Prudential Financial expects $350M proceeds for $11B reinsurance deal

Prudential Financial (NYSE:PRU) agreed to reinsure part of its guaranteed universal life block with Wilton Re, resulting in ~$350M of expected proceeds once the deal closes, the insurance company said on Tuesday.

Under the terms of the agreement, Wilton Re will reinsure ~$11B of reserves backing Prudential’s (PRU) guaranteed universal life policies issued by Pruco Life Insurance Company Arizona (“PLAZ”) and Pruco Life Insurance Company of New Jersey (“PLNJ”). The transaction, covering policies written through 2019, represents ~40% of Prudential’s remaining guaranteed universal life statutory reserves.

The agreement fits with Prudential’s strategy to increase growth and become more capital efficient, Chairman and CEO Charles Lowrey said. The deal follows the company’s transaction in March 2024 that reinsured a $12.5B guaranteed universal life block. With the completion of this latest agreement, Prudential will have reduced its exposure to guaranteed universal life by 60%.

The transaction requires receipt of regulatory approvals. Once the deal closes, Prudential (PRU) expects a decrease in total after-tax annual adjusted operating income of ~$35M. The company also expects to incur one-time expenses of ~$25M in the quarter of the closing, primarily due to the extinguishment of some financing facilities and other closing costs.

The reinsurance transaction is structured on an indemnity coinsurance basis and contains 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. For two years after the deal closes, Prismic will have the option to reinsure 30% of the block form Wilton Re on substantially similar terms.

The transaction won’t change the contracts included in the deal. Prudential (PRU) will continue to service the block of policies included in the transaction and will maintain its existing relationships with contractholders and distribution partners.

The company also doesn’t expect any direct impact on employee headcount as a result of the reinsurance transaction.

Prudential Financial (PRU) stock edged up 0.1% in premarket trading.