James Bracken, CEO, Fortitude Re
Fortitude Re has agreed to buy the legacy variable annuities of Prudential Financials’ PALAC subsidiary.
The Bermudan reinsurer will acquire $31 billion of variable annuities through the deal, representing 17% of Prudential’s annuity block. Its holding company will pay an all-cash purchase price of $1.5 billion for Prudential Annuities Life Assurance, funding the deal with excess capital and modest debt issuances.
Rating agency AM Best said its assessment of Fortitude Re’s holding company following the deal’s announcement would be unchanged. It maintains a financial strength rating of A (Excellent) and its long-term issuer credit rating of “a” (Excellent) for Fortitude Reinsurance Company Ltd.
“The transaction is not anticipated to impact the organisation’s balance sheet strength metrics materially following its anticipated close in first-half 2022,” said the agency.
The PALAC block primarily consists of non-New York traditional variable annuities with guaranteed living benefits issued before 2011. Prudential will continue to service and administer all contracts in the block following to ensure a consistent experience for customers.
“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.”
According to Prudential, the deal would advance its “transformation strategy by reducing exposure to traditional variable annuities with guaranteed living benefits and capital markets sensitivity”.
Its chairman and CEO Charles Lowrey said: “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.”
Fortitude Re, Prudential, PALAC, Acquisition, Insurance, Reinsurance, James Bracken, Charles Lowrey, Bermuda