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Prudential Financial Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed March 14, 2003
Period End
December 31, 2002
Securities
PRUPFHPRSPRH
In the record · 2016–202610-K1110-Q328-K198

PRU filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 198 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Dec ’17Dec ’17
  2. Leadership change8-K · Feb ’20Feb ’20
  3. Deal closed8-K · Apr ’22Apr ’22
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 14, 2003. Cited figures are marked; the original filing is the authoritative source.

Prudential Financial, Inc. reported net income of $194 milliona for 2002, compared with a net loss of $154 million in 2001, on total revenues of $26.675 billion.

Income from continuing operations before income taxes was $64 millionb, including a $757 million pre-tax loss in the Closed Block Business, while the Financial Services Businesses earned $821 million before taxes. Adjusted operating income for the Financial Services Businesses rose to $1.780 billion from $1.349 billion, driven by the Insurance Division and International Insurance and Investments Division, while realized investment losses of $1.358 billion weighed on GAAP results. The Investment Division was weaker, with a pre-tax loss of $28 million, reflecting a $235 million loss in the Retirement segment and a $41 million loss in Financial Advisory.

Management is pursuing growth through the pending $1.15 billionc acquisition of Skandia U.S. Inc., expected to close in the second quarter of 2003, and a February 2003 agreement to combine retail brokerage operations with Wachovia Corporation, in which Prudential would hold a 38% interest. The company also noted it is exploring options for its personal lines property and casualty business, including a possible sale.

Investors should weigh the Closed Block structure, which ties Class B Stock dividends to that business and leaves Common Stock dependent on the Financial Services Businesses. Pending litigation includes a $250 milliond punitive damages verdict against Prudential Securities, and the Plan of Reorganization faces state court challenges that management says could have a material adverse effect if successful.

02—Key points

Key Highlights

  1. Net income of $194 million in 2002, versus a net loss of $154 million in 2001; income from continuing operations was $256 million.
  2. Total revenues of $26.675 billion in 2002, down from $27.071 billion in 2001.
  3. Adjusted operating income for the Financial Services Businesses of $1.780 billion, up from $1.349 billion in 2001.
  4. Realized investment losses, net, of $1.358 billion in 2002, compared with $671 million in 2001.
  5. Closed Block Business pre-tax loss of $757 million in 2002; Financial Services Businesses pre-tax income of $821 million.
  6. Pending acquisition of Skandia U.S. Inc. for a cash purchase price of $1.15 billion plus a $115 million liability assumption, expected to close in the second quarter of 2003.
  7. Agreement to combine retail securities brokerage with Wachovia Corporation, with Prudential holding a 38% interest in the new firm.

03—Questions

Frequently Asked Questions

  1. How did Prudential Financial perform in 2002 on a GAAP basis?

    Prudential reported net income of $194 million for 2002, compared with a net loss of $154 million in 2001. Income from continuing operations before income taxes was $64 million, and income tax was a benefit of $192 million. Realized investment losses of $1.358 billion were a major drag on results.

  2. What is the Closed Block Business and how does it affect shareholders?

    The Closed Block Business holds in force participating policies and the IHC debt, and its results are reported separately. Common Stock reflects the Financial Services Businesses, while Class B Stock reflects the Closed Block Business. The Closed Block Business posted a pre-tax loss of $757 million in 2002, and Common Stock dividends can be affected if the Closed Block Business is in financial distress.

  3. What acquisitions and transactions are pending?

    Prudential agreed to acquire Skandia U.S. Inc. for a cash purchase price of $1.15 billion and the assumption of a $115 million liability, expected to close in the second quarter of 2003. It also agreed in February 2003 to combine its retail brokerage and clearing operations with Wachovia Corporation, retaining a 38% interest in the new firm, with closing expected in the third quarter of 2003.

  4. What are the main litigation risks?

    In October 2002, a jury returned a verdict against Prudential Securities and a former financial advisor for $11.7 million in compensatory damages and $250 million in punitive damages, which the company intends to challenge. Challenges to the Plan of Reorganization are pending in New Jersey courts; the filing states a successful challenge could have a material adverse effect on business, results of operations and financial condition.

  5. Is Prudential considering selling any businesses?

    Prudential said in the third quarter of 2002 that it is exploring options for its personal lines property and casualty insurance business, including a possible sale of all or part of it. No final decision had been made. The company said a sale would likely result in a charge to earnings that could be material.

04—Continue

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