Prudential 2012 Annual Report Download - page 133

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
4. INVESTMENTS (continued)
The amortized cost and fair value of fixed maturities by contractual maturities at December 31, 2012, are as follows:
Available-for-Sale Held-to-Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(in millions)
Due in one year or less ................................................... $ 11,592 $ 11,791 $ 0 $ 0
Due after one year through five years ....................................... 48,308 50,703 97 100
Due after five years through ten years ....................................... 63,167 69,323 358 369
Due after ten years(1) .................................................... 122,360 136,642 1,752 1,816
Asset-backed securities ................................................... 11,846 11,336 1,001 1,067
Commercial mortgage-backed securities ..................................... 11,228 11,937 302 351
Residential mortgage-backed securities ...................................... 9,153 9,604 758 808
Total ............................................................. $277,654 $301,336 $4,268 $4,511
(1) Excludes notes with amortized cost of $1,500 million (fair value, $1,660 million) which have been offset with the associated payables under a netting
agreement.
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-
backed, commercial mortgage-backed, and residential mortgage-backed securities are shown separately in the table above, as they are not
due at a single maturity date.
The following table depicts the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on
impairments of both fixed maturities and equity securities:
2012 2011 2010
(in millions)
Fixed maturities, available-for-sale
Proceeds from sales ................................................................. $15,919 $24,834 $11,214
Proceeds from maturities/repayments ................................................... 21,897 17,660 17,346
Gross investment gains from sales, prepayments, and maturities .............................. 659 1,100 714
Gross investment losses from sales and maturities ......................................... (359) (335) (226)
Fixed maturities, held-to-maturity
Gross investment gains from prepayments ............................................... $ 0 $ 0 $ 0
Proceeds from maturities/repayments ................................................... 530 457 470
Equity securities, available-for-sale
Proceeds from sales ................................................................. $ 4,189 $ 3,750 $ 2,467
Gross investment gains from sales ..................................................... 422 506 364
Gross investment losses from sales ..................................................... (273) (249) (67)
Fixed maturity and equity security impairments
Net writedowns for other-than-temporary impairment losses on fixed maturities recognized in
earnings(1) ...................................................................... $ (337) $ (535) $ (732)
Writedowns for impairments on equity securities .......................................... (125) (112) (112)
(1) Excludes the portion of other-than-temporary impairments recorded in “Other comprehensive income (loss),” representing any difference between the
fair value of the impaired debt security and the net present value of its projected future cash flows at the time of impairment.
As discussed in Note 2, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities are
recognized in “Other comprehensive income (loss)” (“OCI”). For these securities, the net amount recognized in earnings (“credit loss
impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash
flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair
value and amortized cost is recognized in OCI. The following table sets forth the amount of pre-tax credit loss impairments on fixed
maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in OCI, and the
corresponding changes in such amounts.
Credit losses recognized in earnings on fixed maturity securities held by the Company for which a portion of the
OTTI loss was recognized in OCI
Year Ended December 31,
2012 2011
(in millions)
Balance, beginning of period ................................................................ $1,475 $1,493
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold
during the period ........................................................................ (384) (379)
Credit loss impairments previously recognized on securities impaired to fair value during the period(1) ..... (88) (32)
Credit loss impairment recognized in the current period on securities not previously impaired ............. 33 49
Additional credit loss impairments recognized in the current period on securities previously impaired ....... 94 317
Increases due to the passage of time on previously recorded credit losses .............................. 63 58
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be
collected .............................................................................. (27) (31)
Balance, end of period ..................................................................... $1,166 $1,475
Prudential Financial, Inc. 2012 Annual Report 131