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Prudential Financial 'cautious' about pension risk transfer's long-term pipeline

Prudential Financial Inc. is "a little cautious" about the longer-term pipeline of its pension risk transfer business as funding for pension plans significantly fell due to lower interest rates, Vice Chairman Robert Falzon said.

Being viewed as the highest-quality provider helps the company clinch larger deals despite the "more aggressive" pricing of some of its competitors, he said at the Goldman Sachs U.S. Financial Services Conference. He added that underwriting for larger transactions also gives the company competitive advantage because of the insight that it gets from real data, which helps in pricing transactions appropriately.

Prudential Financial also secures attractive returns despite a "more competitive" pension risk transfer market due to the quality of its platform, with Falzon noting that the returns the company is currently earning from its past deals are all above target rates and cost of capital.

However, it becomes "less clear" whether the "pretty robust" immediate pipeline seen for pension risk transfer will still recharge if interest rates stay where they are, he said.

"We don't know how that's going to play itself out, so we're a little cautious about the longer-term pipeline but feel pretty good about what's out there near-term," Falzon said.