Prudential 2015 Annual Report Download - page 97

In view of the difficulties experienced in recent years by many financial institutions, the rating agencies have heightened the level of
scrutiny that they apply to such institutions, have increased the frequency and scope of their credit reviews, have requested additional
information from the companies that they rate, and may adjust upward the capital and other requirements employed in the rating agency
models for maintenance of certain ratings levels, such as the financial strength ratings currently held by our life insurance subsidiaries. In
addition, actions we might take to access third-party financing or to realign our capital structure may in turn cause rating agencies to
reevaluate our ratings.
The following is a summary of the significant changes or actions in our ratings and rating outlooks that have occurred from January 1,
2015 through February 19, 2016.
On May 13, 2015, A.M. Best affirmed Prudential Financial’s long-term senior debt rating at “a-” and short-term debt rating at “AMB-
1”. A.M. Best also affirmed the “A+” financial strength ratings of Prudential Financial’s core subsidiaries, including Prudential Insurance,
PALAC and PRIAC, with stable outlooks.
On September 17, 2015, S&P downgraded the financial strength and long-term counterparty credit ratings of Prudential Financial's
Japanese insurance subsidiaries from “AA-” to “A+” as a result of its decision to downgrade the sovereign debt ratings of Japan from “AA-
” to “A+”. All ratings were assigned stable outlooks.
On September 18, 2015, S&P affirmed the long-term senior debt rating and short-term debt rating of Prudential Financial at “A” and
“A-1”, respectively, and the financial strength ratings of Prudential Financial’s U.S. insurance subsidiaries at “AA-,” in each case, with
stable outlooks.
On November 11, 2015, Moody’s affirmed Prudential Financial’s long-term senior debt rating at “Baa1” and the “A1” financial
strength ratings of Prudential’s operating subsidiaries, including Prudential Insurance and PRIAC, with stable outlooks.
On December 15, 2015, Fitch affirmed Prudential Financial’s long-term senior debt rating at “BBB+” and the financial strength
ratings of our U.S. operating entities at “A+”, with positive outlooks.
Contractual Obligations
The table below summarizes the future estimated cash payments related to certain contractual obligations as of December 31, 2015.
The estimated payments reflected in this table are based on management’s estimates and assumptions about these obligations. Because
these estimates and assumptions are necessarily subjective, the actual cash outflows in future periods will vary, possibly materially, from
those reflected in the table. In addition, we do not believe that our cash flow requirements can be adequately assessed based solely upon an
analysis of these obligations, as the table below does not contemplate all aspects of our cash inflows, such as the level of cash flow
generated by certain of our investments, nor all aspects of our cash outflows.
Estimated Payments Due by Period
Total 2016 2017-2018 2019-2020
2021 and
thereafter
(in millions)
Short-term and long-term debt obligations(1) .................................... $ 41,678 $ 2,219 $ 4,921 $ 4,549 $ 29,989
Operating and capital lease obligations(2) ...................................... 665 131 209 127 198
Purchase obligations:
Commitments to purchase or fund investments(3) ............................ 3,879 3,010 443 289 137
Commercial mortgage loan commitments(4) ................................ 2,272 1,619 600 30 23
Other liabilities:
Insurance liabilities(5) .................................................. 1,121,869 41,598 69,030 71,005 940,236
Other(6) ............................................................. 11,602 11,405 63 53 81
Total ........................................................... $1,181,965 $59,982 $75,266 $76,053 $970,664
(1) The estimated payments due by period for long-term debt reflects the contractual maturities of principal, as disclosed in Note 14 to the Consolidated
Financial Statements, as well as estimated future interest payments. The payment of principal and estimated future interest for short-term debt are
reflected in estimated payments due in 2016. The estimate for future interest payments includes the effect of derivatives that qualify for hedge
accounting treatment. See Note 14 to the Consolidated Financial Statements for additional information concerning our short-term and long-term debt.
(2) The estimated payments due by period for operating and capital leases reflect the future minimum lease payments under non-cancelable operating and
capital leases, as disclosed in Note 23 to the Consolidated Financial Statements.
(3) As discussed in Note 23 to the Consolidated Financial Statements, we have commitments to purchase or fund investments, some of which are
contingent upon events or circumstances not under our control, including those at the discretion of our counterparties. The timing of the fulfillmentof
certain of these commitments cannot be estimated, therefore the settlement of these obligations are reflected in estimated payments due in less than one
year. Commitments to purchase or fund investments include $92 million that we anticipate will ultimately be funded from our separate accounts.
(4) As discussed in Note 23 to the Consolidated Financial Statements, loan commitments of our commercial mortgage operations, which are legally binding
commitments to extend credit to a counterparty, have been reflected in the contractual obligations table above principally based on the expiration date of
the commitment; however, it is possible these loan commitments could be funded prior to their expiration date. In certain circumstances the
counterparty may also extend the date of the expiration in exchange for a fee.
(5) The estimated cash flows due by period for insurance liabilities reflect future estimated cash payments to be made to policyholders and others for future
policy benefits, policyholders’ account balances, policyholder’s dividends, reinsurance payables and separate account liabilities, net of premium receipts
and reinsurance recoverables. These future estimated cash flows for current policies in force generally reflect our best estimate economic and actuarial
assumptions. These cash flows are undiscounted with respect to interest. The sum of the cash flows shown for all years in the table of $1,122 billion
Prudential Financial, Inc. 2015 Annual Report 95