Prudential 2003 Annual Report Download - page 68

The following table sets forth the composition of the portion of our fixed maturity securities portfolio by industry
category attributable to the Closed Block Business as of the dates indicated and the associated gross unrealized gains
and losses.
As of December 31, 2003 As of December 31, 2002
Industry(1)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in millions)
Corporate Securities:
Manufacturing ............... $ 9,412 $ 770 $ 33 $10,149 $ 8,993 $ 675 $ 83 $ 9,585
Finance ..................... 5,587 368 5 5,950 5,322 400 13 5,709
Utilities ..................... 5,398 584 24 5,958 4,921 454 72 5,303
Services .................... 5,088 554 10 5,632 4,332 370 40 4,662
Energy ..................... 2,280 267 3 2,544 2,318 261 7 2,572
Retail and Wholesale .......... 1,990 200 1 2,189 2,613 265 21 2,857
Transportation ............... 1,196 112 4 1,304 1,210 82 16 1,276
Other ...................... 29 5 — 34 273 20 3 290
Total Corporate Securities .......... 30,980 2,860 80 33,760 29,982 2,527 255 32,254
U.S. Government ................. 4,844 284 31 5,097 4,422 446 6 4,862
Mortgage Backed ................. 1,372 50 2 1,420 5,055 143 3 5,195
Asset-Backed Securities ............ 2,842 45 8 2,879 2,851 62 12 2,901
Foreign Government .............. 1,255 182 3 1,434 887 136 2 1,021
Total ................... $41,293 $3,421 $124 $44,590 $43,197 $3,314 $278 $46,233
(1) Investment data has been classified based on Lehman industry categorizations for domestic public holdings and similar classifications by
industry for all other holdings.
As a percentage of amortized cost, fixed maturity investments attributable to the Closed Block Business as of
December 31, 2003, consist primarily of 23% manufacturing sector, 14% finance sector, 13% utilities sector, 12%
services sector, and 12% U.S. Government compared to 21% manufacturing sector, 12% finance sector, 12% mortgage
backed securities, 11% utilities sector and 10% services sector as of December 31, 2002. As of December 31, 2003,
73% of the mortgage-backed securities in the Closed Block Business were publicly traded agency pass-through
securities related to residential mortgage loans. Collateralized mortgage obligations represented the remaining 27% of
mortgage-backed securities, and less than 1% of fixed maturities.
The gross unrealized losses related to our fixed maturity portfolio attributable to the Closed Block Business were
$0.1 billion as of December 31, 2003, compared to $0.3 billion as of December 31, 2002. The gross unrealized losses
as of December 31, 2003, were concentrated primarily in the manufacturing, U.S. Government and utilities sectors
while gross unrealized losses in 2002 were concentrated in manufacturing, utilities, and services sectors. Non-
investment grade securities represented 40% of the gross unrealized losses attributable to the Closed Block Business as
of December 31, 2003, versus 63% of gross unrealized losses as of December 31, 2002.
Fixed Maturity Securities Credit Quality
The Securities Valuation Office (“SVO”) of the NAIC evaluates the investments of insurers for regulatory
reporting purposes and assigns fixed maturity securities to one of six categories called “NAIC Designations.” NAIC
designations of “1” or “2” include fixed maturities considered investment grade, which include securities rated Baa3 or
higher by Moody’s or BBB- or higher by S&P. NAIC Designations of “3” through “6” are referred to as below
investment grade, which include securities rated Ba1 or lower by Moody’s and BB+ or lower by S&P. As a result of
time lags between the funding of investments, the finalization of legal documents and the completion of the SVO filing
process, the fixed maturity portfolio generally includes securities that have not yet been rated by the SVO as of each
balance sheet date. Pending receipt of SVO ratings, the categorization of these securities by NAIC designation is based
on the expected ratings indicated by internal analysis.
Growing and Protecting Your Wealth66