The ratings agency has also affirmed the long-term issuer credit ratings of “a-” of PFI and all existing long- and short-term issue credit ratings of the group.
In addition, A.M. Best has assigned the long-term issuer credit ratings of “a-” to two recently issued senior unsecured notes, due 2047 and 2049.
Prudential’s ratings are reflective of its very strong balance sheet strength, strong operating performance, very favourable business profile and very strong enterprise risk management.
According to A.M. Best, Prudential’s balance sheet strength is enhanced by the favourable financial security it gains from the access to various sources of liquidity and the proven ability to access capital markets of its parent, PFI.
Partially offsetting this is Prudential’s substantial use of captive insurers to finance redundant reserves for its term and universal life products.
Th firm’s operating performance is considered strong, as a result of its favourable return metrics, which have generated positive statutory income in each of the past five years.
In addition to its insurance businesses, Prudential now has over $65 billion in funded pension account values from its long-term operations in the pension risk transfer (PRT) marketplace.
PFI’s rating affirmation is reflective of its extremely diversified earning sources, considerable financial flexibility, strong liquidity profile and strong debt service capabilities.
The cash and short-term holdings at PFI exceed $4 billion, allowing ample liquidity to fund shareholder dividends, share repurchases and potential acquisitions.
Partially offsetting PFI’s positive rating factors is the increasingly large concentration of annuity reserves, primarily due to the growing number of PRT transactions, relative to its total statutory general account reserves.
A.M. Best is also concerned about the companies continued reliance on captive insurers to help manage redundant life-reserve financing requirements.