A.M. Best Co. has assigned debt ratings of “a-” to the newly
issued senior unsecured notes of Prudential Financial, Inc. (PFI)
(Newark, NJ) (NYSE: PRU). The securities were issued in three tranches:
$350 million 5.1% 30-year notes, $350 million 2.3% five-year notes and
$350 million five-year floating rate notes. The notes were issued under
PFI’s medium-term note program. The outlook assigned is stable. The
financial strength, issuer credit and existing debt ratings of PFI and
its domestic life/health insurance companies are unchanged.
The proceeds from this debt issuance are expected to be used for general
corporate purposes, including refinancing PFI’s capital debt maturing in
2014. While this issuance is expected to have a modest short-term
negative impact on PFI’s financial leverage and interest coverage
ratios, both remain within A.M. Best’s guidelines for the organization’s
current ratings. A.M. Best also notes that PFI currently maintains
above-average levels of cash resources.
The ratings recognize PFI’s continued strong market positions in its
diversified businesses, demonstrated holding company financial
flexibility and liquidity, good risk-adjusted capitalization, positive
operating performance in most of its business segments and prospects for
continued organic growth. In addition, PFI’s investment portfolio
continues to demonstrate positive trends with respect to impairments and
remains in a substantial net unrealized gain position.
Partially offsetting these positive rating factors is PFI’s above
average holdings of below investment grade fixed income securities
relative to capital and surplus and its exposures to subprime
residential mortgage-backed securities as well as to commercial real
estate through both commercial mortgage-backed securities and its direct
commercial loan portfolio. A.M. Best also notes that PFI utilizes
significant amounts of operating leverage at levels exceeding most of
its peers. Although the company has made significant strides in reducing
overall leverage in the past few years, the use of total leverage
remains relatively high.
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.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
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