Prudential 2012 Annual Report Download - page 60

During 2012, we recorded other-than-temporary impairments of $99 million in earnings, compared to other-than-temporary
impairments of $127 million recorded in earnings in 2011. The following tables set forth, for the periods indicated, the composition of
other-than-temporary impairments recorded in earnings attributable to the Closed Block Business by asset type, and for fixed maturity
securities, by reason.
Year Ended December 31,
2012 2011
(in millions)
Other-than-temporary impairments recorded in earnings—Closed Block Business(1)
Public fixed maturity securities ....................................................................... $56 $ 90
Private fixed maturity securities ...................................................................... 18 14
Total fixed maturity securities ................................................................... 74 104
Equity securities .................................................................................. 21 18
Other invested assets(2) ............................................................................ 4 5
Total ....................................................................................... $99 $127
(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.
(2) Includes other-than-temporary impairments relating to investments in joint ventures and partnerships.
Year Ended December 31, 2012
Asset-Backed Securities
Collateralized By
Sub-Prime Mortgages
All Other Fixed
Maturity
Securities
Total Fixed
Maturity
Securities
(in millions)
Other-than-temporary impairments on fixed maturity securities recorded in earnings—
Closed Block Business(1)
Due to credit events or adverse conditions of the respective issuer(2) ................ $39 $33 $72
Due to other accounting guidelines(3) ........................................ 1 1 2
Total .............................................................. $40 $34 $74
Year Ended December 31, 2011
Asset-Backed Securities
Collateralized By
Sub-Prime Mortgages
All Other Fixed
Maturity
Securities
Total Fixed
Maturity
Securities
(in millions)
Other-than-temporary impairments on fixed maturity securities recorded in earnings—
Closed Block Business(1)
Due to credit events or adverse conditions of the respective issuer(2) ................ $61 $36 $ 97
Due to other accounting guidelines(3) ........................................ 6 1 7
Total .............................................................. $67 $37 $104
(1) Excludes the portion of other-than-temporary impairment 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.
(2) Represents circumstances where we believe credit events or other adverse conditions of the respective issuers have caused, or will lead to, a deficiency
in the contractual cash flows related to the investment. The amount of the impairment recorded in earnings is the difference between the amortized cost
of the debt 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.
(3) Primarily represents circumstances where we intend to sell the security or more likely than not will be required to sell the security before recovery of its
amortized cost basis.
Fixed maturity other-than-temporary impairments of $74 million in 2012 were concentrated in asset-backed securities collateralized
by sub-prime mortgages, and the utility and capital goods sectors of our corporate securities and were primarily driven by liquidity
concerns, downgrades in credit, bankruptcy or other adverse financial conditions of the respective issuers, which have caused, or we
believe will lead to, a deficiency in the contractual cash flows related to the investment. Fixed maturity other-than-temporary impairments
of $104 million in 2011 were concentrated in asset-backed securities collateralized by sub-prime mortgages, and the utility and consumer
cyclical sectors of our corporate securities and were primarily driven by liquidity concerns, downgrades in credit, bankruptcy or other
adverse financial conditions of the respective issuers, which have caused, or we believe will lead to, a deficiency in the contractual cash
flows related to the investment.
Equity security other-than-temporary impairments in 2012 and 2011 were primarily due to circumstances where the decline in value
was maintained for one year or greater.
For a further discussion of our policies regarding other-than-temporary impairments see “—General Account Investments—Fixed
Maturity Securities—Other-Than-Temporary Impairments of Fixed Maturity Securities” and “—General Account Investments—Equity
Securities—Other-Than-Temporary Impairments of Equity Securities” below.
2011 to 2010 Annual Comparison
Financial Services Businesses
The Financial Services Businesses’ net realized investment gains in 2011 were $1,986 million, compared to net realized investment
gains of $256 million in 2010.
58 Prudential Financial, Inc. 2012 Annual Report