Guaranteed Income Fund and Guaranteed Long-Term Fund statutory safeguards

Important information regarding our Stable Value options

Prudential Retirement Insurance and Annuity Company

At Prudential Retirement®, we’ve been meeting Stable Value challenges for more than 40 years. We believe our offerings remain among the most secure available in the industry. In this brochure, we provide important information about the statutory safeguards that protect Prudential Retirement Insurance and Annuity Company (PRIAC) general account customers in the Guaranteed Income Fund (GIF) and Guaranteed Long-Term Fund (GLTF).

Separate account versus general account

To begin, it is important to distinguish between “separate account” investments and “general account” investments. Prudential Retirement separate accounts typically are used for various types of market-valued stock and bond investments, where the retirement plan participates directly in the underlying investment performance. In contrast, the general account supports GIF and GLTF, where PRIAC declares a rate of interest in advance and contributions and credited interest are guaranteed by PRIAC, backed by all of the company’s general assets.

The general account

State regulation has a broad scope when it comes to the general account, extending to areas such as required levels of capital and surplus, the calculation of policy reserves, investments, sales practices, market conduct, product design and company operations. 

With the insolvencies several years ago of a small number of insurers, state regulators have taken a number of actions to address the perceived causes. These actions have imposed more stringent capital requirements for insurers and closer scrutiny of insurers’ liquidity management. Some of these important safeguards are outlined below:

  • Connecticut requires in Section 38a-76 of its general statutes that an insurer maintain reserves at least equal to its liabilities. This requirement is designed to ensure that all Connecticut insurance companies have adequate assets to meet their contractual obligations. In addition, PRIAC’s reserves are subject to requirements imposed by New York State, since New York extends certain of its insurance laws to all insurers doing business there. New York’s laws set forth very specific requirements regarding the composition of general account investments as well as standards for valuing reserves.
  • Like all life insurance companies, PRIAC must submit financial statements to the State of Connecticut and the National Association of Insurance Commissioners on a quarterly basis, and annually to all other states in which it does business (where the state requires such an annual filing). These statements contain, among other things, information about the general account’s investments and the method of computing reserves necessary to comply with the state’s law. The state insurance departments use this information to evaluate whether there is any cause for concern about the company’s finances.

Life insurance companies are also subject to rigorous audits by the state authorities to gain firsthand knowledge on their financial condition. These audits are performed on site, and independent accounting firms may be retained to assist the state examiners.

Protection in insolvency situations

If, despite these comprehensive restrictions, an insurer’s financial condition is judged critical,
Connecticut law provides for the supervision and, if necessary, liquidation of the life insurance
company by the insurance commissioner. 

In an insolvency proceeding, general account assets would be subject to claims from PRIAC’s customers and creditors, but not to any liabilities of PRIAC’s subsidiaries. Connecticut law establishes specific priorities for claims on a life insurance company’s general account assets in the event of insolvency. The first three priorities are:

CLASS 1: Costs and expenses of insolvency administration.

CLASS 2: Administrative expenses of guaranty associations.

CLASS 3: Payment of the company’s policy claims, which includes our annuity contracts as well as non-pension contracts.

Thus, although there are two classes ahead of contract holders, policy claims represent the first significant category of claims, ahead of general creditor and stockholder claims.

While there are a number of important safeguards afforded to retirement plans by state statute
and regulations, they should be regarded simply as that—safeguards.

Financial strength

The greatest guarantee is the strong financial condition of PRIAC. PRIAC, a Prudential Financial company, is one of the nation’s leading insurance and financial services companies.

The financial strength ratings of PRIAC indicate that our position is solid, and that we have ample capital and liquidity to meet our obligations.1

Independent rating agencies issue separate ratings for our parent company, Prudential Financial, and its businesses, based on each one’s individual financial strength.

PRIAC is strength-rated by the major independent ratings agencies for its ability to meet financial obligations. In addition, as of June 30, 2017, PRIAC maintained a surplus of $1.0 billion and assets of $26 billion (these figures are subject to change in the future).

A.M. Best Company

A+

(2nd category of 15)

Superior ability to meet ongoing obligations to policyholders

Standard & Poor's

AA-

(4th category of 21)

Very strong fiancial security characteristics

Fitch Ratings

AA-

(4th category of 19)

Very strong capacity to meet policyholder and contract obligations

Moody's

A1

(5th category of 21)

Good financial security

 

1All ratings are as of August 2, 2017. Claims-paying ratings represent the opinions of rating agencies regarding the financial ability of an insurance company to meet its obligations under its insurance policies. While ratings can be objective indicators of an insurance company’s financial strength and can provide a relative measure to help select among insurance companies, they are not guarantees of the future financial strength and/or claims-paying ability of a company. The above ratings are subject to change and do not reflect any subsequent rating agency actions. We make every effort to update our literature as soon as possible after a ratings change. Please visit investor.prudential.com for the most current ratings information.

In providing this information Prudential Retirement is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity. Prudential Retirement may benefit from advisory and other fees paid to it or its affiliates for managing, selling, or settling of the Prudential mutual funds and other investment products or securities offered by Prudential Retirement or its affiliates. Investment vehicles sponsored or managed by a Prudential Retirement affiliate generate more revenue for the Prudential enterprise than non-proprietary investment vehicles. Prudential Retirement’s sales personnel generally receive greater compensation if plan assets are invested in proprietary investment vehicles. Prudential Retirement may benefit directly from the difference between investment earnings of Prudential Retirement’s stable value funds and the amount credited to deposits in those funds. Prudential Retirement may also benefit from broker-dealer or other entities’ co-sponsorship of Prudential conferences.

A.M. Best considers “A+” (2nd category of 15) rated companies to have a superior ability to meet their ongoing obligations to policyholders. “A++” is the highest rating assigned by A.M. Best.

Moody’s indicates that “A1” (5th category of 21) rated insurance companies offer good financial security. Insurance companies rated “Aaa” offer exceptional financial security. In addition, Moody’s appends numerical modifiers 1, 2, 3 to each generic rating classification, with 1 being the highest and 3 being the lowest. While the credit policy of these companies is likely to change, such changes as can be visualized are most unlikely to impair their fundamentally strong position. “Aaa” is the highest Insurer Financial Strength Rating assigned by Moody’s.

According to Standard & Poor’s publications, an insurer rated “AA-” (4th category of 21) has very strong financial security characteristics, differing only slightly from those rated higher. An insurer rated “AAA” has extremely strong financial security characteristics. “AAA” is the highest insurer financial strength rating assigned by Standard and Poor’s.

Fitch indicates that “AA-” (4th category of 19) companies are viewed as possessing a very strong capacity to meet policyholder and contract obligations. Risk factors are moderate, and the impact of any adverse business and economic factors is expected to be small. “AAA” is the highest rating assigned by Fitch.

Guarantees are based on the claims-paying ability of the insurance company and are subject to certain limitations, terms and conditions.

Each of the Guaranteed Income Fund (GIF) and the Guaranteed Long-Term Fund (GLTF) is a group annuity product issued by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, CT 06103. Amounts contributed to each contract are deposited in PRIAC’s general account. Payment obligations and the fulfillment of any guarantees specified in the group annuity contract are insurance claims supported by the full faith and credit of PRIAC. PRIAC periodically resets the interest rate credited on contract balances, subject to a minimum rate specified in the group annuity contract. Past interest rates are not indicative of future rates. Neither product is a mutual fund or a bank product. The obligations of PRIAC are not insured by the FDIC or any other federal governmental agency. Contract forms # GA-2020-IA-0805 or state variation thereof (for GIF and GLTF). For GIF, Prudential Retirement is compensated when general account investment returns exceed the interest credited on contract balances. Under GLTF, there is an annual asset charge, which PRIAC converts to a daily equivalent and then deducts from the interest being credited under GLTF (the contract holder has the option of paying the asset charge, as an alternative to deducting the daily equivalent of the asset charge from interest being credited to GLTF).  Prudential Retirement may earn fee revenue in addition to the foregoing compensation if your plan has agreed to pay contract charges, which are sometimes paid in respect of plan and participant recordkeeping and distribution services. For some plans, Prudential Retirement uses a portion of its aggregate compensation to satisfy the plan’s request for allowances and for payments to defray plan expenses. If Prudential Retirement’s aggregate compensation from each product and from other plan investment products exceeds the costs of servicing your plan, Prudential Retirement earns a profit; otherwise we incur a loss. Frequent exchanging between plan investment options may harm long-term investors. Your plan or the plan’s investment funds may have provisions to deter exchanges that may be abusive. These policies may require us to modify, restrict or suspend purchase or exchange privileges and/or impose redemption fees. Prudential Retirement Insurance and Annuity Company and Prudential Insurance Company of America are each solely responsible for its respective financial condition and contractual obligations. Past performance is not indicative of future performance. Products not available in all states.

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