Prudential 2015 Annual Report Download - page 68

The following table sets forth the composition related to the investments of our Japanese insurance operations’ general account as of
the dates indicated.
December 31,
2015
December 31,
2014
(in millions)
Fixed maturities:
Public, available-for-sale, at fair value ............................................................... $109,257 $111,991
Public, held-to-maturity, at amortized cost ........................................................... 1,834 2,000
Private, available-for-sale, at fair value .............................................................. 9,747 8,835
Private, held-to-maturity, at amortized cost ........................................................... 474 575
Trading account assets supporting insurance liabilities, at fair value ........................................... 2,020 1,910
Other trading account assets, at fair value ................................................................ 647 672
Equity securities, available-for-sale, at fair value .......................................................... 2,660 2,504
Commercial mortgage and other loans, at book value ....................................................... 9,756 8,215
Policy loans, at outstanding balance ..................................................................... 2,208 2,146
Other long-term investments(1) ........................................................................ 1,742 1,606
Short-term investments ............................................................................... 417 406
Total Japanese general account investments .......................................................... $140,762 $140,860
(1) Other long-term investments consist of real estate and non-real estate-related investments in joint ventures and partnerships, investment real estate held
through direct ownership, derivatives, and other miscellaneous investments.
The decrease in general account investments related to our Japanese insurance operations in 2015 was primarily attributable to the
translation impact of the Australian dollar and the yen weakening against the U.S. dollar, a net decrease in fair value driven by credit spread
widening and an increase in U.S. interest rates.
As of December 31, 2015, our Japanese insurance operations had $50.2 billion, at fair value, of investments denominated in U.S.
dollars, including $4.0 billion that were hedged to yen through third-party derivative contracts and $32.3 billion that support liabilities
denominated in U.S. dollars, with the remainder hedging our foreign currency exchange rate exposure on U.S. dollar-equivalent equity. As
of December 31, 2014, our Japanese insurance operations had $48.9 billion, at fair value, of investments denominated in U.S. dollars,
including $3.6 billion that were hedged to yen through third-party derivative contracts and $31.9 billion that support liabilities denominated
in U.S. dollars, with the remainder hedging our foreign currency exchange rate exposure on U.S. dollar-equivalent equity. The $1.3 billion
increase in the fair value of U.S. dollar-denominated investments from December 31, 2014, is primarily attributable to portfolio growth as a
result of business inflows and the reinvestment of net investment income, partially offset by a net decrease in fair value driven by credit
spread widening and an increase in U.S. interest rates.
Our Japanese insurance operations had $10.0 billion and $10.4 billion, at fair value, of investments denominated in Australian dollars
that support liabilities denominated in Australian dollars as of December 31, 2015 and 2014, respectively. The $0.4 billion decrease in the
fair value of Australian dollar-denominated investments from December 31, 2014, is primarily attributable to the translation impact of the
Australian dollar weakening against the U.S. dollar, partially offset by portfolio growth as a result of business inflows and the reinvestment
of net investment income.
For additional information regarding U.S. and Australian dollar investments held in our Japanese insurance operations and a
discussion of our yen hedging strategy, see “—Results of Operations by Segment—International Insurance Division,” above.
Investment Results
The following tables set forth the income yield and investment income for each major investment category of our general account for
the periods indicated. The yields are based on net investment income as reported under U.S. GAAP and as such do not include certain
interest related items, such as settlements of duration management swaps which are included in realized gains (losses).
Year Ended December 31, 2015
PFI excluding
Closed Block
Division
Closed Block
Division Combined
Yield(1) Amount Yield(1) Amount Yield(1) Amount
($ in millions)
Fixed maturities ........................................................ 4.03% $ 8,876 4.94% $1,692 4.15% $10,568
Trading account assets supporting insurance liabilities .......................... 3.59 720 0.00 0 3.59 720
Equity securities ........................................................ 5.67 266 3.49 70 5.01 336
Commercial mortgage and other loans ...................................... 4.58 1,728 5.42 512 4.75 2,240
Policy loans ........................................................... 5.01 334 6.06 285 5.45 619
Short-term investments and cash equivalents ................................. 0.25 43 1.14 12 0.28 55
Other investments ...................................................... 5.91 489 7.24 222 6.27 711
Gross investment income before investment expenses ...................... 3.97 12,456 5.14 2,793 4.14 15,249
Investment expenses ................................................ (0.14) (394) (0.25) (140) (0.16) (534)
Investment income after investment expenses ......................... 3.83% 12,062 4.89% 2,653 3.98% 14,715
Investment results of other entities and operations(2) ........................... 114 0 114
Total investment income ................................................. $12,176 $2,653 $14,829
66 Prudential Financial, Inc. 2015 Annual Report