A.M. Best Co. has commented that the financial strength, issuer credit and debt ratings of Prudential Financial, Inc. (Prudential) (Newark, NJ) [NYSE: PRU] and its domestic life/health subsidiaries are unchanged following the recent announcement that it has signed a definitive agreement to acquire the individual life business of The Hartford Financial Services Group, Inc. (The Hartford) (Hartford, CT) [NYSE:HIG] for a cash ceding commission of $615 million. The sale is expected to close in the first quarter of 2013 at the earliest, subject to regulatory approvals. The outlook for all ratings is stable.
Prudential intends to pay the ceding commission with available cash, which aggregated $5.1 billion as of June 30, 2012. Although this diminishes the excess cash position of the holding company, A.M. Best notes that the transaction is expected to be financial leverage neutral and does not believe it materially alters the holding company’s financial flexibility. The acquisition of The Harford’s life insurance business is consistent with Prudential’s domestic growth strategy, which includes expansion of its distribution channels. A.M. Best anticipates that Prudential’s acquisition of the life block from The Hartford will have a limited impact on its operating companies’ financial strength, capitalization, liquidity and business profile, while providing a positive contribution to the organization’s overall operating earnings. The transaction remains subject to regulatory approval and execution risk, which A.M. Best will continue to monitor as part of its overall rating assessment process.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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