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PRUDENTIAL FINANCIAL INC : Other Events, Regulation FD Disclosure, Financial Statements and Exhibits (form 8-K)

07/21/2021 | 07:16am EDT

Item 8.01 Other Events

Entry into Agreement to Sell Full Service Retirement Business

On July 21, 2021, Prudential Financial, Inc. ("Prudential" or the "Company"), entered into an agreement with Great-West Life & Annuity Insurance Company (the "Buyer") pursuant to which the Company has agreed to sell to the Buyer the Company's Full Service Retirement business (the "Business"), primarily through (a) the sale of all of the equity interests in (i) Prudential Retirement Insurance and Annuity Company ("PRIAC"), (ii) Global Portfolio Strategies, Inc., a registered investment advisor, (iii) Prudential Bank & Trust, FSB, and (iv) Mullin TBG Insurance Agency Services, LLC, (b) the ceding to the Buyer and certain of Buyer's affiliates of certain insurance policies partially comprising the Business, which will be administered by such parties on behalf of The Prudential Insurance Company of America ("PICA"), and (c) the sale, transfer and/or novation by Prudential Investment Management Services LLC of certain in-scope contracts and brokerage accounts.

In connection with the closing of the transaction, the Company expects total proceeds of approximately $2.8 billion, which includes cash consideration for the sale of PRIAC, ceding commission for the business reinsured to the Buyer and capital available to be released from PICA. The Company expects one-time costs and taxes related to the transaction of approximately $400 million. The Company plans to use the proceeds for general corporate purposes. The Company expects the transaction to close by the first quarter of 2022, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions.

Increase to Share Repurchase Authorization

The Company also announced today that its Board of Directors has authorized a $500 million increase to the Company's share repurchase authorization for calendar year 2021. As a result, the Company's aggregate common stock share repurchase authorization for the full year 2021 is $2.5 billion. As of June 30, 2021, the Company had repurchased $1.25 billion of shares of its common stock under this authorization.

The timing and amount of any share repurchases under the Company's share repurchase authorization will be determined by management based on market conditions and other considerations, and such repurchases may be executed in the open market, through derivative, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended.

Item 7.01 Regulation FD Disclosure

The Company now expects to return to shareholders in the form of dividends and share repurchases a total of $11.0 billion during years 2021 through 2023, up from the $10.5 billion the Company announced in May 2021. The Company also intends to reduce financial leverage in 2021. The pre-tax adjusted operating income of the Business in 2020 was $51 million.(1) In addition, because certain assets of the Business are currently managed by PGIM, the Company's global asset management business, the Company expects that the pre-tax adjusted operating income of PGIM will be reduced by approximately $25 million annually upon the closing of the transaction.(1)(2) Of the costs related to the Business, the Company estimates that following closing it will retain pre-tax costs of approximately $130 million per year. The Company estimates that it will incur additional pre-tax costs related to the transaction of approximately $160 million, including for, among other things, consulting and advisory services and the separation and retention of employees, which costs are expected to be incurred primarily over a two-year period and recorded to Divested and Run-off Businesses included in Corporate and Other. The Company expects to record a gain on the sale of the Business upon the closing of the transaction. The Company's previously announced target to achieve $750 million of cost savings by the end of 2023 remains unchanged.

The Company is furnishing herewith as Exhibit 99.1 a news release announcing the transaction.

(1) This Current Report on Form 8-K includes references to adjusted operating

income. Adjusted operating income is the measure used by the Company to

evaluate segment performance and to allocate resources.


More information about adjusted operating income can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section included in the Company's Annual Report on Form 10-K.

Set forth below is a reconciliation of adjusted operating income of the Business
to income (loss) before income taxes and equity in earnings of operating joint
ventures, which is the GAAP measure most comparable to adjusted operating

                                                                        Year ended
                                                                       December 31,
                                                                      (in millions)
Adjusted operating income                                             $           51

Realized investment gains (losses), net, and related adjustments

                                                                      (16 )
Charges related to realized investment gains (losses), net                         1

Income (loss) before income taxes and equity in earnings of
operating joint ventures                                              $           36

(2) With respect to our forward-looking statement about the expected reduction in

    adjusted operating income for PGIM, we expect that such adjusted operating
    income for PGIM will be equal to Income (loss) before income taxes and equity
    in earnings of operating joint ventures, which is the most comparable GAAP

                           Forward-Looking Statements

Certain of the statements included in this Current Report on Form 8-K, such as those regarding the expected closing of the transaction and the receipt and use of the proceeds thereof, the Company's plan with respect to dividends, share repurchases and the reduction of financial leverage, the expected reduction in the adjusted operating income of PGIM, the costs relating to the Business that the Company expects to retain post-closing, the expected taxes and costs related to the transaction and how they will be recorded, the Company's expectation that it will record a gain on the sale of the Business and the Company's plan to reduce costs, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as "expects," "believes," "anticipates," "includes," "plans," "assumes," "estimates," "projects," "intends," "should," "will," "shall" or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management's current expectations and beliefs concerning future developments and their potential effects upon Prudential Financial, Inc. and its subsidiaries. There can be no assurance that future developments affecting Prudential Financial, Inc. and its subsidiaries will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the "Risk Factors" and "Forward-Looking Statements" sections included in the Company's Annual Report on Form 10-K. The Company does not undertake to update any particular forward-looking statement included in this document.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

  No.       Description

99.1          News release dated July 21, 2021 (furnished and not filed)

104         Cover Page Interactive Data File (embedded within the Inline XBRL


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