Prudential 2011 Annual Report Download - page 117

The following table sets forth the cost and gross unrealized losses of our equity securities attributable to the Closed Block Business
where the estimated fair value had declined and remained below cost by 20% or more for the following timeframes:
Unrealized Losses from Equity Securities, Greater than 20%—Closed Block Business
December 31, 2011 December 31, 2010
Amortized
Cost(1)
Gross
Unrealized
Losses(1)
Amortized
Cost(1)
Gross
Unrealized
Losses(1)
(in millions)
Less than three months ............................................................ $164 $ 43 $12 $ 3
Three months or greater but less than six months ........................................ 166 59 11 3
Six months or greater but less than nine months ......................................... 8 3 10 4
Nine months or greater but less than twelve months ...................................... 0 0 0 0
Greater than twelve months ......................................................... 0 0 0 0
Total ...................................................................... $338 $105 $33 $10
(1) The aging of amortized cost and gross unrealized losses is determined based upon a count of the number of months the estimated fair value remained
below cost by 20% or more, using month-end valuations.
The gross unrealized losses as of December 31, 2011, were primarily concentrated in the manufacturing and finance sectors compared
to December 31, 2010, where the gross unrealized losses were primarily concentrated in the services, manufacturing, and finance sectors.
Gross unrealized losses attributable to the Closed Block Business where the estimated fair value had declined and remained below cost by
20% or more of $105 million as of December 31, 2011 does not include any gross unrealized losses on securities where the estimated fair
value had declined and remained below cost by 50% or more. Perpetual preferred securities have characteristics of both debt and equity
securities. Since we apply to these securities an impairment model similar to our fixed maturity securities, we have not recognized an other-
than-temporary impairment on certain of these perpetual preferred securities that have been in a continuous unrealized loss position for
twelve months or more as of December 31, 2010. We have not recognized the gross unrealized losses shown in the table above as other-
than-temporary impairments. See “—Other-Than-Temporary Impairments of Equity Securities” for a discussion of the factors we consider
in making these determinations.
Other-Than-Temporary Impairments of Equity Securities
For those equity securities classified as available-for-sale, we record unrealized gains and losses to the extent cost is different from
estimated fair value. All securities with unrealized losses are subject to our review to identify other-than-temporary impairments in value.
In evaluating whether a decline in value is other-than-temporary, we consistently consider several factors including, but not limited to, the
following:
• the extent and the duration of the decline; including, but not limited to, the following general guidelines:
• declines in value greater than 20%, maintained for six months or greater;
• declines in value maintained for one year or greater; and
• declines in value greater than 50%;
• the reasons for the decline in value (issuer specific event, currency or market fluctuation);
• our ability and intent to hold the investment for a period of time to allow for a recovery of value, including certain equity securities
managed by independent third parties where we do not exercise management discretion concerning individual buy or sell decisions;
and
• the financial condition of and near-term prospects of the issuer.
We generally recognize other-than-temporary impairments for securities with declines in value greater than 50% maintained for six
months or greater or with any decline in value maintained for one year or greater. In addition, in making our determinations we continue to
analyze the financial condition and near-term prospects of the issuer, including an assessment of the issuer’s capital position, and consider
our ability and intent to hold the investment for a period of time to allow for a recovery of value.
For those securities that have declines in value that are deemed to be only temporary, we make an assertion as to our ability and intent
to retain the security until recovery. Once identified, these securities are restricted from trading unless authorized based upon events that
could not have been foreseen at the time we asserted our ability and intent to retain the security until recovery. Examples of such events
include, but are not limited to, the deterioration of the issuer’s creditworthiness, a major business combination or disposition, a change in
regulatory requirements, certain other portfolio actions or other similar events. For those securities that have declines in value for which we
cannot assert our ability and intent to retain until recovery, including certain equity securities managed by independent third parties where
we do not exercise management discretion concerning individual buy or sell decisions, impairments are recognized as other-than-temporary
regardless of the reason for, or the extent of, the decline. For perpetual preferred securities, which have characteristics of both debt and
equity securities, we apply an impairment model similar to our fixed maturity securities, factoring in the position of the security in the
capital structure and the lack of a formal maturity date. For additional discussion of our policies regarding other-than-temporary
impairments of fixed maturity securities, see “—Fixed Maturity Securities—Other-than-Temporary Impairments of Fixed Maturity
Securities” above.
Prudential Financial, Inc. 2011 Annual Report 115