Prudential 2015 Annual Report Download - page 63

Related adjustments for 2014 included net negative related adjustments of $4,063 million, compared to net negative related
adjustments of $4,518 million for 2013. Results for both periods were driven by the impact of foreign currency exchange rate movements
on certain non-yen denominated assets and liabilities within our Japanese insurance operations, as discussed above, and by settlements on
interest rate and currency derivatives.
Related charges for 2014 included net related charges of $542 million, compared to net related benefits of $1,807 million in 2013.
Both periods’ results were driven by the impact of derivative activity on the amortization of DAC and other costs and certain policyholder
reserves.
During 2014, we recorded OTTI of $83 million in earnings, compared to $174 million in 2013. The following tables set forth, for the
periods indicated, the composition of OTTI recorded in earnings attributable to the PFI excluding the Closed Block division by asset type,
and for fixed maturity securities, by reason.
Year Ended December 31,
2014 2013
(in millions)
OTTI recorded in earnings—PFI excluding Closed Block Division(1)
Public fixed maturity securities ........................................................................ $22 $111
Private fixed maturity securities ....................................................................... 14 39
Total fixed maturity securities .................................................................... 36 150
Equity securities ................................................................................... 26 12
Other invested assets(2) ............................................................................. 21 12
Total ........................................................................................ $83 $174
(1) 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.
(2) Includes OTTI relating to investments in joint ventures and partnerships and real estate investments.
Year Ended December 31,
2014 2013
(in millions)
OTTI on fixed maturity securities recorded in earnings—PFI excluding Closed Block Division(1)
Due to credit events or adverse conditions of the respective issuer(2) .......................................... $24 $ (80)
Due to other accounting guidelines(3) .................................................................. 12 (70)
Total ........................................................................................ $36 $(150)
(1) 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.
(2) Represents circumstances where we believe credit events or other adverse conditions of the respective issuers have caused, or will lead to, a deficiency
in the contractual cash flows related to the investment. The amount of the impairment recorded in earnings is the difference between the amortized cost
of the debt security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior
to impairment.
(3) Primarily represents circumstances where securities with losses from foreign currency exchange rate movements approach maturity.
Fixed maturity security OTTI in 2014 were concentrated in the utility, consumer cyclical, and finance sectors within corporate
securities. These OTTI were primarily related to intent to sell securities, or related to securities with liquidity concerns, downgrades in
credit, bankruptcy or other adverse financial conditions of the respective issuers. Fixed maturity security OTTI in 2013 were concentrated
in asset-backed securities collateralized by sub-prime mortgages, and in the utility, communications, and consumer non-cyclical sectors
within corporate securities. These OTTI were primarily related to securities with liquidity concerns, downgrades in credit, bankruptcy or
other adverse financial conditions of the respective issuers.
Equity security OTTI in 2014 and 2013 were primarily due to circumstances where the decline in value was maintained for one year
or greater or due to the extent and duration of declines in values.
Closed Block Division
Net realized investment gains were $1,161 million in 2014, compared to net realized investment gains of $232 million in 2013.
Prudential Financial, Inc. 2015 Annual Report 61