Prudential Financial Inc. said Wednesday that it had agreed to buy Allstate Financial's variable annuity business for an initial investment it valued at $560 million.
The Newark, N.J., insurance giant would take over administration of about $16 billion of variable annuity assets under the deal, which is expected to close in the second quarter.
The deal came more than three years after Prudential paid $1.265 billion for American Skandia Life Assurance Co., which had a $21.5 billion-asset variable annuity business and a $4 billion mutual fund arm. The Skandia deal vaulted Prudential into the Top 10 ranks in variable annuity sales.
An Allstate purchase would propel Prudential from fifth place to third among providers of adviser-sold variable annuities as measured by assets under administration, according to the variable annuity research and data service unit of Morningstar Inc.
Allstate, a Northbrook, Ill., insurer, valued the deal at $580.5 million, subject to market adjustments, and said it would recognize a small gain to reported earnings amortized into earnings over the life of the agreement.
Prudential said it expects to make an initial investment in the deal of about $560 million, including deal-related taxes and capital requirements.
As part of the agreement, Prudential is to get exclusive distribution rights to sell variable annuities through Allstate's 13,700 independent contractors and financial professionals. In the bank channel, Allstate will begin marketing an Allstate-branded, Prudential-designed annuity.
