Prudential 2015 Annual Report Download - page 219

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
23. COMMITMENTS AND GUARANTEES, CONTINGENT LIABILITIES AND LITIGATION AND
REGULATORY MATTERS
Leases
The Company occupies leased office space in many locations under various long-term leases and has entered into numerous leases
covering the long-term use of computers and other equipment. Rental expense, net of sub-lease income, incurred for the years ended
December 31, 2015, 2014 and 2013 was $232 million, $225 million and $253 million, respectively.
The following table presents, at December 31, 2015, the Company’s future minimum lease payments under non-cancelable operating
and capital leases along with associated sub-lease income:
Operating and
Capital Leases(1)
Sub-lease
Income
(in millions)
2016 .............................................................................................. $131 $(1)
2017 .............................................................................................. 117 0
2018 .............................................................................................. 92 0
2019 .............................................................................................. 74 0
2020 .............................................................................................. 53 0
2021 and thereafter .................................................................................. 198 0
Total ......................................................................................... $665 $(1)
(1) Future minimum lease payments under capital leases were $22 million as of December 31, 2015.
Occasionally, for business reasons, the Company may exit certain non-cancelable operating leases prior to their expiration. In these
instances, the Company’s policy is to accrue, at the time it ceases to use the property being leased, the future rental expense net of any
expected sub-lease income, and to release this reserve over the remaining commitment period. Of the total non-cancelable operating and
capital leases amounts listed above, $2 million has been accrued as of December 31, 2015. There were no accruals of sub-lease income as
of December 31, 2015.
Commercial Mortgage Loan Commitments
As of December 31,
2015 2014
(in millions)
Total outstanding mortgage loan commitments ..................................................................... $2,272 $2,442
Portion of commitment where prearrangement to sell to investor exists .................................................. $ 721 $ 958
In connection with the Company’s commercial mortgage operations, it originates commercial mortgage loans. Commitments for loans
that will be held for sale are recognized as derivatives and recorded at fair value. In certain of these transactions, the Company pre-arranges
that it will sell the loan to an investor, including to government sponsored entities as discussed below, after the Company funds the loan.
Commitments to Purchase Investments (excluding Commercial Mortgage Loans)
As of December 31,
2015 2014
(in millions)
Expected to be funded from the general account and other operations outside the separate accounts(1) ......................... $3,787 $4,883
Expected to be funded from separate accounts ...................................................................... $ 92 $ 28
(1) Includes a remaining commitment of $152 million and $194 million at December 31, 2015 and 2014, respectively, related to the Company’s agreement
to co-invest with the Fosun Group (“Fosun”) in a private equity fund, managed by Fosun, for the Chinese marketplace.
The Company has other commitments to purchase or fund investments, some of which are contingent upon events or circumstances
not under the Company’s control, including those at the discretion of the Company’s counterparties. The Company anticipates a portion of
these commitments will ultimately be funded from its separate accounts.
Indemnification of Securities Lending Transactions
As of December 31,
2015 2014
(in millions)
Indemnification provided to mutual fund, trust fund, and insurance company separate account clients for securities lending.......... $15,084 $14,334
Fair value of related collateral associated with above indemnifications ................................................... $15,508 $14,740
Accrued liability associated with guarantee ......................................................................... $ 0 $ 0
In the normal course of business, the Company may facilitate securities lending transactions on behalf of mutual funds, trust funds,
and insurance company separate account clients (collectively, “the accounts”) for which the Company is the investment advisor and/or the
Prudential Financial, Inc. 2015 Annual Report 217