US-based insurer Prudential Financial has entered a reinsurance agreement with Wilton Re, involving an $11bn block of guaranteed universal life insurance policies.
This deal is anticipated to generate around $350m in proceeds upon closing.
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The policies in question, issued by Pruco Life Insurance Company Arizona and Pruco Life Insurance Company of New Jersey, account for approximately 40% of Prudential’s remaining guaranteed universal life reserves.
Prudential stated that the transaction will not alter the terms of the contracts for the policyholders and it will continue to manage the policies while maintaining relationships with contract holders and distribution partners.
It does not perceive the deal to impact workforce size.
The reinsurance deal is structured on an indemnity coinsurance basis and includes structural protections such as over-collateralisation and investment guidelines.
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By GlobalDataPGIM Portfolio Advisory, the multi-asset solutions affiliate of PGIM, will be the asset manager for the assets backing the block. Additionally, it will manage extra assets transferred from Wilton Re.
The completion of the deal is contingent on regulatory approvals.
Post-closing, Prudential anticipates a reduction in its total after-tax annual adjusted operating income by approximately $35m.
The company also expects to incur one-time expenses of around $25m in the quarter of closing, mainly due to the termination of certain financing facilities and other closing costs.
Prudential Financial chairman and CEO Charles Lowrey said: “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.
“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.”
Wilton Re CEO Dmitri Ponomarev said: “We are pleased to provide Prudential with a reinsurance solution for a material portion of its in-force guaranteed universal life business.
“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.”
This announcement comes after Prudential’s March 2024 transaction with Somerset Re, which reinsured a $12.5bn guaranteed universal life block.
Once the transaction with Wilton Re is finalised, Prudential will have reduced its exposure to guaranteed universal life by almost 60%.
