Prudential 2007 Annual Report Download - page 67

The following table sets forth the composition of the portion of our fixed maturity securities portfolio by industry category attributable
to the Closed Block Business as of the dates indicated and the associated gross unrealized gains and losses.
December 31, 2007 December 31, 2006
Industry(1)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in millions)
Corporate Securities:
Manufacturing ...................... $ 8,455 $ 346 $ 91 $ 8,710 $ 8,358 $ 349 $ 80 $ 8,627
Utilities ............................ 5,338 280 73 5,545 5,753 323 66 6,010
Services ........................... 4,566 184 77 4,673 4,765 219 41 4,943
Finance ............................ 3,997 53 71 3,979 4,912 102 13 5,001
Energy ............................ 2,103 99 13 2,189 2,104 120 14 2,210
Retail and Wholesale ................. 1,631 59 19 1,671 1,691 71 11 1,751
Transportation ...................... 1,274 65 21 1,318 1,061 66 12 1,115
Total Corporate Securities ................. 27,364 1,086 365 28,085 28,644 1,250 237 29,657
Asset-Backed Securities ................... 8,091 14 478 7,627 8,171 23 15 8,179
Residential Mortgage Backed .............. 5,163 61 18 5,206 3,362 14 35 3,341
Commercial Mortgage Backed(2) ........... 4,265 46 21 4,290 4,018 33 33 4,018
U.S. Government ........................ 3,353 309 1 3,661 4,376 242 38 4,580
Foreign Government ..................... 496 53 4 545 895 105 2 998
Total .......................... $48,732 $1,569 $887 $49,414 $49,466 $1,667 $360 $50,773
(1) Investment data has been classified based on Lehman industry categorizations for domestic public holdings and similar classifications by industry for all
other holdings.
(2) Commercial Mortgage Backed securities were previously presented within Corporate Securities—Finance.
As a percentage of amortized cost, fixed maturity investments attributable to the Closed Block Business as of December 31, 2007
consist primarily of 17% asset-backed securities, 17% manufacturing sector, 11% utilities sector, 11% residential mortgage-backed
securities, 9% services sector and 9% commercial mortgage backed securities compared to 17% asset-backed securities, 17%
manufacturing sector, 12% utilities sector, 10% services sector, 10% finance sector and 7% residential mortgage-backed securities, as of
December 31, 2006. As of December 31, 2007, 86% of the residential mortgage-backed securities in the Closed Block Business were
publicly traded agency pass-through securities, which are supported by implicit or explicit government guarantees and have credit ratings
of AA or AAA. Collateralized mortgage obligations, including approximately $137 million secured by "ALT-A" mortgages, represented
the remaining 14% of residential mortgage-backed securities (and less than 2% of total fixed maturities in the Closed Block Business), and
all have credit ratings of A or above.
As of December 31, 2007, included within asset-backed securities attributable to the Closed Block Business on an amortized cost
basis is approximately $6.3 billion ($5.9 billion fair value) of securities collateralized by sub-prime mortgages, $0.5 billion ($0.5 billion
fair value) of securities collateralized by credit card receivables, $0.4 billion ($0.4 billion fair value) of securities collateralized by auto
loans, $0.3 billion ($0.3 billion fair value) of externally managed investments in the European market, $0.2 billion ($0.2 billion fair value)
of securities collateralized by education loans, and $0.4 billion ($0.3 billion fair value) of other asset-backed securities.
The $0.3 billion of externally managed investments in European markets, included in asset-backed securities of the Closed Block
Business, reflects our investment in medium term notes that are collateralized by portfolios of assets primarily consisting of European fixed
income securities and derivatives, including corporate bonds and asset-backed securities. Our investment in these notes further diversifies
our credit risk. None of the underlying investments are securities collateralized by U.S. sub-prime mortgages, and 90% of the underlying
investments are rated investment grade. The notes have a stated coupon and provide a return based on the return of the underlying
securities. The notes are accounted for as available for sale fixed maturity securities with embedded derivatives (total return swaps).
Changes in the value of the notes are reported in Stockholders’ Equity under the heading “Accumulated Other Comprehensive Income.”
Changes in the market value of the embedded total return swaps are included in current period earnings in “Realized investment gains
(losses), net.”
Prudential Financial 2007 Annual Report 65