CORRECT: Prudential Financial: Holds $375 Million In Fed's CP Program

Life insurer Prudential Financial's holding company is no longer eligible to participate in the Federal Reserve's Commercial Paper Funding Program due to a one-notch downgrade by Fitch Ratings Thursday. The company's insurance subsidiary will still take part, the company said.

On Thursday, Fitch downgraded Prudential Financial Inc.'s (PRU) commercial paper rating to F2 from F1, putting it below the minimum rating for participation in the Federal Reserve program, which is part of its financial-services rescue plan.

Fitch also cut the insurer financial strength ratings of Prudential's primary domestic life insurance subsidiaries to A+ from AA-.

Prudential has $800 million in commercial paper outstanding, and of that $375 million is held through the program, said Bob DeFillippo, a Prudential spokesman.

He said he did not know how much of the $375 million is held by the holding company that was downgraded, but said that the insurance company subsidiary will continue to participate in the program.

In recent weeks, both Standard and Poor's and Moody's Investors service changed their outlook on Prudential's ratings, but left the rating itself unchanged.

DeFillippo said that Prudential's liquidity projections did not factor in continued access to the Federal Reserve program and said that the company is not dependent on access to the commercial paper market or debt capital markets to maintain liquidity.

In its downgrade, Fitch cited Prudential's exposure to volatile credit and investment market conditions, and its potential "future pressure on the financial flexibility of the consolidated enterprise as a whole."

Fitch also downgraded units of Principal Financial Group Inc. (PFG) and Genworth Financial Inc. (GNW).

Life insurers shares slumped Thursday. In recent trading, Prudential fell 14%, Hartford Financial Services Group (HIG) fell 22%, Genworth fell 17%, and Principal was unchanged.

-By Lavonne Kuykendall, Dow Jones Newswires; [phone]; [e-mail]