Prudential 2006 Annual Report Download - page 147

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
13. STOCKHOLDERS’ EQUITY (continued)
to support the Closed Block for regulatory purposes. Dividends on the Class B Stock are payable in an aggregate amount per year at least
equal to the lesser of (1) a Target Dividend Amount of $19.25 million or (2) the CB Distributable Cash Flow for such year, which is a
measure of the net cash flows of the Closed Block Business. Notwithstanding this formula, as with any common stock, Prudential Financial
retains the flexibility to suspend dividends on the Class B Stock; however, if CB Distributable Cash Flow exists and Prudential Financial
chooses not to pay dividends on the Class B Stock in an aggregate amount at least equal to the lesser of the CB Distributable Cash Flow or
the Target Dividend Amount for any period, then cash dividends cannot be paid on the Common Stock with respect to such period.
Preferred Stock
Prudential Financial adopted a shareholder rights plan (the “rights plan”) under which each outstanding share of Common Stock is
coupled with a shareholder right. The rights plan is not applicable to any Class B Stock. Each right initially entitles the holder to purchase
one one-thousandth of a share of a series of Prudential Financial preferred stock upon payment of the exercise price. At the time of the
demutualization, the Board of Directors of Prudential Financial determined that the initial exercise price per right is $110, subject to
adjustment from time to time as provided in the rights plan. There was no preferred stock outstanding at December 31, 2006 and 2005.
Comprehensive Income
The components of comprehensive income for the years ended December 31, are as follows:
2006 2005 2004
(in millions)
Net income .............................................................................. $3,428 $3,540 $2,256
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments ........................................... 197 (401) 327
Change in net unrealized investments gains (losses)(1) ........................................ (405) (445) (627)
Additional minimum pension liability adjustment ............................................ 49 (111) (28)
Cumulative effect of accounting change .................................................... — — 73
Other comprehensive loss, net of tax benefit of $264, $371, $461 .................................... (159) (957) (255)
Comprehensive income ..................................................................... $3,269 $2,583 $2,001
(1) Includes cash flow hedges. See Note 19 for information on cash flow hedges.
The balance of and changes in each component of “Accumulated other comprehensive income (loss)” for the years ended
December 31, are as follows (net of taxes):
Accumulated Other Comprehensive Income (Loss)
Foreign
Currency
Translation
Adjustments
Net
Unrealized
Investment
Gains
(Losses)(1)
Additional
Minimum
Pension
Liability
Adjustment
Pension and
Postretirement
Unrecognized
Net Periodic
Benefit (Cost)
Total
Accumulated
Other
Comprehensive
Income (Loss)
(in millions)
Balance, December 31, 2003 ............................ $ (1) $2,575 $(128) $ — $2,446
Change in component during year(2) .................. 327 (554) (28) — (255)
Balance, December 31, 2004 ............................ 326 2,021 (156) — 2,191
Change in component during year .................... (401) (445) (111) — (957)
Balance, December 31, 2005 ............................ (75) 1,576 (267) — 1,234
Change in component during year .................... 197 (405) 49 — (159)
Impact of adoption of SFAS No. 158(3) ................ — — 218 (774) (556)
Balance, December 31, 2006 ............................ $122 $1,171 $ — $(774) $ 519
(1) Includes cash flow hedges. See Note 19 for information on cash flow hedges.
(2) Net unrealized investment gains (losses) for 2004 include the impact of cumulative effect of accounting change of $73 million.
(3) See Note 16 for additional information on the adoption of SFAS No. 158.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
145