INFORMATION ABOUT PRUDENTIAL FINANCIAL, INC.'S INVESTMENTS AS OF JUNE 30, 2008
Published on
Exhibit 99.2
Prudential Financial, Inc.
Financial Services Businesses
Information Regarding Certain General Account Investments
Residential Mortgage-Backed, Commercial Mortgage-Backed, and Asset-Backed Securities, and Commercial Loans
June 30, 2008
($ millions)
| General Account Investments - Available for Sale |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | ||||
| Asset-backed securities (a) |
12,389 | 69 | 1,060 | 11,398 | ||||
| Residential mortgage-backed securities (b) |
9,966 | 64 | 109 | 9,921 | ||||
| Commercial mortgage-backed securities (c) |
7,352 | 28 | 212 | 7,168 |
| Gross Carrying Value |
Allowance For Losses |
Net Book Value | |||||
| Commercial loans (d) |
21,779 | (103 | ) | 21,676 |
(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 |
||||||||||||||||
| 2008 | — | — | — | — | — | — | — | |||||||||
| 2007 | 346 | 165 | 95 | 46 | — | 652 | 581 | |||||||||
| 2006 | 1,182 | 447 | 217 | 190 | — | 2,036 | 1,894 | |||||||||
| 2005 | 51 | 6 | — | 8 | 4 | 69 | 66 | |||||||||
| 2004 | — | — | — | — | — | — | — | |||||||||
| 2003 and prior | — | — | — | — | — | — | — | |||||||||
| Total enhanced short-term portfolio (1) |
1,579 | 618 | 312 | 244 | 4 | 2,757 | 2,541 | |||||||||
| All other portfolios |
||||||||||||||||
| 2008 | — | — | — | — | — | — | — | |||||||||
| 2007 | 83 | 122 | 58 | 55 | — | 318 | 225 | |||||||||
| 2006 | 491 | 493 | 301 | 147 | 3 | 1,435 | 1,183 | |||||||||
| 2005 | 18 | 379 | 159 | 28 | 14 | 598 | 487 | |||||||||
| 2004 | 42 | 362 | 286 | 20 | 3 | 713 | 583 | |||||||||
| 2003 and prior | 38 | 199 | 190 | 52 | 39 | 518 | 440 | |||||||||
| Total all other portfolios |
672 | 1,555 | 994 | 302 | 59 | 3,582 | 2,918 | |||||||||
| Total collateralized by sub-prime mortgages (2) (3) |
2,251 | 2,173 | 1,306 | 546 | 63 | 6,339 | 5,459 | |||||||||
| Other asset-backed securities: |
||||||||||||||||
| Externally managed investments in the European market (4) |
282 | — | 689 | 566 | 14 | 1,551 | 1,566 | |||||||||
| Collateralized by auto loans |
1,412 | 77 | 100 | 92 | 3 | 1,684 | 1,676 | |||||||||
| Collateralized by credit cards |
56 | — | 7 | 750 | — | 813 | 753 | |||||||||
| Collateralized by non-sub-prime mortgages |
816 | 52 | 7 | 35 | 16 | 926 | 918 | |||||||||
| Other (5) |
142 | 240 | 432 | 66 | 196 | 1,076 | 1,026 | |||||||||
| Total asset-backed securities |
4,959 | 2,542 | 2,541 | 2,055 | 292 | 12,389 | 11,398 | |||||||||
| (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) | Included within the $6.339 billion of asset-backed securities collateralized by sub-prime mortgages attributable to the Financial Services Businesses as of June 30, 2008 were $2.261 billion of securities, on an amortized cost basis, that represent front pay or second pay positions, depending on the overall structure of the securities. As such, these securities have priority to principal cash flows over other securities in the structure, including longer senior securities in most instances. |
| (3) | The weighted average estimated subordination percentage of our general account available for sale asset-backed securities collateralized by sub-prime mortgages attributable to the Financial Services Businesses, excluding those supported by guarantees from monoline bond insurers, was 35% as of June 30, 2008. The subordination percentage represents the current weighted average estimated percentage of the capital structure subordinated to our investment holding that is available to absorb losses before the security incurs the first dollar loss of principal. As of June 30, 2008, based on amortized cost, approximately 91% of these asset-backed securities collateralized by sub-prime mortgages have estimated credit subordination percentages of 20% or more, and 53% have estimated credit subordination percentages of 30% or more. |
| (4) | Externally managed investments in the European markets reflects our investment in medium term notes that are collateralized by portfolios of assets primarily consisting of European fixed income securities and derivatives, including 47% European corporate and bank bonds, 23% bank capital, 18% European asset-backed securities, and 12% other. As of June 30, 2008, fair value excludes the $(278) million impact of a bifurcated embedded derivative. |
| (5) | Includes collateralized debt obligations with amortized cost of $201 million and fair value of $170 million, with less than 1% secured by sub-prime mortgages. Also includes asset backed-securities collateralized by education loans, equipment leases, timeshares, aircraft, and franchises. |
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 $247 million and fair value of $238 million. Based on amortized cost, 72% of these securities have credit ratings of AAA, 5% have A credit ratings, and the remaining 23% have credit ratings of BBB or below. As of June 30, 2008, included within these asset-backed securities are securities collateralized by sub-prime mortgages with amortized cost and fair value of $7 million, all of which have AAA credit ratings, with $6 million in the 2006 vintage and $1 million in the 2003 vintage. Also included are collateralized debt obligations with amortized cost of $49 million and fair value of $41 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 $1.0 billion of trading account assets supporting insurance liabilities, the investment results of which ultimately accrue to contract holders. An additional $302 million of asset-backed securities as of June 30, 2008 are classified as other trading, including $18 million held outside the general account, 84% of which have credit ratings of AAA and 16% of which have credit ratings of BB, and $284 million included in our general account, 75% of which have credit ratings of A or above and the remaining 25% have BBB credit ratings.
(b) Supplemental information for residential mortgage-backed securities:
As of June 30, 2008, based on amortized cost, 98% of the general account available for sale residential mortgage-backed securities attributable to 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 above. Collateralized mortgage obligations, including approximately $52 million secured by “ALT-A” mortgages, represented the remaining 2% of residential mortgage-backed securities; and virtually 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 $600 million ($600 million fair value), all of which have AAA credit ratings. Also excluded from the table above are $612 million of residential mortgage-backed securities classified as trading account assets supporting insurance liabilities and carried at fair value, the investment results of which ultimately accrue to contract holders.
Prudential Financial, Inc.
Financial Services Businesses
Information Regarding Certain General Account Investments
Residential Mortgage-Backed, Commercial Mortgage-Backed, and Asset-Backed Securities, and Commercial Loans
June 30, 2008
($ millions)
(c) Supplemental information for commercial mortgage-backed securities:
| LOWEST RATING AGENCY RATING | ||||||||||||||
| Vintage |
AAA | AA | A | BBB | BB and below |
Total Amortized Cost |
Total Fair Value | |||||||
| 2008 |
176 | — | 10 | 32 | 8 | 226 | 225 | |||||||
| 2007 |
1,183 | — | 3 | 66 | 73 | 1,325 | 1,311 | |||||||
| 2006 |
2,812 | 6 | — | 7 | 11 | 2,836 | 2,741 | |||||||
| 2005 |
1,400 | — | — | 11 | 38 | 1,449 | 1,401 | |||||||
| 2004 |
429 | — | — | — | 4 | 433 | 414 | |||||||
| 2003 and prior |
890 | 118 | 50 | 15 | 10 | 1,083 | 1,076 | |||||||
| Total (1) |
6,890 | 124 | 63 | 131 | 144 | 7,352 | 7,168 | |||||||
| (1) | As of June 30, 2008, based on amortized cost, the weighted average loan to value and debt service coverage ratios of general account available for sale commercial mortgage-backed securities attributable to the Financial Services Businesses is 69% and 1.53 times, respectively. The weighted average estimated subordination percentage of our general account available for sale investments in commercial mortgage-backed securities attributable to the Financial Services Businesses was 35% as of June 30, 2008. The subordination percentage represents the current weighted average estimated percentage of the capital structure subordinated to our investment holding that is available to absorb losses before the security incurs the first dollar loss of principal. The estimated subordination percentage includes an adjustment for that portion of the capital structure which has been effectively defeased by US Treasury securities. As of June 30, 2008, based on amortized cost, approximately 92% of these commercial mortgage-backed securities have estimated credit subordination percentages of 20% or more, and 75% have estimated credit subordination percentages of 30% or more. |
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 of $12 million and fair value of $11 million, 41% of which have credit ratings of AAA and the remaining 59% have credit ratings of BB and below. Also excluded from the table above are commercial mortgage-backed securities classified as trading and carried at fair value, including $2.5 billion of trading account assets supporting insurance liabilities, the investment results of which ultimately accrue to contract holders. An additional $141 million of commercial mortgage-backed securities held outside the general account as of June 30, 2008 are classified as other trading, of which 70% have AAA credit ratings, 21% have A credit ratings, and the remaining 9% have BBB credit ratings.
(d) Supplemental information for commercial loans:
| Commercial loans by property type: |
Gross Carrying Value |
% of Total | |||
| Industrial buildings |
4,560 | 20.9 | % | ||
| Office buildings |
3,952 | 18.2 | % | ||
| Apartment complexes |
3,523 | 16.2 | % | ||
| Retail stores |
3,392 | 15.6 | % | ||
| Other |
2,723 | 12.5 | % | ||
| Agricultural properties |
1,250 | 5.7 | % | ||
| Residential properties |
932 | 4.3 | % | ||
| Subtotal of collateralized loans |
20,332 | 93.4 | % | ||
| Uncollateralized loans |
1,447 | 6.6 | % | ||
| Total commercial loans |
21,779 | 100.0 | % | ||
| Commercial loans by status: |
Gross Carrying Value | |
| Performing |
21,719 | |
| Delinquent, not in foreclosure |
48 | |
| Delinquent, in foreclosure |
7 | |
| Restructured |
5 | |
| Total commercial loans |
21,779 | |
As of June 30, 2008, based on amortized cost, the weighted average loan to value and debt service coverage ratios of general account investments in commercial loans attributable to the Financial Services Businesses was 52% and 1.86 times, respectively.
Prudential Financial, Inc.
Closed Block Business
Information Regarding Certain General Account Investments
Residential Mortgage-Backed, Commercial Mortgage-Backed, and Asset-Backed Securities, and Commercial Loans
June 30, 2008
($ millions)
| General Account Investments - Available for Sale |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | ||||
| Asset-backed securities (a) |
6,889 | 18 | 778 | 6,129 | ||||
| Residential mortgage-backed securities (b) |
3,326 | 26 | 40 | 3,312 | ||||
| Commercial mortgage-backed securities (c) |
3,948 | 15 | 105 | 3,858 |
| Gross Carrying Value |
Allowance For Losses |
Net Book Value | |||||
| Commercial loans (d) |
8,657 | (30 | ) | 8,627 |
(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 |
||||||||||||||||
| 2008 | — | — | — | — | — | — | — | |||||||||
| 2007 | 357 | 170 | 98 | 10 | — | 635 | 565 | |||||||||
| 2006 | 1,219 | 461 | 224 | 61 | — | 1,965 | 1,833 | |||||||||
| 2005 | 52 | 6 | — | — | — | 58 | 57 | |||||||||
| 2004 | — | — | — | — | — | — | — | |||||||||
| 2003 and prior | — | — | — | — | — | — | — | |||||||||
| Total enhanced short-term portfolio (1) |
1,628 | 637 | 322 | 71 | — | 2,658 | 2,455 | |||||||||
| All other portfolios |
||||||||||||||||
| 2008 | 10 | 7 | 11 | 9 | — | 37 | 29 | |||||||||
| 2007 | 46 | 74 | 41 | 40 | — | 201 | 162 | |||||||||
| 2006 | 491 | 232 | 233 | 143 | — | 1,099 | 859 | |||||||||
| 2005 | 29 | 356 | 51 | 14 | 4 | 454 | 368 | |||||||||
| 2004 | 8 | 302 | 47 | — | — | 357 | 292 | |||||||||
| 2003 and prior | 29 | 249 | 135 | 17 | 24 | 454 | 382 | |||||||||
| Total all other portfolios |
613 | 1,220 | 518 | 223 | 28 | 2,602 | 2,092 | |||||||||
| Total collateralized by sub-prime mortgages (2) (3) |
2,241 | 1,857 | 840 | 294 | 28 | 5,260 | 4,547 | |||||||||
| Other asset-backed securities: |
||||||||||||||||
| Collateralized by credit cards |
— | — | 21 | 465 | — | 486 | 446 | |||||||||
| Collateralized by auto loans |
309 | 15 | 27 | 39 | — | 390 | 387 | |||||||||
| Externally managed investments in the European market (4) |
— | — | 281 | — | — | 281 | 283 | |||||||||
| Collateralized by education loans |
212 | 20 | — | — | — | 232 | 231 | |||||||||
| Other (5) |
93 | 48 | 51 | 18 | 30 | 240 | 235 | |||||||||
| Total asset-backed securities |
2,855 | 1,940 | 1,220 | 816 | 58 | 6,889 | 6,129 | |||||||||
| (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) | Included within the $5.260 billion of asset-backed securities collateralized by sub-prime mortgages attributable to the Closed Block Business as of June 30, 2008 were $2.165 billion of securities, on an amortized cost basis, that represent front pay or second pay positions, depending on the overall structure of the securities. As such, these securities have priority to principal cash flows over other securities in the structure, including longer senior securities in most instances. |
| (3) | The weighted average estimated subordination percentage of our general account available for sale asset-backed securities collateralized by sub-prime mortgages attributable to the Closed Block Business, excluding those supported by guarantees from monoline bond insurers, was 36% as of June 30, 2008. The subordination percentage represents the current weighted average estimated percentage of the capital structure subordinated to our investment holding that is available to absorb losses before the security incurs the first dollar loss of principal. As of June 30, 2008, based on amortized cost, approximately 96% of these asset-backed securities collateralized by sub-prime mortgages have credit estimated subordination percentages of 20% or more, and 59% have estimated credit subordination percentages of 30% or more. |
| (4) | Externally managed investments in the European markets reflects our investment in medium term notes that are collateralized by portfolios of assets primarily consisting of European fixed income securities and derivatives, including 47% European corporate and bank bonds, 23% bank capital, 18% European asset-backed securities, and 12% other. As of June 30, 2008, fair value excludes the $(50) million impact of a bifurcated embedded derivative. |
| (5) | Includes collateralized debt obligations with amortized cost of $21 million and fair value of $24 million, with none secured by sub-prime mortgages. Also includes asset backed-securities collateralized by equipment leases, timeshares, aircraft, and franchises. |
Excluded from the table above are $17 million of asset-backed securities classified as trading and carried at fair value, all of which have BBB credit ratings as of June 30, 2008.
(b) Supplemental information for residential mortgage-backed securities:
As of June 30, 2008, based on amortized cost, 82% of the general account available for sale residential mortgage-backed securities attributable to 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 AAA. Collateralized mortgage obligations, including approximately $153 million secured by “ALT-A” mortgages, represented the remaining 18% of residential mortgage-backed securities and all have credit ratings of AAA.
Prudential Financial, Inc.
Closed Block Business
Information Regarding Certain General Account Investments
Residential Mortgage-Backed, Commercial Mortgage-Backed, and Asset-Backed Securities, and Commercial Loans
June 30, 2008
($ millions)
(c) Supplemental information for commercial mortgage-backed securities:
| LOWEST RATING AGENCY RATING | ||||||||||||||
| Vintage |
AAA | AA | A | BBB | BB and below |
Total Amortized Cost |
Total Fair Value | |||||||
| 2008 |
10 | — | — | — | — | 10 | 10 | |||||||
| 2007 |
403 | — | 12 | — | — | 415 | 409 | |||||||
| 2006 |
836 | — | — | — | — | 836 | 808 | |||||||
| 2005 |
1,385 | — | — | — | — | 1,385 | 1,345 | |||||||
| 2004 |
395 | — | — | — | — | 395 | 380 | |||||||
| 2003 and prior |
816 | 39 | 47 | 5 | — | 907 | 906 | |||||||
| Total (1) |
3,845 | 39 | 59 | 5 | — | 3,948 | 3,858 | |||||||
| (1) | As of June 30, 2008, based on amortized cost, the weighted average loan to value and debt service coverage ratios of general account available for sale commercial mortgage-backed securities attributable to the Closed Block Business is 69% and 1.58 times, respectively. The weighted average estimated subordination percentage of our general account available for sale investments in commercial mortgage-backed securities attributable to the Closed Block Business was 32% as of June 30, 2008. The subordination percentage represents the current weighted average estimated percentage of the capital structure subordinated to our investment holding that is available to absorb losses before the security incurs the first dollar loss of principal. The estimated subordination percentage includes an adjustment for that portion of the capital structure which has been effectively defeased by US Treasury securities. As of June 30, 2008, based on amortized cost, approximately 91% of these commercial mortgage-backed securities have estimated credit subordination percentages of 20% or more, and 58% have estimated credit subordination percentages of 30% or more. |
(d) Supplemental information for commercial loans:
| Commercial loans by property type: |
Gross Carrying Value |
% of Total | |||
| Industrial buildings |
1,892 | 21.9 | % | ||
| Office buildings |
1,699 | 19.6 | % | ||
| Apartment complexes |
1,705 | 19.7 | % | ||
| Retail stores |
1,500 | 17.3 | % | ||
| Other |
888 | 10.2 | % | ||
| Agricultural properties |
820 | 9.5 | % | ||
| Residential properties |
1 | — | |||
| Subtotal of collateralized loans |
8,505 | 98.2 | % | ||
| Uncollateralized loans |
152 | 1.8 | % | ||
| Total commercial loans |
8,657 | 100.0 | % | ||
| Commercial loans by status: |
Gross Carrying Value | |
| Performing |
8,656 | |
| Delinquent, not in foreclosure |
— | |
| Delinquent, in foreclosure |
— | |
| Restructured |
1 | |
| Total commercial loans |
8,657 | |
As of June 30, 2008, based on amortized cost, the weighted average loan to value and debt service coverage ratios of general account investments in commercial loans attributable to the Closed Block Business was 43% and 1.84 times, respectively.