Prudential 2012 Annual Report Download - page 145

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
4. INVESTMENTS (continued)
(1) See Note 21 for more information on cash flow hedges.
(2) As of December 31, 2012, includes $63 million of net unrealized losses on held-to-maturity securities that were previously transferred from available-
for-sale. Also includes net unrealized gains on certain joint ventures that are strategic in nature and are included in “Other assets.”
Duration of Gross Unrealized Loss Positions for Fixed Maturities and Equity Securities
The following table shows the fair value and gross unrealized losses aggregated by investment category and length of time that
individual fixed maturity securities and equity securities have been in a continuous unrealized loss position, at December 31:
2012
Less than twelve months Twelve months or more Total
Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses
(in millions)
Fixed maturities(1)
U.S. Treasury securities and obligations of U.S.
government authorities and agencies .............. $ 2,191 $ 33 $ 42 $ 2 $ 2,233 $ 35
Obligations of U.S. states and their political
subdivisions ................................. 343 5 5 0 348 5
Foreign government bonds ........................ 5,426 55 167 11 5,593 66
Corporate securities ............................. 25,051 599 7,961 1,057 33,012 1,656
Commercial mortgage-backed securities ............. 525 3 185 14 710 17
Asset-backed securities .......................... 911 11 3,545 720 4,456 731
Residential mortgage-backed securities .............. 773 4 259 29 1,032 33
Total ..................................... $35,220 $710 $12,164 $1,833 $47,384 $2,543
Equity securities, available-for-sale ............... $ 961 $ 55 $ 0 $ 0 $ 961 $ 55
(1) Includes $526 million of fair value and $67 million of gross unrealized losses at December 31, 2012 on securities classified as held-to-maturity, a
portion of which are not reflected in accumulated other comprehensive income.
2011
Less than twelve months Twelve months or more Total
Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses
(in millions)
Fixed maturities(1)
U.S. Treasury securities and obligations of U.S.
government authorities and agencies .............. $ 870 $ 8 $ 130 $ 10 $ 1,000 $ 18
Obligations of U.S. states and their political
subdivisions ................................. 70462532
Foreign government bonds ........................ 4,017 182 306 27 4,323 209
Corporate securities ............................. 21,419 1,144 9,691 1,969 31,110 3,113
Commercial mortgage-backed securities ............. 917 61 362 47 1,279 108
Asset-backed securities .......................... 2,746 40 4,134 1,785 6,880 1,825
Residential mortgage-backed securities .............. 422 19 378 60 800 79
Total ..................................... $30,398 $1,454 $15,047 $3,900 $45,445 $5,354
Equity securities, available-for-sale ............... $ 2,602 $ 448 $ 0 $ 0 $ 2,602 $ 448
(1) Includes $706 million of fair value and $98 million of gross unrealized losses at December 31, 2011 on securities classified as held-to-maturity, a
portion of which are not reflected in accumulated other comprehensive income.
The gross unrealized losses at December 31, 2012 and 2011 are composed of $1,866 million and $3,535 million related to high or
highest quality securities based on NAIC or equivalent rating and $677 million and $1,819 million related to other than high or highest
quality securities based on NAIC or equivalent rating. At December 31, 2012, the $1,833 million of gross unrealized losses of twelve
months or more were concentrated in asset-backed securities, and in the finance and consumer cyclical sectors of the Company’s corporate
securities. At December 31, 2011, the $3,900 million of gross unrealized losses of twelve months or more were concentrated in asset-
backed securities, and in the finance and utility sectors of the Company’s corporate securities. In accordance with its policy described in
Note 2, the Company concluded that an adjustment to earnings for other-than-temporary impairments for these securities was not warranted
at December 31, 2012 and 2011. These conclusions are based on a detailed analysis of the underlying credit and cash flows on each
security. The gross unrealized losses are primarily attributable to foreign currency movements, credit spread widening and increased
liquidity discounts. At December 31, 2012, the Company does not intend to sell the securities and it is not more likely than not that the
Company will be required to sell the securities before the anticipated recovery of its remaining amortized cost basis.
Prudential Financial, Inc. 2012 Annual Report 143