Prudential 2006 Annual Report Download - page 126
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PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
4. INVESTMENTS (continued)
Duration of Gross Unrealized Loss Positions for Cost Method Investments
The following table shows the fair value and gross unrealized losses aggregated by length of time that individual cost method
investments have been in a continuous unrealized loss position, at December 31:
2006
Less than twelve months Twelve months or more Total
Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
(in millions)
Cost Method Investments ................... $43 $3 $6 $— $49 $3
2005
Less than twelve months Twelve months or more Total
Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
(in millions)
Cost Method Investments ................. $40 $4 $13 $2 $53 $6
The aggregate cost of the Company’s cost method investments included in “Other long-term investments” totaled $214 million
and $148 million at December 31, 2006 and 2005, respectively. In accordance with its policy described in Note 2, the Company
concluded that an adjustment for other than temporary impairments for these securities was not warranted at December 31, 2006 or
2005.
Variable Interest Entities
In the normal course of its activities, the Company enters into relationships with various special purpose entities and other
entities that are deemed to be variable interest entities (“VIEs”), in accordance with FIN No. 46(R), “Consolidation of Variable
Interest Entities.” A VIE is an entity that either (1) has equity investors that lack certain essential characteristics of a controlling
financial interest (including the ability to control the entity, the obligation to absorb the entity’s expected losses and the right to
receive the entity’s expected residual returns) or (2) lacks sufficient equity to finance its own activities without financial support
provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the VIE. If the
Company determines that it stands to absorb a majority of the VIE’s expected losses or to receive a majority of the VIE’s expected
residual returns, the Company would be deemed to be the VIE’s “primary beneficiary” and would be required to consolidate the
VIE.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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