"Considering current financial market conditions, including equity marketlevels, interest rates and credit spreads, we believe that Prudential Financialwill achieve Common Stock earnings per share for 2009 in the range of $4.80 to$5.20 based on after-tax adjusted operating income of the Financial ServicesBusinesses. This expectation assumes appreciation of 2% per quarter in the S&P500 index, commencing with its close as of December 31, 2008," Strangfeld said.The 2009 expectation is subject to change if this assumption is not realized andas discussed under "Forward-Looking Statements and Non-GAAP Measures" below. Adjusted operating income is not calculated under generally accepted accountingprinciples (GAAP). Information regarding adjusted operating income, a non-GAAPmeasure, is discussed later in this press release under "Forward-LookingStatements and Non-GAAP Measures," and a reconciliation of adjusted operatingincome to the most comparable GAAP measure is provided in the tables thataccompany this release. Financial Services BusinessesPrudential Financial`s Common Stock (NYSE:PRU) reflects the performance of itsFinancial Services Businesses, which consist of its U.S Retirement Solutionsand Investment Management, U.S. Individual Life and Group Insurance, andInternational Insurance and Investments divisions and its Corporate and Otheroperations. Reported results for the first quarter of 2009 and earlier periods presentedreflect the implementation of new accounting guidance issued by the FinancialAccounting Standards Board, as discussed under "New Accounting Guidance" laterin this release.
In the following business-level discussion, adjusted operatingincome refers to pre-tax results The U.S. Retirement Solutions and Investment Management division reportedadjusted operating income of $175 million for the first quarter of 2009,compared to $358 million in the year-ago quarter. The Individual Annuities segment reported adjusted operating income of $17million in the current quarter, compared to $115 million in the year-agoquarter. Current quarter results include charges of $215 million to strengthenreserves for guaranteed minimum death and income benefits and $112 millionrepresenting a net increase in amortization of deferred policy acquisition andother costs reflecting an updated estimate of profitability for this business.These charges were largely driven by declines in customer account values throughMarch 31, 2009. Results for the year-ago quarter included net charges of $15million from adjustment of these items to recognize experience in that period.Mark-to-market of embedded derivatives and related hedge positions associatedwith living benefits, after amortization of deferred policy acquisition andother costs, resulted in a net benefit of $261 million to current quarteradjusted operating income, which included a benefit of $236 million from therequired adjustment of embedded derivative liabilities for living benefits torecognize market-based non-performance risk associated with our own creditstanding. Results for the year-ago quarter included net charges of $17 millionfrom mark-to-market of these embedded derivatives and related hedge positions.Excluding the effect of the foregoing items, adjusted operating income for theIndividual Annuities segment declined $64 million from the year-ago quarter,primarily reflecting lower fees driven by market value declines in customeraccount values.
The Retirement segment reported adjusted operating income of $159 million forthe current quarter, an increase of $35 million from the year-ago quarter. Theincrease primarily resulted from a greater contribution from net investmentspreads, which more than offset lower fees associated with market value declinesin customer account values. In addition, current quarter results benefited $13million from the required adjustment of liabilities for contract guarantees torecognize market-based non-performance risk. The Asset Management segment reported a loss of $1 million for the currentquarter, compared to adjusted operating income of $119 million for the year-agoquarter. The decrease came primarily from lower performance-based fees,primarily related to institutional real estate funds, and less favorable resultsfrom proprietary investing activities.