Prudential 2003 Annual Report Download - page 80

to affiliates. A reallocation of these proceeds to general corporate purposes would be considered in calculating the ratio
of corporate debt to total capital and would reduce the $2.6 billion of additional borrowings available for general
corporate purposes.
Uses of Capital
CIGNA Retirement Acquisition. As noted above, we plan to use $2.1 billion of the $2.5 billion to $2.75 billion of
the capital described above to fund the acquisition of CIGNA’s retirement business, which is expected to close during
the first half of 2004.
Share Repurchases. During the fourth quarter of 2003, the Company acquired 6.5 million shares of its Common
Stock at a total cost of approximately $252 million. For the year ended December 31, 2003, we repurchased 29.1
million shares of Common Stock at a total cost of approximately $1.0 billion.
On February 10, 2004, Prudential Financial’s Board of Directors authorized a new stock repurchase program
under which Prudential Financial is authorized to purchase up to $1.5 billion of its outstanding Common Stock in 2004.
The timing and amount of any repurchases under the authorization will be determined by management based on market
conditions and other considerations, and such repurchases may be effected in the open market or through negotiated
transactions. This stock repurchase program supersedes all previous repurchase programs.
Demutualization Consideration. During 2003, Prudential Financial paid out $142 million in demutualization
consideration to eligible policyholders whom we have located since the time of demutualization and to governmental
authorities in respect of other eligible policyholders we continue to be unable to locate. We remain obligated to
disburse additional payments of $812 million to governmental authorities to the extent we are still unable to locate
remaining eligible policyholders within a prescribed period of time specified by state escheat laws. These laws
historically required remittance to the states in periods that typically ranged from three to seven years, but many states
have enacted new legislation that reduces the escheatment time period and a number of other states are pursuing similar
legislation. Liabilities relating to demutualization consideration payments were established at the time of
demutualization in 2001. For an estimate of expected payments by period see “—Contractual Obligations.” In addition,
at the time of demutualization, Prudential Financial made a contribution of $1.050 billion to Prudential Insurance to
cover demutualization consideration for eligible policyholders who received policy credits as a part of our
demutualization. The contribution was financed with proceeds from the purchase by Prudential Insurance of a series of
notes issued by Prudential Financial with market rates of interest and maturities ranging from nineteen months to three
years. During 2003, notes totaling $300 million matured. Of the remaining notes, $600 million matures in 2004 and
$150 million matures in 2005.
Restrictions on Dividends and Returns of Capital from Subsidiaries
Our insurance and various other companies are subject to regulatory limitations on the payment of dividends and
on other transfers of funds to affiliates. With respect to Prudential Insurance, New Jersey insurance law provides that,
except in the case of extraordinary dividends or distributions, all dividends or distributions paid by Prudential
Insurance may be declared or paid only from unassigned surplus, as determined pursuant to statutory accounting
principles, less unrealized investment gains and revaluation of assets. As of December 31, 2003 and December 31,
2002, Prudential Insurance’s unassigned surplus (deficit) was $1,557 million and $(420) million, respectively. There
were applicable adjustments for unrealized investment gains of $624 million as of December 31, 2003 and no
adjustments as of December 31, 2002. There was no revaluation of assets for purposes of the law referred to above
regarding dividends and distributions in either year. Prudential Insurance also must notify the New Jersey insurance
regulator of its intent to pay a dividend. If the dividend, together with other dividends or distributions made within the
preceding twelve months, would exceed a specified statutory limit, Prudential Insurance must also obtain a
non-disapproval from the New Jersey insurance regulator. The current statutory limitation applicable to New Jersey life
insurers generally is the greater of 10% of the prior calendar year’s statutory surplus or the prior calendar year’s
statutory net gain from operations (excluding realized capital gains and losses). In addition to these regulatory
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