Form: 8-K

Current report

Exhibit 99.2

Prudential Financial, Inc.

Financial Services Businesses

Investments in Residential Mortgage-Backed, Commercial Mortgage-Backed, and Asset-Backed Securities - December 31, 2007

($ millions)

 

General Account Investments - Available for Sale

   Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair
Value

Asset-backed securities (a)

   13,833    123    747    13,209

Residential mortgage-backed securities (b)

   7,782    104    46    7,840

Commercial mortgage-backed securities (c)

   6,581    102    25    6,658
           

(a) Supplemental information for asset-backed securities:

 

         LOWEST RATING AGENCY RATING              
   

Vintage

   AAA     AA     A     BBB     BB and
below
    Total
Amortized
Cost
    Total
Fair Value
 

Collateralized by sub-prime mortgages:

                

Enhanced short-term portfolio

                
  2007............    737     —       —       —       —       737     692  
  2006............    2,622     —       —       —       —       2,622     2,532  
  2005............    142     —       —       —       —       142     140  
  2004............    —       —       —       —       —       —       —    
  2003 and prior...    —       —       —       —       —       —       —    
                                            

Total enhanced short-term portfolio (1)

     3,501     —       —       —       —       3,501     3,364  
                                            

All other portfolios

                
  2007............    412     8     —       —       —       420     341  
  2006............    1,413     367     26     5     —       1,811     1,539  
  2005............    76     472     122     7     —       677     604  
  2004............    50     400     309     4     —       763     711  
  2003 and prior...    63     242     230     86     19     640     576  
                                            

Total all other portfolios

     2,014            1,489            687        102            19            4,311            3,771         
                                            

Total collateralized by sub-prime mortgages

     5,515     1,489     687     102     19     7,812     7,135  

Other asset-backed securities (2):

     2,540     289     1,597     1,362     233     6,021     6,074  
                                            

Total asset-backed securities

     8,055     1,778     2,284     1,464     252     13,833     13,209  
                                            

 

(1) Our Enhanced Short-term portfolio is used primarily to invest cash proceeds of securities lending and repurchase activities, and cash generated from certain trading and operating activities. The investment policy statement of this portfolio requires that securities purchased for this portfolio have a remaining expected average life of 2 years or less when acquired.

 

(2) As of December 31, 2007, based on amortized cost, primarily includes $1.8 billion ($1.9 billion fair value) of externally managed investments in the European market, $1.2 billion ($1.2 billion fair value) of securities collateralized by automobile loans, and $0.9 billion ($0.9 billion fair value) of securities collateralized by credit card receivables. Also included are collateralized debt obligations with amortized cost of $220 million ($214 million fair value), with less than 2% secured by sub-prime mortgages.

Excluded from the table above are available for sale asset-backed securities held outside the general account in other entities and operations with amortized cost of $279 million and fair value of $281 million. Based on amortized cost, 73% of these securities have credit ratings of AAA and the remaining 27% have credit ratings of BBB or below. As of December 31, 2007, included within these asset-backed securities are securities collateralized by sub-prime mortgages with amortized cost and fair value of $11 million, all of which have AAA credit ratings, with $10 million in the 2006 vintage and $1 million in the 2003 vintage. Also included are collateralized debt obligations with amortized cost of $79 million and fair value of $81 million, with none secured by sub-prime mortgages. Also excluded from the table above are asset-backed securities classified as trading and carried at fair value, including $1.2 billion of trading account assets supporting insurance liabilities, the investment results of which ultimately accrue to contractholders. An additional $37 million are classified as other trading, 40% of which have credit ratings of AAA or better and the remaining 60% have BBB or below credit ratings.

(b) Supplemental information for residential mortgage-backed securities:

As of December 31, 2007, based on amortized cost, 96% of the residential mortgage-backed securities classified as available for sale in the general account of the Financial Services Businesses were publicly traded agency pass-through securities, which are supported by implicit or explicit government guarantees and have credit ratings of AA or AAA. Collateralized mortgage obligations, including approximately $61 million secured by "ALT-A" mortgages, represented the remaining 4% of residential mortgage-backed securities; all have credit ratings of A or above.

Excluded from the table above are available for sale residential mortgage-backed securities held outside the general account in other entities and operations with amortized cost of $603 million ($608 million fair value), all of which have AAA credit ratings. Also excluded from the table above are $1.1 billion of residential mortgage-backed securities classified as trading account assets supporting insurance liabilities and carried at fair value, the investment results of which ultimately accrue to contractholders.

(c) Supplemental information for commercial mortgage-backed securities:

As of December 31, 2007, based on amortized cost, 92% of commercial mortgage-backed securities have AAA credit ratings, 2% have AA credit ratings, 1% have A credit ratings, and the remaining 5% have BBB or below credit ratings.

Excluded from the table above are available for sale commercial mortgage-backed securities held outside the general account in other entities and operations with amortized cost and fair value of $10 million, 50% of which have credit ratings of AAA and the remaining 50% have credit ratings of BB. Also excluded from the table above are commercial mortgage-backed securities classified as trading and carried at fair value, including $2.6 billion of trading account assets supporting insurance liabilities, the investment results of which ultimately accrue to contractholders. An additional $794 million are classified as other trading, of which 89% have AAA credit ratings, 3% have AA credit ratings, 6% have A credit ratings, and the remaining 2% have BBB or below credit ratings.


Prudential Financial, Inc.

Closed Block Business

Investments in Residential Mortgage-Backed, Commercial Mortgage-Backed, and Asset-Backed Securities - December 31, 2007

($ millions)

 

General Account Investments - Available for Sale

   Amortized
Cost
   Gross
Unrealized Gains
   Gross
Unrealized Losses
   Fair
Value

Asset-backed securities (a)

   8,091    14    478    7,627

Residential mortgage-backed securities (b)

   5,163    61    18    5,206

Commercial mortgage-backed securities (c)

   4,265    46    21    4,290

(a) Supplemental information for asset-backed securities:

 

            LOWEST RATING AGENCY RATING              
   

Vintage

      AAA     AA     A     BBB     BB and
below
    Total
Amortized Cost
    Total Fair
Value
 

Collateralized by sub-prime mortgages:

                 

Enhanced short-term portfolio

                 
  2007............     768     —               —       768     721  
  2006............     2,735     —               —       2,735     2,640  
  2005............     148     —               —       148     147  
  2004............     —       —               —       —       —    
  2003 and prior...     —       —               —       —       —    
                                             

Total enhanced short-term portfolio (1)

      3,651     —               —       3,651     3,508  
                                             

All other portfolios

                 
  2007............     201     10             —       211     175  
  2006............     1,052     22             —       1,074     926  
  2005............     31     420     5         —       456     412  
  2004............     10     307     53         —       370     344  
  2003 and prior...     56     365     124     16     7     568     518  
                                             

Total all other portfolios

      1,350            1,124            182            16            7            2,679            2,375         
                                             

Total collateralized by sub-prime mortgages

      5,001     1,124     182     16     7     6,330     5,883  

Other asset-backed securities (2):

      775     53     394     504     35     1,761     1,744  
                                             

Total asset-backed securities

      5,776     1,177     576     520     42     8,091     7,627  
                                             

 

(1) Our Enhanced Short-term portfolio is used primarily to invest cash proceeds of securities lending and repurchase activities, and cash generated from certain trading and operating activities. The investment policy statement of this portfolio requires that securities purchased for this portfolio have a remaining expected average life of 2 years or less when acquired.

 

(2) As of December 31, 2007, on both a fair value and amortized cost basis, primarily includes $0.5 billion of securities collateralized by credit card receivables, $0.4 billion of securities collateralized by automobile loans, $0.3 billion of externally managed investments in the European market, and $0.2 billion of securities collateralized by education loans. Also included are collateralized debt obligations with amortized cost of $27 million and fair value of $31 million, with none secured by sub-prime mortgages.

(b) Supplemental information for residential mortgage-backed securities:

As of December 31, 2007, based on amortized cost, 86% of the residential mortgage-backed securities in the Closed Block Business were publicly traded agency pass-through securities, which are supported by implicit or explicit government guarantees and have credit ratings of AA or AAA. Collateralized mortgage obligations, including approximately $137 million secured by "ALT-A" mortgages, represented the remaining 14% of residential mortgage-backed securities and all have credit ratings of A or above.

(c) Supplemental information for commercial mortgage-backed securities:

As of December 31, 2007, based on amortized cost, 97% of commercial mortgage-backed securities have AAA credit ratings, 1% have AA credit ratings, and the remaining 2% have A or BBB credit ratings.