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As of December 31, 2006, as a percentage of amortized cost, 76% of the portfolio was comprised of publicly traded securities,
compared to 71% of the portfolio as of December 31, 2005. As of December 31, 2006, 97% of the fixed maturity portfolio was classified as
investment grade compared to 96% as of December 31, 2005. For a discussion of changes in the fair value of our trading account assets
supporting insurance liabilities see “—Trading Account Assets Supporting Insurance Liabilities,” below.
The following table sets forth our public fixed maturities included in our trading account assets supporting insurance liabilities
portfolio by NAIC rating as of the dates indicated.
(1) (2) December 31, 2006 December 31, 2005
NAIC
Designation Rating Agency Equivalent
Amortized
Cost
Gross
Unrealized
Gains(3)
Gross
Unrealized
Losses(3)
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains(3)
Gross
Unrealized
Losses(3)
Fair
Value
(in millions)
1 Aaa, Aa, A ........................... $7,772 $ 25 $117 $7,680 $6,599 $ 14 $138 $6,475
2 Baa ................................. 1,800 3 42 1,761 2,017 3 63 1,957
Subtotal Investment Grade ............... 9,572 28 159 9,441 8,616 17 201 8,432
3 Ba .................................. 79 — 7 72 42 — 5 37
4 B ................................... 1 — — 1 2 — — 2
5 C and lower ........................... 1 — — 1 2 — — 2
6 In or near default ....................... — — — — — — — —
Subtotal Below Investment Grade ......... 81 — 7 74 46 — 5 41
Total Public Trading Account Assets
Supporting Insurance Liabilities ......... $9,653 $ 28 $166 $9,515 $8,662 $ 17 $206 $8,473
(1) See “—Fixed Maturity Securities Credit Quality” above for a discussion on NAIC designations.
(2) Reflects equivalent ratings for investments of the international insurance operations that are not rated by U.S. insurance regulatory authorities.
(3) Amounts are reported in “Asset management fees and other income.”
The following table sets forth our private fixed maturities included in our trading account assets supporting insurance liabilities
portfolio by NAIC rating as of the dates indicated.
(1) (2) December 31, 2006 December 31, 2005
NAIC
Designation Rating Agency Equivalent
Amortized
Cost
Gross
Unrealized
Gains(3)
Gross
Unrealized
Losses(3)
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains(3)
Gross
Unrealized
Losses(3)
Fair
Value
(in millions)
1 Aaa, Aa, A ........................... $ 861 $ 3 $ 27 $ 837 $1,087 $ 2 $ 28 $1,061
2 Baa ................................. 2,242 13 62 2,193 2,564 10 66 2,508
Subtotal Investment Grade ............... 3,103 16 89 3,030 3,651 12 94 3,569
3 Ba .................................. 266 3 8 261 276 2 9 269
4 B ................................... 12 — — 12 31 — 1 30
5 C and lower ........................... 79 — 2 77 99 — 1 98
6 In or near default ....................... 7 4 — 11 8 5 — 13
Subtotal Below Investment Grade ......... 364 7 10 361 414 7 11 410
Total Private Trading Account Assets
Supporting Insurance Liabilities ......... $3,467 $ 23 $ 99 $3,391 $4,065 $19 $105 $3,979
(1) See “—Fixed Maturity Securities Credit Quality” above for a discussion on NAIC designations.
(2) Reflects equivalent ratings for investments of the international insurance operations that are not rated by U.S. insurance regulatory authorities.
(3) Amounts are reported in “Asset management fees and other income.”
Commercial Loans
Investment Mix
We originate domestic commercial mortgages using dedicated investment staff and a network of independent companies through our
various regional offices across the country. All loans are underwritten consistently to our standards using a proprietary quality rating
system that has been developed from our experience in real estate and mortgage lending. Our loan portfolio strategy emphasizes
diversification by property type and geographic location.
Consumer loans are loans extended by Gibraltar Life to individuals for financing purchases of consumer goods and services and are
guaranteed by third party guarantor companies.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
66