Prudential Acquisition Aimed at Improving Participant Experience

Following this morning’s announcement that Empower Retirement is acquiring the full-service retirement business of Prudential Financial, Empower CEO Ed Murphy spoke with PLANSPONSOR about the firm’s plans for additional acquisitions and what this latest deal means for plan sponsors and participants. Murphy also touched on why Empower was interested in Prudential’s recordkeeping business in the first place, and how it will be integrated into the Empower platform.

“We have 1,900 associates from Prudential [coming over],” Murphy says. “These are long-tenured people with tremendous domain expertise. Prudential’s recordkeeping business has a client base of 4,300 plan sponsors, many of which have been with Prudential for a long time. It is a great service provider [that obtains] high-end provider scores. We are looking forward to building on that.”

Murphy went on to say that Prudential’s back-office recordkeeping system has “some compelling capabilities” and that it offers a powerful “nonqualified platform we aim to put to use with existing and prospective customers. It has a solid relationship with a third-party defined benefit [DB] administrator we think we can leverage.”

Murphy then said Prudential’s GoalMaker asset allocation strategy will be an advantage. GoalMaker is a tool that helps participants choose a professionally designed investment portfolio based on their investor style—conservative, moderate or aggressive—and years to retirement. “We can support and leverage it within our environment,” Murphy noted. 

In short, he said, there were “several aspects” to Prudential’s recordkeeping offerings that were too attractive to pass up. 

Today’s Prudential news does not change Empower’s current initiatives, Murphy added. Empower will continue to make substantial investments in technology and products to improve the experience and service for participants, he said.

“All those things will continue,” including investments specifically for retirement plans aimed at executives, Murphy said. The end goal of all of these efforts, the Empower CEO added, is to improve participants’ retirement success.

Murphy said this acquisition further solidifies Empower’s position as the No. 2 recordkeeper in the nation. Empower ranked No. 2 in PLANSPONSOR’s 2020 Recordkeeping Survey by total 401(k) assets, behind Fidelity Investments.

Murphy added that Empower plans to continue growing its participant and asset base at a rate two to three times its competitors. “That is the best marker we can think of,” he said.

For its part, Prudential says it will continue to participate in the institutional and individual retirement market, serving retirees, annuitants and employers through its institutional investment products business, as well as through income and investments solutions provided by its individual annuities business and PGIM, its global asset management subsidiary. Following the close of the transaction, Prudential’s retirement business will consist of pension risk transfer, international reinsurance, structured settlements and institutional stable value wrap product lines.

Prudential expects to use the proceeds from the transaction for general corporate purposes. The company said it now expects to return $11 billion to shareholders through 2023, up from the $10.5 billion announced in May, and it intends to reduce financial leverage and enhance its financial flexibility.

The transaction, which is expected to close in the first quarter of 2022 pending customary regulatory approvals, will increase Empower’s participant base to 16.6 million and its retirement services recordkeeping assets to approximately $1.4 trillion administered in approximately 71,000 workplace savings plans.

Empower will acquire Prudential’s retirement services businesses with both a share purchase and a reinsurance transaction.