $593 billion a year earlier.
Net Income of the Financial Services Businesses in the current quarter included
demutualization costs and expenses of $389 million, primarily from a charge of
$340 million for demutualization consideration to former Canadian branch
policyholders, and $132 million realized investment losses, net of related
charges. The realized losses in the current quarter included $196 million of
losses on the disposal of substantially all of our Enron holdings, consistent
with our previously disclosed expectations of fourth quarter net income. Our
total credit-related losses in the fourth quarter, including the Enron sales and
all other impairments, amounted to $266 million within the Financial Services
Businesses. Net income in the year-ago quarter included pre-tax losses from
divested businesses of $567 million and realized investment losses, net of
related charges, of $199 million.
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Closed Block Business
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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 will
be 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.
Fourth quarter 2001 after-tax adjusted operating income was $89 million, a
decrease of $74 million from the year-ago fourth quarter, primarily due to a
decline in investment income which was partially offset by more favorable
mortality experience in the current quarter. Adjusted operating income excludes
net realized investment gains, net of losses and related charges, and the mutual
insurance company tax. Including the foregoing items, the Closed Block Business
reported a net loss of $103 million for the fourth quarter of 2001 compared to
net income of $63 million for the fourth quarter of 2000.
For the year ended December 31, 2001, after-tax adjusted operating income for
the Closed Block Business amounted to $264 million, compared to $355 million for
the year ended December 31, 2001. The Closed Block Business reported a net loss
of $456 million for the year ended December 31, 2001, compared to net income of
$87 million for the year 2000.
Editor's Note
- -------------
Prudential'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.
Prudential's Class B Stock, which is not traded on any exchange, reflects the
performance of its Closed Block Business, which consists of its traditional
participating insurance and annuity products and the assets and equity that
support these products.
There is no legal separation of the two Businesses, and holders of the Common
Stock and the Class B stock are both common stockholders of Prudential
Financial, Inc.
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.
Page 4
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 11th;
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 Prospectus, dated December 12,
2001, filed under Rule 424 under the Securities Act of 1933 in connection with
our initial public offering, 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, February 13, 2002, at 10 a.m. ET, to discuss with the investment
community the company's fourth quarter and year end 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
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event necessary software needs to be downloaded. The call will remain on the
Investor Relations Web site for replay beginning at 2 p.m. on February 13. The
conference call can also be heard on the telephone. To listen to the conference
call, dial 888-276-9996 (domestic callers) or 651-224-7472 (international
callers). To listen to a replay of the conference call from 5 p.m. on February
13 through 11:59 pm on February 20, dial 800-475-6701 (domestic callers) or
320-365-3844 (international callers). The access code for the replay is 623617.
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.
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-Prudential-
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Exhibit 99.0
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Financial Highlights
(in millions, except per share data)
Three Months Ended Year Ended
December 31 December 31
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
Consolidated Income Statement Data:
Total revenues 6,906 6,625 27,177 26,504
Total benefits and expenses 7,515 7,243 27,404 25,777
-------- -------- -------- --------
Income (loss) from continuing operations before income taxes (609) (618) (227) 727
Income taxes (87) (273) (57) 406
-------- -------- -------- --------
Income (loss) from continuing operations (522) (345) (170) 321
Income from discontinued operations, net of taxes 16 77 16 77
-------- -------- -------- --------
Consolidated net income (loss) (506) (268) (154) 398
======== ======== ======== ========
Net income (loss):
Financial Services Businesses $ (403) $ (331) $ 302 $ 311
Closed Block Business (1) (103) 63 (456) 87
-------- -------- -------- --------
Consolidated net income (loss) $ (506) $ (268) $ (154) $ 398
======== ======== ======== ========
Financial Services Businesses (FSB) Income Statement Data:
Adjusted Operating Income (2):
Revenues:
Premiums $ 2,361 $ 1,498 $ 8,227 $ 5,826
Policy charges and fee income 454 447 1,803 1,639
Net investment income 1,302 1,316 5,239 5,224
Commissions, investment management fees, and other income 1,092 1,197 4,356 5,196
-------- -------- -------- --------
Total revenues 5,209 4,458 19,625 17,885
-------- -------- -------- --------
Benefits and expenses:
Insurance and annuity benefits 2,296 1,658 8,259 6,103
Interest credited to policyholders' account balances 434 393 1,670 1,618
Interest expense 48 118 326 448
Other expenses 2,258 2,256 8,107 7,995
-------- -------- -------- --------
Total benefits and expenses 5,036 4,425 18,362 16,164
-------- -------- -------- --------
FSB adjusted operating income before income taxes 173 33 1,263 1,721
Income taxes (3) 68 (8) 499 605
-------- -------- -------- --------
FSB after-tax adjusted operating income 105 41 764 1,116
-------- -------- -------- --------
Items excluded from FSB adjusted operating income:
Realized investment gains (losses), net of related charges (132) (199) (136) (408)
Divested businesses (25) (567) (147) (636)
Demutualization costs and expenses (4) (389) (30) (588) (143)
-------- -------- -------- --------
Total items excluded from FSB adjusted operating income before income taxes (546) (796) (871) (1,187)
Income taxes, including mutual insurance company tax (22) (347) (393) (305)
-------- -------- -------- --------
Total items excluded from FSB adjusted operating income, after income taxes (524) (449) (478) (882)
-------- -------- -------- --------
FSB income (loss) from continuing operations (after tax) (419) (408) 286 234
Income from discontinued operations, net of taxes 16 77 16 77
-------- -------- -------- --------
Financial Services Businesses net income $ (403) $ (331) $ 302 $ 311
======== ======== ======== ========
Per share of Common Stock, equivalent share basis - diluted (5):
Income (loss) from continuing operations $ (.72) $ (.70) $ .49 $ .40
Net income (loss) (.69) (.57) .52 .53
FSB after-tax adjusted operating income .18 .07 1.31 1.91
Diluted shares (equivalent share basis) (6) 583.7 583.6 583.6 583.6
Financial Services Businesses Attributed Equity (as of end of period) (5):
Total attributed equity $ 19,646
Per share of Common Stock - diluted 33.59
Attributed equity excluding unrealized gains and losses on investments $ 18,803
Per share of Common Stock - diluted 32.15
Number of diluted shares at end of period 584.8
See footnotes on page 4.
Page 1
Financial Services Businesses Division Highlights
(in millions)
Three Months Ended Year Ended
December 31 December 31
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
Adjusted operating income before income taxes, by Division (2):
U.S. Consumer Division $ (13) $ (62) $ 310 $ 740
Employee Benefits Division 24 76 183 387
International Division (7) 125 60 523 322
Asset Management Division 64 40 219 276
Corporate and Other (27) (81) 28 (4)
-------- -------- -------- --------
Total FSB adjusted operating income before income taxes $ 173 $ 33 $ 1,263 $ 1,721
======== ======== ======== ========
Revenues, by Division (2):
U.S. Consumer Division $ 1,925 $ 1,930 $ 7,644 $ 8,026
Employee Benefits Division 1,481 1,470 5,912 5,686
International Division (7) 1,421 671 4,694 2,624
Asset Management Division 341 339 1,272 1,344
Corporate and Other 41 48 103 205
-------- -------- -------- --------
Total $ 5,209 $ 4,458 $ 19,625 $ 17,885
======== ======== ======== ========
U.S. Consumer Division:
Individual Life Insurance Sales (8):
Variable and universal life $ 54 $ 78 $ 228 $ 286
COLI 17 29 199 42
Term life 11 17 43 59
-------- -------- -------- --------
Total $ 82 $ 124 $ 470 $ 387
======== ======== ======== ========
Retail Investments Sales and Assets Under Management:
Mutual Funds and Wrap-Fee Products:
Gross sales, other than money market $ 2,499 $ 3,791 $ 12,725 $ 15,881
======== ======== ======== ========
Net sales (redemptions) other than money market $ (125) $ 1,234 $ 1,968 $ 4,615
======== ======== ======== ========
Assets under management at end of period:
Mutual funds $ 57,809 $ 57,764
Wrap-fee products 17,955 19,621
Unit investment trusts 1,157 1,508
-------- --------
Total $ 76,921 $ 78,893
======== ========
Fixed and variable annuities:
Gross sales $ 361 $ 418 $ 1,391 $ 2,511
======== ======== ======== ========
Net sales (redemptions) $ (231) $ (243) $ (1,181) $ (839)
======== ======== ======== ========
Total account value at end of period $ 21,664 $ 23,985
======== ========
Employee Benefits Division:
Group Insurance Sales (9):
Group life $ 115 $ 47 $ 483 $ 321
Group disability 31 25 147 162
-------- -------- -------- --------
Total $ 146 $ 72 $ 630 $ 483
======== ======== ======== ========
Other Employee Benefits Sales and Assets Under Management:
Defined Contribution:
Gross sales $ 782 $ 1,407 $ 3,689 $ 5,439
======== ======== ======== ========
Net sales $ 144 $ 366 $ 267 $ 1,502
======== ======== ======== ========
Guaranteed products:
Gross sales $ 433 $ 420 $ 2,299 $ 2,024
======== ======== ======== ========
Net sales (withdrawals) $ (370) $ (833) $ (2,073) $ (3,255)
======== ======== ======== ========
See footnotes on page 4.
Page 2
Financial Services Businesses Division Highlights
(in millions)
Three Months Ended Year Ended
December 31 December 31
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
International Division:
International Insurance Sales (10):
GAAP Basis $ 196 $ 162 $ 692 $ 509
=========== =========== =========== ===========
Constant exchange rate basis $ 198 $ 147 $ 692 $ 452
=========== =========== =========== ===========
Asset Management Division:
Assets managed by Asset Management Division (at end of period, in
billions):
Retail customers $ 96.5 $ 107.4
Institutional customers 89.1 95.1
General account 113.8 110.0
----------- -----------
Total managed by Asset Management Division $ 299.4 $ 312.5
=========== ===========
Closed Block Business (CBB) Data, in millions except per share data (1):
Adjusted Operating Income (2):
Revenues $ 2,131 $ 2,307 $ 8,271 $ 8,638
Benefits and expenses 1,984 2,061 7,835 8,091
----------- ----------- ----------- -----------
Adjusted operating income before income taxes 147 246 436 547
Income taxes (3) 58 83 172 192
----------- ----------- ----------- -----------
After-tax adjusted operating income 89 163 264 355
Items excluded from Closed Block Business adjusted operating income:
Realized investment gains (losses) (270) 26 (543) 91
Related charge for dividends to policyholders (113) (127) (512) (445)
----------- ----------- ----------- -----------
Total items excluded from CBB adjusted operating income,
before income taxes (383) (101) (1,055) (354)
Income taxes, including mutual insurance company tax (191) (1) (335) (86)
----------- ----------- ----------- -----------
Total items excluded from CBB adjusted operating income,
after income taxes (192) (100) (720) (268)
----------- ----------- ----------- -----------
Closed Block Business Net income $ (103) $ 63 $ (456) $ 87
=========== =========== =========== ===========
Closed Block Business Attributed equity (as of end of period) (4) $ 807
===========
Attributed equity (as of end of period) per Class B Share $ 404
===========
Number of Class B Shares at end of period 2
===========
Consolidated Data (as of end of period; in billions):
Total assets $ 293 $ 273
Assets under management (at fair market value):
Proprietary, managed by Asset Management Division $ 299 $ 313
Non-proprietary, wrap-fee products and other 89 58
----------- -----------
Total assets under management 388 371
Client assets under administration 202 222
----------- -----------
Assets under management and administration $ 590 $ 593
=========== ===========
See footnotes on page 4.
Page 3
(1) Amounts shown for the Closed Block Business represent results of the
Traditional Participating Products segment for periods prior to the
effective date of the demutualization.
(2) Adjusted operating income is a non-GAAP measure which excludes realized
investment gains, net of losses and related charges; sales practices
remedies and costs; 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) Income taxes applicable to pre-tax adjusted operating income, excluding
mutual insurance company tax.
(4) Demutualization costs and expenses for the quarter and year ended December
31, 2001 include demutualization consideration of $340 million paid to
former Canadian branch policyholders.
(5) Prudential Financial Inc.'s initial public offering and the demutualization
of The Prudential Insurance Company of America became effective on December
18, 2001. Equivalent share earnings reflects a pro forma presentation for
shares outstanding, whereby 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 assumed
to be outstanding for all periods presented. Earnings used in per-share
calculations have not been retroactively adjusted to reflect the
demutualization or related transactions, including the establishment of the
Closed Block Business. 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
earlier periods.
(6) Diluted shares reflect the impact of stock options issued on the date of
demutualization, weighted for the portion of the period for which they were
outstanding.
(7) Results of our International Division include the results of Gibraltar Life
from April 2, 2001, the date of reorganization, through November 30, 2001.
(8) Statutory first year premiums and deposits.
(9) Annualized new business premiums, excluding excess premiums which are
premiums that build cash value but do not purchase face amounts of group
universal life insurance.
(10) Annualized new business premiums. GAAP basis 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.
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