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Prudential Financial 2001 Annual Report - page 96 / 172

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96 / 172

Prudential Financial, Inc.

Financial assets with interest rate risk: Fixed maturities: Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage securitization inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivatives: Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial liabilities with interest rate risk: Short-term and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notional Value of Derivatives

$10,724 2,877 338 9,735

Total estimated potential loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notional Value of Derivatives

Financial assets with interest rate risk: Fixed maturities: Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage securitization inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivatives: Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial liabilities with interest rate risk: Short-term and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities sold but not yet purchased . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,765 3,878 3,247

$ 83,827

$ 79,312

$(4,515)

12,615

12,085

(530)

15,308

14,634

(674)

1,448

1,373

(75)

8,659

8,147

(512)

55

191

136

6

62

56

3

(1)

(4)

84

84

Market Risk Related to Equity Prices We actively manage equity price risk against benchmarks in respective markets. We benchmark our return on equity holdings against a blend of market indices, mainly the S&P 500 and Russell 2000, and we target price sensitivities

December 31, 2001

December 31, 2000

Hypothetical Change in Fair Value

$(6,322) (21) (1,116) (8) (580)

433 566

$(6,860)

Hypothetical Change in Fair Value

$109,942

$103,620

395

374

20,106

18,990

1,188

1,180

9,562

8,982

(10,881)

(10,448)

(35,911)

(35,345)

(in millions)

(in millions)

4

125

121

34

15

(19)

(50)

(50)

The estimated changes in fair values of our financial assets shown above relate to assets invested to support our insurance liabilities, but do not include assets associated with products for which investment risk is borne primarily by the contract holders rather than by us.

Estimated Fair Value

HypotheticalFair Value After + 100 Basis Point Parallel Yield Curve Shift

Estimated Fair Value

HypotheticalFair Value After + 100 Basis Point Parallel Yield Curve Shift

Substantially all of the $1.026 billion increase in the total estimated potential loss at December 31, 2001 from December 31, 2000 resulted from our acquisition of Gibraltar Life in April 2001.

The tables above do not include approximately $95 billion of insurance reserve and deposit liabilities at December 31, 2001 and $77 billion at December 31, 2000. We believe that the interest rate sensitivities of these insurance liabilities offset, in large measure, the interest rate risk of the financial assets set forth in these tables.

(13,800)

(13,683)

117

(25,359)

(25,122)

237

(157)

(141)

16

Total estimated potential loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(5,834)

94

Growing and Protecting Your Wealth

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