NEW YORK - Prudential Financial Inc's sale of its stake in a brokerage joint venture is on schedule to close next month and is expected to give its capital position a significant lift, the company said on Thursday.
Vice Chairman Mark Grier, speaking at an annual investor conference, said the final price the company receives in the sale of its minority stake in Wachovia Securities to majority owner Wells Fargo & Co was still being decided in an appraisal process.
The Newark, New Jersey-based insurer, in a regulatory filing earlier on Thursday, said it assumed proceeds would boost regulatory capital for subsidiary Prudential Insurance by an estimated $2 billion, and add about $4 billion in investable funds. The latter estimate reflects taxes to be paid.
Prudential had already emerged from the credit crisis stronger than some of its smaller peers, and the proceeds from this sale will only help bolster that position, said executives. We expect to outperform peers meaningfully and consistently, said Chief Executive John Strangfeld.
Prudential and Wachovia Corp, which has since been acquired by Wells Fargo, combined their retail brokerages in 2003, with Wachovia taking a 62 percent stake in the joint venture and Prudential taking the rest. In selling its stake, Prudential is exercising an option it received when Wachovia bought brokerage A.G. Edwards Inc.
Grier said that if the company was paid in Wells Fargo shares, it would sell the stock relatively quickly. We do not intend to be long-term holders of Wells, if that is what we get, he said.
Prudential said previously that it expected the sale to close around January 1, and result in after-tax proceeds of $3.7 billion, and a $1.7 billion after-tax gain. On Thursday, Grier said Wells has its own estimate of the value of the brokerage business, and the appraisal process is designed to reconcile the two.
Prudentials's shares were up 40 cents at $48.29 on the New York Stock Exchange, while Wells Fargo's stock was down 1.3 percent at $25.63.
U.S. life insurers' stocks were badly battered during the height of the credit crisis, as large investment and annuities losses spooked investors, who questioned whether the companies had enough capital to ride out the storm. The companies' stocks have rallied since March, as investors' concerns eased. Prudential's shares have risen more than four-fold over that period.
(Reporting by Lilla Zuill, editing by Gerald E. McCormick, Maureen Bavdek and Matthew Lewis)