Prudential 2007 Annual Report Download - page 149

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PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
13. STOCKHOLDERS’ EQUITY (continued)
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, 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(2) ................ — — 218 (774) (556)
Balance, December 31, 2006 ............................ 122 1,171 — (774) 519
Change in component during year .................... 190 (771) — 509 (72)
Balance, December 31, 2007 ............................ $312 $ 400 $— $(265) $ 447
(1) Includes cash flow hedges. See Note 19 for information on cash flow hedges.
(2) See Note 16 for additional information on the adoption of SFAS No. 158.
Statutory Net Income and Surplus
Prudential Financial’s U.S. insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory
accounting practices prescribed or permitted by the insurance department of the state of domicile. Statutory accounting practices primarily
differ from U.S. GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using
different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.
Statutory net income of Prudential Insurance amounted to $1,274 million, $444 million and $2,170 million for the years ended
December 31, 2007, 2006 and 2005, respectively. Statutory capital and surplus of Prudential Insurance amounted to $6,981 million and
$5,973 million at December 31, 2007 and 2006, respectively.
14. EARNINGS PER SHARE
The Company has outstanding two separate classes of common stock. The Common Stock reflects the performance of the Financial
Services Businesses and the Class B Stock reflects the performance of the Closed Block Business. Accordingly, earnings per share is
calculated separately for each of these two classes of common stock.
Net income for the Financial Services Businesses and the Closed Block Business is determined in accordance with U.S. GAAP and
includes general and administrative expenses charged to each of the respective businesses based on the Company’s methodology for the
allocation of such expenses. Cash flows between the Financial Services Businesses and the Closed Block Business related to administrative
expenses are determined by a policy servicing fee arrangement that is based upon insurance and policies in force and statutory cash
premiums. To the extent reported administrative expenses vary from these cash flow amounts, the differences are recorded, on an after tax
basis, as direct equity adjustments to the equity balances of the businesses.
The direct equity adjustments modify the earnings available to each of the classes of common stock for earnings per share purposes.
Prudential Financial 2007 Annual Report 147