Prudential 2003 Annual Report Download - page 88

Contractual Obligations
The following table summarizes the payments due for the specific contractual obligations outlined below as of
December 31, 2003.
Payments Due by Period
Total
Less than 1
Year
1–3
Years
3–5
Years
More than
5 Years
(in millions)
Short-term and long-term debt(1) ............................................ $10,349 $4,739 $ 832 $1,371 $3,407
Operating leases(2) ....................................................... 1,127 215 352 240 320
Policyholders’ account balances with contractual maturities(3) ..................... 9,254 3,218 2,657 1,294 2,085
Undistributed demutualization consideration(4) ................................. 812 271 494 47 —
Total, excluding pension and post-retirement contributions .................... 21,542 8,443 $4,335 $2,952 $5,812
Pension and other post-retirement contributions(5) .............................. 39 39
Total ................................................................... $21,581 $8,482
(1) See Footnote 10 to the Consolidated Financial Statements for additional information.
(2) See Footnote 20 to the Consolidated Financial Statements for additional information.
(3) We offer various investment-type products with contractually scheduled maturities through which customers deposit funds with us that typically
provide for a rate of interest on the amount invested through the maturity of the contract. These obligations are backed by our general account
assets, and we bear all of the investment and asset/liability management risk on these contracts. Examples of these types of products include
GICs, funding agreements, and annuities without life contingencies. These liabilities are reflected within “Policyholders’ account balances” on
our consolidated statements of financial position and amount to $7.717 billion as of December 31, 2003. The difference between our recorded
liability and the total payment amount reflects $1.537 billion of future interest to be credited.
(4) Prudential Financial remains obligated to disburse demutualization consideration for eligible policyholders that we have been unable to locate.
To the extent we continue to be unable to locate these policyholders within a prescribed period of time specified by state escheat laws, typically
three to seven years, the funds must be remitted to governmental authorities. Many states have enacted new legislation that reduces the
escheatment time period and a number of other states are pursuing similar legislation. The amounts reflected in the table above are reflective of
state escheat laws as of December 31, 2003. These liabilities are reflected within “Other liabilities” on our consolidated statements of financial
position.
(5) This amount represents our best estimate as of the date of this filing of our aggregated expected contributions to our non-qualified pension and
post-retirement plans for 2004. We do not currently expect to make any contributions in 2004 to our qualified plans. We have not included any
amounts subsequent to 2004, as these amounts are not readily determinable at this time. See Footnote 15 to the Consolidated Financial
Statements for additional information regarding the estimated 2004 contribution.
We enter into agreements to purchase goods and services in the normal course of business; however, these
agreements are not material to our consolidated results of operations or financial position.
Contractual Commitments
In connection with our commercial mortgage banking business, we originate commercial mortgage loans. As of
December 31, 2003, we had outstanding commercial mortgage loan commitments with borrowers of $1.282 billion. In
certain of these transactions, we prearrange that we will sell the loan to an investor after we fund the loan. As of
December 31, 2003, $559 million of our commitments to originate commercial mortgage loans are subject to such
arrangements.
In connection with our discontinued consumer banking business, we have commitments under home equity lines
of credit and other lines of credit to lend up to specified limits to customers. It is anticipated that commitment amounts
will only be partially drawn down based on overall customer usage patterns and, therefore, do not necessarily represent
future cash requirements. We evaluate each credit decision on such commitments at least annually and have the ability
to cancel or suspend such lines at our option. The total commitments for home equity lines of credit and other lines of
credit were $1.859 billion, of which $818 million remains available as of December 31, 2003.
We also have other commitments, which primarily include commitments to fund investments. These commitments
amounted to $2.964 billion as of December 31, 2003.
In connection with certain acquisitions, we agreed to pay additional consideration in future periods, based upon
the attainment by the acquired entity of defined operating objectives. In accordance with GAAP, we do not accrue
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