Prudential 2012 Annual Report Download - page 69

Year Ended December 31, 2011
Financial Services
Businesses
Closed Block
Business Combined
Yield(1)(3) Amount Yield(1) Amount Yield(1)(3) Amount
($ in millions)
Fixed maturities ................................................... 3.91% $7,063 5.67% $2,232 4.22% $ 9,295
Trading account assets supporting insurance liabilities ..................... 4.23 776 0.00 0 4.23 776
Equity securities ................................................... 6.01 240 2.75 75 4.68 315
Commercial mortgage and other loans .................................. 5.64 1,295 6.47 553 5.86 1,848
Policy loans ...................................................... 4.75 277 6.22 322 5.44 599
Short-term investments and cash equivalents ............................. 0.39 49 0.73 4 0.40 53
Other investments .................................................. 3.77 243 8.81 174 4.97 417
Gross investment income before investment expenses ................. 3.96 9,943 5.77 3,360 4.30 13,303
Investment expenses ............................................ (0.12) (230) (0.25) (146) (0.14) (376)
Investment income after investment expenses .................... 3.84% 9,713 5.52% 3,214 4.16% 12,927
Investment results of other entities and operations(2) ...................... 197 0 197
Total investment income ............................................ $9,910 $3,214 $13,124
Year Ended December 31, 2010
Financial Services
Businesses
Closed Block
Business Combined
Yield(1) Amount Yield(1) Amount Yield(1) Amount
($ in millions)
Fixed maturities ........................................................ 4.33% $5,927 5.91% $2,326 4.69% $ 8,253
Trading account assets supporting insurance liabilities .......................... 4.51 750 0.00 0 4.51 750
Equity securities ........................................................ 6.33 212 2.70 74 4.70 286
Commercial mortgage and other loans ...................................... 6.01 1,256 6.61 536 6.18 1,792
Policy loans ........................................................... 5.00 243 6.38 334 5.71 577
Short-term investments and cash equivalents ................................. 0.32 40 0.52 5 0.33 45
Other investments ...................................................... 4.65 191 6.66 115 5.24 306
Gross investment income before investment expenses ...................... 4.34 8,619 5.88 3,390 4.69 12,009
Investment expenses ................................................ (0.13) (208) (0.24) (143) (0.15) (351)
Investment income after investment expenses ......................... 4.21% 8,411 5.64% 3,247 4.54% 11,658
Investment results of other entities and operations(2) ........................... 209 0 209
Total investment income ................................................. $8,620 $3,247 $11,867
(1) Yields are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity. Yields for fixed
maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for fixed maturities and short-term investments and cash
equivalents are calculated net of liabilities and rebate expenses corresponding to securities lending activity. Yields exclude investment income on assets
other than those included in invested assets. Prior period’s yields are presented on a basis consistent with the current period presentation.
(2) Includes investment income of our trading, banking, and asset management operations.
(3) Yields for the year ended December 31, 2011 are weighted for ten months of income and assets related to the Star and Edison Businesses.
See below for a discussion of the change in the Financial Services Businesses’ yields. The decrease in net investment income yield
attributable to the Closed Block Business’s portfolio for 2012, compared to 2011, was primarily due to the impact of lower interest rates on
floating rate investments due to rate resets and lower fixed income reinvestment rates.
The decrease in net investment income yield attributable to the Closed Block Business for 2011, compared to 2010, was primarily due
to lower interest rates on floating rate investments due to rate resets and lower fixed income reinvestment rates.
The following table sets forth the income yield and investment income for each major investment category of the Financial Services
Businesses’ general account, excluding the Japanese insurance operations’ portion of the general account which is presented separately
below, for the periods indicated. The yields are based on net investment income as reported under U.S. GAAP and do not include
adjustments, such as settlements of duration management swaps that are included in adjusted operating income.
Year Ended December 31,
2012 2011 2010
Yield(1) Amount Yield(1) Amount Yield(1) Amount
($ in millions)
Fixed maturities ........................................................ 5.09% $4,328 5.44% $4,219 5.57% $4,194
Trading account assets supporting insurance liabilities .......................... 4.18 742 4.45 742 4.73 724
Equity securities ........................................................ 8.70 184 9.04 167 9.29 168
Commercial mortgage and other loans ...................................... 5.87 1,138 6.06 1,083 6.32 1,081
Policy loans ........................................................... 5.62 194 5.81 187 5.72 171
Short-term investments and cash equivalents ................................. 0.25 28 0.28 26 0.33 36
Other investments ...................................................... 3.13 87 3.86 80 3.04 59
Gross investment income before investment expenses ...................... 4.76 6,701 5.06 6,504 5.16 6,433
Investment expenses ................................................ (0.11) (89) (0.10) (71) (0.12) (96)
Investment income after investment expenses ......................... 4.65% 6,612 4.96% 6,433 5.04% 6,337
Investment results of other entities and operations(2) ........................... 140 197 209
Total investment income ................................................. $6,752 $6,630 $6,546
Prudential Financial, Inc. 2012 Annual Report 67