Prudential Completes Retirement and $31B Annuity Deals

What You Need to Know

Empower has closed on a $3.55B acquisition of the Prudential full-service retirement business.
Fortitude Re has closed on a deal to acquire about 17% of in-force Prudential individual annuity account value.
Prudential says it will continue to sell protected outcome annuity solutions through subsidiaries it still owns.

Prudential Financial says it’s now stronger, leaner and eager to sell annuities.

The Newark, New Jersey-based life and annuity issuer has announced the completion of two major, previously announced deals.

The company has closed on an agreement to sell a subsidiary, Prudential Annuities Life Assurance Corp., to Fortitude Re, a Bermuda-based reinsurer controlled by The Carlyle Group and T&D Holdings of Japan.

Fortitude Re has taken responsibility for $31 billion in individual variable annuities written before 2011, or about 17% of the Prudential individual annuity account value that was in force in mid-2021.

Prudential is emphasizing that it will continue to service and administer the contracts in the block going to Fortitude Re.

Prudential and Fortitude Re announced the Prudential Annuities Life deal in September 2021 and said then that they hoped to complete it by June 30, 2022. Around that time, the companies said Fortitude Re would provide a $1.5 billion cash payment, and that the deal would help Prudential free up capital and cut its income taxes.

Prudential has also closed on a deal to sell its full-service retirement plan business to Empower — an arm of Great-West Lifeco — for $3.55 billion.

The Backdrop

Many life insurers have been making big deals involving blocks of annuities with benefits guarantees.

The list of drivers includes concerns about the effects of low interest rates on the investment portfolios supporting the products; worries about exposure to stock market and bond fund volatility; the possible effects of looming changes in accounting rules for insurance products with long-term benefits guarantees; and a belief that insurance company investment guidelines in some jurisdictions outside the United States might help insurers there earn more on their investments.

What It Means

Andy Sullivan, the head of Prudential’s U.S.-based business, said in a comment included in the Fortitude Re deal completion announcement that the move will help customers by making Prudential a higher-growth, less market-sensitive, more nimble company.

Prudential will continue to offer annuity benefits protection options through the Prudential FlexGuard and FlexGuard Income indexed variable annuity contracts, he said.