Wachovia Securities sale will plump up Prudential's capital ratio

JAN 06, 2010
Prudential's insurance unit will get a big boost to its risk-based capital ratio when the carrier completes the sale of its minority stake in Wachovia Securities to Wells Fargo & Co., according to filings with the SEC. Prudential Financial Inc. estimated that the proceeds from the anticipated sale could add more than 100 points to the risk-based-capital ratio of Prudential Insurance Co. of America, as well as add $4 billion in investible funds. As of Sept. 30, the life insurer's risk based capital ratio was estimated to be “comfortably over 400%,” according to the filings. Prudential's relationship with Wachovia, which merged with Wells Fargo last year, goes back to 2003. That's when the two companies combined their retail brokerages, with Wachovia taking a 62% stake, leaving Prudential with the remaining 38%. On Jan. 1, 2008, Wachovia acquired A.G. Edwards Inc's brokerage business. At the time, Prudential received a put option to sell its minority ownership interest in Wachovia, which it's now exercising. Prudential and Wells are engaged in an appraisal process to settle on a final sale price. Prudential vice chairman Mark Grier said that Wells Fargo has its own estimate on the value of the brokerage business, which he would not disclose. According to a note from UBS analyst Andrew Kligerman, the sale could generate about $5 billion in pre-tax proceeds for Prudential. Prudential has indicated that it expects the sale to close around Jan. 1.

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