Prudential 2007 Annual Report Download - page 91

Contractual Obligations
The table below summarizes the future estimated cash payments related to certain contractual obligations as of December 31, 2007.
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.
Estimated Payments Due by Period
Total
Less than 1
Year
1–3
Years
3–5
Years
More than
5 Years
(in millions)
Short-term and long-term debt obligations(1) .................................... $ 43,237 $16,652 $ 2,353 $ 4,034 $ 20,198
Operating lease obligations(2) ................................................ 754 164 252 170 168
Purchase obligations:
Commitments to purchase or fund investments(3) ............................. 10,638 10,638 — — —
Commercial mortgage loan commitments(4) ................................. 2,937 970 1,770 197 —
Other liabilities:
Insurance liabilities(5) .................................................. 1,094,676 48,561 71,619 68,801 905,695
Other(6) ............................................................. 18,712 17,896 816 — —
Total .................................................................... $1,170,954 $94,881 $76,810 $73,202 $926,061
(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 payment of principal and estimated future interest for short-term debt are
reflected in estimated payments due in less than one year. 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 short-term and 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 $7.435 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 and others for future
policy benefits, policyholders’ account balances, policyholder’s dividends, reinsurance payables 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 $1.095 trillion exceeds the corresponding liability amounts of $396 billion included in the Consolidated Financial Statements as of
December 31, 2007. 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) The estimated payments due by period for other liabilities includes securities sold under agreements to repurchase, cash collateral for loaned securities,
liabilities recorded under FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes,” an Interpretation of FASB Statement No. 109,
and other miscellaneous liabilities.
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, 2007.
Off-Balance Sheet Arrangements
Guarantees and Other Contingencies
In the course of our business, we provide certain guarantees and indemnities to third parties pursuant to which we may be contingently
required to make payments now or in the future.
A number of guarantees provided by us relate to real estate investments, in which the investor has borrowed funds, and we have
guaranteed their obligation to their lender. In some cases, the investor is an affiliate, and in other cases the unaffiliated investor purchases
the real estate investment from us. We provide these guarantees to assist the investors in obtaining financing for the transaction on more
beneficial terms. The vast majority of these guarantees relate to real estate investments held by our separate accounts and our maximum
potential exposure under these guarantees was $2.538 billion as of December 31, 2007. Any payments that may become required of us
Prudential Financial 2007 Annual Report 89