Prudential 2006 Annual Report Download - page 83

Of the amount of unsecured committed lines available to Prudential Financial, Prudential Insurance and Prudential Funding, $2.5
billion is under the facility that expires in December 2011, which includes 22 financial institutions, and $1.5 billion is under a facility that
expires in September 2010, which includes 22 financial institutions. Borrowings under the outstanding facilities will mature no later than
the respective expiration dates of the facilities. We use these facilities primarily as back-up liquidity lines for our commercial paper
programs, and there were no outstanding borrowings under any of these facilities as of December 31, 2006.
Our ability to borrow under these facilities is conditioned on the continued satisfaction of customary conditions, including
maintenance at all times by Prudential Insurance of total adjusted capital of at least $5.5 billion based on statutory accounting principles
prescribed under New Jersey law. Prudential Insurance’s total adjusted capital as of December 31, 2006, was $9.7 billion and continues to
be above the $5.5 billion threshold. The ability of Prudential Financial to borrow under these facilities is also conditioned on its
maintenance of consolidated net worth of at least $12.5 billion, calculated in accordance with GAAP. Prudential Financial’s net worth on a
consolidated basis totaled $22.9 billion and $22.8 billion as of December 31, 2006 and 2005, respectively. We also use uncommitted lines
of credit from banks and other financial institutions.
Contractual Obligations
The table below summarizes the future estimated cash payments related to certain contractual obligations as of December 31, 2006.
The estimated payments reflected in this table are based on management’s estimates and assumptions about these obligations. Because
these estimates and assumptions are necessarily subjective, the actual cash outflows in future periods will vary, possibly materially, from
those reflected in the table. In addition, we do not believe that our cash flow requirements can be adequately assessed based solely upon an
analysis of these obligations, as the table below does not contemplate all aspects of our cash inflows, such as the level of cash flow
generated by certain of our investments, nor all aspects of our cash outflows, such as income taxes.
Estimated Payments Due by Period
Total
Less than 1
Year
1–3
Years
3–5
Years
More than
5 Years
(in millions)
Long-term debt obligations(1) ................................................ $ 19,625 $ — $ 3,116 $ 1,828 $ 14,681
Operating lease obligations(2) ................................................ 790 182 246 157 205
Purchase obligations:
Commitments to purchase or fund investments(3) ............................. 7,850 7,850 — — —
Commercial mortgage loan commitments(4) ................................. 1,977 1,170 635 172 —
Other long-term liabilities:
Insurance liabilities(5) .................................................. 1,101,383 37,716 71,000 66,127 926,540
Undistributed demutualization consideration(6) .............................. 95 63 32 — —
Total(7) .................................................................. $1,131,720 $46,981 $75,029 $68,284 $941,426
(1) The estimated payments due by period for long-term debt reflects the contractual maturities of principal, as disclosed in Note 21 to the Consolidated
Financial Statements, as well as estimated future interest payments. The estimate for future interest payments includes the effect of derivatives that
qualify for hedge accounting treatment. See Note 12 to the Consolidated Financial Statements for additional information concerning our long-term debt.
(2) The estimated payments due by period for operating leases reflect the future minimum lease payments under non-cancelable operating leases, as
disclosed in Note 21 to the Consolidated Financial Statements. We have no significant capital lease obligations.
(3) We have commitments to purchase or fund investments, some of which are contingent upon events or circumstances not under our control, including
those at the discretion of our counterparties. The timing of the fulfillment of certain of these commitments cannot be estimated, therefore the settlement
of these obligations are reflected in estimated payments due in less than one year. Commitments to purchase or fund investments include $5.823 billion
that we anticipate will be funded from the assets of our separate accounts.
(4) Loan commitments of our commercial mortgage operations, which are legally binding commitments to extend credit to a counterparty, have been reflected
in the contractual obligations table above principally based on the expiration date of the commitment; however, it is possible these loan commitments
could be funded prior to their expiration. In certain circumstances the counterparty may also extend the date of the expiration in exchange for a fee.
(5) The estimated payments due by period for insurance liabilities reflect future estimated cash payments to be made to policyholders for future policy
benefits, policyholders’ account balances and separate account liabilities. These future estimated cash outflows are based on mortality, morbidity, lapse
and other assumptions comparable with our experience, consider future premium receipts on current polices in force, and assume market growth and
interest crediting consistent with assumptions used in amortizing deferred acquisition costs and value of business acquired. These cash outflows are
undiscounted with respect to interest and, as a result, the sum of the cash outflows shown for all years in the table of $1.101 trillion exceeds the
corresponding liability amounts of $365 billion included in the Consolidated Financial Statements as of December 31, 2006. Separate account liabilities
are legally insulated from general account obligations, and it is generally expected these liabilities will be fully funded by separate account assets and
their related cash flows. We have made significant assumptions to determine the future estimated cash outflows related to the underlying policies and
contracts. Due to the significance of the assumptions used, actual cash outflows will differ, possibly materially, from these estimates.
(6) We remain obligated to disburse demutualization consideration for eligible policyholders that we have been unable to locate. To the extent we continue
to be unable to establish contact with these policyholders within a prescribed period of time specified by state escheat laws the funds must be remittedto
governmental authorities. The amounts reflected in the table above are reflective of state escheat laws as of December 31, 2006. These liabilities are
reflected within other liabilities on our Consolidated Statements of Financial Position.
(7) Excludes short-term debt, which includes $4.0 billion of floating rate convertible senior notes. For additional information on our short-term debt see
Note 12 to the Consolidated Financial Statements.
We also enter into agreements to purchase goods and services in the normal course of business; however, these purchase obligations
are not material to our consolidated results of operations or financial position as of December 31, 2006.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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