Prudential 2006 Annual Report Download - page 69

Ongoing surveillance of the portfolio is performed and loans are placed on watch list status based on a predefined set of criteria. We
place loans on early warning status in cases where we detect that the physical condition of the property, the financial situation of the
borrower or tenant or other market factors could lead to a loss of principal or interest. We classify loans as closely monitored when there is
a collateral deficiency or other credit events that will lead to a potential loss of principal or interest. Loans not in good standing are those
loans where there is a high probability of loss of principal, such as when the loan is in the process of foreclosure or the borrower is in
bankruptcy. In our domestic operations, our workout and special servicing professionals manage the loans on the watch list. In our
international portfolios, we monitor delinquency in consumer loans on a pool basis and evaluate any servicing relationship and guarantees
the same way we do for commercial loans.
As of both December 31, 2006 and December 31, 2005, we held approximately 11% of our general account investments in
commercial loans. This percentage is net of a $0.1 billion allowance for losses as of both December 31, 2006 and December 31, 2005.
Our loan portfolio strategy emphasizes diversification by property type and geographic location. The following tables set forth the
breakdown of the gross carrying values of our commercial loan portfolio by geographic region and property type as of the dates indicated.
December 31, 2006 December 31, 2005
Financial Services
Businesses
Closed Block
Business
Financial Services
Businesses
Closed Block
Business
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
($ in millions)
Commercial loans by region:
U.S. Regions:
Pacific ........................................ $ 4,463 25.7% $2,629 35.8% $ 4,210 26.5% $2,661 36.4%
South Atlantic .................................. 3,423 19.7 1,364 18.6 2,715 17.1 1,401 19.2
Middle Atlantic ................................. 2,514 14.5 1,527 20.8 2,197 13.9 1,429 19.6
East North Central ............................... 1,464 8.4 416 5.7 1,360 8.6 490 6.7
West South Central .............................. 838 4.8 401 5.4 949 6.0 392 5.4
Mountain ...................................... 868 5.0 452 6.1 928 5.8 429 5.9
West North Central .............................. 523 3.0 207 2.8 529 3.3 220 3.0
New England ................................... 627 3.6 244 3.3 451 2.9 227 3.1
East South Central ............................... 416 2.4 113 1.5 246 1.5 51 0.7
Subtotal—U.S. ..................................... 15,136 87.1 7,353 100.0 13,585 85.6 7,300 100.0
Asia .............................................. 1,576 9.1 — — 1,726 10.9 — —
Other ............................................. 657 3.8 — — 563 3.5 — —
Total Commercial Loans .......................... $17,369 100.0% $7,353 100.0% $15,874 100.0% $7,300 100.0%
December 31, 2006 December 31, 2005
Financial Services
Businesses
Closed Block
Business
Financial Services
Businesses
Closed Block
Business
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
Gross
Carrying
Value
%of
Total
($ in millions)
Commercial loans by property type:
Industrial buildings .................................. $ 3,558 20.5% $1,826 24.8% $ 3,229 20.3% $1,928 26.4%
Office buildings ..................................... 3,151 18.2 1,398 19.0 3,045 19.2 1,320 18.1
Apartment complexes ................................ 3,055 17.6 1,498 20.4 2,958 18.6 1,717 23.5
Other ............................................. 2,143 12.2 799 10.9 1,898 12.0 994 13.6
Retail stores ........................................ 2,121 12.3 1,067 14.5 1,381 8.7 638 8.8
Agricultural properties ............................... 1,190 6.9 763 10.4 1,037 6.5 2 —
Residential properties ................................ 997 5.7 2 — 1,032 6.5 701 9.6
Subtotal of collateralized loans ..................... 16,215 93.4 7,353 100.0 14,580 91.8 7,300 100.0
Uncollateralized loans ................................ 1,154 6.6 — — 1,294 8.2 — —
Total Commercial Loans .......................... $17,369 100.0% $7,353 100.0% $15,874 100.0% $7,300 100.0%
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
67