Prudential 2007 Annual Report Download - page 62

The following tables set forth the income yield and investment income, excluding realized investment gains (losses), for each major
investment category of the Financial Services Business general account, excluding the Japanese operations’ portion of the general account
which is presented separately below, for the periods indicated.
Year ended
December 31, 2007
Year ended
December 31, 2006
Yield(1) Amount Yield(1) Amount
($ in millions)
Fixed maturities ........................................................................... 6.47% $4,642 6.33% $4,360
Trading account assets supporting insurance liabilities ............................................ 5.42 697 5.04 641
Equity securities .......................................................................... 7.51 139 7.56 128
Commercial loans ......................................................................... 6.49 959 6.58 889
Policy loans .............................................................................. 5.76 148 5.66 122
Short-term investments and cash equivalents .................................................... 4.68 346 5.65 322
Other investments ......................................................................... 1.55 31 5.82 106
Gross investment income before investment expenses ......................................... 6.17 6,962 6.17 6,568
Investment expenses ................................................................... (0.13) (425) (0.14) (419)
Investment income after investment expenses ........................................... 6.04% 6,537 6.03% 6,149
Investment results of other entities and operations(2) .............................................. 352 307
Total investment income .................................................................... $6,889 $6,456
(1) Yields are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity. Yields for fixed
maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for securities lending activity are calculated net of
corresponding liabilities and rebate expenses. Yields exclude investment income on assets other than those included in invested assets of the Financial
Services Businesses. Prior periods yields are presented on a basis consistent with the current period presentation.
(2) Includes investment income of securities brokerage, securities trading, banking operations, real estate and relocation services, and asset management
operations.
The net investment income yield attributable to the non-Japanese operations’ portion of the Financial Services Businesses portfolio
was 6.04% for the year ended December 31, 2007, compared to 6.03% for the year ended December 31, 2006. The increase was primarily
due to an increase in fixed maturity yields as a result of reinvestment of proceeds from sales and maturities of fixed maturities at higher
available interest rates, which occurred primarily in the first half of 2006, as discussed above under “—Realized Investment Gains”, and
the impact of higher rates on floating rate investments.
The following tables set forth the income yield and investment income, excluding realized investment gains (losses), for each major
investment category of our Japanese operations’ general account for the periods indicated.
Year ended
December 31, 2007
Year ended
December 31, 2006
Yield(1) Amount Yield(1) Amount
($ in millions)
Fixed maturities ........................................................................... 2.72% $1,058 2.54% $ 955
Trading account assets supporting insurance liabilities ............................................ 1.67 19 1.01 11
Equity securities .......................................................................... 2.74 59 2.92 54
Commercial loans ......................................................................... 4.45 122 3.81 93
Policy loans .............................................................................. 3.91 40 3.66 36
Short-term investments and cash equivalents .................................................... 3.96 32 3.56 20
Other investments ......................................................................... 11.95 105 12.43 111
Gross investment income before investment expenses ......................................... 3.01 1,435 2.82 1,280
Investment expenses ................................................................... (0.18) (96) (0.18) (96)
Total investment income .................................................................... 2.83% $1,339 2.64% $1,184
(1) Yields are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity. Yields for fixed maturities are
based on amortized cost. Yields for equity securities are based on cost. Yields for securities lending activity are calculated net of corresponding liabilities and
rebate expenses. Yields exclude investment income on assets other than those included in invested assets of the Financial Services Businesses. Prior periods
yields are presented on a basis consistent with the current period presentation.
The net investment income yield attributable to the Japanese insurance operations’ portfolios was 2.83% for the year ended
December 31, 2007, compared to 2.64% for the year ended December 31, 2006. The increase in yield on the Japanese insurance portfolio is
primarily attributable to an increase in unhedged U.S. dollar investments, the lengthening of the duration of the investment portfolio, and an
increase in credit exposure. The U.S. dollar denominated fixed maturities that are not hedged to yen through third party derivative contracts
provide a yield that is substantially higher than the yield on comparable Japanese fixed maturities. The average value of U.S. dollar
denominated fixed maturities that are not hedged to yen through third party derivative contracts for the years ended December 31, 2007 and
2006 was approximately $7.6 billion and $6.3 billion, respectively, based on amortized cost. For additional information regarding U.S.
dollar investments held in our Japanese insurance operations see, “—Results of Operations for Financial Services Businesses by
Segment—International Insurance and Investments Division.”
60 Prudential Financial 2007 Annual Report