Prudential 2012 Annual Report Download - page 185

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
20. FAIR VALUE OF ASSETS AND LIABILITIES (continued)
Level 1—Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or
liabilities. The Company’s Level 1 assets and liabilities primarily include certain cash equivalents and short term investments, equity
securities and derivative contracts that trade on an active exchange market.
Level 2—Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market
data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that
are not active for identical or similar assets or liabilities, and other market observable inputs. The Company’s Level 2 assets and liabilities
include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed
securities, etc.), certain equity securities (mutual funds, which do not actively trade and are priced based on a net asset value), certain
commercial mortgage loans, short-term investments and certain cash equivalents (primarily commercial paper), and certain over-the-
counter derivatives.
Level 3—Fair value is based on at least one or more significant unobservable inputs for the asset or liability. The assets and liabilities
in this category may require significant judgment or estimation in determining the fair value. The Company’s Level 3 assets and liabilities
primarily include: certain private fixed maturities and equity securities, certain manually priced public equity securities and fixed
maturities, certain highly structured over-the-counter derivative contracts, certain commercial mortgage loans, certain consolidated real
estate funds for which the Company is the general partner, and embedded derivatives resulting from certain products with guaranteed
benefits.
Assets and Liabilities by Hierarchy Level—The tables below present the balances of assets and liabilities measured at fair value on
a recurring basis, as of the dates indicated.
As of December 31, 2012
Level 1 Level 2 Level 3 Netting(1) Total
(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies ........ $ 0 $ 17,386 $ 0 $ $ 17,386
Obligations of U.S. states and their political subdivisions ............................... 0 3,452 0 3,452
Foreign government bonds ....................................................... 0 88,290 0 88,290
Corporate securities ............................................................ 0 157,701 1,630 159,331
Asset-backed securities .......................................................... 0 7,633 3,703 11,336
Commercial mortgage-backed securities ............................................ 0 11,813 124 11,937
Residential mortgage-backed securities ............................................. 0 9,593 11 9,604
Subtotal .................................................................. 0 295,868 5,468 301,336
Trading account assets:(2)
U.S. Treasury securities and obligations of U.S. government authorities and agencies ........ 0 287 0 287
Obligations of U.S. states and their political subdivisions ............................... 0 259 0 259
Foreign government bonds ....................................................... 2 767 0 769
Corporate securities ............................................................ 0 13,609 134 13,743
Asset-backed securities .......................................................... 0 923 431 1,354
Commercial mortgage-backed securities ............................................ 0 2,298 8 2,306
Residential mortgage-backed securities ............................................. 0 2,024 2 2,026
Equity securities ............................................................... 1,198 181 1,098 2,477
All other(3) ................................................................... 664 13,371 25 (10,363) 3,697
Subtotal .................................................................. 1,864 33,719 1,698 (10,363) 26,918
Equity securities, available-for-sale ................................................ 5,518 2,429 330 8,277
Commercial mortgage and other loans .............................................. 0 114 48 162
Other long-term investments ..................................................... (57) 141 1,053 246 1,383
Short-term investments .......................................................... 3,519 2,871 0 6,390
Cash equivalents ............................................................... 3,105 10,495 0 13,600
Other assets ................................................................... 78 109 8 195
Subtotal excluding separate account assets ...................................... 14,027 345,746 8,605 (10,117) 358,261
Separate account assets(4) ....................................................... 39,362 192,760 21,132 253,254
Total assets ............................................................... $53,389 $538,506 $29,737 $(10,117) $611,515
Future policy benefits ........................................................... $ 0 $ 0 $ 3,348 $ $ 3,348
Other liabilities and notes of consolidated VIEs ...................................... 0 8,121 1,406 (8,031) 1,496
Total liabilities ............................................................ $ 0 $ 8,121 $ 4,754 $ (8,031) $ 4,844
Prudential Financial, Inc. 2012 Annual Report 183