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:



	2017					2016					2015
	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)	$	7,974				$	4,419				$	5,712
Less: Income (loss) attributable to noncontrolling interests	111					51					70
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards	95					50					55
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	7,768	427.0	$	18.19	$	4,318	438.2	$	9.85	$	5,587	451.7	$	12.37
Effect of dilutive securities and compensation programs
Add: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Basic	$	95				$	50				$	55
Less: Dividends and undistributed earnings allocated to participating unvested share-based payment awards—Diluted	94					49					54
Stock options			2.1					1.8					2.3
Deferred and long-term compensation programs			1.1					0.9					0.9
Exchangeable Surplus Notes	17		5.8			17		5.7			17		5.5
Diluted earnings per share
Net income (loss) attributable to Prudential Financial available to holders of Common Stock	$	7,786	436.0	$	17.86	$	4,336	446.6	$	9.71	$	5,605	460.4	$	12.17

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, 2017, 2016 and 2015, as applicable, were based on 5.2 million, 5.1 million and 4.4 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:



	2017			2016			2015
	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	0.3	$	110.18	2.7	$	83.97	2.4	$	87.97
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	0.1			0.0			0.0
Antidilutive shares due to net loss available to holders of Common Stock	0.0			0.0			0.0
Total antidilutive stock options and shares	0.4			2.7			2.4

In September 2009, the Company issued $500 million of surplus notes with an interest rate of 5.36% per annum which are 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. The exchange rate is subject to customary anti-dilution adjustments and is accordingly revalued during the fourth quarter of each year. As of December 31, 2017, the exchange rate is equal to 11.7643 shares of Common Stock per each $1,000 principal amount of surplus notes. This is equivalent to 5.88 million shares and an exchange price per share of Common Stock of $85.00. 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 are 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.