By Will Feuer
Prudential Financial has recently announced that it has reached an agreement with Somerset Re to reinsure a portion of its guaranteed universal life block. This deal is expected to generate approximately $450 million in proceeds.
Under the agreement, Somerset Re will provide reinsurance for around $12.5 billion of reserves, which support Prudential’s guaranteed universal life policies issued by Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey, as stated by Prudential.
This reinsurance deal specifically covers policies written before 2015 and represents about one-third of Prudential’s total guaranteed universal life statutory reserves. Prudential reassures that this transaction will not impact their employee headcount, and they do not expect any changes for their customers and distribution partners.
Prudential CEO, Charles Lowrey, expressed his optimism about the deal, stating, “This transaction marks another significant milestone in our efforts to reduce market sensitivity and increase capital flexibility.”
In connection with the reinsurance agreement, Prudential estimates a one-time cost of approximately $65 million in the fourth quarter. This cost mainly arises from the extinguishment of certain financing facilities. However, the company anticipates an increase in annual adjusted operating income of about $55 million.
