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Prudential Plc - US Business: Reinsurance transaction & investment

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Prudential Plc

Prudential plc announces $27.6 billion1 US reinsurance agreement alongside $500 million equity investment by Athene Holding Ltd into its US business

  • $27.6 billion1 of Jackson's in-force fixed and fixed indexed annuity portfolio fully reinsured by Athene, effective from 1 June 2020
  • Athene to make a $500 million anchor equity investment in Prudential's US business
  • Athene to hold a 11.1 per cent economic interest in the enlarged common equity of Prudential's US business
  • Equity investment and reinsurance transactions expected to increase Jackson's RBC cover ratio by approximately 80 percentage points2
  • Equity investment expected to close in July 2020
  • Preparations for a minority IPO of Jackson continue alongside an evaluation of other options

The Board of Prudential plc ("Prudential") has today reached agreement with Athene Holding Ltd ("Athene"), a leading retirement services company, for its subsidiary Athene Life Re Ltd to invest $500 million in Prudential's US business in return for an 11.1 per cent economic interest for which the voting interest is 9.9 per cent. Athene's investment will be deployed in Jackson, strengthening its capital base.

Athene Life Re Ltd has also fully reinsured a $27.6 billion1 in-force portfolio of Jackson's US fixed and fixed indexed annuity liabilities under a long-term arrangement.

Athene's investment will take the form of a cash subscription for the issuance of new common equity in Brooke (Holdco 1) Inc, the holding company containing Prudential's US businesses. These include Jackson National Life Insurance Company ("Jackson"), a top-two annuity provider with best-in-class products, distribution and operations headquartered in Lansing, Michigan, and PPM America Inc, an asset manager headquartered in Chicago, Illinois.

The combined effects of the investment and reinsurance transactions are expected to increase Jackson's risk-based capital cover ratio by approximately 80 percentage points2.

Prudential continues to prepare for a minority IPO of Jackson alongside the active evaluation of other options to create an independent US business. A further update will be provided at Prudential's half-year results in August.  After the transaction, Prudential's US business will have an anchor investor of Athene's standing bringing a long-term commitment to Jackson and its development, while Prudential will retain full strategic flexibility in relation to the business.

Mike Wells, Group Chief Executive of Prudential, said:

"We are delighted to be forging a new relationship with the team at Athene, given their deep expertise in the US annuity sector and long-term commitment to its development. This agreement is a key step forward in meeting our strategic objectives for Jackson."

Michael Falcon, Chairman and Chief Executive Officer of Jackson, said:

"Today's transactions with Athene, a leading franchise in the retirement services market, further strengthen our capital position and enhance our ability to grow. We value Athene's investment in Jackson, which is aligned to our common goal of serving the growing population of American savers transitioning into and through retirement."

Jim Belardi, CEO of Athene, said:

"We are very pleased to announce this mutually beneficial transaction in coordination with Jackson and its parent, Prudential plc. As top annuity providers focused on serving the US retirement marketplace, we are excited to bring these two leading franchises together through a large-scale reinsurance transaction that includes a new investment in Jackson by Athene."

Marc Rowan, Co-Founder and Senior Managing Director of Apollo Global Management Inc, Athene's strategic partner and largest shareholder, said:

"In support of our strategic partnership with Athene, we are delighted to help tailor a solution for, and work with, Jackson and Prudential plc on this significant transaction. Jackson has complementary distribution capabilities relative to Athene's business, and it is the largest and highest-quality variable annuity platform in the marketplace. Through our significant investment and support of Athene, we look forward to working with leading insurance franchises like Jackson and Prudential plc to enable them to achieve their strategic objectives."