Pru Hopes To Cash In Securities Firm Stake

Prudential says it hopes to collect the proceeds from the exercise of the option in January 2010.

“We will record Financial Advisory as a divested business beginning in the fourth quarter of 2008,” Prudential says.

Prudential executives also reported at the conference that the company has “robust sources of liquidity,” such as cash flow from operations, lendable securities, credit lines and membership in the Federal Home Loan Bank of New York at the insurance company level, and cash, short-term investments, the Federal Commercial Paper Funding Facility and credit lines at the parent-company level.

Prudential reported that it has a total of about $35 billion in variable annuity living benefits guarantee risk.

About 47% of the living benefits account value “self hedges” through automatic account rebalancing mechanisms, the company says.

In addition, “long-dated hedging instruments limit exposure to hedge cost volatility” for most of the rest of the guarantee risk, Prudential says.

The retained risk comes from run-off guaranteed minimum income benefits that had about $5.1 billion in account value at the end of the third quarter, Prudential says.