Prudential 2011 Annual Report Download - page 91

(6) Excluded from the above are securities held outside the general account in other entities and operations. For additional information regarding
investments held outside the general account, see “—Invested Assets of Other Entities and Operations” below.
(7) The table above excludes fixed maturity securities classified as trading. See “—Trading Account Assets Supporting Insurance Liabilities” and “—Other
Trading Account Assets” for additional information.
The change in net unrealized gains and losses from December 31, 2010 to December 31, 2011, was primarily due to a decrease in
interest rates in both the U.S. and Japan.
The following table sets forth the composition of the portion of our fixed maturity securities portfolio by industry category attributable
to the Closed Block Business as of the dates indicated and the associated gross unrealized gains and losses.
Fixed Maturity Securities—Closed Block Business
December 31, 2011 December 31, 2010
Industry(1)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in millions)
Corporate securities:
Manufacturing ........................... $ 8,325 $1,167 $ 40 $ 9,452 $ 7,940 $ 754 $ 66 $ 8,628
Utilities ................................. 5,630 907 55 6,482 5,566 510 42 6,034
Services ................................ 4,731 578 35 5,274 4,562 377 35 4,904
Finance ................................. 3,088 151 74 3,165 2,723 125 53 2,795
Energy ................................. 1,806 259 4 2,061 1,887 184 6 2,065
Retail and Wholesale ...................... 1,525 255 8 1,772 1,641 166 21 1,786
Transportation ........................... 1,347 153 13 1,487 1,349 102 19 1,432
Other .................................. 49 13 0 62 29 2 0 31
Total corporate securities ....................... 26,501 3,483 229 29,755 25,697 2,220 242 27,675
Asset-backed securities(2) ...................... 4,935 56 819 4,172 4,570 60 701 3,929
Commercial mortgage-backed ................... 3,559 158 2 3,715 3,615 170 6 3,779
U.S. Government ............................. 4,594 943 0 5,537 6,066 197 228 6,035
Residential mortgage-backed .................... 1,880 125 19 1,986 2,311 129 15 2,425
Foreign government(3) ........................ 492 86 5 573 596 90 9 677
State & Municipal ............................ 679 100 1 778 651 19 13 657
Total(4) ............................ $42,640 $4,951 $1,075 $46,516 $43,506 $2,885 $1,214 $45,177
(1) Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for
all other holdings.
(2) Includes securities collateralized by sub-prime mortgages. See “—Asset-Backed Securities” below.
(3) As of both December 31, 2011 and 2010, based on amortized cost, no individual foreign country represented more than 8% of the balance.
(4) The table above excludes fixed maturity securities classified as trading. See “—Other Trading Account Assets” for additional information.
The change in net unrealized gains and losses from December 31, 2010 to December 31, 2011, was primarily due to a decrease in
interest rates.
Asset-Backed Securities
Included within asset-backed securities attributable to the Financial Services Businesses are securities collateralized by sub-prime
mortgages. While there is no market standard definition, we define sub-prime mortgages as residential mortgages that are originated to
weaker quality obligors as indicated by weaker credit scores, as well as mortgages with higher loan-to-value ratios, or limited
documentation. The significant deterioration of the U.S. housing market, high interest rate resets, higher unemployment levels, and relaxed
underwriting standards for some originators of sub-prime mortgages have led to higher delinquency rates, particularly for those mortgages
issued in 2006 and 2007. Recently there has been significant attention given to potential deficiencies in lenders’ foreclosure documentation,
causing delays in the foreclosure process. Many lenders have indicated that the issues are administrative and they do not expect significant
delays in their foreclosure proceedings. From the perspective of an investor in securities backed by sub-prime collateral, any significant
delays in foreclosure proceedings could result in increased servicing costs which could negatively affect the value of the impacted
securities. Separately, as an investor in sub-prime securities, we are evaluating our legal options with respect to potential remedies arising
from any potential deficiencies related to the original lending and securitization practices. The following tables set forth the amortized cost
and fair value of our asset-backed securities attributable to the Financial Services Businesses as of the dates indicated, by credit quality, and
for asset-backed securities collateralized by sub-prime mortgages, by year of issuance (vintage).
Prudential Financial, Inc. 2011 Annual Report 89