Wilton Re to reinsure $11bn of Prudential reserves
Wilton Re will reinsure $11 billion of reserves backing Prudential Financial's guaranteed universal life policies, the companies said.
The agreement will result in approximately $350 million of expected proceeds for Prudential.
The guaranteed universal life block was issued by Pruco Life Insurance Company Arizona (PLAZ) and Pruco Life Insurance Company of New Jersey (PLNJ).
This transaction, covering policies written through 2019, represents approximately 40% of Prudential's remaining guaranteed universal life statutory reserves.
“This transaction builds upon the strong strategic progress we have made over the past several years to become a higher growth and more capital efficient company,” said Charles Lowrey, chairman and CEO of Prudential Financial. “We remain committed to growing our diverse, high-quality suite of life insurance products, which are designed to meet the evolving needs of our customers and their families.”
“We are pleased to provide Prudential a reinsurance solution for a material portion of its in-force guaranteed universal life business,” said Dmitri Ponomarev, CEO of Wilton Re, which has a Bermuda operating company. “This transaction is consistent with Wilton Re’s strategy to address our clients’ largest and most complex in-force life insurance and annuity needs. We also welcome PGIM to the family of Wilton Re’s asset managers.”
Prudential will continue to service the block of policies included in the transaction and maintain its existing relationships with contract-holders and distribution partners. Prudential does not anticipate any direct impact to employee head count as a result of the transaction.
The reinsurance transaction is structured on an indemnity coinsurance basis and contains significant structural protections, including overcollateralization and investment guidelines. PGIM Portfolio Advisory, PGIM’s multi-asset solutions affiliate, will be appointed as the asset manager for all the assets supporting the block and will also receive additional assets to manage from Wilton Re. Moreover, for two years following the closing of the transaction, Bermuda-based Prismic, which was founded by Prudential and Warburg Pincus, will have an option to reinsure 30% of the block from Wilton Re on substantially similar terms.
The transaction is subject to receipt of regulatory approvals. Upon closing, Prudential anticipates a decrease in total after-tax annual adjusted operating income of approximately $35 million. The earnings impact will vary based on market conditions but will be finalised at closing.
The announcement follows Prudential’s previous transaction, completed in March 2024, reinsuring a $12.5 billion guaranteed universal life block with Bermuda-based Somerset Re. Upon closing, Prudential will have achieved an approximately 60% reduction in its exposure to guaranteed universal life.
Fitch Ratings placed Wilton Re's insurer financial strength rating on rating watch negative following the news, saying it expected Wilton Re's risk adjusted capitalization would deteriorate from strong to adequate as a result of the transaction.
It said resolution of the rating watch could take six months to resolve. Wilton Re Bermuda and Wilton Re's other operating companies all have A ratings.
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