Prudential 2007 Annual Report Download - page 148

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
13. STOCKHOLDERS’ EQUITY (continued)
surplus as of the preceding December 31 ($6,981 million as of December 31, 2007) or its statutory net gain from operations for the twelve
month period ending on the preceding December 31, excluding realized investment gains and losses ($1,024 million for the year ended
December 31, 2007).
The laws regulating dividends of Prudential Financial’s other insurance subsidiaries domiciled in other states are similar, but not
identical, to New Jersey’s. The laws of foreign countries may also limit the ability of the Company’s insurance and other subsidiaries
organized in those countries to pay dividends to Prudential Financial.
The declaration and payment of dividends on the Common Stock depends primarily upon the financial condition, results of operations,
cash requirements, future prospects and other factors relating to the Financial Services Businesses. Furthermore, dividends on the Common
Stock are limited to both the amount that is legally available for payment under New Jersey corporate law if the Financial Services
Businesses were treated as a separate corporation thereunder and the amount that is legally available for payment under New Jersey
corporate law on a consolidated basis after taking into account dividends on the Class B Stock.
The declaration and payment of dividends on the Class B Stock depends upon the financial performance of the Closed Block Business
and, as the Closed Block matures, the holders of the Class B Stock will receive the surplus of the Closed Block Business no longer required
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, 2007 and 2006.
Comprehensive Income
The components of comprehensive income for the years ended December 31, are as follows:
2007 2006 2005
(in millions)
Net income .............................................................................. $3,704 $3,428 $3,540
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments ........................................... 190 197 (401)
Change in net unrealized investments gains (losses)(1) ........................................ (771) (405) (445)
Additional minimum pension liability adjustment ............................................ — 49 (111)
Change in pension and postretirement unrecognized net periodic benefit (cost) ..................... 509 — —
Other comprehensive loss, net of tax expense (benefit) of $11, ($264), ($371) .......................... (72) (159) (957)
Comprehensive income ..................................................................... $3,632 $3,269 $2,583
(1) Includes cash flow hedges. See Note 19 for information on cash flow hedges.
146 Prudential Financial 2007 Annual Report