- De-risking transaction for 17% of Prudential’s annuity block
advances transformation strategy by reducing exposure to
traditional variable annuities with guaranteed living benefits and
capital markets sensitivity
- Affirms Prudential’s commitment to the individual retirement
market and organic growth of protected outcome solutions, including
FlexGuard
- Underscores Fortitude Re’s leadership in providing
comprehensive solutions for a broad array of long-dated insurance
liabilities
Prudential Financial, Inc. (“Prudential”) (NYSE: PRU) and
Fortitude Group Holdings, LLC, the parent company of Bermuda’s
largest multi-line reinsurer (“Fortitude Re”), today announced that
they have entered into a definitive agreement under which
Prudential will sell a portion of its in-force legacy variable
annuity block to Fortitude Re for a total transaction value of $2.2
billion.1
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the full release here:
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Under the terms of the agreement, Prudential will sell one of
its stand-alone legal entity subsidiaries, Prudential Annuities
Life Assurance Corporation (PALAC), including PALAC’s in-force
annuity contracts, to Fortitude Re, for an all-cash purchase price
of $1.5 billion, subject to certain adjustments at closing, plus a
capital release to Prudential and an expected tax benefit.
The PALAC block primarily consists of non-New York traditional
variable annuities with guaranteed living benefits that were issued
prior to 2011, which constitute approximately $31 billion or 17% of
Prudential’s total in-force individual annuity account values as of
June 30, 2021. PALAC complements Fortitude Re’s market-leading
capabilities in designing tailored solutions for leading insurers
that enhance capital efficiency and address strategic
priorities.
Prudential will continue to service and administer all contracts
in the PALAC block following the transaction to ensure a consistent
experience for customers. Prudential does not expect there to be
any direct impact to employee head count as a result of the
transaction.
“We are pleased to have reached an agreement with Fortitude Re,
which represents another significant milestone in Prudential’s
journey to becoming a higher growth, less market sensitive, more
nimble company,” said Prudential Chairman and CEO Charles Lowrey.
“This transaction underscores how a partnership with the right
expertise and financial strength can benefit our customers and
investors, while also unlocking new opportunities for our
businesses.”
“This transaction is an important step forward for Fortitude Re
and demonstrates our expertise in delivering comprehensive and
value enhancing solutions for our clients,” said Fortitude Re Chief
Executive Officer James Bracken. “Our strong, diversified balance
sheet, proven risk management capabilities, and access to Carlyle’s
asset origination franchise are key differentiators that enable us
to responsibly manage complex, long-dated insurance liabilities. I
am excited about the partnership with Prudential and the strategic
opportunities this acquisition creates.”
Prudential will retain its interest in all FlexGuard buffered
annuity contracts and PALAC recently issued fixed and fixed indexed
annuities through a reinsurance agreement with Fortitude Re and,
subject to regulatory approvals, intends to offer those FlexGuard
and other recent PALAC customers the option to replace the issuer
of their contract with another Prudential subsidiary, with further
details to be provided to applicable customers. Prudential will
continue to sell new FlexGuard and other protected outcome
solutions through additional existing subsidiaries.
“Prudential’s individual Annuities business in the U.S. remains
an important component of our business mix and organic growth
strategy,” said Prudential Executive Vice President and Head of
U.S. Businesses Andy Sullivan. “Going forward, we will be better
positioned to deliver new investment strategies like FlexGuard,
which continues to achieve record success, and focus on creating
the next generation of protected income solutions to help more
Americans secure their financial future.”
The transaction, which is subject to regulatory approval and
other customary closing conditions, is expected to close during the
first half of 2022.
Upon closing, Prudential anticipates a reduction to pre-tax
annual adjusted operating income of approximately $290 million.
Proceeds from the transaction are expected to be used for general
corporate purposes.
Debevoise & Plimpton LLP served as legal counsel to
Fortitude Re. Sidley Austin LLP served as legal counsel to
Prudential, and Goldman Sachs & Co. LLC served as exclusive
financial advisor.
[1] Total transaction value includes the purchase price
for PALAC plus a capital release to Prudential and an expected tax
benefit.
About Prudential Financial, Inc.
Prudential Financial, Inc. (NYSE: PRU), a global financial
services leader and premier active global investment manager with
more than $1.5 trillion in assets under management as of June 30,
2021, has operations in the United States, Asia, Europe, and Latin
America. Prudential’s diverse and talented employees help to make
lives better by creating financial opportunity for more people.
Prudential’s iconic Rock symbol has stood for strength, stability,
expertise and innovation for more than a century. For more
information, please visit news.prudential.com.
About Fortitude Re
Fortitude Re is Bermuda’s largest multi-line composite reinsurer
with unique competitive advantages and expertise to design bespoke
transactional solutions for legacy Life & Annuity and P&C
lines. Fortitude Re is an independent company backed by a
consortium of sophisticated investor groups led by The Carlyle
Group and T&D Insurance Group. Fortitude Re holds approximately
$45 billion in invested assets as of June 30, 2021. For more
information, visit www.fortitude-re.com. Follow Fortitude Re on
LinkedIn.
Prudential Forward-Looking Statements and Non-GAAP
Measures
Certain of the statements included in this release, such as
those regarding the expected closing of the transaction and the
receipt and use of the proceeds thereof, the company’s strategy
with respect to the products it offers, the growth prospects and
market sensitivity of its business, the expected impact of the
transaction on the company’s head count, the expected tax benefit
to Prudential resulting from the transaction and the expected
reduction in pre-tax adjusted operating income as a result of the
transaction constitute forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995. Words such as “expects,” “believes,” “anticipates,”
“includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,”
“should,” “will,” “shall” or variations of such words are generally
part of forward-looking statements. Forward-looking statements are
made based on management’s current expectations and beliefs
concerning future developments and their potential effects upon
Prudential Financial, Inc. and its subsidiaries. There can be no
assurance that future developments affecting Prudential Financial,
Inc. and its subsidiaries will be those anticipated by management.
These forward-looking statements are not a guarantee of future
performance and involve risks and uncertainties, and there are
certain important factors that could cause actual results to
differ, possibly materially, from expectations or estimates
reflected in such forward-looking statements. Certain important
factors that could cause actual results to differ, possibly
materially, from expectations or estimates reflected in such
forward-looking statements can be found in the “Risk Factors” and
“Forward-Looking Statements” sections included in Prudential’s
Annual Report on Form 10-K. Prudential does not undertake to update
any particular forward-looking statement included in this
document.
This press release includes a reference to adjusted operating
income. Adjusted operating income is the measure used by Prudential
to evaluate segment performance and to allocate resources. Due to
the inherent difficulty in reliably quantifying future realized
investment gains/losses and changes in asset and liability values
given their unknown timing and potential significance, we cannot,
without unreasonable effort, provide an estimate of expected lost
income from continuing operations, which is the GAAP measure most
comparable to adjusted operating income. More information about
adjusted operating income can be found in the “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” section included in Prudential’s Annual Report on Form
10-K.
This press release does not constitute an offer of novation or
exchange with respect to any insurance policies or contracts.
Annuities are issued by Pruco Life Insurance Company, located in
Newark, NJ (main office), or by Prudential Annuities Life Assurance
Corporation (except in NY) located in Shelton, CT (main office).
Variable annuities are distributed by Prudential Annuities
Distributors, Inc., Shelton, CT. All are Prudential Financial
companies and each is solely responsible for its own financial
condition and contractual obligations. Prudential Annuities is a
business of Prudential Financial, Inc. For more information on
FlexGuard, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20210915005661/en/
PRUDENTIAL MEDIA CONTACT: Bill Launder, 973-802-8760,
bill.launder@prudential.com
FORTITUDE RE MEDIA CONTACT: Lara Watson, 201-749-5066,
lara.watson@fortitude-re.com
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