Prudential 2015 Annual Report Download - page 64

Net realized gains on fixed maturity securities were $441 million in 2014, compared to net realized gains of $120 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—Closed Block Division
Gross realized investment gains:
Gross gains on sales and maturities(1) .............................................................. $471 $ 300
Private bond prepayment premiums ................................................................ 39 33
Total gross realized investment gains ................................................................... 510 333
Gross realized investment losses:
Net OTTI recognized in earnings(2) ................................................................ (20) (49)
Gross losses on sales and maturities(1) .............................................................. (37) (149)
Credit related losses on sales ...................................................................... (12) (15)
Total gross realized investment losses .................................................................. (69) (213)
Realized investment gains (losses), net—Fixed Maturity Securities ............................................... $441 $ 120
Net gains (losses) on sales and maturities—Fixed Maturity Securities(1) ........................................... $434 $ 151
(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 realized gains on equity securities were $431 million and $314 million for the years ended 2014 and 2013, respectively, and
included net gains on sales of equity securities of $437 million and $317 million, respectively, partially offset by OTTI-impairments of $6
million and $3 million, 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 $31 million, primarily driven by a net
decrease in the allowance for losses of $32 million, including the impact of assumption updates. Net realized gains on commercial
mortgage and other loans were $7 million for the year ended 2013, primarily related to a net decrease in the allowance for losses. For
additional information regarding our allowance for losses, see “—General Account Investments—Commercial Mortgage and Other
Loans—Commercial Mortgage and Other Loan Quality” below.
Net realized gains on derivatives were $263 million in 2014, compared to net realized losses of $200 million in 2013. Derivative gains
in 2014 primarily reflect net gains of $182 million on currency derivatives used to hedge foreign denominated investments as the U.S.
dollar strengthened against the euro; net gains of $72 million on interest rate derivatives primarily used to manage duration as long term
interest rates decreased; and net gains of $45 million on TBA forward contracts as interest rates declined. These gains are partially offset by
losses of $41 million on terminated capital cash flow hedges due to debt extinguishment. Derivative losses in 2013 primarily reflect net
losses of $106 million on interest rate derivatives primarily used to manage duration as long term interest rates increased as well as losses
of $74 million on currency derivatives used to hedge foreign denominated investments as the U.S. dollar weakened against the euro.
During 2014, we recorded OTTI of $31 million in earnings, compared to OTTI of $62 million in 2013. The following tables set forth,
for the periods indicated, the composition of OTTI recorded in earnings attributable to 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—Closed Block Division(1)
Public fixed maturity securities ........................................................................ $13 $28
Private fixed maturity securities ....................................................................... 7 21
Total fixed maturity securities .................................................................... 20 49
Equity securities ................................................................................... 6 3
Other invested assets(2) ............................................................................. 5 10
Total ........................................................................................ $31 $62
(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.
Year Ended December 31,
2014 2013
(in millions)
OTTI on fixed maturity securities recorded in earnings—Closed Block Division(1)
Due to credit events or adverse conditions of the respective issuer(2) .......................................... $19 $44
Due to other accounting guidelines ..................................................................... 1 5
Total ........................................................................................ $20 $49
62 Prudential Financial, Inc. 2015 Annual Report