prudential financial 1Q02 QFS

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prudential financial 1Q02 QFS

  1. 1. 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
  2. 2. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 CONTENTS Page HIGHLIGHTS 1-2 Financial Highlights 3 Operations Highlights FINANCIAL SERVICES BUSINESSES 4 Combined Statements of Operations 5 Combined Balance Sheets 6 Combining Statements of Operations by Division 7 Combining Balance Sheets by Division 8 Short-Term Debt 9 Long-Term Debt U.S. CONSUMER DIVISION 10 Combined Statements of Operations 11 Combining Statements of Operations 12 Life Insurance Sales and Retail Investments Segment Mutual Funds, Wrap-fee Products and Annuity Sales and Assets Under Management 13 Life Insurance, Retail Investments Segment Mutual Funds, Wrap-fee Products and Annuity Sales by Distribution Channel 14 Account Value Activity 15 Deferred Policy Acquisition Costs 16 Supplementary Information for Individual Life Insurance and Private Client Group 17 Supplementary Information for Property and Casualty Insurance EMPLOYEE BENEFITS DIVISION 18 Combined Statements of Operations 19 Combining Statements of Operations 20 Sales Results and Assets Under Management 21 Supplementary Information INTERNATIONAL DIVISION 22 Combined Statements of Operations 23 Combining Statements of Operations 24-25 Sales Results and Supplementary Information ASSET MANAGEMENT DIVISION 26 Combined Statements of Operations 27 Combining Statements of Operations 28 Assets Under Management - Investment Management and Advisory Services Segment INVESTMENT PORTFOLIO 29 Investment Portfolio Composition 30 Financial Services Businesses Investment Portfolio Composition - Japanese Insurance Operations and Excluding Japanese Insurance Operations 31 Financial Services Businesses Investment Results 32 Financial Services Businesses Investment Results - Japanese Insurance Operations 33 Financial Services Businesses Investment Results - Excluding Japanese Insurance Operations 34-36 KEY DEFINITIONS AND FORMULAS 37 RATINGS AND INVESTOR INFORMATION ii
  3. 3. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 FINANCIAL HIGHLIGHTS (in millions, except per share data) 2001 2002 Year-to-date % 1Q 2Q 4Q 1Q 2002 2001 3Q Change 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 68 191 332 296 15% Financial Services Businesses after-tax 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) - (104) 176 -159% Total items excluded from adjusted operating income, before income taxes 176 (102) (399) (546) (104) (35) 69 -139% Income taxes, including mutual insurance company tax 69 (92) (348) (22) (35) (69) 107 -172% Total items excluded from adjusted operating income, after income taxes 107 (10) (51) (524) (69) 263 403 -35% Income (loss) from continuing operations (after-tax) 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) 0.46 585.1 583.6 Weighted average number of outstanding Common shares (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 $340 million paid to former Canadian branch policyholders. (3) As a result of the establishment of the Closed Block Business concurrently with the demutualization on December 18, 2001, attributed equity as of the end of periods prior to December 31, 2001 is not comparable to attributed equity at that date and thereafter and, therefore, Operating Return on Average Equity is not presented for periods prior to 2002. (4) Amounts shown for the Closed Block Business represent results of the Traditional Participating Products segment for periods prior to effective date of demutualization. Page 1
  4. 4. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 FINANCIAL HIGHLIGHTS (in millions, except per share data) 2001 2002 Year-to-date 1Q 2Q 4Q 1Q 2002 2001 3Q Financial Services Businesses Capitalization Data (1): Short-term debt 11,922 9,440 9,720 5,405 6,515 Long-term debt 2,058 3,047 2,983 3,554 3,350 Equity Security Units (2) - - - 690 690 Attributed Equity: Total Attributed Equity 14,661 14,787 14,683 19,646 19,453 Excluding unrealized gains and losses on investments 13,704 13,822 13,433 18,803 19,034 Excluding accumulated other comprehensive income 13,908 13,960 13,581 19,083 19,289 Total Capitalization: Excluding accumulated other comprehensive income 15,966 17,007 16,564 23,327 23,329 Including accumulated other comprehensive income 16,719 17,834 17,666 23,890 23,493 Book value per share of Common Stock: Excluding unrealized gains and losses on investments 32.15 32.53 Excluding accumulated other comprehensive income 32.63 32.97 Including accumulated other comprehensive income 33.59 33.25 Number of diluted shares at end of period 584.8 585.1 Common Stock Price Range: 32.09 High 33.19 32.09 30.05 Low 29.30 30.05 31.05 Close 33.19 31.05 Common Stock market capitalization ($ 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
  5. 5. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 OPERATIONS HIGHLIGHTS 2002 2001 Year-to-date 2002 2001 2Q 4Q 3Q 1Q 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
  6. 6. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 COMBINED STATEMENTS OF OPERATIONS - FINANCIAL SERVICES BUSINESSES (in millions) 2001 2002 Year-to-date % 2002 2001 1Q 3Q 4Q 2Q 1Q Change 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 (96) 243 -140% Total 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 (45) (117) (37) (389) - (104) 176 -159% Total items excluded from adjusted operating income 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
  7. 7. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 COMBINED BALANCE SHEETS - FINANCIAL SERVICES BUSINESSES (in millions) 03/31/2001 03/31/2002 06/30/2001 09/30/2001 12/31/2001 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
  8. 8. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 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 costs and expenses. Page 6
  9. 9. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 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
  10. 10. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 SHORT TERM DEBT - FINANCIAL SERVICES BUSINESSES (in millions) As of March 31, 2002 As of December 31, 2001 The Prudential The Prudential Prudential Insurance Co. Other Prudential Insurance Co. Other Financial, Inc. of America(a) Affiliates Total Financial, Inc. of America(a) Affiliates Total Borrowings by use of proceeds: General corporate purposes - 549 - 549 - 222 - 222 Investment related - 1,495 - 1,495 - 834 - 834 Securities business related - 1,194 2,277 3,471 - 1,639 1,484 3,123 Specified other businesses - 920 53 973 - 1,141 14 1,155 Limited recourse and non-recourse borrowing - - 27 27 - - 71 71 Total short-term debt - 4,158 2,357 6,515 - 3,836 1,569 5,405 Borrowings by type: Long-term debt due within one year - 347 - 347 - 753 - 753 Commercial paper - 3,750 - 3,750 - 3,022 - 3,022 Bank borrowings - - 1,657 1,657 - - 1,324 1,324 Other short-term debt - 61 673 734 - 61 174 235 Total general obligations - 4,158 2,330 6,488 - 3,836 1,498 5,334 Limited recourse and non-recourse borrowing - - 27 27 - - 71 71 Total short-term debt - 4,158 2,357 6,515 - 3,836 1,569 5,405 (a) Includes Prudential Funding, LLC. Page 8
  11. 11. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 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
  12. 12. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 COMBINED STATEMENTS OF OPERATIONS - U. S. CONSUMER DIVISION (in millions) 2001 2002 Year-to-date % 1Q 3Q 4Q 2Q 1Q 2002 2001 Change 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
  13. 13. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 COMBINING STATEMENTS OF OPERATIONS - U. S. CONSUMER DIVISION (in millions) Quarter Ended March 31, 2002 Total U.S. Individual Property & Retail Investments 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 Total U.S. Individual Property & Retail Investments 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
  14. 14. Prudential Financial, Inc. Quarterly Financial Supplement First Quarter 2002 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) 2001 2002 Year-to-date 2Q 1Q 2002 2001 1Q 3Q 4Q 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) (31) (1,615) Change in market value, interest credited, and other 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
  15. 15. Prudential Financial, Inc. 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 1Q 1Q 2002 2001 2Q 3Q 4Q 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

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