Prudential 2015 Annual Report Download - page 154

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
14. SHORT-TERM AND LONG-TERM DEBT
Short-term Debt
Short-term debt at December 31 for the years indicated is as follows:
2015 2014
($ in millions)
Commercial paper:
Prudential Financial ......................................................................................... $ 80 $ 97
Prudential Funding, LLC ..................................................................................... 384 386
Subtotal commercial paper ........................................................................................ 464 483
Current portion of long-term debt(1) ................................................................................ 752 3,356
Total short-term debt(2) .................................................................................. $1,216 $3,839
Supplemental short-term debt information:
Portion of commercial paper borrowings due overnight ............................................................. $ 331 $ 199
Daily average commercial paper outstanding ...................................................................... $1,127 $1,409
Weighted average maturity of outstanding commercial paper, in days .................................................. 10 22
Weighted average interest rate on outstanding short-term debt(3) ...................................................... 0.16% 0.12%
(1) Includes collateralized borrowings from the FHLBNY of $280 million at December 31, 2014.
(2) Includes Prudential Financial debt of $831 million and $2,319 million at December 31, 2015 and 2014, respectively.
(3) Excludes the current portion of long-term debt.
At December 31, 2015 and 2014, the Company was in compliance with all covenants related to the above debt.
Commercial Paper
Prudential Financial has a commercial paper program with an authorized capacity of $3.0 billion. Prudential Financial commercial
paper borrowings have generally been used to fund the working capital needs of Prudential Financial’s subsidiaries and provide short-term
liquidity at Prudential Financial.
Prudential Funding, LLC (“Prudential Funding”), a wholly-owned subsidiary of Prudential Insurance, has a commercial paper
program, with an authorized capacity of $7.0 billion. Prudential Funding commercial paper borrowings generally have served as an
additional source of financing to meet the working capital needs of Prudential Insurance and its subsidiaries. Prudential Funding also lends
to other subsidiaries of Prudential Financial up to limits agreed with the NJDOBI. Prudential Funding maintains a support agreement with
Prudential Insurance whereby Prudential Insurance has agreed to maintain Prudential Funding’s tangible net worth at a positive level.
Additionally, Prudential Financial has issued a subordinated guarantee covering Prudential Funding’s $7.0 billion commercial paper
program.
Federal Home Loan Bank of New York
Prudential Insurance is a member of the FHLBNY. Membership allows Prudential Insurance access to the FHLBNY’s financial
services, including the ability to obtain collateralized loans and to issue collateralized funding agreements. Under applicable law, the
funding agreements issued to the FHLBNY have priority claim status above debt holders of Prudential Insurance. FHLBNY borrowings
and funding agreements are collateralized by qualifying mortgage-related assets or U.S. Treasury securities, the fair value of which must be
maintained at certain specified levels relative to outstanding borrowings. FHLBNY membership requires Prudential Insurance to own
member stock and borrowings require the purchase of activity-based stock in an amount equal to 4.5% of outstanding borrowings. Under
FHLBNY guidelines, if any of Prudential Insurance’s financial strength ratings decline below A/A2/A Stable by S&P/Moody’s/Fitch,
respectively, and the FHLBNY does not receive written assurances from the NJDOBI regarding Prudential Insurance’s solvency, new
borrowings from the FHLBNY would be limited to a term of 90 days or less. Currently there are no restrictions on the term of borrowings
from the FHLBNY. All FHLBNY stock purchased by Prudential Insurance is classified as restricted general account investments within
“Other long-term investments,” and the carrying value of these investments was $98 million and $151 million as of December 31, 2015 and
2014, respectively.
NJDOBI permits Prudential Insurance to pledge collateral to the FHLBNY in an amount of up to 5% of its prior year-end statutory net
admitted assets, excluding separate account assets. Based on Prudential Insurance’s statutory net admitted assets as of December 31, 2014,
the 5% limitation equates to a maximum amount of pledged assets of $8.9 billion and an estimated maximum borrowing capacity (after
taking into account required collateralization levels) of approximately $7.4 billion. Nevertheless, FHLBNY borrowings are subject to the
FHLBNY’s discretion and to the availability of qualifying assets at Prudential Insurance.
As of December 31, 2015, Prudential Insurance had pledged assets with a fair value of $1.4 billion supporting outstanding funding
agreements totaling $1.0 billion, which are included in “Policyholders’ account balances.” The fair value of qualifying assets that were
available to Prudential Insurance, but not pledged, amounted to $4.5 billion as of December 31, 2015. Prudential Insurance had no
advances outstanding under the FHLBNY facility as of December 31, 2015.
152 Prudential Financial, Inc. 2015 Annual Report