Prudential 2012 Annual Report Download - page 83

includes a quality re-rating process, whereby we update the internal quality rating originally assigned at underwriting based on the
proprietary quality rating system mentioned above. As discussed below, the internal quality rating is a key input in determining our
allowance for loan losses.
For loans with collateral under construction, renovation or lease-up, a stabilized value and projected net operating income are used in
the calculation of the loan-to-value and debt service coverage ratios. Our commercial and agricultural mortgage loan portfolio attributable
to the Financial Services Businesses included approximately $0.5 billion of such loans as of both December 31, 2012 and 2011, and our
commercial and agricultural mortgage loan portfolio attributable to the Closed Block Business included approximately $0.1 billion and
$0.2 billion of such loans as of December 31, 2012 and 2011, respectively. All else being equal, these loans are inherently more risky than
those collateralized by properties that have already stabilized. As of December 31, 2012, there are no loan-specific reserves related to these
loans attributable to either the Financial Services Businesses or the Closed Block Business. In addition, these unstabilized loans are
included in the calculation of our portfolio reserve as discussed below. For information regarding similar loans we hold as part of our
commercial and agricultural mortgage operations, see “—Invested Assets of Other Entities and Operations,” below.
The following tables set forth the gross carrying value of our general account investments in commercial and agricultural mortgage
loans attributable to the Financial Services Businesses and the Closed Block Business as of the dates indicated by loan-to-value and debt
service coverage ratios.
Commercial and Agricultural Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios—Financial Services Businesses
December 31, 2012
Debt Service Coverage Ratio
Greater
than
1.2x
1.0x
to
<1.2x
Less
than
1.0x
Total
Commercial
and
Agricultural
Mortgage
Loans
Loan-to-Value Ratio (in millions)
0%—59.99% .............................................................................. $11,441 $ 438 $193 $12,072
60%—69.99% ............................................................................. 6,836 539 36 7,411
70%—79.99% ............................................................................. 2,776 623 97 3,496
Greater than 80% ........................................................................... 155 536 469 1,160
Total commercial and agricultural mortgage loans ............................................. $21,208 $2,136 $795 $24,139
Commercial and Agricultural Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios—Closed Block Business
December 31, 2012
Debt Service Coverage Ratio
Greater
than
1.2x
1.0x
to
<1.2x
Less
than
1.0x
Total
Commercial
and
Agricultural
Mortgage
Loans
Loan-to-Value Ratio (in millions)
0%—59.99% ............................................................................... $5,196 $235 $ 40 $5,471
60%—69.99% .............................................................................. 2,607 263 0 2,870
70%—79.99% .............................................................................. 753 153 120 1,026
Greater than 80% ........................................................................... 32 168 99 299
Total commercial and agricultural mortgage loans .............................................. $8,588 $819 $259 $9,666
The following table sets forth the breakdown of our commercial and agricultural mortgage loans by year of origination as of
December 31, 2012.
December 31, 2012
Financial Services Businesses Closed Block Business
Year of Origination
Gross
Carrying
Value % of Total
Gross
Carrying
Value % of Total
($ in millions)
2012 ........................................................................ $ 5,009 20.8% $1,830 18.9%
2011 ........................................................................ 4,957 20.5 1,449 15.0
2010 ........................................................................ 3,216 13.3 1,070 11.1
2009 ........................................................................ 1,181 4.9 398 4.1
2008 ........................................................................ 2,588 10.7 1,080 11.2
2007 & Prior ................................................................. 7,188 29.8 3,839 39.7
Total commercial and agricultural mortgage loans ................................ $24,139 100.0% $9,666 100.0%
Prudential Financial, Inc. 2012 Annual Report 81