Prudential 2006 Annual Report Download - page 115

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
3. ACQUISITIONS AND DISPOSITIONS (continued)
Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to assets acquired and liabilities
assumed. Goodwill resulting from the acquisition of CIGNA’s retirement business amounted to $424 million. For tax purposes, the
transaction was accounted for as a purchase of assets and did not result in the recognition of any non-deductible assets. In
accordance with U.S. GAAP, goodwill will not be amortized but rather will be tested at least annually for impairment. The goodwill
associated with this acquisition is reflected as $338 million in the Retirement segment, and as $86 million in the Asset Management
segment.
Pro forma information for the year ended December 31, 2004 is not material and has therefore been omitted.
Acquisition of Hyundai Investment and Securities Co., Ltd.
On February 27, 2004, the Company acquired an 80 percent interest in Hyundai Investment and Securities Co., Ltd. and its
subsidiary Hyundai Investment Trust Management Co., Ltd., a Korean asset management firm, from the Korean Deposit Insurance
Corporation (“KDIC”), an agency of the Korean government, for $301 million in cash, including $210 million used to repay debt
assumed. As part of the acquisition, the Company can choose to acquire, or be required to acquire, the remaining 20 percent interest
three to six years after closing. On February 28, 2007, the Company notified the KDIC of its intention to purchase the remaining 20
percent. Subsequent to the acquisition, the company was renamed Prudential Investment & Securities Co., Ltd (“PISC”). Pro forma
information for this acquisition is omitted as the impact is not material.
The Company’s Consolidated Statements of Operations include the operating results of PISC from the date of acquisition. In
connection with the acquisition, PISC entered into an agreement with the Korean government related to the provision of asset management
and brokerage services, which agreement extends until February 27, 2009. Fees from the Korean government under the terms of this
agreement are recorded in “Asset management fees and other income” and were $21 million, $24 million and $20 million for the years
ended December 31, 2006, 2005 and 2004, respectively.
Upon the completion of the purchase accounting for the transaction, the Company recorded a $21 million extraordinary gain
for the year ended December 31, 2004, as the fair value of the assets acquired of $2.4 billion less the fair value of liabilities assumed
of $2.3 billion exceeded the purchase price. There are no income taxes associated with the extraordinary gain based on the
assumption that foreign investment and subsequent earnings are not to be repatriated to the U.S.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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