Prudential 2003 Annual Report Download - page 63

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requirements of our liabilities. The Asset Liability and Risk Management Group consults with the product experts in
the businesses on an ongoing basis to arrive at asset/liability matching policies and decisions. We adjust this dynamic
process as products change, as we develop new products and as changes in the market environment occur.
We develop asset strategies for specific classes of product liabilities and attributed or accumulated surplus, each
with distinct risk characteristics. Most of our products can be categorized in to the following three classes:
interest-crediting products for which the rates credited to customers are periodically adjusted to reflect market
and competitive forces and actual investment experience, such as fixed annuities;
• participating individual and experience rated group products in which customers participate in actual
investment and business results through annual dividends, interest or return of premium; and
guaranteed products for which there are price or rate guarantees for the life of the contract, such as GICs.
We determine a target asset mix for each product class, which we reflect in our investment policies. Our asset/
liability management process has permitted us to manage interest-sensitive products successfully through several
market cycles.
Portfolio Composition
Our investment portfolio consists primarily of public and private fixed maturity securities, commercial loans,
equity securities and other invested assets. Portfolio composition is a critical element of our investment management
process. The composition of our general account reflects, within the discipline provided by our risk management
approach, our need for competitive results and the diverse selection of investment alternatives available through our
Investment Management segment. The size of our portfolio enables us to invest in asset classes that may be unavailable
to the typical investor.
Our total general account investments were $174.9 billion and $169.2 billion as of December 31, 2003 and 2002,
respectively, which are segregated between the Financial Services Businesses and the Closed Block Business. Total
general account investments attributable to the Financial Services Businesses were $110.9 billion and $105.1 billion as
of December 31, 2003 and 2002, respectively, while total general account investments attributable to the Closed Block
Business were $64.0 billion and $64.1 billion as of December 31, 2003 and 2002, respectively. The following table sets
forth the composition of the investments of our general account as of the dates indicated.
As of December 31, 2003
Financial
Services
Businesses
Closed
Block
Business Total %ofTotal
($ in millions)
Fixed Maturities:
Public, available for sale, at fair value .......................................... $ 66,430 $29,538 $ 95,968 54.9%
Public, held to maturity, at amortized cost ....................................... 3,010 — 3,010 1.7
Private, available for sale, at fair value .......................................... 17,921 15,052 32,973 18.9
Private, held to maturity, at amortized cost ...................................... 58 58 —
Trading account assets, at fair value ................................................ 226 226 0.1
Equity securities, at fair value ..................................................... 1,101 2,282 3,383 1.9
Commercial loans, at book value .................................................. 11,774 7,006 18,780 10.7
Other long term investments(1) ................................................... 3,702 1,041 4,743 2.7
Policy loans, at outstanding balance ................................................ 2,609 5,543 8,152 4.7
Short-term investments .......................................................... 4,052 3,581 7,633 4.4
Total general account investments ............................................. 110,883 64,043 174,926 100.0%
Invested assets of other entities and operations(2) ..................................... 6,115 — 6,115
Total investments .......................................................... $116,998 $64,043 $181,041
Prudential Financial 2003 Annual Report 61