Prudential 2015 Annual Report Download - page 98

exceeds the corresponding liability amounts of approximately $654 billion included in the Consolidated Financial Statements as of December 31, 2015.
Separate account liabilities are legally insulated from general account obligations, and it is generally expected these liabilities will be fully funded by
separate account assets and their related cash flows. We have made significant assumptions to determine the future estimated cash flows related to the
underlying policies and contracts. Due to the significance of the assumptions used, actual cash flows will differ, possibly materially, from these
estimates.
(6) The estimated payments due by period for other liabilities includes securities sold under agreements to repurchase, cash collateral for loaned securities,
liabilities for unrecognized tax benefits, bank customer liabilities, and other miscellaneous liabilities. Amounts presented in the table also exclude
$8,597 billion of notes issued by consolidated VIE’s which recourse for these obligations is limited to the assets of the respective VIE and do not have
recourse to the general credit of the company.
We also enter into agreements to purchase goods and services in the normal course of business; however, these purchase obligations
are not material to our consolidated results of operations or financial position as of December 31, 2015.
Off-Balance Sheet Arrangements
Guarantees and Other Contingencies
In the course of our business, we provide certain guarantees and indemnities to third parties pursuant to which we may be contingently
required to make payments in the future. See “Commitments and Guarantees” within Note 23 to the Consolidated Financial Statements for
additional information.
Other Contingent Commitments
We also have other commitments, some of which are contingent upon events or circumstances not under our control, including those
at the discretion of our counterparties. See “Commitments and Guarantees” within Note 23 to the Consolidated Financial Statements for
additional information regarding these commitments. For further discussion of certain of these commitments that relate to our separate
accounts, also see “—Liquidity associated with other activities—Asset Management operations.”
Other Off-Balance Sheet Arrangements
In November 2013, we entered into a put option agreement with a Delaware trust that gives Prudential Financial the right, at any time
over a ten year period, to issue up to $1.5 billion of senior notes to the trust in return for principal and interest strips of U.S. Treasury
securities that are held by the trust. See Note 14 to our Consolidated Financial Statements for more information on this put option agreement.
In 2014, Prudential Financial entered into financing transactions, pursuant to which it issued $500 million of limited recourse notes and, in
return, obtained $500 million of asset-backed notes from a Delaware master trust and ultimately contributed the asset-backed notes to its
subsidiary, PRIAC. As of December 31, 2015, no principal payments have been received or are currently due on the asset-backed notes and,
as a result, there was no payment obligation under the limited recourse notes. Accordingly, none of the notes are reflected in the Company’s
Consolidated Financial Statements as of that date. For further discussion see “—Liquidity—Financing Activities.”
Other than as described above, we do not have retained or contingent interests in assets transferred to unconsolidated entities, or
variable interests in unconsolidated entities or other similar transactions, arrangements or relationships that serve as credit, liquidity or
market risk support, that we believe are reasonably likely to have a material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or our access to or requirements for capital resources.
In addition, other than the agreements referred to above, we do not have relationships with any unconsolidated entities that are
contractually limited to narrow activities that facilitate our transfer of or access to associated assets.
Risk Management
Overview
We employ a risk governance structure, overseen by senior management and our Board of Directors and managed by Enterprise Risk
Management (“ERM”), to provide a common framework for evaluating the risks embedded in and across our businesses, developing risk
appetites, managing these risks and identifying current and future risk challenges and opportunities.
Risk Governance Framework
Each of our businesses has a risk governance structure that is supported by a framework at the corporate-level. Generally, our
businesses are authorized to make day-to-day risk decisions that are consistent with enterprise risk policies and limits, and subject to
enterprise oversight. The governance structure described in this section is designed to support this framework.
Board of Directors’ Role in Risk Management
Our Board of Directors oversees our risk profile and management’s processes for assessing and managing risk. Certain specific
categories of risk are assigned to Board committees that report back to the full Board, as summarized below:
• Audit Committee: oversees risks related to operational risks, financial controls, legal, regulatory and compliance risks, and the
overall risk management governance structure and risk management function.
96 Prudential Financial, Inc. 2015 Annual Report