A.M. Best Affirms Financial Strength and Debt Ratings of Prudential Insurance Company and Its Subsidiaries.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 20, 2002 A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and maintained the positive outlook for The Prudential Insurance Company of America (Prudential) (Newark, NJ) and its wholly owned subsidiaries. Prudential's existing debt ratings were also affirmed, as well as those of its ultimate parent company, Prudential Financial, Inc. (PFI PFI Pay for Inclusion (web search engines) PFI Private Finance Initiative PFI Private Finance Initiative (UK) PFI Prison Fellowship International PFI Port Fuel Injection (engines) ) (NYSE NYSE See: New York Stock Exchange :PRU PRU Prudential Financial PRU Pupil Referral Unit PRU Photographic Reconnaissance Unit PRU Potomac Rugby Union (Washington, DC) PRU Provincial Reconnaissance Unit PRU Projets de Rénovation Urbaine PRU Pruhonice ) and Prudential Funding, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , Prudential's wholly owned financing subsidiary. Related to these actions, the under review status on American Skandia Life Assurance Corporation's (ASLAC ASLAC Advanced Subscriber Line Audio Processing Interface ASLAC Advanced Subscriber Line Audio Controller ) (Shelton, CT) financial strength rating of A- (Excellent) has been changed to developing from negative. The rating of ASLAC was downgraded to A- (Excellent) and placed under review in A.M. Best's press release on September 27, 2002. As recently announced, Prudential has agreed to purchase American Skandia, Inc., ASLAC's U.S. holding company, from Skandia Insurance Company Ltd., a Stockholm-based financial services organization, for total consideration of $1.265 billion. ASLAC is a leading seller of variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. and is expected to move Prudential into a top ten position in the variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. marketplace. The transaction is subject to regulatory approval and is expected to close early in 2003. The financial strength rating reflects Prudential's diverse and substantial sources of revenues and earnings, excellent risk-adjusted capitalization and sound liquidity position. A.M. Best views favorably management's effectiveness in reducing risks within Prudential through the disposition of non-core businesses and transfer of certain other businesses to PFI. These actions, along with initiatives to reduce its infrastructure costs, should mitigate Prudential's earnings volatility and future funding obligations. In addition, Prudential has experienced stabilization and growth in productivity in its captive agency force, an area that has traditionally held a relatively high cost structure. Prudential's financial strength rating also benefits from the enhanced financial flexibility of PFI as a publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. since its demutualization Demutualization The process of changing corporate structure from a mutual fund company to some other form, such as a limited liability or corporation. Notes: This means mutual/life insurance companies convert from policyholder companies to stock companies. in December 2001. Proforma corporate debt to capital, excluding accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as and non-recourse borrowings, measures below that of PFI's publicly traded peers. Cash coverage generated by its diversified businesses is viewed by A.M. Best as more than sufficient to cover its current and expected needs. A.M. Best expects fixed coverage--defined as adjusted operating income to the sum of interest expense plus preferred dividends--to be maintained in the mid-single digit range. Offsetting these strengths is Prudential's historical and current operating performance, which continues to lag behind that of its peers, increasing investment losses due to generally weak financial market conditions and a growing deficit in the closed block of participating life insurance policies Participating life insurance policies Life insurance that pays dividends to policyholders depending on the company's success as provided by few claims and profitable underwritings and investments. , which remains an ongoing liability of Prudential. A.M. Best considers Prudential's existing level of risk-adjusted capitalization sufficient to support its current rating with a moderate level of cushion. A.M. Best believes that the proposed transaction to acquire ASLAC should provide a number of strategic and financial benefits to Prudential over time. Expense savings, along with ASLAC's existing distribution relationships and fee-based sub-advisor investment platform, are expected to provide Prudential with an expanded and growing source of operating profits. As a leading seller of variable annuities in the independent financial planner channel, ASLAC will provide Prudential with significantly expanded distribution capabilities from third-party sources, which has become a strategic priority for the organization. For a complete listing of Prudential's financial strength and debt ratings, please visit http://www.ambest.com/press/prudential2.pdf. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. |
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