The Prudential Series Fund

More documents

Recommendations

Info

Pruco Life Insurance Company Notes to Consolidated Financial Statements 11. DERIVATIVE INSTRUMENTS (continued) Credit Derivatives Written The following tables set forth our exposure from credit derivatives where we have written credit protection excluding credit protection written on our own credit and embedded derivatives contained in European managed investments, by NAIC rating of the underlying credits as of the dates indicated. December 31, 2008 NAIC First to Default Basket Total Designation (1) Rating Agency Equivalent Notional Fair Value Notional Fair Value 1 Aaa, Aa, A .................. $ 4.5 $ (.5) $ 4.7 $ (.5) 2 Baa 92 (15.5) 92 (15.5) Subtotal Investment Grade 96.5 (16) 96.7 (16) 3 Ba 1.3 (.1) 1.3 (.1) 4 B - - - - 5 C and lower 6.2 (1.0) 6 (1.0) 6 In or near default - - - - Total $ 104 $ (17.1) $ 104 $ (17.1) December 31, 2007 NAIC First to Default Basket Total Designation (1) Rating Agency Equivalent Notional Fair Value Notional Fair Value 1 Aaa, Aa, A .................. $ 49 $ (1.2) $ 49 $ (1.2) 2 Baa 52.5 (3.3) 52.5 (3.3) Subtotal Investment Grade 101.5 (4.5) 101.5 (4.5) 3 Ba 1.8 (.1) 1.8 (.1) 4 B - - - - 5 C and lower 1.7 (.2) 1.7 (.2) 6 In or near default - - - - Total $ 105 $ (4.8) $ 105 $ (4.8) (1)First-to-default credit swap baskets, which may include credits of varying qualities, are grouped above based on the lowest credit in the basket. However, such basket swaps may entail greater credit risk than the rating level of the lowest credit. The following table sets forth the composition of our credit derivatives where we have written credit protection excluding credit protection written on our own credit and embedded derivatives contained in European managed investments, by industry category as of the dates indicated. December 31, 2008 December 31, 2007 Industry Notional Fair Value Notional Fair Value (in millions) Corporate Securities: First to Default Baskets(1) 104 (17.1) 105 (4.8) Total Credit Derivatives ……... $ 104 $ (17.1) $ 105 (4.8) (1) Credit default baskets may include various industry categories. B-36
Pruco Life Insurance Company Notes to Consolidated Financial Statements 11. DERIVATIVE INSTRUMENTS (continued) The Company writes credit derivatives under which the Company is obligated to pay the counterparty the referenced amount of the contract and receive in return the defaulted security or similar security. The Company’s maximum amount at risk under these credit derivatives, assuming the value of the underlying referenced securities become worthless, is $104 million at December 31, 2008. These credit derivatives generally have maturities of five years or less. The Company holds certain externally managed investments in the European market which contain embedded derivatives whose fair value are primarily driven by changes in credit spreads. These investments are medium term notes that are collateralized by investment portfolios primarily consisting of investment grade European fixed income securities, including corporate bonds and asset-backed securities, and derivatives, as well as varying degrees of leverage. The notes have a stated coupon and provide a return based on the performance of the underlying portfolios and the level of leverage. The Company invests in these notes to earn a coupon through maturity, consistent with its investment purpose for other debt securities. The notes are accounted for under U.S. GAAP as available for sale fixed maturity securities with bifurcated embedded derivatives (total return swaps). Changes in the value of the fixed maturity securities are reported in Stockholders’ Equity under the heading ―Accumulated Other Comprehensive Income‖ and changes in the market value of the embedded total return swaps are included in current period earnings in ―Realized investment gains (losses), net.‖ The Company’s maximum exposure to loss from these interests was $63 million and $109 million at December 31, 2008 and 2007, respectively. Credit Risk The Company is exposed to credit-related losses in the event of nonperformance by counterparties to financial derivative transactions. Substantially all of the Company’s over-the-counter derivative contracts are transacted with an affiliate. In instances where the Company transacts with unaffiliated counterparties, the Company manages credit risk by entering into derivative transactions with major international financial institutions and other creditworthy counterparties, and by obtaining collateral where appropriate. Additionally, limits are set on single party credit exposures which are subject to periodic management review. The credit exposure of the Company’s over-the-counter derivative transactions is represented by the contracts with a positive fair value (market value) at the reporting date. The Company effects exchange-traded futures transactions through regulated exchanges and these transactions are settled on a daily basis, thereby reducing credit risk exposure in the event of nonperformance by counterparties to such financial instruments. 12. COMMITMENTS, CONTINGENCIES AND LITIGATION AND REGULATORY MATTERS Commitments The Company has made commitments to fund $19 million of commercial loans in 2008. The Company also made commitments to purchase or fund investments, mostly private fixed maturities, of $33 million in 2008. Contingencies On an ongoing basis, our internal supervisory and control functions review the quality of our sales, marketing, administration and servicing, and other customer interface procedures and practices and may recommend modifications or enhancements. From time to time, this review process results in the discovery of administration, servicing or other errors, including errors relating to the timing or amount of payments or contract values due to customers. In these cases, we offer customers appropriate remediation and may incur charges and expenses, including the costs of such remediation, administrative costs and regulatory fines. It is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual period could be materially affected as a result of payments in connection with the matters discussed above depending, in part, upon the results of operations or cash flow for such period. Management believes, however, that the ultimate payments in connection with these matters should not have a material adverse effect on the Company’s financial position. Litigation and Regulatory Proceedings The Company is subject to legal and regulatory actions in the ordinary course of its businesses, including class action lawsuits. Legal and regulatory actions may include proceedings relating to aspects of the businesses and operations that are specific to the Company and that are typical of the businesses in which the Company operates. Class action and individual lawsuits may involve a variety of issues and/or allegations, which include sales practices, underwriting practices, claims payment and procedures, premium charges, policy servicing and breach of fiduciary duties to customers. The Company may also be subject to litigation arising out of its general business activities, such as investments and third party contracts. In certain of these matters, plaintiffs may seek large and/or indeterminate amounts, including punitive or exemplary damages. B-37
Page 1 and 2:
MAY 1, 2009 PROSPECTUS The Prudenti
Page 3 and 4:
THE PRUDENTIAL SERIES FUND Diversif
Page 5 and 6:
THE PRUDENTIAL SERIES FUND Natural
Page 7 and 8:
This prospectus discusses the follo
Page 9 and 10:
INTRODUCTION ABOUT THE FUND AND ITS
Page 11 and 12:
■ prepayment risk The Portfolio i
Page 13 and 14:
■ ■ ■ ■ ■ ■ ■ ■ ■
Page 15 and 16:
a representative sample of the stoc
Page 17 and 18:
PRINCIPAL RISKS Although we try to
Page 19 and 20:
Foreign investment risk. Investing
Page 21 and 22:
Market risk. Market risk is the ris
Page 23 and 24:
guaranteeing the obligation for ult
Page 25 and 26:
PAST PERFORMANCE Conservative Balan
Page 27 and 28:
Equity Portfolio Annual Returns (Cl
Page 29 and 30:
Global Portfolio Annual Returns (Cl
Page 31 and 32:
High Yield Bond Portfolio Annual Re
Page 33 and 34:
Money Market Portfolio Annual Retur
Page 35 and 36:
Small Capitalization Stock Portfoli
Page 37 and 38:
Value Portfolio Annual Returns (Cla
Page 39 and 40:
EXAMPLE The following Example, whic
Page 41 and 42:
and are considered speculative. We
Page 43 and 44:
can’t guarantee success, and it i
Page 45 and 46:
■ ■ Repurchase agreements. The
Page 47 and 48:
Government Income Portfolio The inv
Page 49 and 50:
The Portfolio may also invest in ob
Page 51 and 52:
unrated, of comparable quality in o
Page 53 and 54:
■ Illiquid securities The Portfol
Page 55 and 56:
MORE DETAILED INFORMATION ABOUT OTH
Page 57 and 58:
are not backed by the full faith an
Page 59 and 60:
HOW THE FUND IS MANAGED BOARD OF TR
Page 61 and 62:
trading, asset management and priva
Page 63 and 64:
Equity Portfolio Spiros “Sig” S
Page 65 and 66:
Richard Piccirillo is Principal and
Page 67 and 68:
Natural Resources Portfolio David A
Page 69 and 70:
HOW TO BUY AND SELL SHARES OF THE P
Page 71 and 72:
(which is generally 4:00 p.m. New Y
Page 73 and 74:
DISTRIBUTOR Prudential Investment M
Page 75 and 76:
FINANCIAL HIGHLIGHTS INTRODUCTION T
Page 77 and 78:
Equity Portfolio Class I Year Ended
Page 79 and 80:
High Yield Bond Portfolio Year Ende
Page 81 and 82:
Small Capitalization Stock Portfoli
Page 83 and 84:
INVESTOR INFORMATION SERVICES: Shar
Page 85 and 86:
TABLE OF CONTENTS Page PER SHARE IN
Page 87 and 88:
PER SHARE INVESTMENT INCOME, CAPITA
Page 89 and 90:
Summary of Charges The Partnership
Page 91 and 92:
Partnership. PREI's investment staf
Page 93 and 94:
would be willing to commit to a fir
Page 95 and 96:
The investment manager will manage
Page 97 and 98:
4. Risks with Sale-Leaseback Transa
Page 99 and 100:
If an account which has been alloca
Page 101 and 102:
correspondingly adjusted. In additi
Page 103 and 104:
RESTRICTIONS ON CONTRACT OWNERS’
Page 105 and 106:
During the year ended December 31,
Page 107 and 108:
(2) Net investment income for the y
Page 109 and 110:
The following sections discuss thos
Page 111 and 112:
The table below presents the amount
Page 113 and 114:
NOTES TO THE FINANCIAL STATEMENTS O
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
THE PRUDENTIAL VARIABLE CONTRACT RE
Page 121 and 122:
Page 123 and 124:
Page 125 and 126: THE PRUDENTIAL VARIABLE CONTRACT RE
Page 127 and 128: NOTES TO THE CONSOLIDATED FINANCIAL
Page 139 and 140: Report of Independent Registered Pu
Page 141 and 142: Pruco Life Insurance Company Consol
Page 143 and 144: Pruco Life Insurance Company Consol
Page 145 and 146: Pruco Life Insurance Company Notes
Page 175: Pruco Life Insurance Company Notes
Page 185 and 186: Many Prudential Financial companies
show all

The Prudential Series Fund

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?