- Supports Prudential’s transformation strategy by reducing
market sensitivity and increasing capital flexibility
- Does not result in any changes for customers and distribution
partners
Prudential Financial, Inc. (NYSE: PRU) announced today an
agreement to reinsure a portion of its guaranteed universal life
block with Somerset Re, resulting in approximately $450 million of
proceeds.1
Under the terms of the agreement, Somerset Re will reinsure
approximately $12.5 billion of reserves backing Prudential’s
guaranteed universal life policies issued by Pruco Life Insurance
Company and Pruco Life Insurance Company of New Jersey. This
transaction, covering policies written prior to 2015, represents
approximately one-third of Prudential’s total guaranteed universal
life statutory reserves.
“This transaction marks another significant milestone in our
efforts to reduce market sensitivity and increase capital
flexibility,” said Charles Lowrey, chairman and CEO of Prudential
Financial. “Looking ahead, we remain committed to offering a
comprehensive and attractive portfolio of life insurance solutions
to meet the diverse needs of our customers.”
“Somerset Re is pleased to expand its risk management support
for Prudential Financial in this transaction,” said Jeffrey Burt,
chairman and CEO of Somerset Re Group. “This represents our third
reinsurance agreement with Prudential, demonstrating the breadth of
solutions Somerset Re is bringing to its business partners.”
The agreement does not result in any changes for contracts
included in the transaction. Prudential will continue to service
the block and maintain its existing relationships with contract
holders and distribution partners.2 Prudential does not expect
there to be any direct impact to employee head count as a result of
the transaction.
The reinsurance transaction is structured on a modified
coinsurance basis and contains significant structural protections,
including overcollateralization and investment guidelines. In
connection with the transaction, PGIM will retain an investment
mandate related to a portion of the assets supporting the
block.
The transaction is expected to close in the fourth quarter of
2023, subject to regulatory approval, including the Bermuda
Monetary Authority. Upon closing, Prudential anticipates an
increase in after-tax annual adjusted operating income of
approximately $55 million, plus amortization of the cost or benefit
of reinsurance, which is currently expected to be accretive to
earnings, but will be finalized at closing.3
Wells Fargo Securities, LLC served as exclusive financial
advisor, and Willkie Farr & Gallagher LLP served as legal
counsel to Prudential for the transaction.
Mayer Brown LLP served as legal counsel to Somerset Re for the
transaction, and RBC Capital Markets advised Somerset Re.
1 Proceeds include approximately $425 million of capital that
supports the block. Proceeds are subject to customary adjustments
at closing.
2 Prudential will retain responsibility for the ongoing
relationships with mortality reinsurance providers.
3 As a result of the transaction, we expect to incur one-time
expenses of approximately $65 million in the fourth quarter of
2023, primarily due to the extinguishment of certain financing
facilities.
About Prudential Financial, Inc.
Prudential Financial, Inc. (NYSE: PRU), a global financial
services leader and premier active global investment manager with
approximately $1.4 trillion in assets under management as of March
31, 2023, has operations in the United States, Asia, Europe, and
Latin America. Prudential’s diverse and talented employees help
make lives better and create financial opportunity for more people
by expanding access to investing, insurance, and retirement
security. Prudential’s iconic Rock symbol has stood for strength,
stability, expertise, and innovation for nearly 150 years. For more
information, please visit news.prudential.com.
About Somerset Reinsurance Ltd.
Somerset Reinsurance Ltd. is a leading provider of reinsurance
solutions for asset-intensive life insurance and annuity business,
helping its clients manage capital efficiency and improve their
financial results. Somerset Re solutions include programs for new
business flow and management of legacy blocks of life insurance and
annuities. Ceding companies ranked Somerset No. 1 in the Business
Capability Index (BCI), as measured by NMG Consulting’s 2021 U.S.
Structured Financial Solutions study in the Portfolio Transfer
Segment. For further information, please visit
www.somersetre.com.
Prudential Forward-Looking Statements
Certain of the statements included in this release, such as
those regarding the expected closing of the transaction, and the
release of statutory capital and receipt and expected amount of the
proceeds related thereto, Prudential’s strategy and product
offerings, the expected increase in after-tax adjusted operating
income as a result of the transaction, and the expected amount and
timing of transaction expenses 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.
Prudential’s 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. Actual proceeds may
differ from what Prudential currently expects due to adjustments at
closing. 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.
Prudential Non-GAAP Measures
This release includes a reference to adjusted operating income.
Adjusted operating income is a non-GAAP measure used by Prudential
to evaluate segment performance and to allocate resources. Adjusted
operating income excludes “Realized investment gains (losses), net,
and related charges and adjustments.” A significant element of
realized investment gains and losses are impairments and
credit-related and interest rate-related gains and losses.
Impairments and losses from sales of credit-impaired securities,
the timing of which depends largely on market credit cycles, can
vary considerably across periods. The timing of other sales that
would result in gains or losses, such as interest rate-related
gains or losses, is largely subject to our discretion and
influenced by market opportunities as well as our tax and capital
profile.
Realized investment gains (losses) within certain businesses for
which such gains (losses) are a principal source of earnings, and
those associated with terminating hedges of foreign currency
earnings and current period yield adjustments, are included in
adjusted operating income. Adjusted operating income generally
excludes realized investment gains and losses from products that
contain embedded derivatives, and from associated derivative
portfolios that are part of an asset-liability management program
related to the risk of those products. Adjusted operating income
also excludes gains and losses from changes in value of certain
assets and liabilities relating to foreign currency exchange
movements that have been economically hedged or considered part of
our capital funding strategies for our international subsidiaries,
as well as gains and losses on certain investments that are
designated as trading. Adjusted operating income also excludes
investment gains and losses on assets supporting experience-rated
contractholder liabilities and changes in experience-rated
contractholder liabilities due to asset value changes, because
these recorded changes in asset and liability values are expected
to ultimately accrue to contractholders. Additionally, adjusted
operating income excludes the changes in fair value of equity
securities that are recorded in net income.
Adjusted operating income excludes “Change in value of market
risk benefits, net of related hedging gains (losses),” which
reflects the impact from changes in current market conditions, and
market experience updates, reflecting the immediate impacts in
current period results from changes in current market conditions on
estimates of profitability, which we believe enhances the
understanding of underlying performance trends. Adjusted operating
income also excludes the results of Divested and Run-off
Businesses, which are not relevant to our ongoing operations, and
discontinued operations and earnings attributable to noncontrolling
interests, each of which is presented as a separate component of
net income under GAAP. Additionally, adjusted operating income
excludes other items, such as certain components of the
consideration for acquisitions, which are recognized as
compensation expense over the requisite service periods, and
goodwill impairments. Earnings attributable to noncontrolling
interests is presented as a separate component of net income under
GAAP and excluded from adjusted operating income. The tax effect
associated with pre-tax adjusted operating income is based on
applicable IRS and foreign tax regulations inclusive of pertinent
adjustments.
Adjusted operating income does not equate to “Net income” as
determined in accordance with U.S. GAAP. Adjusted operating income
is not a substitute for income determined in accordance with U.S.
GAAP, and our definition of adjusted operating income may differ
from that used by other companies. The items above are important to
an understanding of our overall results of operations. However, we
believe that the presentation of adjusted operating income as we
measure it for management purposes enhances the understanding of
our results of operations by highlighting the results from ongoing
operations and the underlying profitability of our businesses.
Trends in the underlying profitability of our businesses can be
more clearly identified without the fluctuating effects of the
items described above.
We believe that our use of this non-GAAP measure helps investors
understand and evaluate Prudential’s performance and financial
position. The presentation of adjusted operating income as we
measure it for management purposes enhances the understanding of
the results of operations by highlighting the results from ongoing
operations and the underlying profitability of our businesses.
Trends in the underlying profitability of our businesses can be
more clearly identified without the fluctuating effects of the
items described below. However, this non-GAAP measure is not a
substitute for net income determined in accordance with GAAP, and
the adjustments made to derive this measure is important to an
understanding of our overall results of operations and financial
position.
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 net income, which is the GAAP measure most comparable
to adjusted operating income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230723518598/en/
Media: Bill Launder, bill.launder@prudential.com
Prudential Financial (NYSE:PRU)
Gráfico Histórico do Ativo
De Abr 2024 até Mai 2024
Prudential Financial (NYSE:PRU)
Gráfico Histórico do Ativo
De Mai 2023 até Mai 2024