by John Darer CLU ChFC MSSC CeFT RSP CLTC
Prudential "to Reinsure Block of Structured Settlement Annuity Contracts", if Regulators Approve
Prudential Financial, Inc. and Warburg Pincus announced September 7, 2023, the launch of Prismic Life Reinsurance, Ltd. (Prismic Life Re), a licensed Class E Bermuda-based life and annuity reinsurance company. Prismic Life Re will assume a $10 billion block of Prudential's structured settlements if approved by regulators.
Note: The Prudential press release abbreviates to the shorter "Prismic". However an internet search brings up results for a San Francisco company, named Prismic, that builds websites. Given Prudential's structured settlement footprint in all 50 states, I've opted to abbreviate to Prismic Life Re.
Who is Warburg Pincus?
At Warburg Pincus, is a private equity firm based in New York City. Established in 1966, Warburg Pincus has invested more than $112 billion in more than 1,000 companies in more than 40 countries around the world.
Source: Warburg Pincus website
What is a Bermuda Class E Long Term Insurer?
According to the Bermuda Monetary Authority,
LONG-TERM - CLASS E: Long-term insurers and reinsurers with total assets of more than $500 million; and not registrable as a Class A or Class B insurer.
Prudential and Warburg Pincus, together with a group of investors, have agreed to make equity investments in Prismic Life Re and will oversee its long-term strategy through participation on its board of directors.
On September 11, 2023 Reinsurance News reported that Nomura has announced it has made an equity investment into Prismic Life Reinsurance, a licensed Class E Bermuda-based life and annuity reinsurance platform, alongside Prudential Financial, Warburg Pincus and other investors. Combined, Prismic Life Re will have an initial equity investment of approximately $1 billion. 65% of the equity is owned by a group of investors that Nomura is a founding investor of, while Prudential Financial owns 20% and Warburg Pincus owns 15%.
How Will The Reinsurance of $10B of Structured Settlement Annuity Contracts Affect Annuitants?
According to the September 7, 2023 announcement, Prudential expects to reinsure to Prismic Life Re a block of structured settlement annuity contracts with reserves of approximately $10 billion, subject to the receipt of required regulatory approvals.
Prudential’s obligations to the holders of the rights to receive structured settlement payments will remain unchanged following the reinsurance arrangement and Prudential will continue to administer the contracts.
Why is Prudential's Motivation?
From there, the release states that Prudential aims for Prismic Life Re to be a strategic reinsurance partner with the ambition to grow their reinsurance relationship materially in years to come. PGIM and Warburg Pincus will provide asset management services to Prismic. PGIM is the investment management business of Prudential Financial, Inc.
Through expanded reinsurance capacity, Prudential expects Prismic Life will allow the company to provide more people with access to its industry-leading life and annuity products.
Charles Lowrey, chairman and CEO of Prudential Financial, Inc., said in the press release: “This unique reinsurance platform will play an important role in our vision to be a global leader in expanding access to investing, insurance, and retirement security for people around the world. Prismic Life Re will enhance our ability to address the evolving needs of our insurance customers and clients while continuing to meet our obligations to policyholders. It represents a formidable combination of industry-leading expertise, global capabilities, and the backing of two of the world’s leading insurance and asset management firms.”
Prismic Life Re will leverage PGIM’s and Warburg Pincus’ global investment management capabilities across public and private markets, including public fixed income, private credit, private real estate, and private equity. Prismic will become a client of PGIM Portfolio Advisory, a newly established affiliate within PGIM that combines asset-liability management expertise with portfolio strategy and asset allocation to deliver
Prismic Life Reinsurance, Ltd. announced that it expects to receive $1 billion in funding from Nomura Holdings, Inc., Prudential Financial, Inc., Warburg Pincus LLC and other investors -September 10, 2023 | MarketScreener