A.M. Best has assigned a debt rating of “bbb” to the recently issued $1 billion 5.375% fixed-to-floating rate junior subordinated notes maturing May 15, 2045 of Prudential Financial, Inc. (PFI) (Newark, NJ) (NYSE: PRU). The outlook assigned is stable. The recently affirmed financial strength, issuer credit and existing debt ratings of PFI and its domestic life/health insurance subsidiaries are unchanged (see A.M. Best’s press release dated May 13, 2015).

The assigned rating reflects the notes’ deeply subordinated status within PFI’s capital structure. Specifically, these securities will rank junior to PFI’s existing and future senior indebtedness and pari passu with PFI’s existing junior subordinated notes.

A.M. Best notes that PFI may redeem the new notes on or after May 15, 2025 or at any time within 90 days after the occurrence of a “tax event,” “a rating agency event” or a “regulatory capital event.” The net proceeds of the hybrid offering are expected to be used for general corporate purposes which could include refinancing portions of the redemption of PFI’s medium-term notes that mature through 2016.

The rating recognizes PFI’s strong operating performance in its various business segments, in addition to very strong liquidity at the holding company. PFI has repeatedly demonstrated its access to the capital markets, particularly over the past three years. However, A.M. Best notes that PFI, although consistent with its scale and business mix, continues to utilize significant amounts of total leverage. A.M. Best notes that this most recent issuance somewhat reduces PFI’s overall financial flexibility. However, incorporating partial equity credit for the new notes, financial leverage remains within the guidelines for the company’s current rating level. Additionally, based on year-to-date 2015 earnings, interest coverage is within the guidelines for the current rating. A.M. Best also notes that PFI currently maintains above-average levels of cash resources if needed.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Equity Credit for Hybrid Securities
  • Insurance Holding Company and Debt Ratings

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

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