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Prudential enters reinsurance deal with Wilton Re

Published 08/20/2024, 08:28 PM
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NEWARK, N.J. - Prudential Financial, Inc. (NYSE: NYSE:PRU) has entered into a reinsurance agreement with Wilton Re, a transaction involving the reinsurance of approximately $11 billion of reserves. This deal relates to Prudential's guaranteed universal life policies issued through 2019 by Pruco Life Insurance Company Arizona and Pruco Life Insurance Company of New Jersey, encompassing around 40% of Prudential's remaining guaranteed universal life statutory reserves.

The agreement, which is expected to generate around $350 million in proceeds for Prudential post-closing, is part of the company's strategic shift towards higher growth and increased capital efficiency. Charles Lowrey, Prudential's CEO, emphasized the company's commitment to expanding its diverse suite of life insurance products to meet customer needs.

Wilton Re's CEO, Dmitri Ponomarev, expressed satisfaction with providing Prudential a reinsurance solution that aligns with their strategy to manage complex in-force life insurance and annuity needs. The transaction also welcomes PGIM, Prudential's investment management arm, into Wilton Re's asset management family.

Clients and distribution partners will see no changes as a result of this agreement, with Prudential continuing to service the policies included in the transaction. The company does not foresee any direct impact on employee headcount from the deal.

The reinsurance transaction, structured on an indemnity coinsurance basis, includes significant structural protections such as overcollateralization and investment guidelines. PGIM Portfolio Advisory will manage the assets supporting the block and receive additional assets from Wilton Re. Additionally, Prismic will have an option to reinsure 30% of the block from Wilton Re two years post-closing on similar terms.

Subject to regulatory approvals, the transaction is anticipated to reduce Prudential's total after-tax annual adjusted operating income by approximately $35 million, with the impact dependent on market conditions at closing. One-time expenses of roughly $25 million are expected in the quarter of closing, mainly due to the extinguishment of certain financing facilities and other closing costs.

This announcement follows a March 2024 transaction where Prudential reinsured a $12.5 billion guaranteed universal life block with Somerset Re, marking a significant reduction in exposure to guaranteed universal life risks.

Wells Fargo acted as the exclusive financial advisor to Prudential for this transaction, with Debevoise & Plimpton LLP providing legal counsel. Wilton Re was advised by Kirkland & Ellis LLP.

This article is based on a press release statement from Prudential Financial, Inc.

In other recent news, Prudential Financial has unveiled a new insurance product, the Prudential Momentum IUL, aimed at providing growth potential and financial protection to customers. This product launch aligns with Prudential's commitment to offering adaptable financial solutions. On the earnings front, Prudential's second-quarter report showcased a 67% increase in Retirement Strategies sales, reaching nearly $22 billion, and the company's asset management division, PGIM, saw a 35% rise in capital deployment, totaling close to $11 billion.

In other recent developments, Wells Fargo upgraded Prudential's stock from Underweight to Equal Weight, indicating a belief in the continued positive momentum of Prudential's core businesses. Prudential has also initiated a Selling Agent Agreement to facilitate the ongoing sale of its Prudential Financial InterNotes®, a strategic move to manage its capital structure and financial flexibility.

These recent developments highlight Prudential's efforts to expand access to financial tools and services, manage its capital effectively, and maintain robust growth across its businesses.

InvestingPro Insights

As Prudential Financial, Inc. (NYSE: PRU) navigates its strategic shift with the recent reinsurance agreement, the company's financial health and market performance remain pivotal for investors monitoring its progress. With a market capitalization of $41.41 billion, Prudential stands as a significant entity in the insurance sector. Notably, the company's P/E ratio currently stands at 14.79, suggesting a valuation that might appeal to investors looking for reasonable pricing relative to near-term earnings growth.

InvestingPro data indicates a stable dividend history for Prudential, with the company having raised its dividend for 15 consecutive years and maintained payments for 23 consecutive years. This consistency underscores Prudential's commitment to shareholder returns, even as it undergoes strategic transformations. Furthermore, the company's dividend yield is currently at 4.54%, which is an attractive figure for income-focused investors.

Despite recent downward revisions in earnings by six analysts for the upcoming period, Prudential's financials show a solid foundation. The company has been profitable over the last twelve months, with a gross profit margin of 27.35%. Additionally, Prudential's price is at 90.07% of its 52-week high, reflecting a strong year-over-year price total return of 31.08%.

For those interested in a deeper dive into Prudential's financial outlook, InvestingPro offers additional insights and metrics. There are currently seven InvestingPro Tips available for Prudential at https://www.investing.com/pro/PRU, which can provide a more comprehensive analysis for investors looking to make informed decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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