The Prudential Insurance Company of America (PICA), an indirect wholly owned subsidiary of Prudential Financial, Incorporated (PRU) entered into a purchase agreement with Nippon Life Insurance Company on Sept. 16.

According to the agreement, Prudential Insurance will issue and sell $500 million of notes to Nippon Life Insurance Company (Nippon Life). The Surplus Notes will be exchangeable, at the option of the noteholders, in whole but not in part, for shares of the former’s common stock at any time beginning on the fifth anniversary of issuance of the note. The notes will be due on Sept. 18, 2019. Interest on the notes will be paid at an annual rate of 5.36%.

Prudential Insurance will not utilize any asset or cash flow of its Closed Block Business to make any payments due in connection with the Surplus Notes, and the obligations of the company under the Surplus Notes will be non-recourse to the assets and cash flows of the Closed Block Business. The Surplus Notes will be general unsecured obligations of the company, subordinated to all present and future debt, policy claims and other creditor claims.

The proceeds from the issuance of the Surplus Notes will be used for general corporate purposes of Prudential Insurance Financial Services Businesses. Nippon Life does not intend to directly or indirectly acquire beneficial ownership of Prudential Insurance.

The Surplus notes will not be registered under the Securities Act and will be sold in a private placement to Nippon Life. Barclays Capital served as financial advisor to Prudential on this transaction.

Nippon life is one of the major insurers in Japan providing whole life, medical, nursing coverage and annuities for more than 10 million individuals, group insurance products for more than 230,000 corporate clients in Japan. Outside Japan, it operates in United States, Asia, Europe and Latin America. Prudential Financial Inc., a financial services leader with approximately $580 billion of assets under management as of Jun 30, 2009, has operations in the United States, Asia, Europe and Latin America.

This investment will enable the two insurance giants to better serve the life insurance customers around the world.
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