Prudential 2007 Annual Report Download - page 147

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
13. STOCKHOLDERS’ EQUITY (continued)
Common Stock Held in Treasury
Common Stock held in treasury is accounted for at average cost. Gains resulting from the reissuance of “Common Stock held in
treasury” are credited to “Additional paid-in capital.” Losses resulting from the reissuance of “Common Stock held in treasury” are charged
first to “Additional paid-in capital” to the extent the Company has previously recorded gains on treasury share transactions, then to
“Retained earnings.”
In November 2004, Prudential Financial’s Board of Directors authorized the Company to repurchase up to $1.5 billion of its
outstanding Common Stock in calendar year 2005. In June 2005, Prudential Financial’s Board of Directors authorized an increase in the
annual rate of share repurchases from $1.5 billion to $2.1 billion for calendar year 2005. During 2005, the Company acquired 32.4 million
shares of its outstanding Common Stock at a total cost of $2.1 billion.
In November 2005, Prudential Financial’s Board of Directors authorized the Company to repurchase up to $2.5 billion of its
outstanding Common Stock in calendar year 2006. During 2006, the Company acquired 32.4 million shares of its outstanding Common
Stock at a total cost of $2.5 billion.
In November 2006, Prudential Financial’s Board of Directors authorized the Company to repurchase up to $3.0 billion of its
outstanding Common Stock in calendar year 2007. During 2007, the Company acquired 32.0 million shares of its outstanding Common
Stock at a total cost of $3.0 billion.
In November 2007, Prudential Financial’s Board of Directors authorized the Company to repurchase up to $3.5 billion of its
outstanding Common Stock in calendar year 2008. The timing and amount of any repurchases under this authorization will be determined
by management based upon market conditions and other considerations, and the repurchases may be effected in the open market, through
derivative, accelerated repurchase and other negotiated transactions and through prearranged trading plans complying with Rule 10b5-1(c)
of the Exchange Act. The 2008 stock repurchase program supersedes all previous repurchase programs.
Stock Conversion Rights of the Class B Stock
Prudential Financial may, at its option, at any time, exchange all outstanding shares of Class B Stock into such number of shares of
Common Stock as have an aggregate average market value equal to 120% of the appraised fair market value of the outstanding shares of
Class B Stock.
Holders of Class B Stock will be permitted to convert their shares of Class B Stock into such number of shares of Common Stock as
have an aggregate average market value equal to 100% of the appraised fair market value of the outstanding shares of Class B Stock (1) in
the holder’s sole discretion, in the year 2016 or at any time thereafter, and (2) at any time in the event that (a) the Class B Stock will no
longer be treated as equity of Prudential Financial for federal income tax purposes or (b) the New Jersey Department of Banking and
Insurance amends, alters, changes or modifies the regulation of the Closed Block, the Closed Block Business, the Class B Stock or the IHC
debt in a manner that materially adversely affects the “CB Distributable Cash Flow”; provided, however, that in no event may a holder of
Class B Stock convert shares of Class B Stock to the extent such holder immediately upon such conversion, together with its affiliates,
would be the beneficial owner (as defined under the Securities Exchange Act of 1934) of in excess of 9.9% of the total outstanding voting
power of Prudential Financial’s voting securities. In the event a holder of shares of Class B Stock requests to convert shares pursuant to
clause (2)(a) in the preceding sentence, Prudential Financial may elect, instead of effecting such conversion, to increase the Target
Dividend Amount to $12.6875 per share per annum retroactively from the time of issuance of the Class B Stock.
Dividends
The principal sources of funds available to Prudential Financial, the parent holding company, to meet its obligations, including the
payment of shareholder dividends, debt service, operating expenses, capital contributions and obligations to subsidiaries are dividends,
returns of capital, interest income from its subsidiaries and cash and short-term investments. The regulated insurance and various other
subsidiaries are subject to regulatory limitations on their payment of dividends and other transfers of funds to Prudential Financial.
Pursuant to Gibraltar Life’s reorganization, in addition to regulatory restrictions, there are certain restrictions that preclude Gibraltar Life
from paying dividends to Prudential Financial in the near term.
New Jersey insurance law provides that dividends or distributions may be declared or paid by Prudential Insurance without prior
regulatory approval only from unassigned surplus, as determined pursuant to statutory accounting principles, less unrealized investment
gains and losses and revaluation of assets. Unassigned surplus of Prudential Insurance was $5,021 million at December 31, 2007. There
were applicable adjustments for unrealized gains of $1,582 million at December 31, 2007. In addition, Prudential Insurance must obtain
non-disapproval from the New Jersey insurance regulator before paying a dividend or distribution if the dividend or distribution, together
with other dividends or distributions made within the preceding twelve months, would exceed the greater of 10% of Prudential Insurance’s
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