Cost Savings and Strategic Growth
Non-GAAP Measures (Continued)
Realized investment gains (losses) within certain businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of
foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income generally excludes realized investment
gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset-liability management program related to the
risk of those products. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange
movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain
investments that are designated as trading. Adjusted operating income also excludes investment gains and losses on assets supporting experience-rated contractholder liabilities
and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately
accrue to contractholders. Additionally, adjusted operating income excludes the changes in fair value of equity securities that are recorded in net income.
Adjusted operating income excludes market experience updates, reflecting the immediate impacts in current period results from changes in current market conditions on
estimates of profitability, which we believe enhances the understanding of underlying performance trends. Adjusted operating income also excludes the results of Divested and
Run-off Businesses, which are not relevant to our ongoing operations and discontinued operations and earnings attributable to noncontrolling interests, each of which is
presented as a separate component of net income under GAAP. Additionally, adjusted operating income excludes other items, such as certain components of the consideration
for acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of contingent consideration. Earnings
attributable to noncontrolling interests is presented as a separate component of net income under GAAP and excluded from adjusted operating income. The tax effect associated
with pre-tax adjusted operating income is based on applicable IRS and foreign tax regulations inclusive of pertinent adjustments.
Adjusted operating income does not equate to “Net income" as determined in accordance with U.S. GAAP. Adjusted operating income is not a substitute for income determined
in accordance with U.S. GAAP, and our definition of adjusted operating income may differ from that used by other companies. The items above 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 of our businesses. Trends in the underlying
profitability of our businesses can be more clearly identified without the fluctuating effects of the items described above.
Adjusted book value is calculated as total equity (GAAP book value) excluding accumulated other comprehensive income (loss) and the cumulative effect of foreign currency
exchange rate remeasurements and currency translation adjustments corresponding to realized investment gains and losses. These items are excluded in order to highlight the
book value attributable to our core business operations separate from the portion attributable to external and potentially volatile capital and currency market conditions.
Expanding access to investing, insurance, and retirement security
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