Schedule II - Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule II - Condensed Financial Information of Registrant

PRUDENTIAL FINANCIAL, INC.

Schedule II

Condensed Financial Information of Registrant

Condensed Statements of Financial Positions as of December 31, 2017 and 2016

(in millions)

	2017			2016
ASSETS
Investment contracts from subsidiaries	$	1		$	1
Fixed maturities, available for sale, at fair value (amortized cost: 2017- $1,218; 2016- $1,105)	1,250			1,071
Other investments	2,330			3,215
Total investments	3,581			4,287
Cash and cash equivalents	1,665			1,116
Due from subsidiaries	1,500			1,836
Loans receivable from subsidiaries	7,846			6,719
Investment in subsidiaries	63,241			54,422
Property, plant and equipment	529			559
Other assets	562			384
TOTAL ASSETS	$	78,924		$	69,323
LIABILITIES AND EQUITY
LIABILITIES
Due to subsidiaries	$	2,205		$	2,585
Loans payable to subsidiaries	5,738			4,295
Short-term debt	880			535
Long-term debt	15,304			15,389
Income taxes payable	5			0
Other liabilities	723			656
Total liabilities	24,855			23,460
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; 660,111,339 shares issued as of both December 31, 2017 and 2016)	6			6
Additional paid-in capital	24,769			24,606
Common Stock held in treasury, at cost (237,559,118 and 230,537,166 shares as of December 31, 2017 and 2016, respectively)	(16,284		)	(15,316		)
Accumulated other comprehensive income (loss)	17,074			14,621
Retained earnings	28,504			21,946
Total equity	54,069			45,863
TOTAL LIABILITIES AND EQUITY	$	78,924		$	69,323

See Notes to Condensed Financial Information of Registrant

PRUDENTIAL FINANCIAL, INC.

Schedule II

Condensed Financial Information of Registrant

Condensed Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015

(in millions)

	2017			2016			2015
REVENUES
Net investment income	$	92		$	61		$	19
Realized investment gains (losses), net	(73		)	(126		)	(98		)
Affiliated interest revenue	379			353			353
Other income (loss)	(79		)	(2		)	28
Total revenues	319			286			302
EXPENSES
General and administrative expenses	126			101			170
Interest expense	1,057			1,106			1,080
Total expenses	1,183			1,207			1,250
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES	(864		)	(921		)	(948		)
Total income tax expense (benefit)	(397		)	(320		)	(396		)
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF SUBSIDIARIES	(467		)	(601		)	(552		)
Equity in earnings of subsidiaries	8,330			4,969			6,194
NET INCOME (LOSS)	$	7,863		$	4,368		$	5,642
Other Comprehensive Income (loss)	2,453			2,336			(3,765		)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	10,316		$	6,704		$	1,877

See Notes to Condensed Financial Information of Registrant

PRUDENTIAL FINANCIAL, INC.

Schedule II

Condensed Financial Information of Registrant

Condensed Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015

(in millions)

	2017			2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	7,863		$	4,368		$	5,642
Adjustments to reconcile net income to cash provided by operating activities:
Equity in earnings of subsidiaries	(8,330		)	(4,969		)	(6,194		)
Realized investment (gains) losses, net	73			126			98
Dividends received from subsidiaries	1,975			2,828			4,557
Property, plant and equipment	(1		)	(13		)	(579		)
Change in:
Due to/from subsidiaries, net	213			(5,109		)	(493		)
Other, operating(1)	(149		)	204			(333		)
Cash flows from (used in) operating activities(1)	1,644			(2,565		)	2,698
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities, available-for-sale	740			0			0
Short-term investments	15,973			17,575			13,700
Payments for the purchase of:
Fixed maturities, available for sale	(865		)	(1,106		)	0
Short-term investments	(15,087		)	(19,111		)	(13,002		)
Capital contributions to subsidiaries	(1,135		)	(2,018		)	(2,545		)
Returns of capital contributions from subsidiaries	1,150			2,755			75
Loans to subsidiaries, net of maturities	(1,127		)	(596		)	2,056
Other, investing	61			1			244
Cash flows from (used in) investing activities	(290		)	(2,500		)	528
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid on Common Stock	(1,296		)	(1,300		)	(1,117		)
Common Stock acquired	(1,250		)	(2,000		)	(1,664		)
Common Stock reissued for exercise of stock options	246			426			209
Proceeds from the issuance of debt (maturities longer than 90 days)	742			30			1,332
Repayments of debt (maturities longer than 90 days)	(480		)	(1,319		)	(2,404		)
Repayments of loans from subsidiaries	(310		)	(390		)	(102		)
Proceeds from loans payable to subsidiaries	1,627			1,405			1,316
Net change in financing arrangements (maturities of 90 days or less)	(16		)	14			8
Excess tax benefits from share-based payment arrangements	0			10			3
Other, financing(1)	(68		)	(132		)	(62		)
Cash flows from (used in) financing activities(1)	(805		)	(3,256		)	(2,481		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	549			(8,321		)	745
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	1,116			9,437			8,692
CASH AND CASH EQUIVALENTS, END OF YEAR	$	1,665		$	1,116		$	9,437
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest	$	1,019		$	1,002		$	1,048
Cash paid (refunds received) during the period for taxes	$	(213	)	$	(544	)	$	46
NON-CASH TRANSACTIONS DURING THE YEAR
Non-cash capital contributions to subsidiaries	$	(17	)	$	(4,158	)	$	1,453
Non-cash dividends/returns of capital from subsidiaries	$	0		$	4,142		$	1,335
Treasury Stock shares issued for stock-based compensation programs	$	104		$	115		$	115

__________

(1) Prior period amounts are presented on a basis consistent with current period presentation, reflecting the adoption of ASU 2016-09. See Note 2 to the Consolidated Financial Statements for additional information.

See Notes to Condensed Financial Information of Registrant

PRUDENTIAL FINANCIAL, INC.

Schedule II

Condensed Financial Information of Registrant

Notes to Condensed Financial Information of Registrant

1.    ORGANIZATION AND PRESENTATION

Prudential Financial, Inc. (“Prudential Financial”) was incorporated on December 28, 1999, as a wholly-owned subsidiary of The Prudential Insurance Company of America (“Prudential Insurance”). On December 18, 2001, Prudential Insurance converted from a mutual life insurance company to a stock life insurance company and became an indirect, wholly-owned subsidiary of Prudential Financial.

The condensed financial statements of Prudential Financial reflect its direct wholly-owned subsidiaries using the equity method of accounting.

Certain amounts in prior years have been reclassified to conform to the current year presentation.

2.    OTHER INVESTMENTS

Prudential Financial’s other investments as of December 31, 2017 and 2016 consisted primarily of highly liquid debt investments and intercompany enterprise liquidity account funds.

3.    DEBT

A summary of Prudential Financial’s short- and long-term debt is as follows:

			December 31,
	Maturity Dates	Rate(1)	2017		2016
			($ in millions)
Short-term debt:
Commercial paper(2)			$	50	$	65
Current portion of long-term debt			830		470
Total short-term debt			$	880	$	535
Long-term debt:
Fixed rate senior notes	2019-2049	2.35%-7.38%	$	8,709	$	9,064
Floating rate senior notes	2020	3.46%-5.49%	29		508
Junior subordinated notes	2042-2068	4.50%-8.88%	6,566		5,817
Total long-term debt			$	15,304	$	15,389

 __________

(1) Ranges of interest rates are for the year ended December 31, 2017.

(2) The weighted average interest rate on outstanding commercial paper was 1.15% and 0.6% at December 31, 2017 and 2016, respectively.

Long-term Debt

In order to modify exposure to interest rate movements, Prudential Financial utilizes derivative instruments, primarily interest rate swaps, in conjunction with some of its debt issues. The impact of these derivative instruments are not reflected in the rates presented in the table above. For those derivatives that qualify for hedge accounting treatment, interest expense increased by $1 million, $2 million, and $3 million for each of the years ended December 31, 2017, 2016 and 2015, respectively.

Schedule of Long-term Debt Maturities

The following table presents Prudential Financial’s contractual maturities for long-term debt as of December 31, 2017:

	Calendar Year
	2019		2020		2021		2022		2023 and thereafter		Total
	($ in millions)
Long-term debt	$	1,100	$	1,179	$	400	$	0	$	12,625	$	15,304

4.    DIVIDENDS AND RETURNS OF CAPITAL

For the years ended December 31, Prudential Financial received cash dividends and/or returns of capital from the following companies:

	2017		2016		2015
	(in millions)
Pruco Reinsurance	$	0	$	1,298	$	0
Prudential Annuities Holding Company	145		98		102
International Insurance and Investments Holding Companies	546		1,171		1,818
Prudential Insurance Company of America	1,000		900		1,950
Prudential Investment Management	467		746		266
Prudential Annuities Life Assurance Corporation	950		1,140		450
Other Holding Companies	16		231		46
Total	$	3,124	$	5,584	$	4,632

5.    COMMITMENTS AND GUARANTEES

Prudential Financial has issued a subordinated guarantee covering a subsidiary’s domestic commercial paper program. As of December 31, 2017, there was $500 million outstanding under this commercial paper program.

Prudential Financial has provided guarantees of the payment of principal and interest on intercompany loans between affiliates. As of December 31, 2017, Prudential Financial had issued guarantees of outstanding loans totaling $3.9 billion between International Insurance subsidiaries and other affiliates.

In 2013, Prudential Financial entered into a $500 million indemnity and guarantee agreement with Wells Fargo Bank Northwest, N.A. Under this agreement, Prudential Financial guaranteed obligations with respect to an affiliated loan from PICA to an affiliate. The loan proceeds were utilized to construct Prudential’s new home office in Newark, New Jersey.

Prudential Financial is also subject to other financial guarantees, net worth maintenance agreements and indemnity arrangements, including those made in the normal course of businesses guaranteeing the performance of, or representations made by, Prudential Financial subsidiaries. Prudential Financial has provided indemnities and guarantees related to acquisitions and dispositions, investments, debt issuances and other transactions, including those provided as part of its ongoing operations that are triggered by, among other things, breaches of representations, warranties or covenants provided by Prudential Financial or its subsidiaries. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, it is not possible to determine the maximum potential amount due under these guarantees. At December 31, 2017, Prudential Financial has no accrued liabilities associated with other financial guarantees and indemnity arrangements.

6.    REDEMPTION OF CLASS B SHARES

From demutualization through December 31, 2014, Prudential Financial had two classes of common stock outstanding. The Common Stock, which is publicly-traded (NYSE:PRU), reflected the performance of the Financial Services Businesses, while the Class B Stock, which was issued through a private placement and did not trade on any exchange, reflected the performance of the Closed Block Business.

On January 2, 2015, pursuant to a Share Repurchase Prudential Agreement entered into on December 1, 2014, between the Company and the holders of the Class B stock, the Company repurchased and canceled all of the shares of the Class B Stock for an aggregate cash purchase price of $651 million, resulting in the elimination of the Class B stock held in treasury, a $484 million decrease in “Retained Earnings” and a $167 million decrease in “Additional paid-in-capital.”

In accordance with the terms of the Share Repurchase agreement, the holders of the Class B Stock subsequently exercised their right to dispute the calculation of the purchase price. This dispute was resolved during the first quarter of 2016, resulting in an increase to the cash purchase price of $119 million, bringing the total aggregate purchase price to $770 million. The increase to the cash purchase price resulted in a corresponding decrease in “Retained Earnings.”