Prudential 2015 Annual Report Download - page 78

(1) Excluded from the table above are commercial mortgage and other loans held outside the general account in other entities and operations. For additional
information regarding commercial mortgage and other loans held outside the general account, see “—Invested Assets of Other Entities and Operations”
below.
We originate commercial and agricultural mortgage loans using a dedicated investment staff through our various regional offices and
international offices primarily in London and Tokyo. All loans are underwritten consistently to our standards using a proprietary quality
rating system that has been developed from our experience in real estate and mortgage lending.
Uncollateralized loans primarily represent corporate loans which do not meet the definition of a security under authoritative
accounting guidance.
Residential property loans primarily include Japanese recourse loans. Upon default of these recourse loans we can make a claim
against the personal assets of the property owner, in addition to the mortgaged property. These loans are also backed by third-party
guarantors.
Other collateralized loans include collateralized structured loans and consumer loans.
Composition of Commercial and Agricultural Mortgage Loans
Our commercial and agricultural mortgage loan portfolio strategy emphasizes diversification by property type and geographic
location. The following tables set forth the breakdown of the gross carrying values of our general account investments in commercial and
agricultural mortgage loans attributable to PFI excluding the Closed Block division by geographic region and property type as of the dates
indicated.
December 31, 2015 December 31, 2014
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
($ in millions)
Commercial and agricultural mortgage loans by region:
U.S. Regions: .............................................................................
Pacific ............................................................................... $12,285 31.5% $10,951 31.4%
South Atlantic ......................................................................... 7,764 19.9 6,939 19.9
Middle Atlantic ....................................................................... 5,271 13.5 4,595 13.2
East North Central ..................................................................... 2,704 6.9 2,662 7.6
West South Central ..................................................................... 3,945 10.1 3,671 10.5
Mountain ............................................................................ 1,697 4.4 1,646 4.7
New England ......................................................................... 1,752 4.5 1,736 5.0
West North Central ..................................................................... 608 1.6 580 1.7
East South Central ..................................................................... 533 1.4 258 0.7
Subtotal-U.S. ............................................................................. 36,559 93.8 33,038 94.7
Europe .................................................................................. 1,608 4.1 921 2.6
Asia ..................................................................................... 406 1.0 693 2.0
Other .................................................................................... 429 1.1 230 0.7
Total commercial and agricultural mortgage loans ............................................ $39,002 100.0% $34,882 100.0%
December 31, 2015 December 31, 2014
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
($ in millions)
Commercial and agricultural mortgage loans by property type:
Industrial ................................................................................. $ 6,510 16.7% $ 6,266 18.0%
Retail ................................................................................... 6,813 17.5 6,515 18.7
Office ................................................................................... 8,498 21.8 7,111 20.4
Apartments/Multi-Family .................................................................... 10,079 25.8 8,536 24.4
Other .................................................................................... 3,133 8.0 2,972 8.5
Agricultural properties ...................................................................... 2,130 5.5 1,787 5.1
Hospitality ............................................................................... 1,839 4.7 1,695 4.9
Total commercial and agricultural mortgage loans ............................................ $39,002 100.0% $34,882 100.0%
Loan-to-value and debt service coverage ratios are measures commonly used to assess the quality of commercial and agricultural
mortgage loans. The loan-to-value ratio compares the amount of the loan to the fair value of the underlying property collateralizing the
loan, and is commonly expressed as a percentage. Loan-to-value ratios greater than 100% indicate that the loan amount is greater than the
collateral value. A smaller loan-to-value ratio indicates a greater excess of collateral value over the loan amount. The debt service coverage
ratio compares a property’s net operating income to its debt service payments. Debt service coverage ratios less than 1.0 times indicate that
property operations do not generate enough income to cover the loan’s current debt payments. A larger debt service coverage ratio
indicates a greater excess of net operating income over the debt service payments.
76 Prudential Financial, Inc. 2015 Annual Report