Prudential 2015 Annual Report Download - page 82

Invested Assets of Other Entities and Operations
“Invested Assets of Other Entities and Operations” presented below includes investments held outside the general account and
primarily represents investments associated with our asset management operations and derivative operations. Our derivative operations act
on behalf of affiliates primarily to manage interest rate, foreign currency, credit, and equity exposures. Assets within our asset management
operations that are managed for third parties and those assets classified as “Separate account assets” on our balance sheet are not included.
December 31,
2015
December 31,
2014
(in millions)
Fixed maturities:
Public, available-for-sale, at fair value ............................................................... $ 94 $ 96
Private, available-for-sale, at fair value .............................................................. 39 52
Other trading account assets, at fair value ................................................................ 12,609 9,068
Equity securities, available-for-sale, at fair value .......................................................... 11 8
Commercial mortgage and other loans, at book value(1) .................................................... 302 419
Other long-term investments .......................................................................... 516 986
Short-term investments ............................................................................... 388 347
Total investments ............................................................................... $13,959 $10,976
(1) Book value is generally based on unpaid principal balance net of any allowance for losses, the lower of cost or fair value, or fair value, depending on the
loan.
The increase in Invested Assets of Other Entities and Operations is primarily due to consolidated variable interest entities which were
launched and consolidated during 2015.
Other Trading Account Assets
Other trading account assets are primarily related to assets associated with consolidated variable interest entities for which the
Company is the investment manager, as well as our derivative operations used to manage interest rate, foreign currency, credit and equity
exposures. The assets of the consolidated variable interest entities are generally offset by liabilities for which the fair value option has been
elected. For further information on these consolidated variable interest entities, see Note 5 to the Consolidated Financial Statements.
Commercial Mortgage and Other Loans
Our asset management operations include our commercial mortgage operations, which provide mortgage origination, asset
management and servicing for our general account, institutional clients, and government sponsored entities such as Fannie Mae, the Federal
Housing Administration, and Freddie Mac.
The mortgage loans of our commercial mortgage operations are included in “Commercial mortgage and other loans,” with related
derivatives and other hedging instruments primarily included in “Other trading account assets” and “Other long-term investments.”
Other Long-Term Investments
Other long-term investments primarily include strategic investments made as part of our asset management operations. We make these
strategic investments in real estate, as well as fixed income, public equity and real estate securities, including controlling interests. Certain
of these investments are made primarily for purposes of co-investment in our managed funds and structured products. Other strategic
investments are made with the intention to sell or syndicate to investors, including our general account, or for placement in funds and
structured products that we offer and manage (seed investments). As part of our asset management operations, we also make loans to our
managed funds that are secured by equity commitments from investors or assets of the funds. Other long-term investments also include
certain assets in consolidated investment funds where the Company is deemed to exercise control over the funds.
Liquidity and Capital Resources
Overview
Liquidity refers to the ability to generate sufficient cash resources to meet the payment obligations of the Company. Capital refers to
the long-term financial resources available to support the operations of our businesses, fund business growth, and provide a cushion to
withstand adverse circumstances. Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of our
businesses, general economic conditions and our access to the capital markets and the alternate sources of liquidity and capital described
herein.
Effective and prudent liquidity and capital management is a priority across the organization. Management monitors the liquidity of
Prudential Financial and its subsidiaries on a daily basis and projects borrowing and capital needs over a multi-year time horizon through
our periodic planning process. We believe that cash flows from the sources of funds available to us are sufficient to satisfy the current
liquidity requirements of Prudential Financial and its subsidiaries, including under reasonably foreseeable stress scenarios. We have a
capital management framework in place that governs the allocation of capital and approval of capital uses. We also employ a Capital
Protection Framework to ensure the availability of capital resources to maintain adequate capitalization on a consolidated basis and
competitive risk-based capital (“RBC”) ratios and solvency margins for our insurance subsidiaries under various stress scenarios.
80 Prudential Financial, Inc. 2015 Annual Report