Prudential 2012 Annual Report Download - page 91

(1) 2012 includes dividends and/or returns of capital of $865 million from international subsidiaries, $646 million from asset management subsidiaries,
$600 million from Prudential Insurance, $408 million from Prudential Annuities Life Assurance Corporation, $230 million from Prudential Bank &
Trust and $113 million from other subsidiaries. 2011 includes dividends and/or returns of capital of $1,592 million from Prudential Insurance, $478
million from international subsidiaries, $588 million from Prudential Annuities Life Assurance Corporation, $468 million from asset management
subsidiaries and $116 million from other subsidiaries.
(2) 2012 includes an increase in net borrowings by Prudential Financial of $1,727 million in our intercompany liquidity account and $395 million from
Prudential of Japan, partially offset by a repayment of $20 million to Prudential Holdings, LLC. 2012 also includes net repayments by subsidiaries of
$558 million by asset management subsidiaries, $200 million by Prudential Annuities Life Assurance Corporation, $188 million by Pruco Re and $42
million by other subsidiaries, partially offset by net borrowings of $164 million by Pruco Life Insurance Company. 2011 includes an increase of $395
million in net borrowings by Prudential Financial in our intercompany liquidity account and net repayments of $322 million by Prudential Securities
Group (previously supporting the global commodities business), $282 million by Prudential Real Estate and Relocation, $175 million by Prudential
Annuities Life Assurance Corporation, $169 million by our asset management subsidiaries and $100 million by Prudential Arizona Reinsurance Term
Company (previously funding statutory reserves required under Regulation XXX), partially offset by net borrowings of $1,030 million by Pruco Re,
$336 million by Pruco Life Insurance and $43 million from other subsidiaries.
(3) Represents payments in 2011 and subsequent repayments in 2012 associated with transitional financing agreements provided in connection with the sale
of the real estate brokerage franchise and relocation business in 2011.
(4) Primarily includes tax settlements pursuant to the tax allocation agreement between Prudential Financial and its subsidiaries, net of estimated tax
payments to the Internal Revenue Service.
(5) 2012 includes capital contributions of $1,431 million to Pruco Re, $406 million to international insurance subsidiaries, $31 million to asset management
subsidiaries and $44 million to other subsidiaries. Subsequent to 2012, Prudential Financial made a $712 million capital contribution to Prudential
Insurance, of which $615 million was paid to The Hartford in connection with our acquisition of its Individual Life Insurance Business. 2011 includes
capital contributions of $1,005 million to international insurance subsidiaries, $64 million to Pruco Re, and $62 million to asset management
subsidiaries and $45 million to an investment subsidiary.
Restrictions on Dividends and Returns of Capital from Subsidiaries
Our insurance companies are subject to regulatory limitations on the payment of dividends and other transfers of funds to Prudential
Financial and other affiliates. The payment of dividends by any of our subsidiaries is subject to declaration by their Board of Directors and
can be affected by market conditions and other factors. See Note 15 to the Consolidated Financial Statements for details on specific
dividend restrictions.
Domestic insurance subsidiaries. Prudential Insurance is permitted to pay ordinary dividends based on calculations specified under
New Jersey insurance law, subject to prior notification to NJDOBI. Any distributions above this amount in any 12-month period are
considered to be “extraordinary” dividends, and the approval of NJDOBI is required prior to payment. In 2012, Prudential Insurance paid
an ordinary dividend of $316 million and an extraordinary dividend of $284 million to its parent, Prudential Holdings, LLC, all of which
was in turn distributed to Prudential Financial. In 2013, Prudential Insurance is permitted to pay an ordinary dividend of $893 million under
New Jersey insurance law.
The laws regulating dividends of the states where our other domestic insurance companies are domiciled are similar, but not identical,
to New Jersey’s. In 2012, Prudential Annuities Life Assurance Corporation, or PALAC, did not have ordinary dividend capacity but paid
an extraordinary dividend of $408 million to Prudential Financial. In 2013, PALAC is permitted to pay an ordinary dividend of $41 million
based on Connecticut insurance law. On September 6, 2012, Prudential Retirement Insurance and Annuity Corporation, or PRIAC, paid an
ordinary dividend of $200 million to its parent, Prudential Insurance.
International insurance subsidiaries. Our international insurance subsidiaries are subject to dividend restrictions from the regulatory
authorities in the international jurisdictions in which they operate. Our most significant international insurance subsidiaries, Prudential of
Japan and Gibraltar Life, are permitted to pay common stock dividends based on calculations specified by Japanese insurance law, subject to
prior notification to the Financial Services Agency, or FSA. Dividends in excess of these amounts and other forms of capital distribution
require the prior approval of the FSA. In 2012, Prudential of Japan paid a dividend of ¥18.4 billion, or $224 million, which was ultimately
sent to Prudential Financial. The current regulatory fiscal year end for both Prudential of Japan and Gibraltar Life is March 31, 2013, at
which time the common stock dividend amount permitted to be paid without prior approval from the FSA will be determinable. Although
Gibraltar Life may be able to pay common stock dividends under these legal and regulatory restrictions, we do not anticipate receiving
common stock dividends for several years as Gibraltar Life may return capital to Prudential Financial through other means, such as the
repayment of subordinated debt or preferred stock obligations held by Prudential Financial or other affiliates. In 2012, Gibraltar repaid ¥31.5
billion, or $401 million, in subordinated debt to its parent, Prudential Holdings of Japan, of which $259 million was ultimately sent to
Prudential Financial. As of December 31, 2012, Gibraltar Life had subordinated debt and preferred stock obligations to affiliates of
approximately $3.7 billion. Additionally, during 2012, Prudential of Korea paid a dividend of $58 million, which was ultimately sent to
Prudential Financial.
Other subsidiaries. The ability of our asset management subsidiaries and the majority of our other operating subsidiaries to pay
dividends is largely unrestricted from a regulatory standpoint.
Liquidity of Insurance Subsidiaries
We manage the liquidity of our insurance operations to ensure stable, reliable and cost-effective sources of cash flows to meet all of
our obligations. Liquidity within each of our insurance subsidiaries is provided by a variety of sources, as described more fully below,
including portfolios of liquid assets. The investment portfolios of our subsidiaries are integral to the overall liquidity of our insurance
operations. We segment our investment portfolios and employ an asset/liability management approach specific to the requirements of each
of our product lines. This enhances the discipline applied in managing the liquidity, as well as the interest rate and credit risk profiles, of
each portfolio in a manner consistent with the unique characteristics of the product liabilities. We use a projection process for cash flows
from operations to ensure sufficient liquidity is available to meet projected cash outflows, including claims.
Prudential Financial, Inc. 2012 Annual Report 89