Prudential declines treasury assistance after rally

Prudential Financial Inc., the biggest life insurer approved for U.S. bailout funds, said it will raise $1.25 billion selling shares and refuse government aid after a share rally made it easier to tap private investors.

The insurer may use proceeds from the public offering to add capital to subsidiaries and repay short-term debt, Newark, New Jersey-based Prudential said on Monday in a statement.

Prudential, which applied for funds from the U.S. Troubled Asset Relief Program in October, joins Allstate Corp. and Ameriprise Financial Inc. in turning down a bailout to guard against investment losses. Stock and bond markets have improved since March, allowing insurers to brace for more defaults on corporate debt and commercial mortgages by selling stock and debt to investors.

“Suddenly TARP money is last year’s out-of-style fad -- nobody wants to be seen wearing it in public,” said Kathleen Shanley, an analyst at Gimme Credit LLC, in a May 21 research note. “Investors’ newfound appetite for bank and insurance equity and debt offerings have made the decision to walk away from TARP money much less daunting.”

The insurer slipped 40 cents, or 1 percent, to $39.51 at 10:03 a.m. in New York Stock Exchange composite trading. Prudential has more than tripled from $11.29 on March 5 as the 11-company Standard and Poor’s Supercomposite Life & Health Insurance Index has increased about 184 percent. Northbrook, Illinois-based Allstate has risen 83 percent and Ameriprise has more than doubled over the same period.

Prudential Chief Executive Officer John Strangfeld cited improving markets on May 7 and said the insurer may sell debt or equity to private investors.

The company, which reported a second-half loss of $1.7 billion, has posted more than $11 billion in unrealized losses and writedowns tied to the subprime meltdown since 2007.

Strangfeld expects to boost capital by exiting Prudential’s brokerage joint venture, Wells Fargo Advisors. Prudential has the right to sell a minority stake in the unit, valued last year by the insurer at about $5 billion, to the brokerage’s majority owner, San Francisco-based Wells Fargo & Co. Prudential, which created the venture with Wachovia Corp. in 2003, may have to wait until Jan. 1, 2010, to exercise the option to sell.

MetLife Inc., the biggest U.S. life insurer, said on April 13 it wouldn’t accept U.S. funds and sold $1.25 billion in debt to investors on May 26. The New York-based insurer, which slipped to a loss in the first quarter, raised $2.3 billion in a share sale in October.

‘Finalizing Details’ Hartford, the Connecticut-based life and property-casualty insurer, is “finalizing details” in its talks with the U.S. about a Treasury capital injection, the company said last month. Hartford won approval for $3.4 billion from the capital purchase program.

Principal Financial Group Inc. and Lincoln National Corp. were also approved for TARP funds. Principal raised $1.9 billion selling new shares and debt to private investors last month. Lincoln CEO Dennis Glass said May 29 that “the capital markets have opened to Lincoln in the past 48 hours.” Glass said selling a stake to the TARP fund could be part of a “mix” of capital alternatives available.

Citigroup Inc. and Goldman Sachs Group Inc. will manage the sale of Prudential shares, the insurer said.

SunTrust Banks Inc., the Atlanta-based company ordered to raise capital after U.S. stress tests earlier this year, said on Monday that it will sell $1.4 billion in common stock. The bank also announced a $1 billion tender offer to buy some of its outstanding securities.