A.m. best assigns ratings to prudential financial, inc.’s new senior unsecured notes

Oldwick, n.j.--(business wire)--a.m. best co. has assigned debt ratings of “a-” to the newly issued senior unsecured notes of prudential financial, inc. (pfi) (newark, nj) [nyse: pru]. the securities were issued in two tranches: $400 million 4.50% 10-year notes and $325 million 5.80% 30-year notes. the notes were issued under pfi’s medium-term note program. the outlook assigned to the ratings is stable. the ratings on pfi’s domestic life/health insurance companies and existing debt securities are unchanged. the proceeds from this debt issuance are expected to be used for general corporate purposes, including the prefunding of upcoming debt maturities. this issuance is expected to have a minor impact on pfi’s financial leverage, which is within a.m. best’s guidelines for its current ratings. a.m. best notes that the leverage impact will slightly dampen fixed charge coverage; however, the company currently maintains above-average levels of cash resources. the ratings recognize the breadth and diversity in pfi’s business mix within its insurance, investment and international divisions as well as its strong global market presence. additionally, a.m. best acknowledges pfi’s broad sources of liquidity, which includes holding company cash, excess capital at its operating subsidiaries, access to commercial paper and committed bank credit facilities. these sources more than cover anticipated holding company requirements that include debt servicing and the current authorized share repurchase program. partially offsetting these strengths are pfi’s somewhat reduced capital flexibility given its short-term increase in financial leverage, and to a lesser extent, anticipated share repurchases and the recent increase in pfi’s common stock dividend. additionally, pfi’s ongoing requirement to fund organic growth in each of its businesses requires substantial capital commitments. although currently supported by strong capital levels, capital could decline under adverse market conditions, but this risk is partially mitigated through extensive use of hedging programs. finally, the investment portfolio retains above-average exposure to below investment grade bonds—largely in the closed block—with potential for ongoing impairments. a.m. best notes that asset impairments specific to the closed block can be passed onto policyholders. the principal methodology used in determining these ratings is best’s credit rating methodology -- global life and non-life insurance edition, which provides a comprehensive explanation of a.m. best’s rating process and highlights the different rating criteria employed. additional key criteria utilized include: “risk management and the rating process for insurance companies”; “a.m. best’s ratings & the treatment of debt”; and “equity credit for hybrid securities.” methodologies can be found at www.ambest.com/ratings/methodology. founded in 1899, a.m. best company is the world's oldest and most authoritative insurance rating and information source. for more information, visit www.ambest.com. copyright © 2011 by a.m. best company, inc. all rights reserved.
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