Related Party

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

13. RELATED PARTY TRANSACTIONS

The Company has extensive transactions and relationships with Prudential Insurance and other affiliates. Although we seek to ensure that these transactions and relationships are fair and reasonable, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties.

Expense Charges and Allocations

Many of the Company's expenses are allocations or charges from Prudential Insurance or other affiliates.

The Company's general and administrative expenses are charged to the Company using allocation methodologies based on business production processes. Management believes that the methodology is reasonable and reflects costs incurred by Prudential Insurance to process transactions on behalf of the Company. The Company operates under service and lease agreements whereby services of officers and employees, supplies, use of equipment and office space are provided by Prudential Insurance. The Company reviews its allocation methodology periodically which it may adjust accordingly. General and administrative expenses also include allocations of stock compensation expenses related to a stock option program and a deferred compensation program issued by Prudential Financial. The expense charged to the Company for the stock option program and deferred compensation program was$2millionfor the years endedDecember 31, 2013, 2012and 2011.

The Company is charged for its share of employee benefits expenses. These expenses include costs for funded and non-funded contributory and non-contributory defined benefit pension plans. Some of these benefits are based on earnings and length of service. Other benefits are based on an account balance, which takes into consideration age, service and earnings during career. The Company's share of net expense for the pension plans was$3 millionfor the years endedDecember 31, 2013, 2012and 2011.

Prudential Insurance sponsors voluntary savings plans for the Company's employees (“401(k) plans”). The 401(k) plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The expense charged to the Company for the matching contribution to the 401(k) plans was$1millionfor the years endedDecember 31, 2013, 2012and 2011.

Affiliated Asset Administration Fee Income

In accordance with a revenue sharing agreement with AST Investment Services, Inc., the Company receives fee income calculated on contractholder separate account balances invested in the Advanced Series Trust, formerly known as American Skandia Trust. Income received from AST Investment Services, Inc. related to this agreement was $227 million, $226 million and $243 million for the years ended December 31, 2013, 2012 and 2011 respectively. These revenues are recorded as “Asset administration fees and other income” in theStatements of Operations and Comprehensive Income.

Affiliated Investment Management Expenses

In accordance with an agreement with Prudential Investment Management, Inc. (“PIMI”), the Company pays investment management expenses to PIMI who acts as investment manager to certain Company general account and separate account assets. Investment management expenses paid to PIMI related to this agreement was $7 million, $8 million and $9 millionfor the years ended December 31, 2013, 2012 and 2011 respectively. These expenses are recorded as “Net investment income” in the Statements of Operations and Comprehensive Income.

Cost Allocation Agreements with Affiliates

Certain operating costs (including rental of office space, furniture, and equipment) have been charged to the Company at cost by Prudential Annuities Information Services and Technology Corporation (“PAIST”), an affiliated company. PALAC signed a written service agreement with PAIST for these services executed and approved by the Connecticut Insurance Department in 1995. This agreement automatically continues in effect from year to year and may be terminated by either party upon 30 days written notice.

Allocated lease expense was $10 million, $4 million and $4 millionfor the years ended December 31, 2013, 2012 and 2011 respectively. Allocated sub-lease rental income, recorded as a reduction to lease expense was$4 million, $4 million and $2 millionfor the years ended December 31, 2013, 2012 and 2011 respectively.Assuming that the written service agreement between PALAC and PAIST continues indefinitely, PALAC's allocated future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2013 are as follows:

		Lease		Sub-Lease
		(in thousands)
2014	$	4,480	$	(635)
2015		3,716		-
2016		3,716		-
2017		3,716		-
2018		3,716		-
2019 and thereafter		3,406		-
Total	$	22,750	$	(635)

The Company pays commissions and certain other fees to PAD in consideration for PAD's marketing and underwriting of the Company's products. Commissions and fees are paid by PAD to broker-dealers who sold and service the Company's products. Commissions and fees paid by the Company to PAD were $172 million, $186 million and $185 millionfor the years ended December 31, 2013, 2012 and 2011 respectively.

Debt Agreements

Short-term and Long-term Debt

The Company is authorized to borrow funds up to $4 billion from Prudential Financial and its affiliates to meet its capital and other funding needs. The Company had debt of $5 million and $0million outstanding with Prudential Funding, LLC as of December 31, 2013 and December 31, 2012, respectively. Total interest expense on debt with Prudential Funding, LLC was less than $1 million for the years ended December 31, 2013, 2012 and 2011.

The Company had debt of $200 million and $400 million outstanding with Prudential Financial as of December 31, 2013 and December 31, 2012, respectively. This loan has a fixed interest rate of 4.49% and matures on December 29, 2014. In 2013 and 2012, $200 million partial pay downs were made on this outstanding debt.Total interest expense on debt with Prudential Financial was $17 million, $27 million and $36 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Reinsurance Agreements [UNDER REVIEW BY LEGAL]

The Company uses reinsurance as part of its risk management and capital management strategies for certain of its optional living benefit features. Fees ceded under these agreements are included in “Realized investment gains (losses), net” on the Statement of Operations and Comprehensive Income. The Company ceded fees of $275million, $269 million and $263 millionto Pruco Re for the years endedDecember 31, 2013, 2012 and 2011, respectively. The Company ceded fees of $1 million, $1 million and $2 million to Prudential Insurance for the years endedDecember 31, 2013, 2012 and 2011, respectively. The Company's reinsurance payables related to affiliated reinsurance were $25 million as of December 31, 2013 and December 31, 2012.

The Company's reinsurance recoverables related to affiliated reinsurance were $0.7billion and$1.7billionasof December 31, 2013 and December 31, 2012, respectively. The assets are reflected in “Reinsurancerecoverables” in the Company's Statements of Financial Position.Realized gains (losses) were $(1.3) billion, $(0.3) billion and $1.3 billionfor the years ended December 31, 2013, 2012 and 2011, respectively. Changes in realized gains (losses) for theyears endedDecember 31, 2013,2012and 2011 periods were primarily due to changes in market conditions in each respective period.

Derivative Trades

In its ordinary course of business, the Company enters into OTC derivative contracts with an affiliate, PGF.

Purchase/sale of fixed maturities and commercial mortgage loans from/to an affiliate

During 2011, the Company sold fixed maturity securities to affiliated companies in various transactions. These securities had an amortized cost of $143 million and a fair value of $151 million. The net difference between historic amortized cost and the fair value was $8 million and was recorded as a realized investment gain on the Company's Statement of Operations and Comprehensive Income. The Company also sold commercial mortgage loans to an affiliated company. These loans had an amortized cost of $49 million and a fair value of $54 million. The net difference between historic amortized cost and the fair value was $5 million and was recorded as a realized gain on the Company's Statement of Operations and Comprehensive Income.

During2012, the Company sold fixed maturity securities to Prudential Financial. These securities had an amortized cost of $123million and a fair value of $141 million. The net difference between historic amortized cost and the fair value was accounted for as an increase of$11 million toadditional paid-in capital, net of taxes.The Company also sold fixed maturity securities to an affiliated company. These securities had an amortized cost of $27 million and a fair value of $28 million. The net difference between historic amortized cost and the fair value was $1 million and was recorded as a realized investment gain on the Company's Statement of Operations and Comprehensive Income. The Company also sold commercial mortgage loans to an affiliated company. These loans had an amortized cost of $27 million and a fair value of $28 million. The net difference between historic amortized cost and the fair value was $1 million and was recorded as a realized investment gain on the Company's Statement of Operations and Comprehensive Income.

During 2013, the Company sold fixed maturity securities to Prudential Financial. These securities had an amortized cost of $90million and a fair value of $103 million. The net difference between historic amortized cost and the fair value was accounted for as an increase of $8 million toadditional paid-in capital, net of taxes. The Company also sold commercial mortgage loans to an affiliated company. These securities had an amortized cost of $6 million and a fair value of $6 million. The net difference between historic amortized cost and the fair value was less than $1 million and was recorded as a realized investment gain on the Company's Statement of Operations and Comprehensive Income.