Prudential 2015 Annual Report Download - page 89

(1) Amounts are reflected gross of affiliated reinsurance recoverables. 2014 has been revised to conform to current period presentation.
(2) As of December 31, 2015 and 2014, $9.1 billion and $8.0 billion, respectively, of the insurance-related liabilities for Prudential of Japan are associated
with U.S. dollar-denominated products that are coinsured to our domestic insurance operations and supported by U.S. dollar-denominated assets.
(3) Includes The Prudential Gibraltar Financial Life Insurance Co., Ltd., a wholly-owned subsidiary of Gibraltar Life.
(4) Represents our international insurance operations, excluding Japan.
The liabilities presented above are primarily supported by invested assets in our general account. When selecting assets to support
these contractual obligations, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions. As
a result, assets will include both liquid assets, as discussed below, and other assets that we believe adequately support our liabilities.
We believe most of the longer-term recurring pay individual life insurance policies sold by our Japanese operations do not have
significant withdrawal risk because policyholders may incur surrender charges and must undergo a new underwriting process to obtain a
new insurance policy.
Gibraltar Life sells fixed annuities, denominated in U.S. and Australian dollars that may be subject to increased surrenders should the
yen depreciate in relation to these currencies and interest rates in Australia and the U.S. decline relative to Japan. A significant portion of
the liabilities associated with these contracts include a market value adjustment feature, which mitigates the profitability impact from
surrenders. As of December 31, 2015, products with a market value adjustment feature represented $21.0 billion of our Japan operations’
insurance-related liabilities, which included $17.1 billion attributable to non-yen denominated fixed annuities.
In 2013, Gibraltar Life discontinued sales of a yen-denominated single premium reduced death benefit whole life product that had a
greater savings component, which made it more susceptible to increased levels of surrenders if interest rates increase in Japan. As of
December 31, 2015, yen-denominated single premium reduced death benefit whole life products represented $7.8 billion of our Japan
operations’ insurance-related liabilities.
Liquid Assets
Liquid assets include cash and cash equivalents, short-term investments, fixed maturities that are not designated as held-to-maturity
and public equity securities. In addition to access to substantial investment portfolios, our insurance companies’ liquidity is managed
through access to a variety of instruments available for funding and/or managing cash flow mismatches, including from time to time those
arising from claim levels in excess of projections. Our ability to utilize assets and liquidity between our subsidiaries is limited by regulatory
and other constraints. We believe that ongoing operations and the liquidity profile of our assets provide sufficient liquidity under
reasonably foreseeable stress scenarios for each of our insurance subsidiaries.
The following table sets forth the fair value of certain of our domestic insurance operations’ portfolio of liquid assets, including cash
and short-term investments, fixed maturity investments other than those designated as held-to-maturity, classified by NAIC or equivalent
rating, and public equity securities, as of the dates indicated.
December 31, 2015
Prudential
Insurance PLIC PRIAC Other(1) Total
December 31,
2014
(in billions)
Cash and short-term investments ....................................... $ 6.2 $ 2.4 $ 0.9 $ 0.8 $ 10.3 $ 7.7
Fixed maturity investments:
High or highest quality ........................................... 88.9 32.1 17.8 8.7 147.5 157.8
Other than high or highest quality ................................... 5.9 3.9 1.8 0.7 12.3 11.6
Subtotal ........................................................... 94.8 36.0 19.6 9.4 159.8 169.4
Public equity securities ............................................... 0.3 2.8 0.0 0.1 3.2 4.0
Total ............................................................. $101.3 $41.2 $20.5 $10.3 $173.3 $181.1
(1) Includes PALAC and Pruco Life.
The following table sets forth the fair value of our international insurance operations’ portfolio of liquid assets, including cash and
short-term investments, fixed maturity investments other than those designated as held-to-maturity, classified by NAIC or equivalent
rating, and public equity securities, as of the dates indicated.
December 31, 2015
Prudential
of Japan
Gibraltar
Life(1)
All
Other(2) Total
December 31,
2014
(in billions)
Cash and short-term investments ............................................. $ 0.6 $ 1.4 $ 1.5 $ 3.5 $ 2.1
Fixed maturity investments:
High or highest quality(3) .............................................. 29.2 79.0 15.6 123.8 123.9
Other than high or highest quality ........................................ 0.5 2.5 0.3 3.3 3.0
Subtotal ................................................................ 29.7 81.5 15.9 127.1 126.9
Public equity securities ..................................................... 1.7 2.4 0.5 4.6 4.3
Total ................................................................... $32.0 $85.3 $17.9 $135.2 $133.3
Prudential Financial, Inc. 2015 Annual Report 87