Prudential 2002 Annual Report Download - page 92
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Please find page 92 of the 2002 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
1. BUSINESS
Prudential Financial, Inc. (“Prudential Financial”) and its subsidiaries (collectively, “Prudential” or the
“Company”) provide a wide range of insurance, investment management, securities and other financial products
and services to both retail and institutional customers throughout the United States and in many other countries.
Principal products and services provided include life insurance, property and casualty insurance, annuities, mutual
funds, pension and retirement related investments and administration, asset management and securities brokerage.
The Company has organized its principal operations into the Financial Services Businesses and the Closed Block
Business. The Financial Services Businesses operate through three operating divisions: Insurance, Investment,
and International Insurance and Investments. Businesses that are not sufficiently material to warrant separate
disclosure are included in Corporate and Other operations within the Financial Services Businesses. The Closed
Block Business, which includes the Closed Block (see Note 10), is managed separately from the Financial
Services Businesses. The Closed Block Business was established on the date of demutualization and includes the
Company’s in force participating insurance and annuity products and assets that are used for the payment of
benefits and policyholder dividends on these products, as well as other assets and equity that support these
products and related liabilities. In connection with the demutualization, the Company has ceased offering these
participating products.
Demutualization and Initial Public Offering
On December 18, 2001 (the “date of demutualization”), The Prudential Insurance Company of America
(“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 demutualization was completed in
accordance with the Company’s Plan of Reorganization, which was approved by the Commissioner of Banking
and Insurance of the State of New Jersey in October 2001.
On the date of demutualization, policyholder membership interests in Prudential Insurance were extinguished
and eligible policyholders collectively received shares of Common Stock, the rights to receive cash and increases
to their policy values in the form of policy credits. The demutualization was accounted for as a reorganization.
Accordingly, the Company’s retained earnings on the date of demutualization, after the distribution of the above
consideration, was reclassified to “Common Stock” and “Additional paid-in capital.” At the time of
demutualization, Prudential Financial completed an initial public offering of 126.5 million shares of Common
Stock at a price of $27.50 per share which included 16.5 million shares of Common Stock as a result of the
exercise of the over-allotment option granted to underwriters in the initial public offering. Also on the date of
demutualization, Prudential Financial completed the sale, through a private placement, of 2.0 million shares of
Class B Stock, a separate class of common stock, at a price of $87.50 per share. The Common Stock reflects the
performance of the Financial Services Businesses and the Class B Stock reflects the performance of the Closed
Block Business. In addition to the issuances of Common Stock and Class B Stock, on the date of demutualization,
Prudential Financial issued 13.8 million 6.75% equity security units at a price of $50 per unit (see Note 13) and
Prudential Holdings, LLC, a wholly owned subsidiary of Prudential Financial, issued $1.75 billion in senior
secured notes (see Note 12).
Concurrent with the demutualization, Prudential Insurance completed a corporate reorganization whereby
various subsidiaries (and certain related assets and liabilities) of Prudential Insurance were dividended so that they
became wholly owned subsidiaries of Prudential Financial rather than of Prudential Insurance. The subsidiaries
distributed by Prudential Insurance to Prudential Financial included its property and casualty insurance
companies, its principal securities brokerage companies, its international insurance companies, its principal asset
management operations, its international securities and investments operations, its domestic banking operations
and its residential real estate brokerage franchise and relocation services operations.
Prudential Financial 2002 Annual Report 91