Fortitude Group Holdings LLC, the parent company of a Bermudan multi-line reinsurer, Fortitude Re, and Prudential Financial Inc. (NYSE: PRU), have entered into a definitive agreement under which Prudential will sell a portion of its in-force legacy variable annuity block to Fortitude Re for a total transaction value of $2.2 billion.
Under the terms of the agreement, Prudential will sell one of its stand-alone legal entity subsidiaries, Prudential Annuities Life Assurance Corp. (PALAC), including PALAC’s in-force annuity contracts, to Fortitude Re, for an all-cash purchase price of $1.5 billion, subject to certain adjustments at closing, plus a capital release to Prudential and an expected tax benefit.
The PALAC block primarily consists of non-New York traditional variable annuities with guaranteed living benefits that were issued prior to 2011, which constitute approximately $31 billion or 17% of Prudential’s total in-force individual annuity account values as of June 30.
“We are pleased to have reached an agreement with Fortitude Re, which represents another significant milestone in Prudential’s journey to becoming a higher growth, less market sensitive, more nimble company,” said Prudential chairman and CEO Charles Lowrey. “This transaction underscores how a partnership with the right expertise and financial strength can benefit our customers and investors, while also unlocking new opportunities for our businesses.”
“This transaction is an important step forward for Fortitude Re and demonstrates our expertise in delivering comprehensive and value enhancing solutions for our clients,” said Fortitude Re chief executive officer James Bracken. “Our strong, diversified balance sheet, proven risk management capabilities, and access to Carlyle’s asset origination franchise are key differentiators that enable us to responsibly manage complex, long-dated insurance liabilities. I am excited about the partnership with Prudential and the strategic opportunities this acquisition creates.”
“Prudential’s individual Annuities business in the U.S. remains an important component of our business mix and organic growth strategy,” said Prudential executive vice president and head of U.S. businesses Andy Sullivan. “Going forward, we will be better positioned to deliver new investment strategies like FlexGuard, which continues to achieve record success, and focus on creating the next generation of protected income solutions to help more Americans secure their financial future.”
Debevoise & Plimpton LLP served as legal counsel to Fortitude Re. Sidley Austin LLP served as legal counsel to Prudential, and Goldman Sachs & Co. LLC served as exclusive financial advisor.