Prudential 2005 Annual Report Download - page 70

As of December 31, 2005 and December 31, 2004, our international insurance subsidiaries had cash and short-term investments of
approximately $1.7 billion and $3.6 billion, respectively, and fixed maturity investments with fair values of $36.5 billion and $38.0 billion,
respectively. We believe that ongoing operations and the liquidity profile of our international insurance assets provide sufficient current
liquidity, including under reasonably foreseeable stress scenarios.
Prudential Securities Group
As of December 31, 2005 and December 31, 2004, Prudential Securities Group’s assets totaled $6.7 billion and $7.1 billion,
respectively. Prudential Securities Group continues to own our investment in Wachovia Securities as well as the retained wholly owned
businesses. The wholly owned businesses remaining in Prudential Securities Group continue to maintain sufficiently liquid balance sheets,
consisting mostly of cash and cash equivalents, segregated client assets, short-term collateralized receivables from clients and broker-
dealers, and collateralized loans to clients. Distributions from our investment in Wachovia Securities to Prudential Securities Group totaled
$154 million and $80 million for the years ended December 31, 2005 and 2004, respectively. As of December 31, 2005, Prudential
Securities Group had remaining assets amounting to $229 million related to its former institutional fixed income activities, compared to
$386 million as of December 31, 2004.
Financing Activities
As of December 31, 2005 and December 31, 2004, total short- and long-term debt of the Company on a consolidated basis was $19.4
billion and $11.7 billion, respectively. Outstanding short- and long-term debt of Prudential Financial, the parent company, amounted to
$8.3 billion as of December 31, 2005 and $4.6 billion as of December 31, 2004, which is included in the total consolidated outstanding
short- and long-term debt of the Company.
Prudential Financial is authorized to borrow funds from various sources to meet its capital needs, as well as the capital needs of its
subsidiaries. The following table sets forth the outstanding short- and long-term debt of Prudential Financial, as of the dates indicated:
December 31, 2005 December 31, 2004
(in millions)
Borrowings:
General obligation short-term debt:
Commercial paper ..................................................................... $ 766 $ 446
Floating rate convertible senior notes ...................................................... 2,000 —
Current portion of long-term debt ......................................................... 677 —
General obligation long-term debt:
Senior debt ........................................................................... 3,820 3,658
Retail medium-term notes ............................................................... 1,045 470
Total general obligations ........................................................... $8,308 $4,574
Prudential Financial’s short-term debt includes commercial paper borrowings of $766 million and $446 million as of December 31,
2005 and December 31, 2004, respectively. The weighted average interest rate on the commercial paper borrowings under this program
was 3.19%, 1.44%, and 1.21% for the years ended December 31, 2005, 2004, and 2003, respectively.
To enhance its financial flexibility, Prudential Financial filed a $5 billion shelf registration statement, effective March 21, 2005, with
the SEC that permits the issuance of public debt, equity and hybrid securities, superseding the $5 billion shelf registration that was filed in
April 2003. The total principal amount of debt outstanding under both shelf programs as of December 31, 2005 was $5.5 billion. The total
remaining issuance capacity under the current shelf program as of December 31, 2005 was approximately $3.7 billion.
On March 30, 2005, Prudential Financial allocated up to $2.5 billion of the 2005 $5 billion shelf registration for a new medium-term
notes, Series C program. The total principal amount of debt outstanding under Prudential Financial’s domestic medium-term note and
senior note programs as of December 31, 2005 and December 31, 2004 was $4.5 billion and $3.7 billion, respectively. On June 8, 2005,
Prudential Financial issued $850 million of medium-term notes, Series C. The net proceeds from the sale of the notes were used for general
corporate purposes, including a loan to one of our domestic insurance subsidiaries. The individual life business used the loan to replace
reliance on 364-day letter of credit facilities supporting reserve credits realized through reinsurance on certain term insurance business.
This transaction reduced rollover and repricing risks with respect to those letter of credit facilities. The weighted average interest rates on
Prudential Financial’s domestic medium-term note and senior note programs, including the effect of interest rate hedging activity, were
4.95%, 4.20%, and 3.76% for the years ended December 31, 2005, 2004 and 2003, respectively.
On April 29, 2005, Prudential Financial allocated up to $2.0 billion of the 2005 $5 billion shelf registration for a retail medium-term
notes program to supersede the 2004 retail medium-term notes program. This retail medium-term notes program serves as a funding source
for a spread product of our Retirement segment that is economically similar to funding agreement-backed medium-term notes issued to
institutional investors, except that the notes are senior obligations of Prudential Financial and are purchased by retail investors. The total
principal amount of debt outstanding under this program as of December 31, 2005 and December 31, 2004 was $1,047 million and $470
million, respectively. The weighted average interest rate on this debt, including the effect of interest rate hedging activity, was 5.06% and
2.85% for the years ended December 31, 2005 and 2004, respectively.
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