Demutualization is the process of converting a mutual life insurance company, which is owned by its policyholders, into a publicly traded stock company owned by shareholders, pursuant to a plan of conversion approved by policyholders and government regulators. Mutual life policyholders (and heirs) continue to be entitled to receive whatever policy benefits may be due, but in addition receive stock, cash and/or policy credits in exchange for their ownership interest in the old mutual insurance company.

The amount paid to each policyholder is based on a number of factors, including length of time the policy has been in force, face value of the policy, and total premiums paid. For many policyholders, the windfall arising from demutualization can be substantial. Shares may be sold at any time, without affecting policy benefits.

On December 15, 2000, Prudential’s Board of Directors unanimously adopted a Plan of Reorganization to convert from a mutual life insurance company to a stock company. The conversion occurred on November 16, 2001, after regulatory and policyholder approvals - 36% of eligible policyholders voted.

Most eligible policyholders (including private employers - both for profit and not-for-profit, labor organizations, trusts, employee benefit plans, governments - federal, state, and local, schools, churches and associations) received 110 million shares of stock worth - $3.025 billion - in the new company, Prudential Financial, in exchange for their ownership interest. Other eligible policyholders received cash or policy credits. Prudential was unable to locate 1.2 million policyholders entitled to receive compensation.

Compensation consisted of a fixed component of 10 Prudential Financial common shares, as well as a variable component based on policy value. Lost policyholders received cash compensation of $28.44 per share entitlement. The shares were offered to the public at $27.50. In the first year after the initial public offering, the price of a Prudential common share increased 16%.

Millions of missing policyholders aren't aware they are entitled to receive demutualization compensation. Contact efforts were unsuccessful, due to name changes after marriage or divorce, unreported changes of address, expired postal forwarding orders and non-current beneficiary information.