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Fitch Rates Prudential Financial's Junior Subordinated Debt 'BBB'
September 13, 2017 / 2:28 PM / 11 days ago

Fitch Rates Prudential Financial's Junior Subordinated Debt 'BBB'

(The following statement was released by the rating agency) CHICAGO, September 13 (Fitch) Fitch Ratings has assigned a 'BBB' rating to $750 million of junior subordinated notes issued by Prudential Financial, Inc. (PFI). Existing ratings assigned to PFI and its affiliates are unaffected by today's rating action and are listed at the end of this release. The Rating Outlook is Stable. KEY RATING DRIVERS The rating assigned to the new junior subordinated notes is equivalent to the rating assigned to PFI's existing junior subordinated notes. The notes are rated three notches below PFI's long-term Issuer Default Rating (IDR), which reflects Fitch's assumption of "poor" recovery prospects in the event of default given the level of subordination and one additional notch for "minimal" non-performance risk. Fitch expects proceeds from the debt issuance will be used to refinance existing debt outstanding. As a result, this issuance is not expected to impact PFI's financial leverage metrics. Based on Fitch's rating criteria, the new junior subordinated notes have been assigned no equity credit. RATING SENSITIVITIES The key rating triggers that could result in a rating upgrade include: --Sustained reduction in financial leverage to 20% or below; --GAAP interest coverage in the 12x-14x range (based on pre-tax operating income); --Stated regulatory capital ratios in the U.S. and Japan remaining near current levels; --Prism capital score of "Very Strong" and TFC ratio at or below 0.8x. Triggers that could result in a downgrade include: --GAAP return on equity (ROE) below 10%; --Financial leverage above 30%; --TFC above 1.5x; stated NAIC RBC ratio below 450% and Japan solvency margin ratio below 700%; --Prism capital score below "Strong" and GAAP interest coverage ratio below 8x. A one notch downgrade of the Japan sovereign to 'A-' would likely result in a one notch downgrade of the 'AA-' IFS ratings to 'A+'. FULL LIST OF RATING ACTIONS Fitch has assigned the following rating: Prudential Financial, Inc. --$750 million of 4.50% junior subordinated notes due 2047 'BBB'. Fitch currently rates PFI's entities as follows with a Stable Outlook: Prudential Financial, Inc. --Long-term IDR 'A'; --Senior notes 'A-'; --Junior subordinated notes 'BBB'; --Short-term IDR 'F1'; --Commercial paper (CP) 'F1'. Prudential Insurance Company of America --IFS 'AA-'; --Long-term IDR 'A+; --Surplus notes 'A'; --Short-term IDR 'F1+'. Prudential Funding, LLC --Senior unsecured 'A+'. --CP 'F1+'. PRUCO Life Insurance Company Prudential Annuities Life Assurance Corp. Prudential Retirement Insurance & Annuity Company PRUCO Life Insurance Company of New Jersey --IFS 'AA-'. PRICOA Global Funding I --Secured notes program 'AA-'. Contact: Primary Analyst Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Bradley S. Ellis, CFA Director +1-312-368-2089 Committee Chairperson Keith M. Buckley, CFA Managing Director +1-312-368-3211 Date of Relevant Rating Committee: May 1, 2017 Media Relations: Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: benjamin.rippey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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