Prudential Financial to sell $31B PALAC block of legacy variable annuities to Fortitude Re
Prudential Financial (NYSE: PRU) has entered a definitive agreement to sell a portion of its legacy variable annuity block to Fortitude Re for $2.2 billion. The transaction involves Prudential Annuities Life Assurance Corporation and includes an all-cash purchase price of $1.5 billion. This deal reduces Prudential's exposure to traditional variable annuities, enhancing capital efficiency and aligns with its strategy for organic growth in protected outcome solutions. Following the transaction, Prudential will maintain service operations for these contracts without significant impact on its workforce.
- Transaction value of $2.2 billion enhances Prudential's capital efficiency.
- Reduces exposure to traditional variable annuities, decreasing market sensitivity.
- Affirms commitment to individual retirement market and new investment strategies.
- Expected reduction in pre-tax annual adjusted operating income by approximately $290 million.
-
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
Under the terms of the agreement, Prudential will sell one of its stand-alone legal entity subsidiaries,
The PALAC block primarily consists of non-
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
“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
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
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
[1] Total transaction value includes the purchase price for PALAC plus a capital release to Prudential and an expected tax benefit.
About
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
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
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
View source version on businesswire.com: https://www.businesswire.com/news/home/20210915005661/en/
PRUDENTIAL MEDIA CONTACT:
FORTITUDE RE MEDIA CONTACT:
Source:
FAQ
What is the transaction value of Prudential's agreement with Fortitude Re?
What percentage of Prudential's annuity block is involved in this transaction?
When is the expected closing date for Prudential's transaction with Fortitude Re?
How will Prudential's operating income be affected by the transaction?