Earnings Per Share

12 Months Ended

Dec. 31, 2019

EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the basic and diluted per share computations of Common Stock based on the consolidated earnings of Prudential Financial for the years ended December 31, is as follows:



	2019					2018					2017
	Income		Weighted Average Shares	Per Share Amount		Income		Weighted Average Shares	Per Share Amount		Income		Weighted Average Shares	Per Share Amount

	(in millions, except per share amounts)
Basic earnings per share
Net income (loss)	$	4,238				$	4,088				$	7,974
Less: Income (loss) attributable to noncontrolling interests	52					14					111
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards	46					48					95
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	4,140	404.8	$	10.23	$	4,026	417.6	$	9.64	$	7,768	427.0	$	18.19
Effect of dilutive securities and compensation programs
Add: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Basic	$	46				$	48				$	95
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Diluted	45					47					94
Stock options			1.1					1.5					2.1
Deferred and long-term compensation programs			1.4					1.2					1.1
Exchangeable Surplus Notes	12		3.6			21		5.9			17		5.8
Diluted earnings per share
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	4,153	410.9	$	10.11	$	4,048	426.2	$	9.50	$	7,786	436.0	$	17.86

Unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and included in the computation of earnings per share pursuant to the two-class method. Under this method, earnings attributable to Prudential Financial are allocated between Common Stock and the participating awards, as if the awards were a second class of stock. During periods of net income available to holders of Common Stock, the calculation of earnings per share excludes the income attributable to participating securities in the numerator and the dilutive impact of these securities from the denominator. In the event of a net loss available to holders of Common Stock, undistributed earnings are not allocated to participating securities and the denominator excludes the dilutive impact of these securities as they do not share in the losses of the Company. Undistributed earnings allocated to participating unvested share-based payment awards for the years ended December 31, 2019, 2018 and 2017, as applicable, were based on 4.6 million, 4.9 million and 5.2 million of such awards, respectively, weighted for the period they were outstanding.

Stock options and shares related to deferred and long-term compensation programs that are considered antidilutive are excluded from the computation of diluted earnings per share. Stock options are considered antidilutive based on application of the treasury stock method or in the event of a net loss available to holders of Common Stock. Shares related to deferred and long-term compensation programs are considered antidilutive in the event of a net loss available to holders of Common Stock. For the years ended December 31, the number of stock options and shares related to deferred and long-term compensation programs that were considered antidilutive and were excluded from the computation of diluted earnings per share, weighted for the portion of the period they were outstanding, are as follows:



	2019			2018			2017
	Shares	Exercise Price Per Share		Shares	Exercise Price Per Share		Shares	Exercise Price Per Share

	(in millions, except per share amounts, based on weighted average)
Antidilutive stock options based on application of the treasury stock method	1.2	$	102.84	0.7	$	108.34	0.3	$	110.18
Antidilutive stock options due to net loss available to holders of Common Stock	0.0			0.0			0.0
Antidilutive shares based on application of the treasury stock method	0.0			0.0			0.1
Antidilutive shares due to net loss available to holders of Common Stock	0.0			0.0			0.0
Total antidilutive stock options and shares	1.2			0.7			0.4

In September 2009, the Company issued $500 million of surplus notes with an interest rate of 5.36% per annum which were exchangeable at the option of the note holders for shares of Common Stock. The initial exchange rate for the surplus notes was 10.1235 shares of Common Stock per each $1,000 principal amount of surplus notes. This was equivalent to 5.1 million shares and an initial exchange price per share of Common Stock of $98.78. In August 2019, as a result of the note holders’ exercise of the exchange option, the Company issued approximately 6.2 million shares of Common Stock at an exchange rate equal to 12.3877 shares of Common Stock per each $1,000 principal amount of surplus notes. The Company’s obligations under the surplus notes are now satisfied. In calculating diluted earnings per share under the if-converted method, the potential shares that would be issued assuming a hypothetical exchange, weighted for the period the notes were outstanding, are added to the denominator, and the related interest expense, net of tax, is excluded from the numerator, if the overall effect is dilutive.