Exhibit 99.2

 

ITEM 6.    SELECTED FINANCIAL DATA

 

We derived the selected consolidated income statement data for the years ended December 31, 2006, 2005 and 2004 and the selected consolidated balance sheet data as of December 31, 2006 and 2005 from our Consolidated Financial Statements included elsewhere herein. We derived the selected consolidated income statement data for the years ended December 31, 2003 and 2002 and the selected consolidated balance sheet data as of December 31, 2004, 2003 and 2002 from consolidated financial statements not included herein.

 

On June 1, 2006, we acquired the variable annuity business of The Allstate Corporation through a reinsurance transaction. Results presented below include the results of this business from the date of acquisition.

 

The 2005 income tax provision includes a benefit of $720 million from reduction of tax liabilities in connection with the Internal Revenue Service examination of our tax returns for the years 1997 through 2001.

 

On April 1, 2004, we acquired the retirement business of CIGNA Corporation. Results presented below include the results of this business from the date of acquisition.

 

On July 1, 2003, we completed an agreement with Wachovia Corporation, or Wachovia, to combine each company’s respective retail securities brokerage and clearing operations forming a joint venture, Wachovia Securities. We have a 38% ownership interest in the joint venture, while Wachovia owns the remaining 62%. The transaction included our securities brokerage operations but did not include our equity sales, trading and research operations. As part of the transaction we retained certain assets and liabilities related to the contributed businesses, including liabilities for certain litigation and regulatory matters. We account for our 38% ownership of the joint venture under the equity method of accounting; periods prior to July 1, 2003, continue to reflect the results of our previously wholly owned securities brokerage operations on a fully consolidated basis.

 

On May 1, 2003, we acquired Skandia U.S. Inc., which included American Skandia, Inc. Results presented below include the results of American Skandia from the date of acquisition.

 

Our Gibraltar Life operations use a November 30 fiscal year end. Consolidated balance sheet data as of December 31, 2006, 2005, 2004, 2003 and 2002 includes Gibraltar Life assets and liabilities as of November 30. Consolidated income statement data for 2006, 2005, 2004, 2003 and 2002 includes Gibraltar Life results for the twelve months ended November 30, 2006, 2005, 2004, 2003 and 2002, respectively.

 

We have made several dispositions that materially affect the comparability of the data presented below. In the fourth quarter of 2003, we completed the sale of our property and casualty insurance companies that operated nationally in 48 states outside of New Jersey, and the District of Columbia, to Liberty Mutual Group, as well as our New Jersey property and casualty insurance companies to Palisades Group. Results for 2003 include a pre-tax loss of $491 million related to the disposition of these businesses. In the fourth quarter of 2000, we terminated the capital markets activities of Prudential Securities. This business had pre-tax income of $287 million in 2003, including the gain from a $332 million settlement of an arbitration award and a pre-tax loss of $36 million in 2002. In 2000, we sold Gibraltar Casualty Company, a commercial property and casualty insurer. We incurred losses of $81 million in 2003 and $79 million in 2002 under a stop-loss agreement we entered into at the time of sale.


This selected consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements included elsewhere herein.

 

     Year Ended December 31,  
         2006        2005     2004     2003         2002      
     (in millions, except per share and ratio information)  

Income Statement Data:

           

Revenues:

           

Premiums

   $ 13,908    $ 13,756     $ 12,521     $ 13,163     $ 12,914  

Policy charges and fee income

     2,653      2,520       2,342       1,978       1,815  

Net investment income

     11,351      10,595       9,454       8,651       8,779  

Realized investment gains (losses), net

     774      1,378       778       375       (1,290 )

Asset management fees and other income

     3,582      3,098       2,718       3,131       3,489  
                                       

Total revenues

     32,268      31,347       27,813       27,298       25,707  
                                       

Benefits and expenses:

           

Policyholders’ benefits

     14,283      13,883       12,863       13,301       13,250  

Interest credited to policyholders’ account balances

     2,917      2,699       2,359       1,857       1,869  

Dividends to policyholders

     2,622      2,850       2,481       2,599       2,641  

General and administrative expenses

     8,052      7,641       6,844       7,173       7,924  

Loss on disposition of property and casualty insurance operations

     —        —         —         491       —    
                                       

Total benefits and expenses

     27,874      27,073       24,547       25,421       25,684  
                                       

Income from continuing operations before income taxes, equity in earnings of operating joint ventures, extraordinary gain on acquisition and cumulative effect of accounting change

     4,394      4,274       3,266       1,877       23  

Income tax expense (benefit)

     1,245      803       931       621       (210 )
                                       

Income from continuing operations before equity in earnings of operating joint ventures, extraordinary gain on acquisition and cumulative effect of accounting change

     3,149      3,471       2,335       1,256       233  

Equity in earnings of operating joint ventures, net of taxes

     208      142       55       45       5  
                                       

Income from continuing operations before extraordinary gain on acquisition and cumulative effect of accounting change(3)

     3,357      3,613       2,390       1,301       238  

Income (loss) from discontinued operations, net of taxes

     71      (73 )     (76 )     (37 )     (44 )

Extraordinary gain on acquisition, net of taxes

     —        —         21       —         —    

Cumulative effect of accounting change, net of taxes

     —        —         (79 )     —         —    
                                       

Net income

   $ 3,428    $ 3,540     $ 2,256     $ 1,264     $ 194  
                                       

Basic income from continuing operations before extraordinary gain on acquisition and cumulative effect of accounting change per share—Common Stock

   $ 6.49    $ 6.59     $ 3.63     $ 2.06     $ 1.33  
                                       

Diluted income from continuing operations before extraordinary gain on acquisition and cumulative effect of accounting change per share—Common Stock

   $ 6.36    $ 6.48     $ 3.56     $ 2.05     $ 1.33  
                                       

Basic net income per share—Common Stock

   $ 6.63    $ 6.45     $ 3.38     $ 1.99     $ 1.25  
                                       

Diluted net income per share—Common Stock

   $ 6.50    $ 6.34     $ 3.31     $ 1.98     $ 1.25  
                                       

Basic and diluted net income (loss) per share—Class B Stock

   $ 108.00    $ 119.50     $ 249.00     $ 89.50     $ (264.00 )
                                       

Dividends declared per share—Common Stock

   $ 0.95    $ 0.78     $ 0.625     $ 0.50     $ 0.40  
                                       

Dividends declared per share—Class B Stock

   $ 9.625    $ 9.625     $ 9.625     $ 9.625     $ 9.625  
                                       

Ratio of earnings to fixed charges(1)

     2.12      2.18       2.10       1.78       1.02  
                                       

 

     As of December 31,
     2006    2005    2004    2003    2002
     (in millions)

Balance Sheet Data:

              

Total investments excluding policy loans

   $ 226,530    $ 213,031    $ 209,383    $ 174,042    $ 174,895

Separate account assets

     177,463      153,159      115,568      106,680      70,555

Total assets

     454,266      413,374      400,828      321,274      292,579

Future policy benefits and policyholders’ account balances

     187,603      177,531      179,337      146,223      140,168

Separate account liabilities

     177,463      153,159      115,568      106,680      70,555

Short-term debt

     12,536      11,114      4,044      4,739      3,469

Long-term debt

     11,423      8,270      7,627      5,610      4,757

Total liabilities

     431,374      390,611      378,484      299,982      270,559

Guaranteed beneficial interest in Trust holding solely debentures of Parent(2)

     —        —        —        —        690

Stockholders’ equity(4)

   $ 22,892    $ 22,763    $ 22,344    $ 21,292    $ 21,330

 

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(1)   For purposes of this computation, earnings are defined as income from continuing operations before income taxes, extraordinary gain on acquisition and cumulative effect of accounting change excluding undistributed income from equity method investments, fixed charges and interest capitalized. Fixed charges are the sum of gross interest expense, interest credited to policyholders’ account balances and an estimated interest component of rent expense.
(2)   Effective December 31, 2003, the Company adopted the revised guidance under FIN No. 46. As a result, the Trust was deconsolidated and the Prudential Financial debentures are reported as “Long-term debt.”
(3)   The SEC and other regulators are investigating the Company’s reinsurance arrangements and the SEC’s investigation is focused on certain reinsurance contracts entered into with a single counterparty in the years 1997 through 2002 relating to the Company’s property and casualty insurance operations that were sold in 2003. The Company accounted for these property and casualty contracts as reinsurance. However, if as a result of these investigations deposit accounting rather than reinsurance accounting were required to be applied to these property and casualty contracts, there would be no impact on the consolidated financial statements of the Company for any annual period for which selected consolidated income statement data is presented above (or for any interim period subsequent to December 31, 2002) except that consolidated income (loss) from continuing operations before extraordinary gain on acquisition and cumulative effect of accounting change would be decreased by approximately $25 million in 2002. See “Legal Proceedings.”
(4)   The Company adopted Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” effective December 31, 2006, which resulted in a reduction of stockholders’ equity of $556 million upon adoption.

 

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