Prudential 2015 Annual Report Download - page 128

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
Prudential Financial made a Section 338(g) election under the Internal Revenue Code with respect to this acquisition, resulting in the
acquired entity being treated for U.S. tax purposes as a newly-incorporated company. Under such election, the U.S. tax basis of the assets
acquired and liabilities assumed of UniAsia Life Assurance Berhad was adjusted as of January 2, 2014, to reflect the consequences of the
Section 338(g) election.
Acquisition of The Hartford’s Individual Life Insurance Business
In January 2013, the Company acquired the Hartford Life Business through a reinsurance transaction. Under the agreement, the
Company paid cash consideration of $615 million, primarily in the form of a ceding commission to provide reinsurance for approximately
700,000 life insurance policies with net retained face amount in force of approximately $141 billion. The acquisition increased the
Company’s scale in the U.S. individual life insurance market, particularly universal life products, and provides complementary distribution
opportunities through expanded wirehouse and bank distribution channels.
The assets acquired and liabilities assumed have been included in the Company’s Consolidated Financial Statements as of the
acquisition date. Total assets acquired were $11.2 billion, including $1.4 billion of VOBA and $0.1 billion of cash, and total liabilities
assumed were $10.6 billion. There is no goodwill, including tax deductible goodwill, associated with the acquisition.
Sale of Wealth Management Solutions Business
In April 2013, the Company signed a definitive agreement to sell its wealth management solutions business to Envestnet Inc. The
transaction, which did not have a material impact to the Company’s financial results, closed in July 2013. Due to the existence of an
ongoing contractual relationship between the Company and these operations, this disposition did not qualify for discontinued operations
accounting treatment under U.S. GAAP.
4. INVESTMENTS
Fixed Maturities and Equity Securities
The following tables provide information relating to fixed maturities and equity securities (excluding investments classified as trading)
as of the dates indicated:
December 31, 2015
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
OTTI
in AOCI(4)
(in millions)
Fixed maturities, available-for-sale
U.S. Treasury securities and obligations of U.S. government authorities and
agencies ........................................................... $ 14,992 $ 3,544 $ 19 $ 18,517 $ 0
Obligations of U.S. states and their political subdivisions ....................... 8,089 747 41 8,795 0
Foreign government bonds ............................................... 71,849 12,011 147 83,713 1
U.S. corporate public securities ........................................... 70,979 6,344 1,955 75,368 (3)
U.S. corporate private securities(1) ........................................ 28,525 2,278 359 30,444 0
Foreign corporate public securities ........................................ 26,354 2,821 621 28,554 0
Foreign corporate private securities ........................................ 19,393 739 994 19,138 0
Asset-backed securities(2) ............................................... 10,121 226 121 10,226 (452)
Commercial mortgage-backed securities .................................... 10,337 195 70 10,462 (1)
Residential mortgage-backed securities(3) .................................. 4,777 335 6 5,106 (4)
Total fixed maturities, available-for-sale(1) ............................. $265,416 $29,240 $4,333 $290,323 $(459)
Equity securities, available-for-sale ...................................... $ 6,847 $ 2,570 $ 143 $ 9,274
December 31, 2015
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in millions)
Fixed maturities, held-to-maturity
Foreign government bonds ........................................................... $ 816 $196 $0 $1,012
Foreign corporate public securities .................................................... 625 62 0 687
Foreign corporate private securities(5) .................................................. 78 4 0 82
Commercial mortgage-backed securities ................................................ 33 1 0 34
Residential mortgage-backed securities(3) ............................................... 756 53 0 809
Total fixed maturities, held-to-maturity(5) ........................................... $2,308 $316 $0 $2,624
(1) Excludes notes with amortized cost of $1,050 million (fair value, $1,039 million) which have been offset with the associated payables under a netting
agreement.
(2) Includes credit-tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans and other asset types.
(3) Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
126 Prudential Financial, Inc. 2015 Annual Report