UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2014
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File Number 001-16707
Prudential Financial, Inc.
(Exact Name of Registrant as Specified in its Charter)
| New Jersey | 22-3703799 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
751 Broad Street
Newark, New Jersey 07102
(973) 802-6000
(Address and Telephone Number of Registrant’s Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 31, 2014, 458 million shares of the registrant’s Common Stock (par value $0.01) were outstanding. In addition, 2 million shares of the registrant’s Class B Stock, for which there is no established public trading market, were outstanding.
| Page | ||||||||
| Item 1. | ||||||||
| 1 | ||||||||
| 2 | ||||||||
| 3 | ||||||||
| Unaudited Interim Consolidated Statements of Equity for the six months ended June 30, 2014 and 2013 |
4 | |||||||
| 5 | ||||||||
| Notes to Unaudited Interim Consolidated Financial Statements |
6 | |||||||
| 6 | ||||||||
| 7 | ||||||||
| 9 | ||||||||
| 11 | ||||||||
| 28 | ||||||||
| 30 | ||||||||
| 33 | ||||||||
| 37 | ||||||||
| 42 | ||||||||
| 45 | ||||||||
| 46 | ||||||||
| 54 | ||||||||
| 56 | ||||||||
| 84 | ||||||||
| 15. Commitments and Guarantees, Contingent Liabilities and Litigation and Regulatory Matters |
94 | |||||||
| Unaudited Interim Supplemental Combining Financial Information: |
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| 105 | ||||||||
| 106 | ||||||||
| Notes to Unaudited Interim Supplemental Combining Financial Information |
108 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
110 | ||||||
| Item 3. | 218 | |||||||
| Item 4. | 218 | |||||||
| Item 1. | 220 | |||||||
| Item 1A. | 220 | |||||||
| Item 2. | 220 | |||||||
| Item 6. | 221 | |||||||
| 222 | ||||||||
Forward-Looking Statements
Certain of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Management’s Discussion and Analysis of Financial Condition and Results of Operations, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Prudential Financial, Inc. and its subsidiaries. There can be no assurance that future developments affecting Prudential Financial, Inc. and its subsidiaries will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) general economic, market and political conditions, including the performance and fluctuations of fixed income, equity, real estate and other financial markets; (2) the availability and cost of additional debt or equity capital or external financing for our operations; (3) interest rate fluctuations or prolonged periods of low interest rates; (4) the degree to which we choose not to hedge risks, or the potential ineffectiveness or insufficiency of hedging or risk management strategies we do implement, with regard to variable annuity or other product guarantees; (5) any inability to access our credit facilities; (6) reestimates of our reserves for future policy benefits and claims; (7) differences between actual experience regarding mortality, longevity, morbidity, persistency, surrender experience, interest rates or market returns and the assumptions we use in pricing our products, establishing liabilities and reserves or for other purposes; (8) changes in our assumptions related to deferred policy acquisition costs, value of business acquired or goodwill; (9) changes in assumptions for retirement expense; (10) changes in our financial strength or credit ratings; (11) statutory reserve requirements associated with term and universal life insurance policies under Regulation XXX and Guideline AXXX; (12) investment losses, defaults and counterparty non-performance; (13) competition in our product lines and for personnel; (14) difficulties in marketing and distributing products through current or future distribution channels; (15) changes in tax law; (16) economic, political, currency and other risks relating to our international operations; (17) fluctuations in foreign currency exchange rates and foreign securities markets; (18) regulatory or legislative changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (19) inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (20) adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities, including in connection with our divestiture or winding down of businesses; (21) domestic or international military actions, natural or man-made disasters including terrorist activities or pandemic disease, or other events resulting in catastrophic loss of life; (22) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; (23) effects of acquisitions, divestitures and restructurings, including possible difficulties in integrating and realizing projected results of acquisitions; (24) interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems; (25) changes in statutory or U.S. GAAP accounting principles, practices or policies; (26) Prudential Financial, Inc.’s primary reliance, as a holding company, on dividends or distributions from its subsidiaries to meet debt payment obligations and the ability of the subsidiaries to pay such dividends or distributions in light of our ratings objectives and/or applicable regulatory restrictions; and (27) risks due to the lack of legal separation between our Financial Services Businesses and our Closed Block Business. Prudential Financial, Inc. does not intend, and is under no obligation, to update any particular forward-looking statement included in this document. See “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2013 for discussion of certain risks relating to our businesses and investment in our securities.
i
Throughout this Quarterly Report on Form 10-Q, “Prudential Financial” and the “Registrant” refer to Prudential Financial, Inc., the ultimate holding company for all of our companies. “Prudential Insurance” refers to The Prudential Insurance Company of America. “Prudential,” the “Company,” “we” and “our” refer to our consolidated operations.
PART I - FINANCIAL INFORMATION
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Financial Position
June 30, 2014 and December 31, 2013 (in millions, except share amounts)
| June 30, 2014 |
December 31, 2013 |
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| ASSETS |
||||||||
| Fixed maturities, available-for-sale, at fair value (amortized cost: 2014-$277,756; 2013-$268,727)(1) |
$ | 304,472 | $ | 286,866 | ||||
| Fixed maturities, held-to-maturity, at amortized cost (fair value: 2014-$3,464; 2013-$3,553)(1) |
3,171 | 3,312 | ||||||
| Trading account assets supporting insurance liabilities, at fair value(1) |
21,273 | 20,827 | ||||||
| Other trading account assets, at fair value(1) |
8,665 | 6,453 | ||||||
| Equity securities, available-for-sale, at fair value (cost: 2014-$7,218; 2013-$7,003) |
10,222 | 9,910 | ||||||
| Commercial mortgage and other loans (includes $204 and $158 measured at fair value under the fair value option at June 30, 2014 and December 31, 2013, respectively)(1) |
42,964 | 41,008 | ||||||
| Policy loans |
11,966 | 11,766 | ||||||
| Other long-term investments (includes $944 and $873 measured at fair value under the fair value option at June 30, 2014 and December 31, 2013, respectively)(1) |
10,923 | 10,328 | ||||||
| Short-term investments |
5,663 | 7,703 | ||||||
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| Total investments |
419,319 | 398,173 | ||||||
| Cash and cash equivalents(1) |
12,160 | 11,439 | ||||||
| Accrued investment income(1) |
3,162 | 3,089 | ||||||
| Deferred policy acquisition costs |
16,669 | 16,512 | ||||||
| Value of business acquired |
3,499 | 3,675 | ||||||
| Other assets(1) |
13,927 | 13,833 | ||||||
| Separate account assets |
296,801 | 285,060 | ||||||
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| TOTAL ASSETS |
$ | 765,537 | $ | 731,781 | ||||
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| LIABILITIES AND EQUITY |
||||||||
| LIABILITIES |
||||||||
| Future policy benefits |
$ | 215,219 | $ | 206,859 | ||||
| Policyholders’ account balances(1) |
138,545 | 136,657 | ||||||
| Policyholders’ dividends |
7,186 | 5,515 | ||||||
| Securities sold under agreements to repurchase |
8,786 | 7,898 | ||||||
| Cash collateral for loaned securities |
4,889 | 5,040 | ||||||
| Income taxes |
8,504 | 5,422 | ||||||
| Short-term debt |
3,804 | 2,669 | ||||||
| Long-term debt |
23,488 | 23,553 | ||||||
| Other liabilities(1) |
11,935 | 13,925 | ||||||
| Notes issued by consolidated variable interest entities (includes $4,539 and $3,254 measured at fair value under the fair value option at June 30, 2014 and December 31, 2013, respectively)(1) |
4,573 | 3,302 | ||||||
| Separate account liabilities |
296,801 | 285,060 | ||||||
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| Total liabilities |
723,730 | 695,900 | ||||||
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| COMMITMENTS AND CONTINGENT LIABILITIES (See Note 15) |
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| EQUITY |
||||||||
| Preferred Stock ($.01 par value; 10,000,000 shares authorized; none issued) |
0 | 0 | ||||||
| Common Stock ($.01 par value; 1,500,000,000 shares authorized; 660,111,337 and 660,111,319 shares issued at June 30, 2014 and December 31, 2013, respectively) |
6 | 6 | ||||||
| Class B Stock ($.01 par value; 10,000,000 shares authorized; 2,000,000 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively) |
0 | 0 | ||||||
| Additional paid-in capital |
24,478 | 24,475 | ||||||
| Common Stock held in treasury, at cost (201,707,340 and 199,056,067 shares at June 30, 2014 and December 31, 2013, respectively) |
(12,723 | ) | (12,415 | ) | ||||
| Accumulated other comprehensive income (loss) |
13,077 | 8,681 | ||||||
| Retained earnings |
16,357 | 14,531 | ||||||
|
|
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|
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| Total Prudential Financial, Inc. equity |
41,195 | 35,278 | ||||||
|
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|
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|
|||||
| Noncontrolling interests |
612 | 603 | ||||||
|
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|
|||||
| Total equity |
41,807 | 35,881 | ||||||
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|
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| TOTAL LIABILITIES AND EQUITY |
$ | 765,537 | $ | 731,781 | ||||
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| (1) | See Note 5 for details of balances associated with variable interest entities. |
See Notes to Unaudited Interim Consolidated Financial Statements
1
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Operations
Three and Six Months Ended June 30, 2014 and 2013 (in millions, except per share amounts)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| REVENUES |
||||||||||||||||
| Premiums |
$ | 6,068 | $ | 6,922 | $ | 11,936 | $ | 14,006 | ||||||||
| Policy charges and fee income |
1,520 | 1,375 | 3,021 | 2,731 | ||||||||||||
| Net investment income |
3,754 | 3,711 | 7,592 | 7,349 | ||||||||||||
| Asset management and service fees |
928 | 880 | 1,832 | 1,700 | ||||||||||||
| Other income |
267 | (1,823 | ) | 802 | (3,827 | ) | ||||||||||
| Realized investment gains (losses), net: |
||||||||||||||||
| Other-than-temporary impairments on fixed maturity securities |
(32 | ) | (180 | ) | (111 | ) | (488 | ) | ||||||||
| Other-than-temporary impairments on fixed maturity securities transferred to Other Comprehensive Income |
6 | 147 | 69 | 385 | ||||||||||||
| Other realized investment gains (losses), net |
635 | (991 | ) | 859 | (1,644 | ) | ||||||||||
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|
|||||||||
| Total realized investment gains (losses), net |
609 | (1,024 | ) | 817 | (1,747 | ) | ||||||||||
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|
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| Total revenues |
13,146 | 10,041 | 26,000 | 20,212 | ||||||||||||
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| BENEFITS AND EXPENSES |
||||||||||||||||
| Policyholders’ benefits |
6,466 | 7,024 | 12,852 | 14,243 | ||||||||||||
| Interest credited to policyholders’ account balances |
1,178 | 394 | 2,193 | 1,444 | ||||||||||||
| Dividends to policyholders |
711 | 445 | 1,311 | 1,005 | ||||||||||||
| Amortization of deferred policy acquisition costs |
482 | 220 | 919 | 438 | ||||||||||||
| General and administrative expenses |
2,802 | 2,727 | 5,500 | 5,410 | ||||||||||||
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|
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| Total benefits and expenses |
11,639 | 10,810 | 22,775 | 22,540 | ||||||||||||
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|
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| INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES |
1,507 | (769 | ) | 3,225 | (2,328 | ) | ||||||||||
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|||||||||
| Income tax expense (benefit) |
404 | (275 | ) | 877 | (1,102 | ) | ||||||||||
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| INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES |
1,103 | (494 | ) | 2,348 | (1,226 | ) | ||||||||||
| Equity in earnings of operating joint ventures, net of taxes |
6 | 5 | 6 | 51 | ||||||||||||
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| INCOME (LOSS) FROM CONTINUING OPERATIONS |
1,109 | (489 | ) | 2,354 | (1,175 | ) | ||||||||||
| Income (loss) from discontinued operations, net of taxes |
4 | 2 | 8 | 3 | ||||||||||||
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| NET INCOME (LOSS) |
1,113 | (487 | ) | 2,362 | (1,172 | ) | ||||||||||
| Less: Income (loss) attributable to noncontrolling interests |
23 | 27 | 34 | 62 | ||||||||||||
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| NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC |
$ | 1,090 | $ | (514 | ) | $ | 2,328 | $ | (1,234 | ) | ||||||
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| EARNINGS PER SHARE (See Note 8) |
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| Financial Services Businesses |
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| Basic earnings per share-Common Stock: |
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| Income (loss) from continuing operations attributable to Prudential Financial, Inc. |
$ | 2.25 | $ | (1.12 | ) | $ | 4.87 | $ | (2.70 | ) | ||||||
| Income (loss) from discontinued operations, net of taxes |
0.01 | 0.00 | 0.02 | 0.01 | ||||||||||||
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| Net income (loss) attributable to Prudential Financial, Inc. |
$ | 2.26 | $ | (1.12 | ) | $ | 4.89 | $ | (2.69 | ) | ||||||
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| Diluted earnings per share-Common Stock: |
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| Income (loss) from continuing operations attributable to Prudential Financial, Inc. |
$ | 2.21 | $ | (1.12 | ) | $ | 4.79 | $ | (2.70 | ) | ||||||
| Income (loss) from discontinued operations, net of taxes |
0.01 | 0.00 | 0.02 | 0.01 | ||||||||||||
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| Net income (loss) attributable to Prudential Financial, Inc. |
$ | 2.22 | $ | (1.12 | ) | $ | 4.81 | $ | (2.69 | ) | ||||||
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| Dividends declared per share of Common Stock |
$ | 0.53 | $ | 0.40 | $ | 1.06 | $ | 0.80 | ||||||||
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| Closed Block Business |
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| Basic and Diluted earnings per share-Class B Stock: |
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| Income (loss) from continuing operations attributable to Prudential Financial, Inc. |
$ | 22.00 | $ | 1.00 | $ | 29.50 | $ | 6.50 | ||||||||
| Income (loss) from discontinued operations, net of taxes |
0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
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| Net income (loss) attributable to Prudential Financial, Inc. |
$ | 22.00 | $ | 1.00 | $ | 29.50 | $ | 6.50 | ||||||||
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| Dividends declared per share of Class B Stock |
$ | 2.41 | $ | 2.41 | $ | 4.82 | $ | 4.82 | ||||||||
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See Notes to Unaudited Interim Consolidated Financial Statements
2
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Comprehensive Income
Three and Six Months Ended June 30, 2014 and 2013 (in millions)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| NET INCOME (LOSS) |
$ | 1,113 | $ | (487 | ) | $ | 2,362 | $ | (1,172 | ) | ||||||
| Other comprehensive income (loss), before tax: |
||||||||||||||||
| Foreign currency translation adjustments for the period |
167 | (505 | ) | 247 | (1,406 | ) | ||||||||||
| Net unrealized investment gains (losses) |
3,251 | (5,430 | ) | 6,319 | (1,152 | ) | ||||||||||
| Defined benefit pension and postretirement unrecognized periodic benefit |
20 | 43 | 43 | 93 | ||||||||||||
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| Total |
3,438 | (5,892 | ) | 6,609 | (2,465 | ) | ||||||||||
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| Less: Income tax expense (benefit) related to other comprehensive income (loss) |
1,158 | (1,933 | ) | 2,205 | (710 | ) | ||||||||||
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| Other comprehensive income (loss), net of taxes |
2,280 | (3,959 | ) | 4,404 | (1,755 | ) | ||||||||||
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| Comprehensive income (loss) |
3,393 | (4,446 | ) | 6,766 | (2,927 | ) | ||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests |
24 | 37 | 42 | 72 | ||||||||||||
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| Comprehensive income (loss) attributable to Prudential Financial, Inc. |
$ | 3,369 | $ | (4,483 | ) | $ | 6,724 | $ | (2,999 | ) | ||||||
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See Notes to Unaudited Interim Consolidated Financial Statements
3
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Equity(1)
Six Months Ended June 30, 2014 and 2013 (in millions)
| Prudential Financial, Inc. Equity | ||||||||||||||||||||||||||||||||
| Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Common Stock Held In Treasury |
Accumulated Other Comprehensive Income (Loss) |
Total Prudential Financial, Inc. Equity |
Noncontrolling Interests |
Total Equity |
|||||||||||||||||||||||||
| Balance December 31, 2013 |
$ | 6 | $ | 24,475 | $ | 14,531 | $ | (12,415 | ) | $ | 8,681 | $ | 35,278 | $ | 603 | $ | 35,881 | |||||||||||||||
| Common Stock acquired |
(500 | ) | (500 | ) | (500 | ) | ||||||||||||||||||||||||||
| Contributions from noncontrolling interests |
(3 | ) | (3 | ) | 2 | (1 | ) | |||||||||||||||||||||||||
| Distributions to noncontrolling interests |
(54 | ) | (54 | ) | ||||||||||||||||||||||||||||
| Consolidations/(deconsolidations) of noncontrolling interests |
19 | 19 | ||||||||||||||||||||||||||||||
| Stock-based compensation programs |
6 | 0 | 192 | 198 | 198 | |||||||||||||||||||||||||||
| Dividends declared on Common Stock |
(493 | ) | (493 | ) | (493 | ) | ||||||||||||||||||||||||||
| Dividends declared on Class B Stock |
(9 | ) | (9 | ) | (9 | ) | ||||||||||||||||||||||||||
| Comprehensive income: |
||||||||||||||||||||||||||||||||
| Net income (loss) |
2,328 | 2,328 | 34 | 2,362 | ||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax |
4,396 | 4,396 | 8 | 4,404 | ||||||||||||||||||||||||||||
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| Total comprehensive income (loss) |
6,724 | 42 | 6,766 | |||||||||||||||||||||||||||||
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| Balance, June 30, 2014 |
$ | 6 | $ | 24,478 | $ | 16,357 | $ | (12,723 | ) | $ | 13,077 | $ | 41,195 | $ | 612 | $ | 41,807 | |||||||||||||||
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| Prudential Financial, Inc. Equity | ||||||||||||||||||||||||||||||||
| Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Common Stock Held In Treasury |
Accumulated Other Comprehensive Income (Loss) |
Total Prudential Financial, Inc. Equity |
Noncontrolling Interests |
Total Equity |
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| Balance, December 31, 2012 |
$ | 6 | $ | 24,380 | $ | 16,066 | $ | (12,163 | ) | $ | 10,214 | $ | 38,503 | $ | 609 | $ | 39,112 | |||||||||||||||
| Common Stock acquired |
(250 | ) | (250 | ) | (250 | ) | ||||||||||||||||||||||||||
| Contributions from noncontrolling interests |
1 | 1 | ||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests |
(72 | ) | (72 | ) | ||||||||||||||||||||||||||||
| Consolidations/(deconsolidations) of noncontrolling interests |
28 | 28 | ||||||||||||||||||||||||||||||
| Stock-based compensation programs |
3 | (39 | ) | 237 | 201 | 201 | ||||||||||||||||||||||||||
| Dividends declared on Common Stock |
(376 | ) | (376 | ) | (376 | ) | ||||||||||||||||||||||||||
| Dividends declared on Class B Stock |
(10 | ) | (10 | ) | (10 | ) | ||||||||||||||||||||||||||
| Comprehensive income: |
||||||||||||||||||||||||||||||||
| Net income (loss) |
(1,234 | ) | (1,234 | ) | 62 | (1,172 | ) | |||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax |
(1,765 | ) | (1,765 | ) | 10 | (1,755 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total comprehensive income (loss) |
(2,999 | ) | 72 | (2,927 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance, June 30, 2013 |
$ | 6 | $ | 24,383 | $ | 14,407 | $ | (12,176 | ) | $ | 8,449 | $ | 35,069 | $ | 638 | $ | 35,707 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) | Class B Stock is not presented as the amounts are immaterial. |
See Notes to Unaudited Interim Consolidated Financial Statements
4
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Cash Flows
Six Months Ended June 30, 2014 and 2013 (in millions)
| 2014 | 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net income (loss) |
$ | 2,362 | $ | (1,172 | ) | |||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Realized investment (gains) losses, net |
(817 | ) | 1,747 | |||||
| Policy charges and fee income |
(1,032 | ) | (856 | ) | ||||
| Interest credited to policyholders’ account balances |
2,193 | 1,444 | ||||||
| Depreciation and amortization |
179 | 161 | ||||||
| Gains on trading account assets supporting insurance liabilities, net |
(324 | ) | 378 | |||||
| Change in: |
||||||||
| Deferred policy acquisition costs |
(429 | ) | (1,131 | ) | ||||
| Future policy benefits and other insurance liabilities |
3,251 | 4,774 | ||||||
| Other trading account assets |
(1 | ) | (39 | ) | ||||
| Income taxes |
898 | (2,681 | ) | |||||
| Other, net |
(725 | ) | (239 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from operating activities |
5,555 | 2,386 | ||||||
|
|
|
|
|
|||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Proceeds from the sale/maturity/prepayment of: |
||||||||
| Fixed maturities, available-for-sale |
26,535 | 26,806 | ||||||
| Fixed maturities, held-to-maturity |
232 | 275 | ||||||
| Trading account assets supporting insurance liabilities and other trading account assets |
6,098 | 12,639 | ||||||
| Equity securities, available-for-sale |
2,483 | 2,082 | ||||||
| Commercial mortgage and other loans |
1,673 | 2,737 | ||||||
| Policy loans |
1,096 | 1,176 | ||||||
| Other long-term investments |
350 | 805 | ||||||
| Short-term investments |
35,249 | 21,896 | ||||||
| Payments for the purchase/origination of: |
||||||||
| Fixed maturities, available-for-sale |
(32,670 | ) | (30,252 | ) | ||||
| Fixed maturities, held-to-maturity |
(23 | ) | (37 | ) | ||||
| Trading account assets supporting insurance liabilities and other trading account assets |
(7,563 | ) | (14,019 | ) | ||||
| Equity securities, available-for-sale |
(2,289 | ) | (1,982 | ) | ||||
| Commercial mortgage and other loans |
(3,527 | ) | (3,753 | ) | ||||
| Policy loans |
(969 | ) | (905 | ) | ||||
| Other long-term investments |
(1,148 | ) | (1,522 | ) | ||||
| Short-term investments |
(33,301 | ) | (23,090 | ) | ||||
| Acquisition of business, net of cash acquired |
(23 | ) | (488 | ) | ||||
| Other, net |
272 | (221 | ) | |||||
|
|
|
|
|
|||||
| Cash flows used in investing activities |
(7,525 | ) | (7,853 | ) | ||||
|
|
|
|
|
|||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Policyholders’ account deposits |
12,226 | 12,245 | ||||||
| Policyholders’ account withdrawals |
(11,617 | ) | (12,957 | ) | ||||
| Net change in securities sold under agreements to repurchase and cash collateral for loaned securities |
736 | 2,914 | ||||||
| Cash dividends paid on Common Stock |
(495 | ) | (397 | ) | ||||
| Cash dividends paid on Class B Stock |
(10 | ) | (10 | ) | ||||
| Net change in financing arrangements (maturities 90 days or less) |
324 | 496 | ||||||
| Common Stock acquired |
(500 | ) | (237 | ) | ||||
| Common Stock reissued for exercise of stock options |
138 | 116 | ||||||
| Proceeds from the issuance of debt (maturities longer than 90 days) |
2,817 | 2,091 | ||||||
| Repayments of debt (maturities longer than 90 days) |
(971 | ) | (2,848 | ) | ||||
| Excess tax benefits from share-based payment arrangements |
16 | 13 | ||||||
| Other, net |
(47 | ) | (161 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities |
2,617 | 1,265 | ||||||
|
|
|
|
|
|||||
| Effect of foreign exchange rate changes on cash balances |
74 | (853 | ) | |||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
721 | (5,055 | ) | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
11,439 | 18,100 | ||||||
|
|
|
|
|
|||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 12,160 | $ | 13,045 | ||||
|
|
|
|
|
|||||
| NON-CASH TRANSACTIONS DURING THE PERIOD |
||||||||
| Treasury Stock shares issued for stock-based compensation programs |
$ | 94 | $ | 102 | ||||
| Acquisition of Gibraltar BSN Life Berhad (See Note 3): |
||||||||
| Assets acquired, excluding cash and cash equivalents acquired |
$ | 656 | $ | 0 | ||||
| Liabilities assumed |
586 | 0 | ||||||
| Noncontrolling interest assumed |
47 | 0 | ||||||
|
|
|
|
|
|||||
| Net cash paid on acquisition |
$ | 23 | $ | 0 | ||||
|
|
|
|
|
|||||
| Acquisition of The Hartford’s individual life business (See Note 3): |
||||||||
| Assets acquired, excluding cash and cash equivalents acquired |
$ | 0 | $ | 11,056 | ||||
| Liabilities assumed |
0 | 10,568 | ||||||
|
|
|
|
|
|||||
| Net cash paid on acquisition |
$ | 0 | $ | 488 | ||||
|
|
|
|
|
|||||
See Notes to Unaudited Interim Consolidated Financial Statements
5
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements
1. BUSINESS AND BASIS OF PRESENTATION
Prudential Financial, Inc. (“Prudential Financial”) and its subsidiaries (collectively, “Prudential” or the “Company”) provide a wide range of insurance, investment management, and other financial products and services to both individual and institutional customers throughout the United States and in many other countries. Principal products and services provided include life insurance, annuities, retirement-related services, mutual funds, and investment management. The Company has organized its principal operations into the Financial Services Businesses and the Closed Block Business. The Financial Services Businesses operate through three operating divisions: U.S. Retirement Solutions and Investment Management, U.S. Individual Life and Group Insurance, and International Insurance. The Company’s businesses that are not sufficiently material to warrant separate disclosure and divested businesses are included in Corporate and Other operations within the Financial Services Businesses. The Closed Block Business, which includes the Closed Block (see Note 6), is managed separately from the Financial Services Businesses. The Closed Block Business was established on the date of demutualization and includes the Company’s in force participating insurance and annuity products and assets that are used for the payment of benefits and policyholders’ dividends on these products, as well as other assets and equity that support these products and related liabilities. In connection with the demutualization, the Company ceased offering these participating products.
Basis of Presentation
The Unaudited Interim Consolidated Financial Statements include the accounts of Prudential Financial, entities over which the Company exercises control, including majority-owned subsidiaries and minority-owned entities such as limited partnerships in which the Company is the general partner, and variable interest entities in which the Company is considered the primary beneficiary. See Note 5 for more information on the Company’s consolidated variable interest entities. The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated.
In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
The Company’s Gibraltar Life Insurance Company, Ltd. (“Gibraltar Life”) consolidated operations use a November 30 fiscal year end for purposes of inclusion in the Company’s Consolidated Financial Statements. Therefore, the Unaudited Interim Consolidated Financial Statements as of June 30, 2014, include the assets and liabilities of Gibraltar Life and its results of operations as of, and for the three and six months ended, May 31, 2014, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
6
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The most significant estimates include those used in determining deferred policy acquisition costs and related amortization; value of business acquired and its amortization; amortization of sales inducements; measurement of goodwill and any related impairment; valuation of investments including derivatives and the recognition of other-than-temporary impairments; future policy benefits including guarantees; pension and other postretirement benefits; provision for income taxes and valuation of deferred tax assets; and reserves for contingent liabilities, including reserves for losses in connection with unresolved legal matters.
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current period presentation.
2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS
This section supplements, and should be read in conjunction with, Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
Adoption of New Accounting Pronouncements
In December 2013, the Financial Accounting Standards Board (“FASB”) issued updated guidance establishing a single definition of a public entity for use in financial accounting and reporting guidance. This new guidance is effective for all current and future reporting periods and did not have a significant effect on the Company’s consolidated financial position, results of operations or financial statement disclosures.
In July 2013, the FASB issued new guidance regarding derivatives. The guidance permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting in addition to the United States Treasury rate and London Inter-Bank Offered Rate (“LIBOR”). The guidance also removes the restriction on using different benchmark rates for similar hedges. The guidance is effective for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013, and was applied prospectively. Adoption of the guidance did not have a significant effect on the Company’s consolidated financial position, results of operations or financial statement disclosures.
In July 2013, the FASB issued updated guidance regarding the presentation of unrecognized tax benefits when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. This new guidance became effective for interim or annual reporting periods that began after December 15, 2013, and was applied prospectively. Adoption of the guidance did not have a significant effect on the Company’s consolidated financial position, results of operations or financial statement disclosures.
In June 2013, the FASB issued updated guidance clarifying the characteristics of an investment company and requiring new disclosures. Under the guidance, all entities regulated under the Investment Company Act of 1940 automatically qualify as investment companies, while all other entities need to consider both the fundamental and typical characteristics of an investment company in determining whether they qualify as investment companies. This new guidance became effective for interim or annual reporting periods that began after December 15, 2013, and was applied prospectively. Adoption of the guidance did not have a significant effect on the Company’s consolidated financial position, results of operations or financial statement disclosures.
In March 2013, the FASB issued updated guidance regarding the recognition in net income of the cumulative translation adjustment upon the sale or loss of control of a business or group of assets residing in a foreign subsidiary, or a loss of control of a foreign investment. This guidance became effective for interim or annual reporting periods that began after December 15, 2013, and was applied prospectively. The amendments
7
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
require an entity that ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity to release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. For an equity method investment that is a foreign entity, the partial sale guidance still applies. As such, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment. Adoption of the guidance did not have a significant effect on the Company’s consolidated financial position, results of operations or financial statement disclosures.
In February 2013, the FASB issued updated guidance regarding the presentation of comprehensive income. Under the guidance, an entity is required to separately present information about significant items reclassified out of accumulated other comprehensive income by component as well as changes in accumulated other comprehensive income balances by component in either the financial statements or the notes to the financial statements. The guidance does not change the items that are reported in other comprehensive income, does not change when an item of other comprehensive income must be reclassified to net income, and does not amend any existing requirements for reporting net income or other comprehensive income. The guidance became effective for interim or annual reporting periods that began after December 15, 2012, and was applied prospectively. The disclosures required by this guidance are included in Note 7.
In December 2011 and January 2013, the FASB issued updated guidance regarding the disclosure of recognized derivative instruments (including bifurcated embedded derivatives), repurchase agreements and securities borrowing/lending transactions that are offset in the statement of financial position or are subject to an enforceable master netting arrangement or similar agreement (irrespective of whether they are offset in the statement of financial position). This new guidance requires an entity to disclose information on both a gross and net basis about instruments and transactions within the scope of this guidance. This new guidance became effective for interim or annual reporting periods that began on or after January 1, 2013, and was applied retrospectively for all comparative periods presented. The disclosures required by this guidance are included in Note 14.
Future Adoption of New Accounting Pronouncements
In January 2014, the FASB issued updated guidance regarding investments in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. Under the guidance, an entity is permitted to make an accounting policy election to amortize the initial cost of its investment in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the statement of operations as a component of income tax expense (benefit) if certain conditions are met. The new guidance is effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014, and should be applied retrospectively to all periods presented. The Company is currently assessing the impact of the guidance on the Company’s consolidated financial position, results of operations and financial statement disclosures.
In January 2014, the FASB issued updated guidance for troubled debt restructurings clarifying when an in substance repossession or foreclosure occurs, and when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. The new guidance is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2014. This guidance can be elected for prospective adoption or by using a modified retrospective transition method. This guidance is not expected to have a significant impact on the Company’s consolidated financial position, results of operations or financial statement disclosures.
In April 2014, the FASB issued updated guidance that changes the criteria for reporting discontinued operations and introduces new disclosures. The new guidance is effective prospectively to new disposals and new
8
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
classifications of disposal groups as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those annual periods. Early adoption is permitted for new disposals or new classifications as held for sale that have not been reported in financial statements previously issued or available for issuance. This guidance is not expected to have a significant impact on the Company’s consolidated financial position, results of operations or financial statement disclosures.
In May 2014, the FASB issued updated guidance on accounting for revenue recognition. The guidance is based on the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from cost incurred to obtain or fulfill a contract. Revenue recognition for insurance contracts is explicitly scoped out of the guidance. The new guidance is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2016, and must be applied using one of two retrospective application methods. Early adoption is not permitted. The Company is currently assessing the impact of the guidance on the Company’s consolidated financial position, results of operations and financial statement disclosures.
In August 2014, the FASB issued updated guidance for measuring the financial assets and the financial liabilities of a consolidated collateralized financing entity. Under the guidance, an entity within scope is permitted to measure both the financial assets and financial liabilities of a consolidated collateralized financing entity based on either the fair value of the financial assets or the financial liabilities, whichever is more observable. If elected, the guidance will eliminate the measurement difference that exists when both are measured at fair value. The new guidance is effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2015. Early adoption will be permitted. This guidance can be elected for modified retrospective or full retrospective adoption. The Company is currently assessing the impact of the guidance on the Company’s consolidated financial position, results of operations and financial statement disclosures.
3. ACQUISITIONS AND DISPOSITIONS
Acquisition of UniAsia Life Assurance
On January 2, 2014, the Company completed the acquisition of UniAsia Life Assurance Berhad, an established life insurance company in Malaysia, through the formation of a joint venture with Bank Simpanan Nasional (“BSN”), a bank owned by the Malaysian government. The joint venture paid cash consideration of $158 million, 70% of which was provided by Prudential Insurance and 30% of which was provided by BSN. This acquisition is part of the Company’s strategic initiative to further expand its business into Southeast Asian markets. Subsequent to the acquisition, the Company renamed the acquired company Gibraltar BSN Life Berhad.
The assets acquired and the liabilities assumed have been included in the Company’s Unaudited Interim Consolidated Financial Statements as of the acquisition date. After adjustments, total assets acquired were $744 million, including $88 million of cash and cash equivalents and $19 million of goodwill, none of which is deductible for local tax purposes, and total liabilities assumed were $586 million.
Prudential Financial intends to make a Section 338(g) election under the Internal Revenue Code with respect to this acquisition, resulting in the acquired entity being treated for U.S. tax purposes as a newly-incorporated company. Under such election, the U.S. tax basis of the assets acquired and liabilities assumed of UniAsia Life Assurance Berhad was adjusted as of January 2, 2014, to reflect the consequences of the Section 338(g) election.
9
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Acquisition of The Hartford’s Individual Life Insurance Business
On January 2, 2013, the Company acquired The Hartford Financial Services Group’s (“The Hartford”) individual life insurance business through a reinsurance transaction. Under the agreement, the Company paid The Hartford cash consideration of $615 million, primarily in the form of a ceding commission, to provide reinsurance for approximately 700,000 life insurance policies with net retained face amount in force of approximately $141 billion. The acquisition increased the Company’s scale in the U.S. individual life insurance market, particularly universal life products, and provides complementary distribution opportunities through expanded wirehouse and bank distribution channels.
The assets acquired and liabilities assumed have been included in the Company’s Unaudited Interim Consolidated Financial Statements as of the acquisition date. Total assets acquired were $11.2 billion, including $1.4 billion of value of business acquired and $0.1 billion of cash, and total liabilities assumed were $10.6 billion. There is no goodwill, including tax deductible goodwill, associated with the acquisition.
Sale of Wealth Management Solutions Business
In April 2013, the Company signed a definitive agreement to sell its wealth management solutions business to Envestnet Inc. The transaction, which does not have a material impact to the Company’s financial results, closed on July 1, 2013. Due to the existence of an ongoing contractual relationship between the Company and these operations, this disposition did not qualify for discontinued operations treatment under U.S. GAAP.
Discontinued Operations
Income from discontinued operations, including charges upon disposition, are as follows:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (in millions) | ||||||||||||||||
| Real estate investments sold or held for sale(1) |
$ | 6 | $ | 2 | $ | 12 | $ | 2 | ||||||||
| Global commodities business |
0 | 0 | 0 | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income from discontinued operations before income taxes |
6 | 2 | 12 | 4 | ||||||||||||
| Income tax expense |
2 | 0 | 4 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income from discontinued operations, net of taxes |
$ | 4 | $ | 2 | $ | 8 | $ | 3 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Reflects the income from discontinued real estate investments. |
Charges recorded in connection with the disposals of businesses include estimates that are subject to subsequent adjustment.
The Company’s Unaudited Interim Consolidated Statements of Financial Position include total assets and total liabilities related to discontinued operations as follows:
| June 30, 2014 |
December 31, 2013 |
|||||||
| (in millions) | ||||||||
| Total assets |
$ | 5 | $ | 15 | ||||
| Total liabilities |
$ | 7 | $ | 7 | ||||
10
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Fixed Maturities and Equity Securities
The following tables provide information relating to fixed maturities and equity securities (excluding investments classified as trading) as of the dates indicated:
| June 30, 2014 | ||||||||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
Other-than- temporary Impairments in AOCI(3) |
||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Fixed maturities, available-for-sale |
||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies |
$ | 14,348 | $ | 2,759 | $ | 8 | $ | 17,099 | $ | 0 | ||||||||||
| Obligations of U.S. states and their political subdivisions |
4,766 | 566 | 20 | 5,312 | 0 | |||||||||||||||
| Foreign government bonds |
79,407 | 8,869 | 138 | 88,138 | 1 | |||||||||||||||
| Corporate securities |
148,552 | 14,935 | 1,206 | 162,281 | (6 | ) | ||||||||||||||
| Asset-backed securities(1) |
10,577 | 289 | 150 | 10,716 | (626 | ) | ||||||||||||||
| Commercial mortgage-backed securities |
14,040 | 460 | 58 | 14,442 | 0 | |||||||||||||||
| Residential mortgage-backed securities(2) |
6,066 | 427 | 9 | 6,484 | (6 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total fixed maturities, available-for-sale |
$ | 277,756 | $ | 28,305 | $ | 1,589 | $ | 304,472 | $ | (637 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Equity securities, available-for-sale |
$ | 7,218 | $ | 3,030 | $ | 26 | $ | 10,222 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| June 30, 2014 | ||||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
| (in millions) | ||||||||||||||||
| Fixed maturities, held-to-maturity |
||||||||||||||||
| Foreign government bonds |
$ | 972 | $ | 149 | $ | 0 | $ | 1,121 | ||||||||
| Corporate securities(4) |
879 | 71 | 17 | 933 | ||||||||||||
| Asset-backed securities(1) |
641 | 45 | 0 | 686 | ||||||||||||
| Commercial mortgage-backed securities |
114 | 11 | 0 | 125 | ||||||||||||
| Residential mortgage-backed securities(2) |
565 | 34 | 0 | 599 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total fixed maturities, held-to-maturity(4) |
$ | 3,171 | $ | 310 | $ | 17 | $ | 3,464 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Includes credit-tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans and other asset types. |
| (2) | Includes publicly-traded agency pass-through securities and collateralized mortgage obligations. |
| (3) | Represents the amount of other-than-temporary impairment losses in Accumulated Other Comprehensive Income (“AOCI”), which were not included in earnings. Amount excludes $921 million of net unrealized gains on impaired available-for-sale securities and less than $1 million of net unrealized gains on impaired held-to-maturity securities relating to changes in the value of such securities subsequent to the impairment measurement date. |
| (4) | Excludes notes with amortized cost of $3,588 million (fair value, $3,859 million) which have been offset with the associated payables under a netting agreement. |
11
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
| December 31, 2013 | ||||||||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
Other-than- temporary Impairments in AOCI(3) |
||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Fixed maturities, available-for-sale |
||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies |
$ | 13,754 | $ | 1,742 | $ | 96 | $ | 15,400 | $ | 0 | ||||||||||
| Obligations of U.S. states and their political subdivisions |
3,598 | 274 | 137 | 3,735 | 0 | |||||||||||||||
| Foreign government bonds |
75,595 | 7,459 | 266 | 82,788 | 1 | |||||||||||||||
| Corporate securities |
145,091 | 12,095 | 3,408 | 153,778 | (4 | ) | ||||||||||||||
| Asset-backed securities(1) |
10,691 | 214 | 316 | 10,589 | (755 | ) | ||||||||||||||
| Commercial mortgage-backed securities |
13,633 | 403 | 163 | 13,873 | 0 | |||||||||||||||
| Residential mortgage-backed securities(2) |
6,365 | 379 | 41 | 6,703 | (7 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total fixed maturities, available-for-sale |
$ | 268,727 | $ | 22,566 | $ | 4,427 | $ | 286,866 | $ | (765 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Equity securities, available-for-sale |
$ | 7,003 | $ | 2,931 | $ | 24 | $ | 9,910 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2013 | ||||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
| (in millions) | ||||||||||||||||
| Fixed maturities, held-to-maturity |
||||||||||||||||
| Foreign government bonds |
$ | 938 | $ | 117 | $ | 0 | $ | 1,055 | ||||||||
| Corporate securities(4) |
904 | 50 | 24 | 930 | ||||||||||||
| Asset-backed securities(1) |
693 | 46 | 0 | 739 | ||||||||||||
| Commercial mortgage-backed securities |
166 | 18 | 0 | 184 | ||||||||||||
| Residential mortgage-backed securities(2) |
611 | 34 | 0 | 645 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total fixed maturities, held-to-maturity(4) |
$ | 3,312 | $ | 265 | $ | 24 | $ | 3,553 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Includes credit-tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans, and other asset types. |
| (2) | Includes publicly-traded agency pass-through securities and collateralized mortgage obligations. |
| (3) | Represents the amount of other-than-temporary impairment losses in AOCI, which were not included in earnings. Amount excludes $875 million of net unrealized gains on impaired available-for-sale securities and $1 million of net unrealized gains on impaired held-to-maturity securities relating to changes in the value of such securities subsequent to the impairment measurement date. |
| (4) | Excludes notes with amortized cost of $2,400 million (fair value, $2,461 million) which have been offset with the associated payables under a netting agreement. |
12
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The amortized cost and fair value of fixed maturities by contractual maturities at June 30, 2014, are as follows:
| Available-for-Sale | Held-to-Maturity | |||||||||||||||
| Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
| (in millions) | ||||||||||||||||
| Due in one year or less |
$ | 12,289 | $ | 12,760 | $ | 0 | $ | 0 | ||||||||
| Due after one year through five years |
50,192 | 55,136 | 21 | 22 | ||||||||||||
| Due after five years through ten years |
57,901 | 63,722 | 323 | 335 | ||||||||||||
| Due after ten years(1) |
126,691 | 141,212 | 1,507 | 1,697 | ||||||||||||
| Asset-backed securities |
10,577 | 10,716 | 641 | 686 | ||||||||||||
| Commercial mortgage-backed securities |
14,040 | 14,442 | 114 | 125 | ||||||||||||
| Residential mortgage-backed securities |
6,066 | 6,484 | 565 | 599 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 277,756 | $ | 304,472 | $ | 3,171 | $ | 3,464 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Excludes notes with amortized cost of $3,588 million (fair value, $3,859 million) which have been offset with the associated payables under a netting agreement. |
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed, and residential mortgage-backed securities are shown separately in the table above as they are not due at a single maturity date.
The following table depicts the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on impairments of both fixed maturities and equity securities:
| Three Months
Ended June 30, |
Six Months
Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (in millions) | ||||||||||||||||
| Fixed maturities, available-for-sale |
||||||||||||||||
| Proceeds from sales |
$ | 7,460 | $ | 8,139 | $ | 16,038 | $ | 14,634 | ||||||||
| Proceeds from maturities/repayments |
5,847 | 6,705 | 10,706 | 12,444 | ||||||||||||
| Gross investment gains from sales, prepayments, and maturities |
476 | 413 | 901 | 642 | ||||||||||||
| Gross investment losses from sales and maturities |
(83 | ) | (88 | ) | (235 | ) | (194 | ) | ||||||||
| Fixed maturities, held-to-maturity |
||||||||||||||||
| Gross investment gains from prepayments |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
| Proceeds from maturities/repayments |
138 | 148 | 232 | 273 | ||||||||||||
| Equity securities, available-for-sale |
||||||||||||||||
| Proceeds from sales |
$ | 1,316 | $ | 1,137 | $ | 2,481 | $ | 2,185 | ||||||||
| Gross investment gains from sales |
198 | 124 | 331 | 231 | ||||||||||||
| Gross investment losses from sales |
(22 | ) | (29 | ) | (60 | ) | (52 | ) | ||||||||
| Fixed maturity and equity security impairments |
||||||||||||||||
| Net writedowns for other-than-temporary impairment losses on fixed maturities recognized in earnings(1) |
$ | (26 | ) | $ | (33 | ) | $ | (42 | ) | $ | (103 | ) | ||||
| Writedowns for impairments on equity securities |
(7 | ) | (1 | ) | (17 | ) | (8 | ) | ||||||||
| (1) | Excludes the portion of other-than-temporary impairments recorded in “Other comprehensive income (loss),” representing any difference between the fair value of the impaired debt security and the net present value of its projected future cash flows at the time of impairment. |
13
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
As discussed in Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2013, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities are recognized in “Other comprehensive income (loss)” (“OCI”). For these securities, the net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in OCI. The following tables set forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.
Credit losses recognized in earnings on fixed maturity securities held by the Company for which a portion of the OTTI loss was recognized in OCI
| Three Months Ended June 30, 2014 |
Six Months Ended June 30, 2014 |
|||||||
| (in millions) | ||||||||
| Balance, beginning of period |
$ | 838 | $ | 968 | ||||
| Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period |
(59 | ) | (199 | ) | ||||
| Credit loss impairments previously recognized on securities impaired to fair value during the period(1) |
0 | 0 | ||||||
| Credit loss impairment recognized in the current period on securities not previously impaired |
10 | 12 | ||||||
| Additional credit loss impairments recognized in the current period on securities previously impaired |
0 | 4 | ||||||
| Increases due to the passage of time on previously recorded credit losses |
9 | 18 | ||||||
| Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected |
(4 | ) | (9 | ) | ||||
|
|
|
|
|
|||||
| Balance, end of period |
$ | 794 | $ | 794 | ||||
|
|
|
|
|
|||||
| Three Months Ended June 30, 2013 |
Six Months Ended June 30, 2013 |
|||||||
| (in millions) | ||||||||
| Balance, beginning of period |
$ | 1,089 | $ | 1,166 | ||||
| Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period |
(53 | ) | (150 | ) | ||||
| Credit loss impairments previously recognized on securities impaired to fair value during the period(1) |
0 | 0 | ||||||
| Credit loss impairment recognized in the current period on securities not previously impaired |
7 | 8 | ||||||
| Additional credit loss impairments recognized in the current period on securities previously impaired |
27 | 39 | ||||||
| Increases due to the passage of time on previously recorded credit losses |
14 | 26 | ||||||
| Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected |
(4 | ) | (9 | ) | ||||
|
|
|
|
|
|||||
| Balance, end of period |
$ | 1,080 | $ | 1,080 | ||||
|
|
|
|
|
|||||
14
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
| (1) | Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost. |
Trading Account Assets Supporting Insurance Liabilities
The following table sets forth the composition of “Trading account assets supporting insurance liabilities” as of the dates indicated:
| June 30, 2014 | December 31, 2013 | |||||||||||||||
| Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
| (in millions) | ||||||||||||||||
| Short-term investments and cash equivalents |
$ | 726 | $ | 726 | $ | 697 | $ | 697 | ||||||||
| Fixed maturities: |
||||||||||||||||
| Corporate securities |
12,097 | 12,829 | 12,109 | 12,616 | ||||||||||||
| Commercial mortgage-backed securities |
2,450 | 2,498 | 2,417 | 2,441 | ||||||||||||
| Residential mortgage-backed securities(1) |
1,772 | 1,795 | 1,857 | 1,830 | ||||||||||||
| Asset-backed securities(2) |
1,159 | 1,181 | 1,096 | 1,107 | ||||||||||||
| Foreign government bonds |
639 | 659 | 579 | 596 | ||||||||||||
| U.S. government authorities and agencies and obligations of U.S. states |
302 | 353 | 303 | 341 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total fixed maturities |
18,419 | 19,315 | 18,361 | 18,931 | ||||||||||||
| Equity securities |
1,005 | 1,232 | 913 | 1,199 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total trading account assets supporting insurance liabilities |
$ | 20,150 | $ | 21,273 | $ | 19,971 | $ | 20,827 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Includes publicly-traded agency pass-through securities and collateralized mortgage obligations. |
| (2) | Includes credit-tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans and other asset types. |
The net change in unrealized gains (losses) from trading account assets supporting insurance liabilities still held at period end, recorded within “Other income”, was $201 million and ($596) million during the three months ended June 30, 2014 and 2013, respectively, and $267 million and ($493) million during the six months ended June 30, 2014 and 2013, respectively.
Other Trading Account Assets
The following table sets forth the composition of the “Other trading account assets” as of the dates indicated:
| June 30, 2014 | December 31, 2013 | |||||||||||||||
| Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
| (in millions) | ||||||||||||||||
| Short-term investments and cash equivalents |
$ | 85 | $ | 86 | $ | 105 | $ | 106 | ||||||||
| Fixed maturities |
6,265 | 6,361 | 4,653 | 4,723 | ||||||||||||
| Equity securities |
1,026 | 1,160 | 1,051 | 1,177 | ||||||||||||
| Other |
8 | 13 | 3 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Subtotal |
$ | 7,384 | 7,620 | $ | 5,812 | 6,013 | ||||||||||
|
|
|
|
|
|||||||||||||
| Derivative instruments |
1,045 | 440 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Total other trading account assets |
$ | 8,665 | $ | 6,453 | ||||||||||||
|
|
|
|
|
|||||||||||||
15
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The net change in unrealized gains (losses) from other trading account assets, excluding derivative instruments, still held at period end, recorded within “Other income” was $9 million and $13 million during the three months ended June 30, 2014 and 2013, respectively, and $35 million and $87 million during the six months ended June 30, 2014 and 2013, respectively.
Concentrations of Financial Instruments
The Company monitors its concentrations of financial instruments on an on-going basis, and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any one issuer.
As of both June 30, 2014 and December 31, 2013, the Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government, certain U.S. government agencies and certain securities guaranteed by the U.S. government, as well as the securities disclosed below.
| June 30, 2014 | December 31, 2013 | |||||||||||||||
| Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
| (in millions) | ||||||||||||||||
| Investments in Japanese government and government agency securities: |
||||||||||||||||
| Fixed maturities, available-for-sale |
$ | 61,968 | $ | 68,248 | $ | 59,775 | $ | 65,389 | ||||||||
| Fixed maturities, held-to-maturity |
949 | 1,096 | 916 | 1,032 | ||||||||||||
| Trading account assets supporting insurance liabilities |
490 | 498 | 451 | 458 | ||||||||||||
| Other trading account assets |
39 | 39 | 38 | 39 | ||||||||||||
| Short-term investments |
0 | 0 | 0 | 0 | ||||||||||||
| Cash equivalents |
296 | 296 | 107 | 107 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 63,742 | $ | 70,177 | $ | 61,287 | $ | 67,025 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| June 30, 2014 | December 31, 2013 | |||||||||||||||
| Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
| (in millions) | ||||||||||||||||
| Investments in South Korean government and government agency securities: |
||||||||||||||||
| Fixed maturities, available-for-sale |
$ | 7,257 | $ | 8,322 | $ | 6,672 | $ | 7,277 | ||||||||
| Fixed maturities, held-to-maturity |
0 | 0 | 0 | 0 | ||||||||||||
| Trading account assets supporting insurance liabilities |
61 | 62 | 61 | 61 | ||||||||||||
| Other trading account assets |
0 | 0 | 0 | 0 | ||||||||||||
| Short-term investments |
0 | 0 | 0 | 0 | ||||||||||||
| Cash equivalents |
0 | 0 | 0 | 0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 7,318 | $ | 8,384 | $ | 6,733 | $ | 7,338 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
16
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Commercial Mortgage and Other Loans
The Company’s commercial mortgage and other loans are comprised as follows, as of the dates indicated:
| June 30, 2014 | December 31, 2013 | |||||||||||||||
| Amount (in millions) |
% of Total |
Amount (in millions) |
% of Total |
|||||||||||||
| Commercial and agricultural mortgage loans by property type: |
||||||||||||||||
| Office |
$ | 8,455 | 20.6 | % | $ | 7,762 | 19.9 | % | ||||||||
| Retail |
8,458 | 20.6 | 8,698 | 22.3 | ||||||||||||
| Apartments/Multi-Family |
8,883 | 21.6 | 7,492 | 19.2 | ||||||||||||
| Industrial |
7,372 | 17.9 | 7,390 | 18.9 | ||||||||||||
| Hospitality |
2,068 | 5.0 | 2,050 | 5.2 | ||||||||||||
| Other |
3,691 | 9.0 | 3,464 | 8.9 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total commercial mortgage loans |
38,927 | 94.7 | 36,856 | 94.4 | ||||||||||||
| Agricultural property loans |
2,173 | 5.3 | 2,183 | 5.6 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total commercial and agricultural mortgage loans by property type |
41,100 | 100.0 | % | 39,039 | 100.0 | % | ||||||||||
|
|
|
|
|
|||||||||||||
| Valuation allowance |
(192 | ) | (195 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total net commercial and agricultural mortgage loans by property type |
40,908 | 38,844 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Other loans |
||||||||||||||||
| Uncollateralized loans |
1,232 | 1,306 | ||||||||||||||
| Residential property loans |
512 | 544 | ||||||||||||||
| Other collateralized loans |
328 | 335 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Total other loans |
2,072 | 2,185 | ||||||||||||||
| Valuation allowance |
(16 | ) | (21 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total net other loans |
2,056 | 2,164 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Total commercial mortgage and other loans(1) |
$ | 42,964 | $ | 41,008 | ||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | Includes loans held at fair value. |
The commercial mortgage and agricultural property loans are geographically dispersed throughout the United States, Canada, Europe, Mexico and Asia with the largest concentrations in California (26%), New York (10%), and Texas (9%) at June 30, 2014.
Activity in the allowance for losses for all commercial mortgage and other loans, as of the dates indicated, is as follows:
| June 30, 2014 | ||||||||||||||||||||||||
| Commercial Mortgage Loans |
Agricultural Property Loans |
Residential Property Loans |
Other Collateralized Loans |
Uncollateralized Loans |
Total | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Allowance for losses, beginning of year |
$ | 188 | $ | 7 | $ | 6 | $ | 3 | $ | 12 | $ | 216 | ||||||||||||
| Addition to / (release of) allowance of losses |
4 | 0 | 0 | (1 | ) | (2 | ) | 1 | ||||||||||||||||
| Charge-offs, net of recoveries |
(7 | ) | 0 | 0 | (2 | ) | 0 | (9 | ) | |||||||||||||||
| Change in foreign exchange |
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total ending balance |
$ | 185 | $ | 7 | $ | 6 | $ | 0 | $ | 10 | $ | 208 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
17
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
| December 31, 2013 | ||||||||||||||||||||||||
| Commercial Mortgage Loans |
Agricultural Property Loans |
Residential Property Loans |
Other Collateralized Loans |
Uncollateralized Loans |
Total | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Allowance for losses, beginning of year |
$ | 209 | $ | 20 | $ | 11 | $ | 12 | $ | 17 | $ | 269 | ||||||||||||
| Addition to / (release of) allowance of losses |
12 | (7 | ) | (3 | ) | (9 | ) | (2 | ) | (9 | ) | |||||||||||||
| Charge-offs, net of recoveries |
(33 | ) | (6 | ) | 0 | 0 | 0 | (39 | ) | |||||||||||||||
| Change in foreign exchange |
0 | 0 | (2 | ) | 0 | (3 | ) | (5 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total ending balance |
$ | 188 | $ | 7 | $ | 6 | $ | 3 | $ | 12 | $ | 216 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The following tables set forth the allowance for credit losses and the recorded investment in commercial mortgage and other loans as of the dates indicated:
| June 30, 2014 | ||||||||||||||||||||||||
| Commercial Mortgage Loans |
Agricultural Property Loans |
Residential Property Loans |
Other Collateralized Loans |
Uncollateralized Loans |
Total | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Allowance for Credit Losses: |
||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment |
$ | 11 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 11 | ||||||||||||
| Ending balance: collectively evaluated for impairment |
174 | 7 | 6 | 0 | 10 | 197 | ||||||||||||||||||
| Ending balance: loans acquired with deteriorated credit quality |
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total ending balance |
$ | 185 | $ | 7 | $ | 6 | $ | 0 | $ | 10 | $ | 208 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Recorded Investment:(1) |
||||||||||||||||||||||||
| Ending balance gross of reserves: individually evaluated for impairment |
$ | 400 | $ | 4 | $ | 0 | $ | 4 | $ | 2 | $ | 410 | ||||||||||||
| Ending balance gross of reserves: collectively evaluated for impairment |
38,527 | 2,169 | 512 | 324 | 1,230 | 42,762 | ||||||||||||||||||
| Ending balance gross of reserves: loans acquired with deteriorated credit quality |
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total ending balance, gross of reserves |
$ | 38,927 | $ | 2,173 | $ | 512 | $ | 328 | $ | 1,232 | $ | 43,172 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | Recorded investment reflects the balance sheet carrying value gross of related allowance. |
18
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
| December 31, 2013 | ||||||||||||||||||||||||
| Commercial Mortgage Loans |
Agricultural Property Loans |
Residential Property Loans |
Other Collateralized Loans |
Uncollateralized Loans |
Total | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Allowance for Credit Losses: |
||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment |
$ | 16 | $ | 0 | $ | 0 | $ | 3 | $ | 0 | $ | 19 | ||||||||||||
| Ending balance: collectively evaluated for impairment |
172 | 7 | 6 | 0 | 12 | 197 | ||||||||||||||||||
| Ending balance: loans acquired with deteriorated credit quality |
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total ending balance |
$ | 188 | $ | 7 | $ | 6 | $ | 3 | $ | 12 | $ | 216 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Recorded Investment:(1) |
||||||||||||||||||||||||
| Ending balance gross of reserves: individually evaluated for impairment |
$ | 429 | $ | 5 | $ | 0 | $ | 7 | $ | 2 | $ | 443 | ||||||||||||
| Ending balance gross of reserves: collectively evaluated for impairment |
36,427 | 2,178 | 544 | 328 | 1,304 | 40,781 | ||||||||||||||||||
| Ending balance gross of reserves: loans acquired with deteriorated credit quality |
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total ending balance, gross of reserves |
$ | 36,856 | $ | 2,183 | $ | 544 | $ | 335 | $ | 1,306 | $ | 41,224 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | Recorded investment reflects the balance sheet carrying value gross of related allowance. |
19
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Impaired loans include those loans for which it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. Impaired commercial mortgage and other loans identified in management’s specific review of probable loan losses and the related allowance for losses, as of the dates indicated, are as follows:
| June 30, 2014 | ||||||||||||||||||||
| Recorded Investment(1) |
Unpaid Principal Balance |
Related Allowance |
Average Recorded Investment Before Allowance(2) |
Interest Income Recognized(3) |
||||||||||||||||
| (in millions) | ||||||||||||||||||||
| With no related allowance recorded: |
||||||||||||||||||||
| Commercial mortgage loans |
$ | 14 | $ | 14 | $ | 0 | $ | 24 | $ | 0 | ||||||||||
| Agricultural property loans |
1 | 1 | 0 | 3 | 0 | |||||||||||||||
| Residential property loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Other collateralized loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Uncollateralized loans |
0 | 2 | 0 | 0 | 0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total with no related allowance |
$ | 15 | $ | 17 | $ | 0 | $ | 27 | $ | 0 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| With an allowance recorded: |
||||||||||||||||||||
| Commercial mortgage loans |
$ | 114 | $ | 115 | $ | 11 | $ | 73 | $ | 3 | ||||||||||
| Agricultural property loans |
2 | 2 | 0 | 1 | 0 | |||||||||||||||
| Residential property loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Other collateralized loans |
3 | 3 | 0 | 4 | 0 | |||||||||||||||
| Uncollateralized loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total with related allowance |
$ | 119 | $ | 120 | $ | 11 | $ | 78 | $ | 3 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total: |
||||||||||||||||||||
| Commercial mortgage loans |
$ | 128 | $ | 129 | $ | 11 | $ | 97 | $ | 3 | ||||||||||
| Agricultural property loans |
3 | 3 | 0 | 4 | 0 | |||||||||||||||
| Residential property loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Other collateralized loans |
3 | 3 | 0 | 4 | 0 | |||||||||||||||
| Uncollateralized loans |
0 | 2 | 0 | 0 | 0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 134 | $ | 137 | $ | 11 | $ | 105 | $ | 3 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Recorded investment reflects the balance sheet carrying value gross of related allowance. |
| (2) | Average recorded investment represents the average of the beginning-of-period and end-of-period balances. |
| (3) | The interest income recognized is for the year-to-date income regardless of when the impairments occurred. |
20
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
| December 31, 2013 | ||||||||||||||||||||
| Recorded Investment(1) |
Unpaid Principal Balance |
Related Allowance |
Average Recorded Investment Before Allowance(2) |
Interest Income Recognized(3) |
||||||||||||||||
| (in millions) | ||||||||||||||||||||
| With no related allowance recorded: |
||||||||||||||||||||
| Commercial mortgage loans |
$ | 33 | $ | 33 | $ | 0 | $ | 30 | $ | 1 | ||||||||||
| Agricultural property loans |
5 | 5 | 0 | 2 | 0 | |||||||||||||||
| Residential property loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Other collateralized loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Uncollateralized loans |
0 | 2 | 0 | 0 | 0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total with no related allowance |
$ | 38 | $ | 40 | $ | 0 | $ | 32 | $ | 1 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| With an allowance recorded: |
||||||||||||||||||||
| Commercial mortgage loans |
$ | 54 | $ | 55 | $ | 16 | $ | 121 | $ | 1 | ||||||||||
| Agricultural property loans |
0 | 0 | 0 | 10 | 0 | |||||||||||||||
| Residential property loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Other collateralized loans |
5 | 5 | 3 | 8 | 3 | |||||||||||||||
| Uncollateralized loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total with related allowance |
$ | 59 | $ | 60 | $ | 19 | $ | 139 | $ | 4 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total: |
||||||||||||||||||||
| Commercial mortgage loans |
$ | 87 | $ | 88 | $ | 16 | $ | 151 | $ | 2 | ||||||||||
| Agricultural property loans |
5 | 5 | 0 | 12 | 0 | |||||||||||||||
| Residential property loans |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Other collateralized loans |
5 | 5 | 3 | 8 | 3 | |||||||||||||||
| Uncollateralized loans |
0 | 2 | 0 | 0 | 0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 97 | $ | 100 | $ | 19 | $ | 171 | $ | 5 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Recorded investment reflects the balance sheet carrying value gross of related allowance. |
| (2) | Average recorded investment represents the average of the beginning-of-period and all subsequent quarterly end-of-period balances. |
| (3) | The interest income recognized is for the year-to-date income regardless of when the impairments occurred. |
The net carrying value of commercial and other loans held for sale by the Company as of June 30, 2014 and December 31, 2013 was $204 million and $158 million, respectively. In all of these transactions, the Company pre-arranges that it will sell the loan to an investor. As of both June 30, 2014 and December 31, 2013, all of the Company’s commercial and other loans held for sale were collateralized, with collateral primarily consisting of apartment complexes.
21
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The following tables set forth certain key credit quality indicators as of June 30, 2014, based upon the recorded investment gross of allowance for credit losses.
Commercial mortgage loans
| Debt Service Coverage Ratio—June 30, 2014 | ||||||||||||||||
| Greater than 1.2X |
1.0X to <1.2X | Less than 1.0X |
Total | |||||||||||||
| (in millions) | ||||||||||||||||
| Loan-to-Value Ratio |
||||||||||||||||
| 0%-59.99% |
$ | 20,299 | $ | 560 | $ | 354 | $ | 21,213 | ||||||||
| 60%-69.99% |
11,675 | 436 | 268 | 12,379 | ||||||||||||
| 70%-79.99% |
4,099 | 479 | 41 | 4,619 | ||||||||||||
| Greater than 80% |
354 | 183 | 179 | 716 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total commercial mortgage loans |
$ | 36,427 | $ | 1,658 | $ | 842 | $ | 38,927 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Agricultural property loans
| Debt Service Coverage Ratio—June 30, 2014 | ||||||||||||||||
| Greater than 1.2X |
1.0X to <1.2X | Less than 1.0X |
Total | |||||||||||||
| (in millions) | ||||||||||||||||
| Loan-to-Value Ratio |
||||||||||||||||
| 0%-59.99% |
$ | 2,027 | $ | 134 | $ | 2 | $ | 2,163 | ||||||||
| 60%-69.99% |
10 | 0 | 0 | 10 | ||||||||||||
| 70%-79.99% |
0 | 0 | 0 | 0 | ||||||||||||
| Greater than 80% |
0 | 0 | 0 | 0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total agricultural property loans |
$ | 2,037 | $ | 134 | $ | 2 | $ | 2,173 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Total commercial and agricultural mortgage loans
| Debt Service Coverage Ratio—June 30, 2014 | ||||||||||||||||
| Greater than 1.2X |
1.0X to <1.2X | Less than 1.0X |
Total | |||||||||||||
| (in millions) | ||||||||||||||||
| Loan-to-Value Ratio |
||||||||||||||||
| 0%-59.99% |
$ | 22,326 | $ | 694 | $ | 356 | $ | 23,376 | ||||||||
| 60%-69.99% |
11,685 | 436 | 268 | 12,389 | ||||||||||||
| 70%-79.99% |
4,099 | 479 | 41 | 4,619 | ||||||||||||
| Greater than 80% |
354 | 183 | 179 | 716 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total commercial and agricultural mortgage loans |
$ | 38,464 | $ | 1,792 | $ | 844 | $ | 41,100 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
22
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The following tables set forth certain key credit quality indicators as of December 31, 2013, based upon the recorded investment gross of allowance for credit losses.
Commercial mortgage loans
| Debt Service Coverage Ratio—December 31, 2013 | ||||||||||||||||
| Greater than 1.2X |
1.0X to <1.2X | Less than 1.0X |
Total | |||||||||||||
| (in millions) | ||||||||||||||||
| Loan-to-Value Ratio |
||||||||||||||||
| 0%-59.99% |
$ | 19,089 | $ | 597 | $ | 179 | $ | 19,865 | ||||||||
| 60%-69.99% |
11,101 | 379 | 95 | 11,575 | ||||||||||||
| 70%-79.99% |
4,005 | 422 | 216 | 4,643 | ||||||||||||
| Greater than 80% |
325 | 173 | 275 | 773 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total commercial mortgage loans |
$ | 34,520 | $ | 1,571 | $ | 765 | $ | 36,856 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Agricultural property loans
| Debt Service Coverage Ratio—December 31, 2013 | ||||||||||||||||
| Greater than 1.2X |
1.0X to <1.2X | Less than 1.0X |
Total | |||||||||||||
| (in millions) | ||||||||||||||||
| Loan-to-Value Ratio |
||||||||||||||||
| 0%-59.99% |
$ | 2,023 | $ | 137 | $ | 0 | $ | 2,160 | ||||||||
| 60%-69.99% |
23 | 0 | 0 | 23 | ||||||||||||
| 70%-79.99% |
0 | 0 | 0 | 0 | ||||||||||||
| Greater than 80% |
0 | 0 | 0 | 0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total agricultural property loans |
$ | 2,046 | $ | 137 | $ | 0 | $ | 2,183 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Total commercial and agricultural mortgage loans
| Debt Service Coverage Ratio—December 31, 2013 | ||||||||||||||||
| Greater than 1.2X |
1.0X to <1.2X | Less than 1.0X |
Total | |||||||||||||
| (in millions) | ||||||||||||||||
| Loan-to-Value Ratio |
||||||||||||||||
| 0%-59.99% |
$ | 21,112 | $ | 734 | $ | 179 | $ | 22,025 | ||||||||
| 60%-69.99% |
11,124 | 379 | 95 | 11,598 | ||||||||||||
| 70%-79.99% |
4,005 | 422 | 216 | 4,643 | ||||||||||||
| Greater than 80% |
325 | 173 | 275 | 773 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total commercial and agricultural mortgage loans |
$ | 36,566 | $ | 1,708 | $ | 765 | $ | 39,039 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
23
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The following tables provide an aging of past due commercial mortgage and other loans as of the dates indicated, based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage loans on nonaccrual status as of the dates indicated.
| June 30, 2014 | ||||||||||||||||||||||||||||||||
| Current | 30-59 Days Past Due |
60-89 Days Past Due |
Greater Than 90 Days - Accruing |
Greater Than 90 Days - Not Accruing |
Total Past Due |
Total Commercial Mortgage and Other Loans |
Non Accrual Status |
|||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Commercial mortgage loans |
$ | 38,918 | $ | 5 | $ | 3 | $ | 0 | $ | 1 | $ | 9 | $ | 38,927 | $ | 9 | ||||||||||||||||
| Agricultural property loans |
2,172 | 0 | 0 | 0 | 1 | 1 | 2,173 | 1 | ||||||||||||||||||||||||
| Residential property loans |
493 | 7 | 4 | 0 | 8 | 19 | 512 | 9 | ||||||||||||||||||||||||
| Other collateralized loans |
328 | 0 | 0 | 0 | 0 | 0 | 328 | 3 | ||||||||||||||||||||||||
| Uncollateralized loans |
1,232 | 0 | 0 | 0 | 0 | 0 | 1,232 | 2 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 43,143 | $ | 12 | $ | 7 | $ | 0 | $ | 10 | $ | 29 | $ | 43,172 | $ | 24 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| December 31, 2013 | ||||||||||||||||||||||||||||||||
| Current | 30-59 Days Past Due |
60-89 Days Past Due |
Greater Than 90 Days - Accruing |
Greater Than 90 Days - Not Accruing |
Total Past Due |
Total Commercial Mortgage and Other Loans |
Non Accrual Status |
|||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Commercial mortgage loans |
$ | 36,821 | $ | 16 | $ | 0 | $ | 0 | $ | 19 | $ | 35 | $ | 36,856 | $ | 154 | ||||||||||||||||
| Agricultural property loans |
2,182 | 0 | 0 | 0 | 1 | 1 | 2,183 | 2 | ||||||||||||||||||||||||
| Residential property loans |
520 | 11 | 3 | 0 | 10 | 24 | 544 | 10 | ||||||||||||||||||||||||
| Other collateralized loans |
334 | 0 | 0 | 0 | 1 | 1 | 335 | 5 | ||||||||||||||||||||||||
| Uncollateralized loans |
1,306 | 0 | 0 | 0 | 0 | 0 | 1,306 | 2 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 41,163 | $ | 27 | $ | 3 | $ | 0 | $ | 31 | $ | 61 | $ | 41,224 | $ | 173 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
See Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2013, for further discussion regarding nonaccrual status loans.
For both the three and six months ended June 30, 2014, there were no new commercial mortgage and other loans acquired, other than those through direct origination, nor were there any new commercial mortgage and other loans sold, other than those classified as held-for-sale. For the three months ended June 30, 2013, there were no new commercial mortgage and other loans acquired, other than those through direct origination, and there were $7 million of commercial mortgage and other loans sold, other than those classified as held-for-sale. For the six months ended June 20, 2013, there were $718 million of commercial mortgage and other loans acquired, other than those through direct origination and $7 million of commercial mortgage and other loans sold, other than those classified as held-for-sale.
The Company’s commercial mortgage and other loans may occasionally be involved in a troubled debt restructuring. As of both June 30, 2014 and December 31, 2013, the Company had no significant commitments to fund to borrowers that have been involved in a troubled debt restructuring. During the three months and six months ended June 30, 2014 and 2013, respectively, there were no new troubled debt restructurings related to commercial mortgage and other loans, and no payment defaults on commercial mortgage and other loans that were modified as a troubled debt restructuring within the 12 months preceding each respective period. For
24
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
additional information relating to the accounting for troubled debt restructurings, see Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2013.
Net Investment Income
Net investment income for the three and six months ended June 30, 2014 and 2013, was from the following sources:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (in millions) | ||||||||||||||||
| Fixed maturities, available-for-sale |
$ | 2,669 | $ | 2,641 | $ | 5,286 | $ | 5,292 | ||||||||
| Fixed maturities, held-to-maturity |
42 | 30 | 82 | 61 | ||||||||||||
| Equity securities, available-for-sale |
105 | 94 | 189 | 172 | ||||||||||||
| Trading account assets |
259 | 234 | 517 | 472 | ||||||||||||
| Commercial mortgage and other loans |
522 | 492 | 1,020 | 982 | ||||||||||||
| Policy loans |
158 | 150 | 312 | 298 | ||||||||||||
| Short-term investments and cash equivalents |
8 | 11 | 17 | 21 | ||||||||||||
| Other long-term investments |
175 | 199 | 517 | 332 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross investment income |
3,938 | 3,851 | 7,940 | 7,630 | ||||||||||||
| Less: investment expenses |
(184 | ) | (140 | ) | (348 | ) | (281 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net investment income |
$ | 3,754 | $ | 3,711 | $ | 7,592 | $ | 7,349 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Realized Investment Gains (Losses), Net
Realized investment gains (losses), net, for the three and six months ended June 30, 2014 and 2013, were from the following sources:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (in millions) | ||||||||||||||||
| Fixed maturities |
$ | 367 | $ | 291 | $ | 624 | $ | 344 | ||||||||
| Equity securities |
169 | 94 | 254 | 171 | ||||||||||||
| Commercial mortgage and other loans |
8 | 24 | 16 | 37 | ||||||||||||
| Investment real-estate |
0 | 0 | 0 | 0 | ||||||||||||
| Joint ventures and limited partnerships |
0 | (5 | ) | 1 | (6 | ) | ||||||||||
| Derivatives(1) |
60 | (1,430 | ) | (85 | ) | (2,300 | ) | |||||||||
| Other |
5 | 2 | 7 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Realized investment gains (losses), net |
$ | 609 | $ | (1,024 | ) | $ | 817 | $ | (1,747 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Includes the offset of hedged items in qualifying effective hedge relationship prior to maturity or termination. |
25
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Net Unrealized Gains (Losses) on Investments by Asset Class
The table below presents net unrealized gains (losses) on investments by asset class as of the dates indicated:
| June 30, | December 31, | |||||||
| 2014 | 2013 | |||||||
| (in millions) | ||||||||
| Fixed maturity securities on which an OTTI loss has been recognized |
$ | 284 | $ | 110 | ||||
| Fixed maturity securities, available-for-sale—all other |
26,432 | 18,029 | ||||||
| Equity securities, available-for-sale |
3,004 | 2,907 | ||||||
| Derivatives designated as cash flow hedges(1) |
(533 | ) | (446 | ) | ||||
| Other investments(2) |
15 | 4 | ||||||
|
|
|
|
|
|||||
| Net unrealized gains (losses) on investments |
$ | 29,202 | $ | 20,604 | ||||
|
|
|
|
|
|||||
| (1) | See Note 14 for more information on cash flow hedges. |
| (2) | As of June 30, 2014, includes $11 million of net unrealized losses on held-to-maturity securities that were previously transferred from available-for-sale. |
Duration of Gross Unrealized Loss Positions for Fixed Maturities and Equity Securities
The following table shows the fair value and gross unrealized losses aggregated by investment category and length of time that individual fixed maturity securities and equity securities have been in a continuous unrealized loss position, as of the dates indicated:
| June 30, 2014 | ||||||||||||||||||||||||
| Less than twelve months |
Twelve months or more | Total | ||||||||||||||||||||||
| Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
|||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Fixed maturities(1) |
||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government authorities and agencies |
$ | 1,225 | $ | 5 | $ | 83 | $ | 3 | $ | 1,308 | $ | 8 | ||||||||||||
| Obligations of U.S. states and their political subdivisions |
53 | 0 | 587 | 20 | 640 | 20 | ||||||||||||||||||
| Foreign government bonds |
967 | 26 | 2,046 | 112 | 3,013 | 138 | ||||||||||||||||||
| Corporate securities |
5,037 | 65 | 22,766 | 1,158 | 27,803 | 1,223 | ||||||||||||||||||
| Commercial mortgage-backed securities |
423 | 2 | 1,984 | 56 | 2,407 | 58 | ||||||||||||||||||
| Asset-backed securities |
1,358 | 7 | 2,883 | 143 | 4,241 | 150 | ||||||||||||||||||
| Residential mortgage-backed securities |
2 | 0 | 413 | 9 | 415 | |||||||||||||||||||