Prudential 2015 Annual Report Download - page 62

2014 to 2013 Annual Comparison
PFI excluding Closed Block Division
Net realized investment losses were $475 million in 2014, compared to net realized investment losses of $5,438 million in 2013.
Net realized gains on fixed maturity securities were $753 million in 2014, compared to net realized losses of $213 million in 2013, as
set forth in the following table:
Year Ended December 31,
2014 2013
(in millions)
Realized investment gains (losses), net—Fixed Maturity Securities—PFI excluding Closed Block Division
Gross realized investment gains:
Gross gains on sales and maturities(1) .............................................................. $1,063 $ 1,172
Private bond prepayment premiums ................................................................ 91 66
Total gross realized investment gains ................................................................... 1,154 1,238
Gross realized investment losses:
Net OTTI recognized in earnings(2) ................................................................ (36) (150)
Gross losses on sales and maturities(1) .............................................................. (327) (1,270)
Credit related losses on sales ...................................................................... (38) (31)
Total gross realized investment losses .................................................................. (401) (1,451)
Realized investment gains (losses), net—Fixed Maturity Securities ............................................... $ 753 $ (213)
Net gains (losses) on sales and maturities—Fixed Maturity Securities(1) ........................................... $ 736 $ (98)
(1) Amounts exclude prepayment premiums, OTTI, and credit related losses through sales of investments pursuant to our credit risk objectives.
(2) Excludes the portion of OTTI recorded in “Other comprehensive income (loss),” representing any difference between the fair value of the impaired debt
security and the net present value of its projected future cash flows at the time of impairment.
Net gains on sales and maturities of fixed maturity securities of $736 million in 2014 were primarily due to sales and maturities of
U.S. dollar-denominated securities within our International Insurance segment. Net losses on sales and maturities of fixed maturity
securities of $98 million in 2013 were primarily driven by losses on sales of securities due to changes in interest rates subsequent to the
acquisition of securities that were sold, partially offset by gains on sales within our International Insurance segment initiated for purposes
of duration management as well as from surrenders of fixed annuities denominated in Australian and U.S. dollars. See below for additional
information regarding the OTTI of fixed maturity securities in 2014 and 2013.
Net realized gains on equity securities were $81 million and $130 million for the years ended 2014 and 2013, respectively, driven by
gains on sales, primarily within our International Insurance segment, of $107 million and $142 million, respectively. These gains were
partially offset by OTTI of $26 million and $12 million for the years ended 2014 and 2013, respectively. See below for additional
information regarding the OTTI of equity securities in 2014 and 2013.
Net realized gains on commercial mortgage and other loans for the year ended 2014 were $79 million, primarily driven by a net
decrease in the allowance for losses of $65 million, including the impact of assumption updates. Net realized gains on commercial
mortgage and other loans were $72 million for the year ended in 2013, were primarily driven by a net decrease in the allowance for losses
of $38 million, mostly driven by payoffs and quality rating upgrades. For additional information regarding our commercial mortgage and
other allowance for losses, see “—General Account Investments—Commercial Mortgage and Other Loans—Commercial Mortgage and
Other Loan Quality” below.
Net realized losses on derivatives were $445 million in 2014, compared to net realized losses of $5,488 million in 2013. The net
derivative losses in 2014 primarily reflect net losses of $2,627 million on product related embedded derivatives and related hedge positions
mainly associated with certain variable annuity contracts. Also contributing were net losses of $500 million on foreign currency derivatives
used to hedge portfolio assets in our Japan business, primarily due to the weakening of the Japanese yen against the U.S. dollar and other
currencies. These losses were partially offset by gains of $1,502 million on interest rate derivatives used to manage duration as long-term
interest rates decreased; $869 million gains on other foreign currency derivatives primarily associated with hedges of portfolio assets in our
U.S. business and hedges of future income of non-U.S. businesses (predominantly in Japan) as the U.S. dollar strengthened against various
currencies; and $166 million gains of fees earned on fee-based synthetic GICs which are accounted for as derivatives. The net derivative
losses in 2013 primarily reflect net losses of $4,195 million on product related embedded derivatives and related hedge positions mainly
associated with certain variable annuity contracts as well as net mark-to-market losses of $987 million on interest rate derivatives used to
manage duration as long-term interest rates increased. Also contributing were net losses $794 million on foreign currency derivatives used
to hedge portfolio assets in our Japan business, primarily due to the weakening of the Japanese yen against the U.S. dollar and other
currencies. Partially offsetting these losses were net gains of $472 million on foreign currency forward contracts used to hedge the future
income of non-U.S. businesses, predominantly in Japan, due to the strengthening of the U.S. dollar against the Japanese yen.
Net realized gains on other investments were $7 million in 2014 and included net gains of $28 million, primarily from our Asset
Management and International Insurance segments, partially offset by OTTI of $21 million on real estate and joint ventures and partnership
investments. Net realized gains on other investments were $61 million in 2013 and included net gains of $73 million, primarily within our
Corporate and Other segment, partially offset by OTTI of $12 million on real estate and joint ventures and partnership investments.
60 Prudential Financial, Inc. 2015 Annual Report