NEWARK, N.J. (Bloomberg)—Prudential Financial Inc., the second-biggest U.S. life insurer, plans to sell $1 billion of debt as soon as Monday to help pay for two overseas units from American International Group Inc.

Prudential may issue $500 million each of 10- and 30-year bonds, according to a person familiar with the transaction. The 10-year notes may yield 167 basis points more than similar-maturity Treasuries, and the 30-year bonds may pay a spread of 185 basis points, said the person, who declined to be identified because terms aren't set.

The insurer is tapping the corporate bond market after raising about $1 billion from a stock sale on Nov. 12. Newark, N.J.-based Prudential agreed Sept. 30 to buy AIG's Star Life Insurance Co. and Edison Life Insurance Co., two Japanese businesses, for $4.8 billion. Prudential reduced the size of stock and bond sales that it planned to pay for the deal by increasing the cash component.

“When the deal came out, the view we had was they were not using as much of their excess capital and adding more financing to the transaction,” said Randy Binner, an insurance analyst at FBR Capital Markets. “It kind of cut into the accretion of the deal somewhat and brought up more subjective questions about how much capital was excess at Pru.”

Accretion refers to an increase in a company's earnings from an acquisition. Prudential previously said it would fund the purchase with $1.7 billion of capital and by selling $1.3 billion of equity and $1.2 billion of debt. It announced Nov. 3 that it would reduce the stock and bond sales to $1 billion each and use $2.2 billion of cash.

Last benchmark sale

By using more cash to fund the deal, and boosting its annual dividend 64% to $1.15 a share, its highest payout since 2007, Prudential “sent the market a signal that they’re more prepared to return some of the excess capital buffer,” said Mr. Binner, who recommends buying Prudential stock.

Prudential last sold debt in benchmark size on June 16, issuing $1 billion of securities, according to data compiled by Bloomberg. Benchmark sales are typically at least $500 million.

The insurer issued $650 million of 5.375% 10-year debt, and $350 million of 6.625% 30-year bonds, Bloomberg data show. The 10-year notes traded on Nov. 10 at 109.662 cents on the dollar to yield 152.8 basis points more than similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. A basis point is 0.01 percentage point.

Citigroup Inc., HSBC Holdings P.L.C. and Wells Fargo & Co. are managing Monday’s debt sale, said the person familiar with the offering.

MetLife Inc. is the biggest U.S. life insurer.

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