Prudential 2015 Annual Report Download - page 92

(1) The daily weighted average outstanding balance for the year ended December 31, 2015 and 2014 was $8,221 million and $8,807 million, respectively,
for PFI excluding the Closed Block division, and $4,755 million and $5,165 million, respectively, for the Closed Block division.
(2) Amount for PFI excluding the Closed Block division as of December 31, 2015 includes $2,256 million of securities that had a term greater than one day
due to the timing of the January 1, 2016 holiday.
(3) Excludes securities that may be returned to the Company overnight.
As of December 31, 2015, our domestic insurance entities had assets eligible for the asset-based or secured financing programs of
$102 billion, of which $11.4 billion were on loan. Taking into account market conditions and outstanding loan balances as of December 31,
2015, we believe approximately $13.4 billion of the remaining eligible assets are readily lendable, including approximately $10.1 billion
relating to PFI excluding the Closed Block division, of which $1.7 billion relates to certain separate accounts and may only be used for
financing activities related to those accounts, and the remaining $3.3 billion relating to the Closed Block division.
Membership in the Federal Home Loan Banks
Prudential Insurance is a member of the Federal Home Loan Bank of New York (“FHLBNY”). Membership allows Prudential
Insurance access to the FHLBNY’s financial services, including the ability to obtain loans and to issue funding agreements as an alternative
source of liquidity that are collateralized by qualifying mortgage-related assets or U.S. Treasury securities. Based on regulatory limitations,
as of December 31, 2015, Prudential Insurance had an estimated maximum borrowing capacity of $7.4 billion under the FHLBNY facility,
of which $1.0 billion was outstanding.
PRIAC is a member of the Federal Home Loan Bank of Boston (“FHLBB”), which provides PRIAC access to collateralized advances
from the FHLBB. Under Connecticut law, without the prior consent of the Connecticut Insurance Department, the amount of assets insurers
may pledge to secure debt obligations is limited to the lesser of 5% of prior year statutory admitted assets or 25% of prior year statutory
surplus, resulting in a maximum borrowing capacity for PRIAC under the FHLBB facility of approximately $210 million, none of which
was outstanding as of December 31, 2015.
Borrowings under these facilities are subject to the FHLBNY’s and the FHLBB’s discretion and require the availability of qualifying
assets at Prudential Insurance and PRIAC, respectively. For further information, see Note 14 to our Consolidated Financial Statements.
Commercial Paper Programs
Prudential Financial and Prudential Funding have commercial paper programs with an authorized issuance capacity of $3.0 billion and
$7.0 billion, respectively. Prudential Financial commercial paper borrowings generally have been used to fund the working capital needs of
our subsidiaries. Prudential Funding commercial paper borrowings generally have been used to fund the working capital needs of
Prudential Insurance and its subsidiaries. Prudential Funding also lends to other subsidiaries of Prudential Financial up to limits agreed with
NJDOBI. Prudential Funding maintains a support agreement with Prudential Insurance whereby Prudential Insurance has agreed to
maintain Prudential Funding’s positive tangible net worth at all times. Prudential Financial has also issued a subordinated guarantee
covering Prudential Funding’s commercial paper program. As of December 31, 2015, Prudential Financial and Prudential Funding had
outstanding borrowings of $80 million and $384 million, respectively, under these commercial paper programs. For further information,
see Note 14 to our Consolidated Financial Statements.
Credit Facilities
We have access to a $4.0 billion syndicated, unsecured committed five year credit facility, expiring 2020, which has both Prudential
Financial and Prudential Funding as borrowers. The facility may be used for general corporate purposes, including as backup liquidity for
our commercial paper programs. There were no outstanding borrowings under this credit facility as of December 31, 2015, or as of
February 19, 2016.
The Company expects that it may borrow under the facility from time to time to fund its working capital needs. In addition, amounts
under the credit facility may be drawn in the form of standby letters of credit that can be used to meet the Company’s operating needs. The
credit facility contains representations and warranties, covenants and events of default that are customary for facilities of this type, and
borrowings are not contingent on the Company’s credit ratings nor subject to material adverse change clauses. Borrowings require that the
Company maintain at all times consolidated net worth of at least $18.985 billion, which is calculated as U.S. GAAP equity, excluding
AOCI, equity of noncontrolling interests and equity attributable to the Closed Block. As of December 31, 2015, the Company’s
consolidated net worth exceeded this required minimum amount.
This credit facility, which was entered into on April 14, 2015, amends and restates the Company’s previously existing $2.0 billion five
year credit facility and $1.75 billion three year credit facility.
Put Option Agreement for Senior Debt Issuance
In November 2013, we entered into a ten year put option agreement with a Delaware trust upon the completion of the sale of $1.5
billion of trust securities by that Delaware trust in a Rule 144A private placement. The trust invested the proceeds from the sale of the trust
securities in a portfolio of principal and interest strips of U.S. Treasury securities. The put option agreement provides Prudential Financial
the right to sell to the trust at any time up to $1.5 billion of 4.419% senior notes due November 2023 and receive in exchange a
corresponding amount of the principal and interest strips of U.S. Treasury securities held by the trust. In return, we agreed to pay a semi-
annual put premium to the trust at a rate of 1.777% per annum applied to the unexercised portion of the put option. The put option
agreement with the trust provides Prudential Financial with a source of liquid assets. We will determine the use of proceeds from any
exercise of the put option at the time of exercise. For example, proceeds could be used to meet general liquidity needs and/or to meet the
capital requirements of our subsidiaries.
90 Prudential Financial, Inc. 2015 Annual Report