In addition to the gross profit components mentioned above, we also include the impact of the embedded derivatives associated with certain of the optional living benefit features of our variable annuity contracts and related hedging activities in actual gross profits used as the basis for calculating current period amortization, including any impacts that are recorded in the reinsurance affiliate. Historically, we also included the impact of these embedded derivatives and related hedging activities, excluding the impact of the market-perceived risk of our own non-performance, in our total gross profits used to determine the DAC and DSI amortization rates. In the third quarter of 2010, the hedging strategy of the Company and our reinsurance affiliate was revised, which resulted in a change in how certain gross profit components are used to determine the DAC and DSI amortization rates. For additional information regarding the change in hedging strategy see “Item 1. Business - Products.” As of the third quarter of 2010, management’s best estimate of the total gross profits associated with these optional living benefit features and related hedge positions is based
Total assets increased $20.389 billion, from $39.083 billion at December 31, 2009 to $59.472 billion at December 31, 2010. Separate account assets increased $18.106 billion, from $25.163 billion at December 31, 2009 to $43.269 billion at December 31, 2010, primarily driven by both increased annuity deposits that resulted in positive net flows, and improvements in equity markets.
Total liabilities increased by $19.971 billion, from $36.175 billion at December 31, 2009 to $56.146 billion at December 31, 2010, primarily due to an increase in separate account liabilities of $18.106 billion, driven mainly by positive net flows and improvements in equity markets described above. Policyholder account balances increased $714 million, from $6.795 billion at December 31, 2009 to $7.509 billion at December 31, 2010, primarily driven by continued growth in universal life in force. Future policy benefits and other policyholder liabilities increased by $182 million, from $3.146 billion at December 31, 2009 to $3.328 billion at December 31, 2010, primarily driven by an increase in life reserves associated with term in force growth, partially offset by a decrease in the liability for variable annuity living benefit embedded derivatives due to a decrease in the present value of future expected benefit payments primarily driven by the impact of favorable equity markets.
2010 to 2009 Annual Comparison Revenues increased $230 million from $371 million in 2009 to $601 million in 2010.
The Risk Based Capital, or RBC, ratio is a primary measure by which we evaluate the capital adequacy of the Company. Prudential Financial manages its domestic insurance subsidiaries RBC ratios to a level that is consistent with the ratings targets for those subsidiaries and in excess of the minimum levels required by applicable insurance regulations. RBC is determined by statutory formulas that consider risks related to the type and quality of the invested assets, insurance-related risks associated with an insurer’s products, interest rate risks and general business risks. The RBC ratio calculations are intended to assist insurance regulators in measuring the adequacy of an insurer’s statutory capitalization. As of December 31, 2010, the RBC ratio for each of Prudential Insurance and the Company exceeded the minimum levels required by applicable insurance regulations.