AM Best Affirms Credit Ratings of Prudential Financial, Inc. and Its Subsidiaries
December 05 2019 - 3:32PM
Business Wire
AM Best has affirmed the Financial Strength Rating (FSR)
of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term
ICR) of “aa-” of the domestic life/health insurance subsidiaries of
Prudential Financial, Inc. (PFI) (Newark, NJ) [NYSE: PRU], referred
to as Prudential. Concurrently, AM Best has affirmed the Long-Term
ICR of “a-” of PFI and all existing Long- and Short-Term Issue
Credit Ratings (Long-Term IR; Short-Term IR) of the group. The
outlook of these Credit Ratings (ratings) is stable. (Please see
link below for a detailed listing of the companies and
ratings.)
The ratings reflect Prudential’s balance sheet strength, which
AM Best categorizes as very strong, as well as its strong operating
performance, very favorable business profile and very strong
enterprise risk management.
Prudential’s balance sheet strength is enhanced by favorable
financial flexibility as its parent, PFI, has access to various
sources of liquidity and a proven ability to access capital
markets. Prudential also benefits from its market-leading positions
in its core business lines. The rating affirmations of PFI reflect
its highly diversified earnings sources, financial flexibility and
strong liquidity. During 2019, the company has generated solid
adjusted operating returns with positive business growth metrics.
PFI’s international segment, which is dominated by its Japan
operations, remains the single-largest segment, representing
roughly two-fifths of the company’s total pre-tax operating
earnings. In PFI’s domestic business, the retirement segment has
been the largest growth area due to pension risk transfer (PRT)
deals and opportunities afforded by aging demographics. In
addition, AM Best expects the company’s $2.35 billion acquisition
of Assurance IQ, Inc, a leading direct-to-consumer solutions
platform for health and financial wellness needs to help grow
Prudential’s direct-to-consumer distribution while lowering
customer acquisition costs, as well as creating a new earnings
stream. However, the benefits of this acquisition are expected to
take hold over a period of time.
Partially offsetting these positive rating factors is the
increasingly large concentration of annuity reserves, primarily due
to the increasing number of PRT transactions. AM Best believes that
some annuities, such as variable annuities, are more sensitive to
market movements, and therefore are more risky from a credit
perspective as compared with ordinary life insurance products. In
addition, the low interest rate environment continues to have a
negative impact on net investment yields. The company has reduced
the use of captive reinsurers on new business, although it
continues to utilize such structures to manage redundant
life-reserve financing requirements. AM Best will continue to
review these structures in conjunction with its operating companies
in its assessment of capital adequacy. Moreover, AM Best notes that
the allocation to commercial mortgages continues to increase, and
relative to capital and surplus, is higher than the industry
average. In addition, Prudential’s holdings of
below-investment-grade fixed-income securities relative to capital
and surplus is somewhat higher than industry totals. It is noted
that PFI continues to maintain sizeable liquidity resources, and
its prudent utilization will continue to be monitored by AM
Best.
A complete listing of Prudential Financial, Inc.’s FSRs,
Long-Term ICRs and Long- and Short-Term IRs also is available.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media use of
Best’s Credit Ratings and AM Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global credit rating agency, news publisher and
data provider specializing in the insurance industry. The company
does business in more than 100 countries. Headquartered in Oldwick,
NJ, AM Best has offices in cities around the world, including
London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For
more information, visit www.ambest.com.
Copyright © 2019 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20191205005857/en/
Edward Kohlberg Director +1 908 439 2200, ext.
5664 edward.kohlberg@ambest.com
Christopher Sharkey Manager, Public Relations +1 908 439
2200, ext. 5159 christopher.sharkey@ambest.com
Kenneth Johnson, CFA, CAIA, FRM Senior Director +1 908 439
2200, ext. 5056 ken.johnson@ambest.com
Jim Peavy Director, Public Relations +1 908 439 2200, ext.
5644 james.peavy@ambest.com
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