Prudential 2011 Annual Report Download - page 112

The following table sets forth the breakdown of our commercial and agricultural mortgage loans by year of origination
as of December 31, 2011.
December 31, 2011
Financial Services Businesses Closed Block Business
Year of Origination
Gross
Carrying
Value % of Total
Gross
Carrying
Value % of Total
($ in millions)
2011 ........................................................................ $ 4,940 22.5% $1,473 16.2%
2010 ........................................................................ 3,243 14.7 1,086 11.9
2009 ........................................................................ 1,507 6.9 491 5.4
2008 ........................................................................ 2,861 13.0 1,120 12.3
2007 ........................................................................ 3,496 15.9 1,442 15.9
2006 and prior ................................................................ 5,941 27.0 3,488 38.3
Total commercial and agricultural mortgage loans ................................ $21,988 100.0% $9,100 100.0%
Commercial Mortgage and Other Loans by Contractual Maturity Date
The following table sets forth the breakdown of our commercial mortgage and other loan portfolio by contractual maturity as of
December 31, 2011.
December 31, 2011
Financial Services Businesses Closed Block Business
Amortized
Cost % of Total
Amortized
Cost % of Total
($ in millions)
Vintage
Maturing in 2012 ............................................................. $ 2,297 9.1% $ 735 8.1%
Maturing in 2013 ............................................................. 2,409 9.5 680 7.5
Maturing in 2014 ............................................................. 1,540 6.1 860 9.4
Maturing in 2015 ............................................................. 2,386 9.4 878 9.6
Maturing in 2016 ............................................................. 2,892 11.4 957 10.5
Maturing in 2017 ............................................................. 2,686 10.6 635 7.0
Maturing in 2018 ............................................................. 3,117 12.3 1,061 11.7
Maturing in 2019 ............................................................. 742 2.9 271 3.0
Maturing in 2020 ............................................................. 1,560 6.2 850 9.3
Maturing in 2021 ............................................................. 2,149 8.5 1,029 11.3
Maturing in 2022 ............................................................. 803 3.2 327 3.6
Maturing in 2023 and beyond ................................................... 2,742 10.8 817 9.0
Total commercial mortgage and other loans ........................................ $25,323 100.0% $9,100 100.0%
Commercial Mortgage and Other Loan Quality
Ongoing review of the portfolio is performed and loans are placed on watch list status based on a predefined set of criteria, where they
are assigned to one of the following categories. We place loans on early warning status in cases where, based on our analysis of the loan’s
collateral, the financial situation of the borrower or tenants or other market factors, we believe a loss of principal or interest could occur.
We classify loans as closely monitored when we determine there is a collateral deficiency or other credit events that may lead to a potential
loss of principal or interest. Loans not in good standing are those loans where we have concluded that there is a high probability of loss of
principal, such as when the loan is in the process of foreclosure or the borrower is in bankruptcy. In our domestic operations, our workout
and special servicing professionals manage the loans on the watch list. As described below, in determining our allowance for losses we
evaluate each loan on the watch list to determine if it is probable that amounts due according to the contractual terms of the loan agreement
will not be collected. In our international portfolios, we monitor delinquency in consumer loans on a pool basis and evaluate any servicing
relationship and guarantees the same way we do for commercial mortgage loans.
We establish an allowance for losses to provide for the risk of credit losses inherent in the lending process. The allowance includes
loan specific reserves for loans that are determined to be impaired as a result of our loan review process, and a portfolio reserve for
probable incurred but not specifically identified losses for loans which are not on the watch list. We define an impaired loan as a loan for
which we estimate it is probable that amounts due according to the contractual terms of the loan agreement will not be collected. The loan
specific portion of the loss allowance is based on our assessment as to ultimate collectability of loan principal and interest. Valuation
allowances for an impaired loan are recorded based on the present value of expected future cash flows discounted at the loan’s effective
interest rate or based on the fair value of the collateral if the loan is collateral dependent. The portfolio reserve for incurred but not
specifically identified losses considers the current credit composition of the portfolio based on the internal quality ratings mentioned above.
The portfolio reserves are determined using past loan experience, including historical credit migration, loss probability, and loss severity
factors by property type. These factors are reviewed and updated as appropriate. The valuation allowance for commercial mortgage and
other loans can increase or decrease from period to period based on these factors. The following tables set forth the aging schedule of our
general account investments in commercial mortgage and other loans, based upon the recorded investment gross of allowance for credit
losses, attributable to the Financial Services Businesses and Closed Block Business as of the dates indicated.
110 Prudential Financial, Inc. 2011 Annual Report