Prudential Financial is moving ahead with efforts to reduce its exposure to individual variable annuity benefits guarantees.
The Newark, New Jersey-based company announced Wednesday that it has agreed to sell a large portion of its variable annuity business to Fortitude Re, a Bermuda-based reinsurer.
The deal involves annuities with a total of $31 billion in account value, or about 17% of Prudential's total in-force individual annuity account value, as of June 30.
Prudential and Fortitude Re hope to complete the deal by June 30, 2022.
The Reinsurer
Fortitude Re was once part of American International Group. The Carlyle Group and T&D Holdings of Japan bought a 76.6% stake in Fortitude Re's holding company, Fortitude Group Holdings, in June 2020.
The Deal
Prudential said it will carry out the shift by selling its stake in a subsidiary, Prudential Annuities Life Assurance Corp., to Fortitude Re, through a transaction with a value of $2.2 billion.
The transaction value includes a $1.5 billion cash payment, a release of capital to Prudential, and a tax benefit for Prudential.
Fortitude Re will get traditional individual variable annuities that come with guaranteed living benefits and written before 2011. All of the contracts were written outside New York state.
Prudential will continue to service and administer the contracts, and the deal will have no effect on Prudential's employee head count, the company said.
