Prudential 2005 Annual Report Download - page 143

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PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
16. EMPLOYEE BENEFIT PLANS (continued)
Pension and postretirement plan asset allocation as of September 30, 2005 and September 30, 2004, are as follows:
Pension Percentage
of Plan Assets as of
September 30
Postretirement Percentage
of Plan Assets as of
September 30
2005 2004 2005 2004
Asset category
U.S. Stocks ........................................................ 29% 41% 79% 58%
International Stocks .................................................. 8% 12% 10% 6%
Bonds ............................................................ 51% 39% 7% 22%
Short-term Investments ............................................... 0% 0% 3% 3%
Real Estate ......................................................... 6% 6% 1% 0%
Municipal Bonds .................................................... 0% 0% 0% 11%
Other ............................................................. 6% 2% 0% 0%
Total ............................................................. 100% 100% 100% 100%
The Company, for its domestic pension and postretirement plans, has developed guidelines for asset allocations. As of the
September 30, 2005 measurement date the range of target percentages are as follows:
Pension Investment Policy
Guidelines as of
September 30, 2005
Postretirement Investment
Policy Guidelines as of
September 30, 2005
Minimum Maximum Minimum Maximum
Asset category
U.S. Stocks ..................................................... 19% 34% 53% 98%
International Stocks ............................................... 3% 9% 1% 13%
Bonds .......................................................... 45% 64% 0% 21%
Short-term Investments ............................................ 0% 16% 0% 20%
Real Estate ...................................................... 0% 12% 0% 13%
Municipal Bonds ................................................. 0% 0% 1% 1%
Other .......................................................... 0% 12% 0% 0%
Management reviews its investment strategy on an annual basis.
The investment goal of the domestic pension plan assets is to generate an above benchmark return on a diversified portfolio of
stocks, bonds and real estate, while meeting the cash requirements for a pension obligation that includes a traditional formula
principally representing payments to annuitants and a cash balance formula that allows lump sum payments and annuity payments.
The pension plan risk management practices include guidelines for asset concentration, credit rating and liquidity. The pension plan
does not invest in leveraged derivatives. Derivatives such as futures contracts are used to reduce transaction costs and change asset
concentration.
The investment goal of the domestic postretirement plan assets is to generate an above benchmark return on a diversified
portfolio of stocks, bonds, real estate, short-term investments and municipal bonds, while meeting the cash requirements for the
postretirement obligations that includes a medical benefit including prescription drugs, a dental benefit and a life benefit. Stocks are
used to provide expected growth in assets deposited into the plan assets. Bonds provide liquidity and income. Real estate provides
for capital growth and income. Short-term investments provide liquidity and allow for defensive asset mixes. Municipal bonds
provide liquidity and tax efficient income, where appropriate. The postretirement plans risk management practices include
guidelines for asset concentration, credit rating, liquidity, and tax efficiency. The postretirement plan does not invest in leveraged
derivatives. Derivatives such as futures contracts are used to reduce transaction costs and change asset concentration.
There were no investments in Prudential Financial Common Stock as of September 30, 2005 or 2004 for either the pension or
postretirement plans. Pension plan assets of $8,201 million and $7,161 million are included in separate account assets and liabilities
as of September 30, 2005 and 2004, respectively.
Prudential Financial 2005 Annual Report 141