Prudential 2011 Annual Report Download - page 109

Other Trading Account Assets
“Other trading account assets, at fair value” consist primarily of certain financial instruments that contain an embedded derivative
where we elected to classify the entire instrument as a trading account asset rather than bifurcate. These instruments are carried at fair
value, with realized and unrealized gains and losses reported in “Asset management fees and other income,” and excluded from adjusted
operating income. Interest and dividend income from these investments is reported in “Net investment income,” and is included in adjusted
operating income. The following table sets forth the composition of our other trading account assets as of the dates indicated.
December 31, 2011 December 31, 2010
Financial Services
Businesses
Closed Block
Business
Financial Services
Businesses
Closed Block
Business
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(in millions)
Short-term investments and cash equivalents ................ $ 4 $ 4 $ 0 $ 0 $ 3 $ 3 $ 0 $ 0
Fixed maturities:
Corporate securities ................................ 116 104 110 119 161 150 110 118
Commercial mortgage-backed ........................ 155 111 0 0 143 103 0 0
Residential mortgage-backed ......................... 186 96 0 0 301 181 0 0
Asset-backed securities ............................. 598 551 69 70 636 589 36 37
Foreign government ................................ 46 46 0 0 25 25 0 0
U.S. government ................................... 4 4 0 0 0 0 0 0
Total fixed maturities ........................... 1,105 912 179 189 1,266 1,048 146 155
Equity securities(1) .................................... 1,226 1,177 133 128 157 156 1 1
Other ................................................ 11 11 0 0 12 13 0 0
Total other trading account assets ..................... $2,346 $2,104 $312 $317 $1,438 $1,220 $147 $156
(1) During 2011, perpetual preferred stocks of $1.3 billion ($1.2 billion Financial Services Businesses, $0.1 billion Closed Block Business) were
reclassified from “Equity securities, available-for-sale.” Prior periods were not restated.
As of December 31, 2011, on an amortized cost basis 82% of asset-backed securities classified as “Other trading account assets”
attributable to the Financial Services Businesses have credit ratings of A or above, 9% have BBB and the remaining 9% have BB and
below credit ratings. As of December 31, 2011, on an amortized cost basis 75% of asset-backed securities classified as “Other trading
account assets” attributable to the Closed Block Business have credit ratings of A or above and the remaining 25% have BBB credit
ratings.
Commercial Mortgage and Other Loans
Investment Mix
As of December 31, 2011 and 2010 we held approximately 10% and 11%, respectively, of our general account investments in
commercial mortgage and other loans. This percentage is net of a $310 million and $435 million allowance for losses as of December 31,
2011 and 2010, respectively. The following table sets forth the composition of our commercial mortgage and other loans portfolio, before
the allowance for losses, as of the dates indicated.
December 31, 2011 December 31, 2010
Financial
Services
Businesses
Closed
Block
Business
Financial
Services
Businesses
Closed
Block
Business
(in millions)
Commercial and agricultural mortgage loans ............................................... $21,988 $9,100 $19,796 $8,608
Uncollateralized loans ................................................................. 2,236 0 1,467 0
Residential property loans .............................................................. 1,033 0 891 1
Other collateralized loans .............................................................. 66 0 80 0
Total commercial mortgage and other loans(1) .......................................... $25,323 $9,100 $22,234 $8,609
(1) Excluded from the table above are commercial mortgage loans held outside the general account in other entities and operations. For additional
information regarding commercial mortgage loans held outside the general account, see “—Invested Assets of Other Entities and Operations” below.
We originate commercial and agricultural mortgage loans using a dedicated investment staff and a network of independent companies
through our various regional offices. All loans are underwritten consistently to our standards using a proprietary quality rating system that
has been developed from our experience in real estate and mortgage lending.
Uncollateralized loans primarily represent reverse dual currency loans and corporate loans which do not meet the definition of a
security under authoritative accounting guidance.
Residential property loans primarily include Japanese recourse loans. Upon default of these recourse loans we can make a claim
against the personal assets of the property owner, in addition to the mortgaged property. These loans are also backed by third party
guarantors.
Prudential Financial, Inc. 2011 Annual Report 107