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Prudential files demutualization plan in New Jersey

Editor's note: The New Jersey Department of Insurance has approved Prudential's demutualization application and a public hearing will be held July 17-19, 2001, in Trenton, N.J. Prudential can now proceed with policyholder notification and a vote to switch to a publicly traded stock company. If policyholders approve the plan, Prudential will conduct an IPO of up to $3.9 billion and finish the conversion by year's end. Prudential's 11 million policyholders are expected to receive 454.6 million shares in the demutualization.

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Prudential Insurance Co. of America filed its application to demutualize with the New Jersey Department of Insurance (DOI) on March 14, 2001, taking a major step toward an IPO.

Prudential plans to distribute its full $20 billion value in the form of stock or cash to 11 million eligible policyholders in the demutualization, which the company hopes will be complete by the fourth quarter of 2001. Policyholders eligible for remuneration include those with individual and group life insurance, health insurance, or annuities purchased on or before Dec. 15, 2000.

Eligible policyholders will receive cash or stock compensation equal to at least eight shares of stock at the IPO price. The company will calculate how much a policyholder has contributed to Prudential's value — for example, how many years the policy has been in force, or how many policies are owned — in deciding how many additional shares a policyholder will receive.

Policyholders whose compensation is valued at fewer than 50 shares will receive cash instead of stock, but Prudential is proposing to "top up" cash compensation by offering additional cash or policy credits if the stock's closing price averages between 110 and 120 percent of the IPO price in the first 20 days of trading.

If the New Jersey DOI approves Prudential's application, which the company expects to take six to eight months, Prudential will mail demutualization information and a ballot to the 11 million eligible policyholders. Under New Jersey state law, at least 1 million policyholders must vote on the demutualization, and two-thirds must approve, for the IPO to occur.

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