NU Online News Service, Oct. 14, 2004, 6:01 a.m. EDT

Moody’s Investors Service, New York, has increased the insurance financial strength rating of 2 major life insurance units at Prudential Financial Inc., Newark, N.J.[@@]

The rating agency has increased the rating of Prudential Insurance Company of America to Aa3, from A1, and its Pruco Life Insurance Company unit to Aa3, from A1.

Moody’s also affirmed the A3 rating on the parent company’s senior unsecured debt and raised the rating on the senior unsecured debt at Prudential Insurance to A1, from A2.

The Prudential Insurance company “upgrade reflects the improvements to [Prudential Financial's] financial profile that have taken place over the recent past,” Robert Riegle and Ann Perry, Moody’s analysts, write in a comment on the rating moves.

The improvements include a safer mix of business, strong capital levels at the life operating companies and recent acquisitions of American Skandia Corp., Shelton, Conn., and a large retirement business once owned by CIGNA Corp., Philadelphia.

The American Skandia and CIGNA retirement deals have strengthened Prudential’s market position and increased the potential efficiency of the company’s annuity and retirement businesses, the Moody’s analysts write.

Prudential already has combined the American Skandia operations with its own annuity operations, and integration of the CIGNA retirement business is on target, the analysts write.

The analysts point out that Prudential has plenty of capital and has reduced the “proportion of its earnings derived from its own pension plan.”

But the analysts also point out that Prudential Financial managers are facing strong pressure from shareholders to increase their returns.

Signs of that pressure include a big share buyback and efforts to use reinsurance arrangements and securitization deals to get cash from the company’s closed block of participating life insurance policies, the analysts write.