Prudential 2012 Annual Report Download - page 74

collateralized by sub-prime mortgages attributable to the Financial Services Businesses were $390 million as of December 31, 2012, and
$906 million as of December 31, 2011. For additional information regarding other-than-temporary impairments of asset-backed securities
collateralized by sub-prime mortgages see “—Realized Investment Gains and Losses” above. For information regarding the methodology
used in determining the fair value of our asset-backed securities collateralized by sub-prime mortgages, see Note 20 to the Consolidated
Financial Statements.
The weighted average estimated subordination percentage of our asset-backed securities collateralized by sub-prime mortgages
attributable to the Financial Services Businesses, excluding those supported by guarantees from monoline bond insurers, was 28% as of
December 31, 2012. The subordination percentage represents the current weighted average estimated percentage of the capital structure
subordinated to our investment holding that is available to absorb losses before the security incurs the first dollar loss of principal. As of
December 31, 2012, based on amortized cost, approximately 57% of the asset-backed securities collateralized by sub-prime mortgages
attributable to the Financial Services Businesses have estimated credit subordination percentages of 20% or more, and 39% have estimated
credit subordination percentages of 30% or more.
In addition to subordination, certain securities, referred to as front pay or second pay securities, benefit from the prioritization of
principal cash flows within the senior tranches of the structure. In most instances, these shorter duration senior securities have priority to
principal cash flows over other securities in the structure, including longer duration senior securities. Included within the $2.242 billion of
asset-backed securities collateralized by sub-prime mortgages attributable to the Financial Services Businesses as of December 31, 2012
were $405 million of securities, on an amortized cost basis, that represent front pay or second pay securities, depending on the overall
structure of the securities.
The following tables set forth the amortized cost and fair value of our asset-backed securities attributable to the Closed Block Business as of
the dates indicated, by credit quality, and for asset-backed securities collateralized by sub-prime mortgages, by year of issuance (vintage).
Asset-Backed Securities at Amortized Cost—Closed Block Business
December 31, 2012
Lowest Rating Agency Rating
Vintage AAA AA A BBB
BB and
below
Total
Amortized
Cost
Total
December 31,
2011
(in millions)
Collateralized by sub-prime mortgages:
2012—2008 ..................................................... $ 0$0$0$0 $ 0 $ 0 $ 0
2007 ........................................................... 1 5 1 19 298 324 431
2006 ........................................................... 8 83 3 0 617 711 994
2005 ........................................................... 8 33 63 19 110 233 296
2004 & Prior .................................................... 0 5 11 21 466 503 569
Total collateralized by sub-prime mortgages(1) ..................... 17 126 78 59 1,491 1,771 2,290
Other asset-backed securities:
Collateralized by credit cards ....................................... 299 5 0 144 2 450 659
Collateralized by auto loans ........................................ 892 0 0 0 0 892 739
Externally-managed investments in the European market ................. 0 0 0 206 0 206 199
Collateralized by education loans .................................... 18 432 0 0 0 450 485
Other asset-backed securities(2) ..................................... 449 291 59 1 23 823 563
Total asset-backed securities(3) .................................. $1,675 $854 $137 $410 $1,516 $4,592 $4,935
(1) Included within the $1.8 billion of asset-backed securities collateralized by sub-prime mortgages as of December 31, 2012, are $2 million of securities
collateralized by second-lien exposures.
(2) As of December 31, 2012, includes collateralized loan obligations with amortized cost of $599 million, with none secured by sub-prime mortgages.
Also includes asset-backed securities collateralized by franchises, equipment leases, aircraft, manufacturing and timeshares.
(3) Excluded from the table above are asset-backed securities classified as trading.
Asset-Backed Securities at Fair Value—Closed Block Business
December 31, 2012
Lowest Rating Agency Rating
Vintage AAA AA A BBB
BB and
below
Total
Fair Value
Total
December 31,
2011
(in millions)
Collateralized by sub-prime mortgages:
2012—2008 ..................................................... $ 0$0$0$0 $ 0 $ 0 $ 0
2007 ........................................................... 1 5 1 18 244 269 267
2006 ........................................................... 7 80 3 0 453 543 597
2005 ........................................................... 8 32 59 19 87 205 216
2004 & Prior .................................................... 0 4 11 19 408 442 421
Total collateralized by sub-prime mortgages ....................... 16 121 74 56 1,192 1,459 1,501
Other asset-backed securities:
Collateralized by credit cards ....................................... 303 5 0 144 2 454 669
Collateralized by auto loans ........................................ 896 0 0 0 0 896 739
Externally-managed investments in the European market ................. 0 0 0 239 0 239 233
Collateralized by education loans .................................... 18 435 0 0 0 453 474
Other asset-backed securities(1) ..................................... 453 296 61 1 31 842 556
Total asset-backed securities(2) .................................. $1,686 $857 $135 $440 $1,225 $4,343 $4,172
72 Prudential Financial, Inc. 2012 Annual Report