The rating agency Moody's Investors Service has conferred a “Baa2” rating on the senior debt of Prudential Financial Inc. (PRU). The rating action also includes the recent issuance of senior unsecured notes worth $800 million by Prudential. The rating holds an investment grade status and carries a “stable” outlook.
The $800 million of notes were issued in two parts – $500 million of 5-year 3.0 % debt that would yield 118 basis points more than similar maturity U.S. Treasuries, and $300 million of 5.625%, 30- year bonds that would pay a spread of 138 basis points.
The proceeds from the issuance will be partly used to finance a portion of the upcoming debt repayment and partly to fund other working capital needs of the company.
Moody’s “Baa2” rating is the second last before the non-investment grade and eight positions below its highest “Aaa” investment grade.
While Standard and Poor’s rated the new issuance at “A,” another rating agency Fitch rated the notes at “BBB+.”
Financial strength and credit ratings are intended to measure a company’s ability to meet policyholder obligations. These are important factors that affect public confidence in Prudential's products, and impact its competitiveness. Securing an investment grade debt rating with a stable outlook reflects optimism about the company’s future performance.
Prudential, the fourth leading life insurer only after American International Group Inc. (AIG), MetLife Inc. (MET), and New York Life Insurance Co., carries a Zacks #3 Rank, which translates into a Hold recommendation over the short term (1-3 months). Also, considering Prudential’s fundamentals, we rate the stock Neutral over the long term.
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