Prudential 2007 Annual Report Download - page 25

consider hypothetical excess tax benefits that would be recognized assuming all employee options are exercised and shares issued to
employees vest. As a result of the adoption of SFAS No. 123(R), we can now only include in this calculation the hypothetical excess tax
benefits that would have resulted in a reduction of taxes payable in the current period. Prior to our adoption of SFAS No. 123(R), we
considered hypothetical excess tax benefits in applying the treasury stock method if it was probable that the excess tax benefit would be
utilized for tax purposes prior to its expiration.
As described above, we did not use the fair value recognition provisions of SFAS No. 123, as amended, for employee stock options
issued prior to January 1, 2003. In applying the treasury stock method to these options, prior to our adoption of SFAS No. 123(R), the
hypothetical excess tax benefit from these options was calculated as the entire amount deductible on our tax return. Upon adoption of SFAS
No. 123(R), we elected to continue to apply this calculation methodology for options issued to employees prior to January 1, 2003.
Consolidated Results of Operations
The following table summarizes net income for the Financial Services Businesses and the Closed Block Business for the periods
presented.
Year ended
December 31,
2007 2006 2005
(in millions)
Financial Services Businesses by segment:
Individual Life ................................................................................... $ 548 $ 482 $ 527
Individual Annuities ............................................................................... 672 539 503
Group Insurance .................................................................................. 247 211 293
Total Insurance Division ........................................................................ 1,467 1,232 1,323
Asset Management ................................................................................ 657 589 465
Financial Advisory ................................................................................ (73) (267) (447)
Retirement ....................................................................................... 364 425 435
Total Investment Division ....................................................................... 948 747 453
International Insurance ............................................................................. 1,891 1,607 1,401
International Investments ........................................................................... 227 176 84
Total International Insurance and Investments Division ........................................... 2,118 1,783 1,485
Corporate and Other ........................................................................... (137) 229 531
Income from continuing operations before income taxes and equity in earnings of operating joint ventures for Financial
Services Businesses ................................................................................. 4,396 3,991 3,792
Income tax expense ................................................................................ 1,145 1,126 642
Income from continuing operations before equity in earnings of operating joint ventures for Financial Services Businesses . . 3,251 2,865 3,150
Equity in earnings of operating joint ventures, net of taxes ................................................. 246 208 142
Income from continuing operations for Financial Services Businesses ............................................ 3,497 3,073 3,292
Income (loss) from discontinued operations, net of taxes ................................................... 15 71 (73)
Net income—Financial Services Businesses ................................................................ $3,512 $ 3,144 $ 3,219
Basic income from continuing operations per share—Common Stock ............................................ $ 7.72 $ 6.49 $ 6.59
Diluted income from continuing operations per share—Common Stock ........................................... $ 7.58 $ 6.36 $ 6.48
Basic net income per share—Common Stock ................................................................ $ 7.75 $ 6.63 $ 6.45
Diluted net income per share—Common Stock .............................................................. $ 7.61 $ 6.50 $ 6.34
Closed Block Business:
Income from operations before income taxes for Closed Block Business .......................................... $ 290 $ 403 $ 482
Income tax expense ................................................................................ 100 119 161
Income from continuing operations for Closed Block Business .................................................. 190 284 321
Income from discontinued operations, net of taxes ........................................................... 2 — —
Net income—Closed Block Business ...................................................................... $ 192 $ 284 $ 321
Basic and diluted income from continuing operations per share—Class B Stock .................................... $68.50 $108.00 $119.50
Basic and diluted net income per share—Class B Stock ....................................................... $69.50 $108.00 $119.50
Consolidated:
Net income .......................................................................................... $3,704 $ 3,428 $ 3,540
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