Fitch hikes outlook on Prudential after Wachovia Securities sale

Fitch Ratings on Monday raised its outlook on Prudential Financial Inc., citing improvements to the insurance and investment company’s capital position.

The revision was made in light of the Dec. 15 announcement that Wells Fargo will buy Prudential’s minority interest in its retail brokerage arm for $4.5 billion. Fitch changed its outlook to “stable” from “negative.”

The “BBB+” long-term issuer default and the “BBB” senior debt ratings were affirmed.

In a note to analysts, Fitch said that Prudential has made considerable progress addressing concerns about its capitalization, liquidity position and overall financial flexibility. From the end of 2007 through Sept. 30, Fitch noted that Prudential has reduced total leverage by over $11 billion.

While Prudential’s exposure to investment losses remains a concern, Fitch said the company is well positioned to deal with such losses and other contingencies in the medium term.

Fitch said the sale of Prudential’s minority stake in Wachovia Securities, Wells Fargo’s retail brokerage arm, should generate an after-tax gain of $1.5 billion. The sale is expected to close by the end of the year.

Related Topics: Prudential Insurance Co. Of America, Wachovia