CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB+' rating to $1.2 billion of new senior unsecured notes issued by Prudential Financial, Inc. (PFI). Other PFI ratings are unaffected. The Rating Outlook for PFI's Ratings is currently Stable.
KEY RATING DRIVERS
The ratings are equivalent to the ratings assigned to PFI's existing senior unsecured notes, and reflect standard notching based on Fitch's rating criteria.
Proceeds from the debt issuance are anticipated to fund debt maturing in 2014. As a result, Fitch's view of financial leverage is not affected by this issuance.
PFI's balance sheet fundamentals remain consistent with rating expectations, and recent financial performance has exceeded rating expectations. The ratings assigned to PFI and its subsidiaries continue to reflect the company's very strong competitive position in the U.S. and Japanese life insurance markets.
Fitch views the statutory capital adequacy of PFI's insurance subsidiaries as very strong. At year-end 2013, PFI reported a combined risk-based capital (RBC) ratio for its U.S. insurance subsidiaries of 456%. PFI's two Japanese insurance subsidiaries, Prudential of Japan and Gibraltar, reported solvency margin ratios of 772% and 937%, respectively. PFI's financial leverage remains above rating expectations, and was approximately 34% at year-end 2013.
As a result of recent improvement in financial performance, which has benefited from improved financial market conditions and recent acquisitions, GAAP interest coverage has improved to 9.5x in 2013 compared to 6.1x in 2012.
Key rating triggers that could result in an upgrade of PFI's operating and holding company ratings are: continued reduced reliance on short-term funding; progress lowering the financial leverage ratio to the mid-20% range and total leverage below 40%; GAAP interest coverage in the 8x-10x range (based on pre-tax adjusted operating earnings); stated NAIC RBC ratio remaining near current levels; and a Japan solvency margin ratio above 700%.
Key rating triggers that could result in a downgrade of PFI's holding company ratings (i.e. wider notching from the operating company) include: an FLR above 35%; outstanding commercial paper (CP) above 10% of total debt on a sustained basis; a total financing and commitments ratio (TFC) above 1.5x; and/or a GAAP interest coverage ratio below 5x.
Triggers that could result in a downgrade of both operating and holding company ratings include: a stated NAIC RBC ratio below 400%, Japan solvency margin ratio below 600%, as well as a more significant breach of the above noted holding company triggers.
Fitch has assigned the following rating:
Prudential Financial, Inc.
--$700 million of 3.50% senior notes due 2024 'BBB+';
--$500 million of 4.60% senior notes due 2044 'BBB+.'
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology, November 2013.