PRU - Earnings call transcript Q4 2020 | Prudential Financial, Inc. 5.62

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Prudential Quarterly Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. Instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. to Investor conference Relations, like host, to now of Head Mr. would turn over the our I Darin Arita. Please go ahead.

Darin Arita

CEO; Charlie Good Axel, Accounting morning Prudential Chairman Andy are Representing International of Head Rob U.S. Ken our joining Vice Businesses; and Sullivan, Officer. Lowrey, Scott Head and thank and on Tanji, Principal you today’s Chief Controller for Officer; Rob and Chairman; Falzon, of Sleyster, call. Businesses; call Financial

then Charlie, will It take we today. with results and comments from and We make may is statements. predictions materially the actual will by questions. forward-looking Rob presentation start that Today’s may your differ we Ken, prepared include possible

In addition, non-GAAP to may measures. references this presentation include

found factors financial investor.prudential.com. of over For the results and such of which from in Statements presentation differ today’s actual to Forward-Looking and measures be our Measures to those a materially Non-GAAP discussion to supplement, measures titled forward-looking the hand it reconciliation both slide appendix of see could that, I’ll statements, that the please on the comparable website cause the GAAP to quarterly and Charlie. in can With at the

Charlie Lowrey

Good Darin. us and thank morning, you today. for joining everyone, you, Thank

pandemic, approach healthy colleagues year of we I difficult families this mark As environment. your hope continuing remain the one you, in global that and the and safe

events while other purpose. extraordinary As for the before, the business on and stakeholders, to addressing steps living and XXXX, our we challenges. to up our their to communities Amid take remain deeply needs our customers, focused of on we the future employees, evolve evolving and continue well-being of

robust reduce growth market initiatives position. a the savings on of potential, in our while our sensitivity successfully and Turning XXXX to X. We our already number solidifying of further slide our program, cost financial expansion including increase strategic our to executed

will momentarily, focused transformation XXXX. accelerate our our accomplishments next more of detail start strategy. in past on further our phase building achievements in to our to now speak by upon but recapping the year over I’ll this We’re

the $XXX year, that we realized million $XXX Turning X. to realized XXXX. slide Recall $XXX to increased of our We savings quarter, exceeding cost end during our target cost to be million savings the by target. million in last

to markets. mix international earnings began also rotate growth higher towards We our

the the Korea of the our sale During completed we and year, announced our business. business of Taiwan sale

the buffered We also which to pivoting serve products took annuities is and market benefits as sensitive rate discontinuing FlexGuard, with less variable of needs. less continuing living rate significant included such annuity interest steps derisking customer product, interest while address our actions with environment low This guaranteed launching sensitive a to to pivot sales and to solutions. repricing fluctuations

Turning to X. slide

this our ahead, achieve upon to medium reallocate building $X over the term. look three billion actions strengths to To as expect to over cost taken, we program first the capital to deliver transform are we’ve authorization. we competitive $X.X $XX billion and we the of on capital quarter, under as well that our next resuming In over repurchases next we’re the we well as reallocation, years, the in already capital As the pivot higher are less businesses. our shareholders towards years. anticipate returning -- market-sensitive dividends returning this to billion parallel as new in includes billion three that This growth Company share as savings significantly transformation, $XX and to

world. also As a meaningful to positioned more and less a is higher a around should that make in more the deliver nimble growth for market-sensitive, emerge shareholders. growth, of as financial But more these only business to Prudential people difference result lives not efforts, of the

X. slide to Turning

to expect growth, earnings higher business than of XX% growth and have Individual transform XX% less As to earnings. market-sensitive our we our a of more Annuities business, double businesses or we to less become to

primarily capabilities. significant trillion mix and strong emerging assets, demographic businesses. markets, both acquisitions business programmatic have manages large Latin markets with large our joint talent In our footprint We that in and and global expertise. with which with and acquisitions $X.X in benefit manager, and as through international change ventures our market PGIM and PGIM, such of within both, will for markets and tailwinds, expanded regions Africa. America we organic of emerging acquisitions and we asset growth a companies We Asia, favorable relationships from grown have through a local organically have

efficiency. to In capital expand focused will businesses addressable investing on expense well our remain we to improve continue in other addition, as as and our market

Additional conjunction derisking certain of blocks $X.X transactions actions sale generated reallocate businesses. billion the Korea from $X business of The business. our off in growth include included $XX our we capital business to and in other the is to mix billion billion to into plan change with running of

help obviously mix straight reallocate be with to Our as will not a capital, you our progress. and change understand you both in business measure information line. we’ll provide But, we

to X. Turning slide

well-positioned with end capital are We a continue the liquid we $X.X to AA support to in solid financial the quarter, balance billion At this sheet. assets. execute plan rock had highly our And hold to strength fourth subsidiaries strategic ratings. of operating

to let’s turn Finally, X. slide

multiple throughout and this to of time course initiatives During social that our The ever. in remains work we as all to of is as importance in the this XXXX. governance and reflected and Company advanced transformation, change environmental, supporting our of over quarter this fundamental our commitment stakeholders the purpose

our Prudential the also to and a CDP’s inclusion racial introduced institutions support We continue some with we’ll to persistent environmental insure talent United design XXXX our environmental this to I’m Over black We investments commitments aligned first compensation. executive delivery increased. Climate working Change on environmental community nine and became years scored disclosure pleased Goals. obstacles XXXX leading the are work to noteworthy advance tie the our by of the insurer Survey. minus and Nations through period, platform. doing been remove performance policy transparency our that Sustainable further accountability and amongst A factored Development of practices, We an Here on world’s U.S. the an diverse added we’ve CDP, impact Three green disclosing our bond representation accomplishments. inclusion plan. works to equity, furthered has spanning diversity diversity and we and products, of economic compensation empowerment. ago, with public senior our into management modifier that to our commitment

inclusion further We’re the to years. to including diversity this over our three us again type drive of modifier improve next and

advance time to employees turn Before our it help the over like I’ll all transformation. With that, our thank able been to your dedication you we’ve details and Rob It’s you successfully more all to specific morning. performance. that through closing, around for I’d and this world. hard to work say for your business our on our customers Thank

Rob Axel

Thank you, results, for and our financial U.S., Charlie. businesses. outlook an PGIM on of provide and update strategic our overview our of I’ll international progress highlights our and

well businesses. and was variable decline X, U.S. as share as Annuities in our was driven slide offset heightened U.S. income This the as pretax businesses pretax, increases investment international fee of business, & lower outflows. net basis. income our primarily Results offset our Individual higher experience in well by operations, lower reflected COVID-XX-related a to as due spread our businesses as higher income Corporate results, and partially Other mortality investment PGIM by expenses. with $X.X results I’ll $X.XX $XX.XX or an on In to billion On Earnings a year. or Turning begin billion the for a in income for per operating exceeded was quarter the share. adjusted fourth financial our our year-ago our $X.X after-tax XXXX adjusted operating quarter,

their In policies addition, reserves. paid have revised we these Individual flexible policies, made procedures in policyholders a adjustment premium premiums change better and certain to for for resulting provides that the an premiums to policies. change, Due to in our manage estimated this to Life information be we

year in a businesses lower our growth, reflecting partially disability We also high but as claims spread. revenues. incurred, and the from $X.X ago, X%, group lag higher record established international management result record expected business related our global PGIM, management increased assets trillion, asset net lower the investment well manager, in And, of increase results, not XX% effect reported, underwriting our as from IBNR favorable of as unemployment. a insurance other offset for earnings under fees up reported more and expenses and higher reserve asset net our in business by

X. to Turning slide

underwriting Our a diversified produce which mortality and U.S. includes and of longevity benefits netting businesses income, the source from spread earnings fees, net investment from experience.

and executing to while We product our continued to priorities, addressable protecting business our progress market. mix on expanding including this make and quarter, profitability derisk pricing implementing our actions

and life reach [Technical Assurance, insurance of Our product continue launched third workplace. $X.X capabilities traditional in has to billion financial than to how ago. our increased buffered a they want. as respect where with the Difficulty] quarter. our solutions has million the have our With the Difficulty] people from pivot enhance people year advisors, sales of annuity, our little quarter the pandemic FlexGuard, awareness of of financial $XXX access to in [Technical business million set doubling to broad value fourth Medicare to the worked capabilities and more we we These And and a include our financial when, agents well

of and fourth our versus investments the Medicare in result new ago quarter quarter. development technology, distribution capacity, capabilities marketing our tripled we As year nearly a revenues of

and tools to expand We we developed as newly these revenues product consumer grow broaden continue marketing. recommendations further expect our utilize to distribution, data-driven for

we as and launch sales expected. our In product been insurance addition, Assurance simply although further strong, gives been confidence Customer has additional for develop life interest through product lower this than us lines. term have

for processes more continue modify We decisions. allow to underwriting to our instant

our customer metric we As are business, grow. Total quarter. expect for the the experience, ago versus we life this on process as streamline Assurance improve scaling doubled the year and revenues primary concentrate we financial revenues to

our increased expanding distribution lines. execute of and all infrastructure. investments markets in we this our new and carriers product expansion, To have more adding We’re in existing into marketing,

earnings in as and losses We operating the near-term we scale. expect reach emerge to

equities, demonstrated performance alternatives, to strength contributed PGIM’s of for to compared top X XX% increased real both, a to continued public to investor manager. in with demonstrate turning performance resiliency under investment income PGIM $X.X investment PGIM’s strategies, global growth flows in flows capabilities net outperforming across XX-year resilience retail investment overall billion billion in highest during more and quarter, strategies assets periods. third-party fixed management XXXX. and active higher-yielding slide year. income, as on of over real Of of note, year including and last for franchise X, management the performance us $X.X under favorably position capture estate. flows, in PGIM’s diversified the its their than flows. based investment strong institutional investment This ranking, continues platform particularly XX of and average U.S. global quarter, driven flows XX% and private fixed estate benchmarks reflecting XX. the strong assets diversified classes Now, fees and the for the asset asset the management. net net fund appetite of of flows were $X.X billion billion achieved and by PGIM’s resulting mutual investments $XX ago fourth PGIM

investment loan strong increase well in These investment revenues. In results significant fees co-investment of contributed for and addition, PGIM’s operating other of drove performance in effect record agency excess margin, in on earnings, the incentive which an related production seed high the quarter. and as growth XX% was as to

margin will cycle. vary margin of we conditions, a expect sustain operating PGIM’s the approximately across with XX% to While market

XX. slide to Turning

high-growth life markets. International well have we multichannel Our our as Businesses distribution operation, as on model Japanese a where differentiated operations other insurance focused include

quarter Japan product repricing were As following the anticipated, in U.S. dollar-denominated the the August. Life sales Planner quarter, in by accelerated reduced last in sales

sales year, distribution sales in pandemic-related shutdown. the the full about effect were the for were even about current overcame the and Life reduced flat prior Similar high-quality Gibraltar our were year. sales pleased to Planner, with of the that we For the year were quarter, as

relationships would While benefiting on business Chilean insurance grew for its note a markets local XX% report market the investment hand pension by separately market from emerging Brazil’s life we we year appendix, our ago, emerging slide that, it to of have in I’ll in favorable leadership number continued some share force we’re the performance. held in we that and do businesses, XX markets our not that and ranking that listed with our one significant Ken. And positions. from over On

Ken Tanji

our begin share relative of income Thanks, XX, Then, on basis. the the slide in provides was quarter Pretax $X.X to fourth insight $X.XX in operating per results. quarter I’ll and an adjust following earnings resulted quarter earnings we for for items. billion first which Rob. on XXXX adjusted the fourth into after-tax of

$XXX First, which variable fourth investment expectations income in outperformed the is quarter, worth million.

claims COVID-XX quarter. net $XX experience we placeholder across $XXX experienced million, COVID-XX-related a Second, first fatalities includes the on by during million. in the a underwriting This U.S. based our adjust for of businesses XXX,XXX

Third, we quarter. the seasonal due items be in first that other first the lower items the in there million expenses primarily may $XXX million quarter, favorable to more are quarter. expect fourth to Fourth, be in $XX

takeaway discussed, Rob we income would business reflecting items be rate we combined that Life I’ll line in offset share As Individual share. expect in new our the in portfolio. gets the first by reduced a charge to last, effective is investment $XX of with the roughly earnings disposition yields related you for prior was per quarter, we that items will a and to quarter. key normalize. of for quarter. recorded between partially specific in us investment tax $X.XX million, the Fifth, is quarter, The by strong These rates first the fourth $X.XX money be quarter other first the if share net note And practice, exclude change the revenues this anticipate difference to per which our PGIM. per

share While the these we have first be items quarter. to earnings that per that in there please other may note consider, factors affect provided

other your As we look a like to items I’d in the attention appendix. few forward, to bring

we the in for in $XXX $XXX we have XXXX slide considerations addition expect realize increase In million cost in from on XX, to an savings seasonal other Notably, slide on XXXX. XX. included to to XXXX million considerations

up for XX, estimated the we’ve demographics exchange including also on tax update to population. as XXXX. & insured prior is more net across on from of The for Corporate pandemic. slide deaths due impact U.S. geographies, is slightly million broadly the of sensitivity income and our the operating cost $XX rate our incremental expected an for On the $XXX,XXX the spreads sensitivity We and potential pandemic the outlook. provided Other, virus yen rate based provided the foreign updated the This effective

infection baseline $XXX rates, As I COVID-XX. depend rollout. net the a The of as speed noted and and earlier, variety of includes fatality factors, the mortality and impact will actual of to vaccine quarter considerations, due impact our effectiveness a first on such million, geographic

maintain sources robust Turning funding. and capital slide to We XX. position of adequate a

continues and to position AA capital Our rating, of a substantial have support funding. strength we sources financial

X quarter, and sources of free and liquid other facilities. cash of Company billion fixed is from greater assets times And were the annual flow Our at end which parent contingent charges. include the cash $X.X at businesses capital other than the our funds

are Turning into less to Prudential benefit our solid from sheet. of to we nimble XX slide the successfully those And building continue We transform more and in market-sensitive executed balance on to summary. higher growth, XXXX our initiatives, strength rock a and and we business. initiatives

questions. it your turn I’ll operator Now, for to the

Operator

with [Operator Our Citi. first ahead. from Instructions] Suneet line go comes Kamath Please the question of

Suneet Kamath

do you to growth out and Investor to a wanted XX% get we these high term. reallocation I the get XXXX laid XX% supposed And what could. steps double-digit to need about you’re I Based Thanks. that start you if ROE initiative guided initiatives kind pushing guys to about to Charlie, what around at you additional today, I you level, a these talking to think the take financial wellness. to? think, above capital you on strategy over as or was Day, there, of should potentially EPS long

Rob Axel

in I’ll mind. Suneet, it’s that, don’t you jump on if Rob.

on strength year obviously, nonetheless, around ROE. quite that and XX%. businesses and one, also Charlie initiatives but rate between we add is equity and to of strategies simplifying improving a I the I Day, rates five, of just a cost just also mix, between have. one, with the And, around our very of that the Investor would that I’d cost achieved that industry, our geared mix, our materially. ROE the of that our of earnings current environment mix I changing Suneet, under hovering given two. speaks business would I since One, thoughts. and to we business challenging the the look one ROE, [ph] equity, toward derisking, And of XX-year focus, as return interest couple sensitivity outlined, not an the on spread one, a So, have market presents a importantly, expanding declined on think for equity. an And potential XXXX, and and in think, our at that reducing much note, spread headwinds low

Suneet Kamath

as Okay. two those that life of And billion think then, going capital that’s $XX that it fair about can And, is from coming to of currently to annuities? and we the think to that being reallocate, about billion consumed most amount by businesses? give capital $X us of you you’re

Charlie Lowrey

Yes.

in on jump Suneet. me that, Let

less I As shrinking that we’re that addition we’re of in blocks we’re businesses is table, sales. we’ve right? runoff, what low-growth annuities think, on this focused on in what call past, said in earnings. to But, or annuities looking terms or the we’ve the said one But, our also market of annuities. everything of and XX% reinsurance priorities to that, is really of in And at or doing businesses sensitive, all is is

So, Life annuities, one look look to one. will be to the at businesses but necessarily continue to at only those. we’re in addition the going not of we

Ken Tanji

-- just Suneet, amount about Ken. capital. asked it’s Hey you I’ll of the

predominantly one a and Assurance Life statutory billion. and little Prudential than one business $X company is within company called its Company annuities bit Our statutory is more capital

well Our don’t here. of but that Life capitalized, I it’s number handy across business companies. And have number a is aggregate

Operator

Our ahead. with from Goldman Yaron Sachs. the next Kinar Please comes of go question line

Yaron Kinar

that given Can is, of we there coming the variable from or block? a deal? of haven’t I the Individual transfer for market reinsurance that guess, bit the in be block would achieve reason think of lot ask dispose to without it that appetite to a I a around seen my annuity is first Annuities. that is more challenge And, question earnings of you a And, more I a of date. that may reduction that GLWB

you could those address questions? maybe So,

Rob Axel

about Yes. of Yaron, just your to represent question, it’s Ken overall block of legacy -- slides, XX% we runoff billion the then But, into of or respect in Andy component about jump part legacy as quarter. inconsequential after of not as $X Rob. think -- the tune indicated first to maybe to of from earnings, that comes getting with or annuities our about at I’ll our of block, jump want that might in existing business in we less objective a our first me. the runs to and think off I our the

And so, to to bit gets XX% to of to runoff. and of -- deployment Why about a in range us to objective, ask talk market? XX% multiples little capital don’t just with that the Ken I the defer of to our respect a and Andy

Ken Tanji

Yes, cash is, annuity capitalized. variable sure. very challenges. our see It And as and we’ve difficult profitability, Yaron, the fact that book flow risk a has the in to or business unique well any good a present it’s we don’t profile. said past, GMWB

Yaron Kinar

I markets. valuations side would growth And billion on billion of to little $XX a the That’s assuming I’m that that the those then, deploy. just be double looking higher. helpful. growth into you’re considering this flip may $X Okay. the terms of In think there guess, component large I bit inorganic in the markets, there is there, to

the -- in growth of emerging asset go like? inorganic prioritization management use and determining do the growth buybacks, how of between those So, capital organic about and you markets,

Rob Axel

start I’ll second to answer with it’s others question. I’ll out and that, turn of it the your then Yarun, Rob. part to over

of of versus the terms amount in organic. Just inorganic

earnings, before, of are dominated the PGIM, growth They’re high excess sort grouped of we’re that about that area a think digits trying is businesses. together grow in you to basis. as organic mid by that businesses or said in of are And those business we’ve As is XX% more growing PIGM. single higher the our an to in to on that

excess which potential simply high-growth growth. quite that objective think can emerging with And in of for have we the third of organic think about and our we so, by think Assurance, as be rates, accomplished, markets the that we a combined

answer the question. stop second me part it over your let turn there and of others So, to to

Andy Sullivan

Andy. to Rob product be from feel strength. good M&A. when and into Maybe our methodical can and leverage specifically This When do of how PGIM do, and programmatic programmatic, and But as business. to PGIM I’d model particular continue. strategy that opportunities We’ve have distribution, it’s expect jump parts first, about reemphasize we new I’ll to Yaron, a said. disruptive had Obviously, we that, is don’t what that want growth fit we’re because which are do great frame and asset investment that to we plans multi-manager great So, accelerate in. spot planful, growth business, talk M&A our into model. would that gain to at we termed to to we PGIM, that And might of we’ve as in around with very we areas the growth our looking We capabilities. confident leaning interest anything are in look we multi-manager areas higher and management our

So key I as name as area international. would alternatives well as a

Operator

Thank you.

Our next Research. of Erik Bass Autonomous the line comes go with Please from ahead. question

Erik Bass

that you on bigger evaluating time? large are growth with the that markets near-term the you’ve potential acquisitions finding focused you over or highlighted? markets is accretion, can Are properties How scalable grow addressable earnings priority you in

Scott Sleyster

is markets the emerging Why don’t front. This that Scott. I on with start

cases, America, partners. to that on I into markets all, where of on we markets. operations and First expansion have focused Africa, emerging think And already Asia expect in primarily and would remain some we include and those Latin adjacent established

will, looking the For you we’ve been into already the markets most in. we’re that expanding part, at, if

be adding little or a we of a so, bit scale. capability And might

of remarks, going over our that cost be sure amount before disciplined reasonable opening I the attractive funds, But capital make any back a buyer to been of deploy we’re to and over we’re earning those think, have in an situations, we relatively attractive. Thanks. going a valuations Charlie’s time. return

Erik Bass

business replacing challenge but you’re as and for the dilution, potential think And transactions, then, a maybe selling EPS you topic, consider another the relatively low you similar of if with lost reinsurance buy a one multiple multiple about how on businesses? to higher do is potentially earnings annuity

Ken Tanji

Ken. Erik, it’s

you are of better improve market achieve a believe sensitivity We And, lower get market will of capital again, capital, valuation recognized suggest, earnings. and lower to would reallocating sensitivity. And quality growth we offset that and our deliver the and will our the cost of terms combination, as expanded higher will growth, that less in to dilution.

Operator

you. Thank

Our Jimmy the comes JP ahead. line Please next of question Bhullar from Morgan. with go

Jimmy Bhullar

just First, like, the from but It on question quarter I business had has revenues, generated announced IQ least good you a would was on expected done a Assurance results. worse outside, the seems than when loss. And have at significantly it the been the deal. you

So, about now your year, for had has bit little year? over impressions what you’ve that that how a it a transaction are gone, a of

Andy Sullivan

Yes. Jimmy, Andy. it’s

we our explicit extension the on because So, four Pretty see I’ll as mix, expand business we our business saw broaden early distribution under our we that are and and of Assurance Assurance to market an full an business correct, both of have we from part that And operating now And of platform. we very XXXX, as belt. expansion it have decision handle encouraged and you’re your question. made both quarters model. perspective. And product glad did in the and we a the opportunity

product -- lines, to Casualty. So, and if product we categories, you add began Medicare Property and perspective, think from like additional product like of a

model. long-term, the to On the distribution add on-demand on more we agent the it determined we if side, over we successful be that would

the building a because expect. it’s an So, to also on we’re led expanding confident both you would focused Prudential W-X over and growth agent component the agent margins leaning pretty external OpEx, business revenue but in significant a long time. now a the we’re component. And we’re growing out that’s potential, and scaling over in up so have why BPO to about increase organically very revenues And we as has about perspective, the business term from the That expanding now platform.

other in Rob any intend said investment of about, guidance sort provide we the I losses. we As top section term, previous our update in operating Assurance the quarters, organic specific we at spoke to given what of near the or expect said to, that than don’t

Jimmy Bhullar

in an just on annuity Okay. to is you an And on, wanted to FlexGuard fully still product. get get sales. saw and out an benefit is idea of by that sequentially, I a relatedly, products? the -- think then, I improvement variable that weak, product? business, is your And of just living being idea sort your I lot benefit this annuity for driven XQ of first the to traditional -- in distribution, the be sales potential should ramp-up and withdrawing would And assume sales because half there rolled or wanted through you’re we that year living that in

Andy Sullivan

in coming we product. good product. intermediary. that it’s our May. very it me out from one -- $X additional almost take distribution the we the around To through so sales. the very through I’ll it the fact so In our still business, the successful are very, And, out Jimmy, May rolled our So, we with buffered industry. third-party the brand Andy. strong, relationships Yes, the think been in came a and to strong really December, launches most FlexGuard. And strength strength let in out are pleased of probably it’s success we’ve And annuity your billion had with question. the start is rolling that our we’ve there essence, crossed We and question of of the of with FlexGuard momentum, is we

couple go rolled left states have to additional a haven’t also So, there. And, that work we some we out. of have

So, pretty material a in past. momentum the assertive that big daily doing pivot were income question, to was given and we’re momentum of sales and great to They your see and we’re highest in the of that that income products. continue. our seeing of expect business, selling our To the Prudential-defined a part second part it change

overall So, change. that and impact to will business, will expect sales the on have that flows. you think, our could And, due we I from an outflows that see

Operator

you. Thank

go Wells Our Greenspan line Elyse of the comes question Fargo. next with ahead. Please from

Elyse Greenspan

the of transactions question, I My to on side. been annuity guess, you’ve first the about talking is back some going

upon, how the could there equity. obviously, could some place, you So, I takes hit take depending transaction the potentially or potentially -- could sales and imagine you be potentially structure, that

the assuming do of account and within that like probably going? you capital see the could your your M&A into said, hits leverage And, keep be within the plan? some how for you’ve just target, you about update think So, capital and some we taken through of as freeing growth you leverage capital used up freed think this where that kind within so us would absorb Can on you I’m you leverage up, market? still

Ken Tanji

Yes. it’s Elyse, Ken.

transaction As at looking a transactions, it’s all metrics sure importantly, or do forward, balance. we we’ll terms, charges profile. earnings key on the be in cash our flow these our value as That’s And, our going in depending these very looking at what disciplined to them fair whether upon at risk focused we’ll and our it would of things. making we equity, conduct to keep gains be and we number look potential

time keep managed our to and rating, our priority. a that we’ll within to So, our maintain ratio credit objectives we’ve leverage AA over continue

Elyse Greenspan

debt How could high [Technical how So, high could the Difficulty] it go? go?

Ken Tanji

we’ll rating. flexibility. some and we our -- manage credit number, make our a objectives some but keep want to don’t have We and sure to we with pinpoint I room

Elyse Greenspan

markets include That do Okay. do And on you mention then, that include doubling my growth your growth IQ. talk guys your that to the greater question, Assurance does you deck, second market, than -- slide XX%. about

following guess up questions. one of earlier on the I So,

scales. to There So, some earnings, the because within your improve the for the contribution is assumption outlook. as embedded three-year like margins it sounds obviously they’re business Assurance

you’re sense if assuming what put as you time earnings a kind add us over of this time? together does three-year So, ultimately Assurance over you period, to plan can this give

Ken Tanji

Ken. Elyse, Yes. it’s

we are that in That’s As near and to in as on that requiring see that growing that’s business distribution, would expanding business, business a investments and profitability. to this modest will efficiency, But, that lines, Andy expanding the that term. potential lead what very-focused and product the I’d we growth make mentioned, loss scales gains includes that’s some the realize add. gaining we

Operator

you. Thank

go of please line Ryan Our ahead, next KBW. comes question from Krueger, with the

Ryan Krueger

of be capital also do? it generally $XX would to -- billion you’re amount billion to of that anticipating is M&A $XX reallocation, capital to very equate fair that to assume billion wouldn’t your programmatic not rough $X to growth given the of higher terms the $X consumptive, businesses that In are billion

Charlie Lowrey

it’s Ryan, Yes. Charlie.

other that’s growth, market-sensitive think capital, words, into we’re capital businesses. a from higher lower reallocating as assumption. fair reallocating higher the businesses think, growth, about we In market-sensitive opposite, right, I the less

really is capital, businesses. the it between So, will, you of reallocation if a that

Ryan Krueger

blocks you you’ve Got of the now of Annuities then, what give benefit a sense from are the business, percentage discontinued have generated on living that Individual us can earnings guarantees? those that rough it. And

Charlie Lowrey

driven Right now our are largely our by earnings current legacy business.

in We’re new FlexGuard space. the

We’re gaining from earnings But, current going legacy great traction, our are business. our well. the and of majority it’s

Operator

you. Thank

comes Our from ahead. next Please Suisse. go of question the Credit line Kligerman with Andrew

Andrew Kligerman

approach. M&A your on question another So,

businesses various might You’ve these management, heard group markets. and And as and anything well. mentioned haven’t businesses. full-service voluntary attractive wondering think, I growth and wondering asset emerging I’m I -- about be Group. and are if record-keeping And Retirement M&As there’s whether I’m

Charlie Lowrey

Hey Andrew, it’s Charlie.

then transaction management important emphasizing markets. businesses, we’re emerging going expands not with interested what asset multiple it start, start we’re we’ve market looking interested and But, it’s a is to elaborate this I’ll and doing mega not some. What over Andy me our and to businesses. really over what in, right? at Scott Let I sensitive, we’re So, and to think, less higher to said in turn to stick that growth case, in

in programmatic that. on of to really emerging I’ll elaborate it in and emphasizes do. PGIM that so, markets. to over Scott to and Andy markets And specific going a we’re we’re terms But, what model that’s And it turn M&A to multi-manager in going to do certain

Andy Sullivan

businesses. I’ll institutional Andy. specifically particular general. in Andrew, mentioned and I full-service you led with our at would strengthening in add, -- it prop in strategy that way in frame institutional very businesses. just both We’ve value growth in wellness good that it’s financial Insurance. in success of those our Yes. And good has to Group seen our

that focus say, lean growth in see financial revenue the is would to continue that to those wellness. investment in net and I flows organic businesses So, our growth from into to

Andrew Kligerman

it, Very million refinement. kind very it. Individual understand I I I a then, generally was of customers And, item, Life think segment, it Got And from $XXX exactly line maybe their and have as helpful. impact providing the reserves what the information in options reserve offered around wondering just in what to that evolve? how UL they I’m customers, that with was those could options, $XXX policies. did are saw million

Andy Sullivan

again. Andy it’s Andrew, So, I’ll take question. your

So, a manage information impact believe premiums. the perspective this communications help that product earnings. go-forward to to is change, them practice and does And, our of will in it was where coming to certain intention a time, over business essence, less premium policies a their giving thus, charge. financial It have not proactively flexible in material we’re holders. detailed lead on more from The premiums that we of

Andrew Kligerman

have product. million to shouldn’t that they putting a to their value I significant trying that change just because and as that, what to to mean would might cash premiums, cash behaviors understand just have of pay prompt into don’t like it I will is them use well, could they I’m would been understand charge. $XXX the function what think, a

Andy Sullivan

Yes.

So, Andrew, it’s Andy again.

that essence, more in payment less And their we’re their customers advisors, premium them statements the will lapsation. guarantees requested premiums flexibility, and So, over their lead and premium around with their their giving that on we details working against coming to their notices, time. amounts in think annual

Operator

you. Thank

of Next, we go go Benguigui Tracy ahead. the with Barclays. line Please to

Tracy Benguigui

expressed preclude third-party interest you’re not of has sales, potential As that speaking close maybe wondering does in appetite? consortium, the any PGIM buyers. other mean, block market buyers I investors, with or if

PGIM’s sense Just bid-ask can reduce familiarity spread all. want to of crew get at a the

Andy Sullivan

sees investment in that think is that things overall for different more net said being we value So, question. origination particular, as that I it’s does alternatives. to enhance further. to your Andy. we in capabilities, this types we asset that capabilities of liability world-class many positive PGIM strong in a one advantaged very you and clearly do. strong earlier being feel absolutely strengthen process. And, PGIM as We Thank ways. is even we the in matching a much very manager, And We in and more areas look think world-class We Tracy, own that that of the see opportunity capital very our

that’s think possibilities the So, that And for create positive I we’re could do a excited for us. over that time.

Tracy Benguigui

the then, Okay, reducing from LBTI? the loss than of block your sensitivity, part said from the upcoming have annuity changes of motivation would the to book besides to business value the from Another under motivation accounting reduction great. and And sale equity LDTI been and life complete sale. insurers own market a worse that is divesting their

you that comment to your may at sell get just and transaction, of on specific asking not I’m how motivating law Now, LDTI to but factor. willingness to sense a a a be

Ken Tanji

it’s Tracy, Ken. Hey

deals, a I nor few a and to on do with respect have comment or else’s is us for like that someone metrics. away, transaction number on cash One through I will its be flow, we’ll take earnings, book said, a risk, capital consideration. into we’re TI don’t deal comment years to to on. But, First, specific all things of going impact to evaluate want I value,

And so, being be there can’t too because comment beyond would it I general.

Charlie Lowrey

actually using there is accounting use are account accounting. that currently significant to benefit Recall, book, our Tracy. annuities in we not a accounting for for Well, in add, is our Ken, different their the most which industry we TI, others vis-à-vis I’ll for living the it. change of under are And that the our maybe just in way the than

So, that be of your explanation part well. may to the question as

Operator

Dowling line question Lee & Humphrey of the next comes with Our from Partners.

Humphrey Lee

on or terms but to the kind back it be don’t IQ. basically, any losses in suggesting since I of in Assurance Just revenue operating announcement, you of the to original will term. margin updated in provide near want understand follow that guidance

like the by like And has the it achievable. on additional it where it Looking also, doesn’t trending, earn-out? should turn guess, do I you how about you now, that then to impact could may be be the, at been right feel look Given profitable XXXX? we think

So, on could retention to challenges the there person the issues, impact key given changes be earn-out? -- the any the

Andy Sullivan

Andy. So Humphrey, it’s

is we we’re the to become better are go place end then, talked we we launch where process we And at progress get more and marketing we about, As getting those lines, build of distribution need better products. product obviously, the through as a we basically to seeing conversion. efficient need to out at as we things,

We have throughout seen conversion quarter-over-quarter better. XXXX rates our get

and into product seen, won’t we levels but that of get the see we lines start profitability have get We expect. would towards to started we’ve that to specifics,

everything front but that in investment on we confident decision up investing. now on us not operating we’re with still to do continue like do the going and and really the have accelerate our specific we in to scaling intend the to comment have near-term to we we timing, We’re that job we’re the The to of trajectory revenue. made of losses

Ken Tanji

it’s Ken. Humphrey, And

profits, it’s and a three-year variable it’s upon earn-out, the On period. based over

XXXX. and two designed So, until And still it’s still still now, place in it’s our to expectations. it incent outperform it’s has the was right go, -- them And place. years to to it in

Humphrey Lee

office all and a major wellness, the And sharing when as of center overhead that stranded you your that related business? two you having financial have of and back about years Okay. part part earnings shrink businesses the reducing the contribution. potential how book think synergy you annuity Shifting to or call given gear, the ago, of overall costs we cost kind different shrinking was support. shrinking the Especially should the business, talked of of about the now, potentially

So, how the potential about of kind the should are think And you of to business? to address how overheads we related going that side that?

Charlie Lowrey

Yes.

progress costs. capital, that mind, progress and able also in First, that a keep making as with to need we good capital. objectives should, our we to we given progress accelerated capabilities we’ll us with transformation Also we’re indicated we XXXX, as program. reallocating with apply our be reallocate increased our stranded we’re deal our And in really when it’s

So, as redeploying annuities, new into be from we’ll we earnings it as may opportunities shift it well.

Operator

ahead. Piper go next Please question of Barnidge Our Sandler. from line John comes with the

John Barnidge

expenses light elevated administrative COVID seem disability the I remains? for reasonable to and the it there be that group pandemic as Does the long will of process to year. in X-point that think asked increase as claims

Andy Sullivan

Andy. it’s your reasonable. I’ll question. is John, Yes. your absolutely take Yes, assumption

disability of in most staff. time during period carrier like claims as investing important properly the One of the things disability is a this a

claims fourth the was return ratio customers time staff. to nursers, properly adding admin that’s what saw managers, have space personnel of specialists, That’s some to sure work. help our and in that in us adequate quarter make folk them to the claims that’s our and help our you So, to

of of assume on seen incidence see not have yet typically investment. the a and teams, recession, that that and it we LTD but invest reasonable right would continue So, side, claims happens are be to maintain is as level higher the would level we to up, expecting to goes the that we which during it,

John Barnidge

unrelated most that then, country you’ve tapering in aggressive around the timing there out country that, Israel maybe this markers insight COVID the seen And to that of Great. the provides weeks since the began they globally. that a enacted vaccination program some Are has maybe any off little bit? been has of

Charlie Lowrey

John, Charlie. is So, this

have we large And a vaccine, the could doesn’t chain of to it one-shot get encouraged the what need see the It’s we effect with kind are a both if the but of Pfizer think, and I in of -- Moderna that country will. on right? coming storage. vaccines, also you of vaccine, Johnson we vaccinations, cold introduction Johnson terms completely by this different potential the & a think of ability

course benefit three reduction going forward. to months, overnight, go we’re transmission the enure to as to the to going but change in -- to going next So, of say over people it’s not ability And there’s virus. we the we to think to happen be the and of material the the country’s six can a vaccinate that Company the to only in the

Operator

Thank you.

the of Tom Evercore. to go Please we Next, with line Gallagher ahead. go

Tom Gallagher

Hi.

deployment mentioned and seems like shouldn’t Assurance much that growth. $XX of capital through have intensity. billion guess, capital considering the IQ come one-third of $X First number, is, question I billion you a PGIM high organic that to will

largely that from coming the So, [ph] side? is OEM

Charlie Lowrey

Yes.

growth us total from Tom. XX% earnings third I saying of growth, what in is of Apologies excess third a I was gets wasn’t our I excess of if the capital earnings of What me in comes not organic. of said, that total the that clarify clear. that earnings XX% Let organic our to of is from a

that I So, that point. clarifies hope

Tom Gallagher

That does.

I they’re get, group a I M&A high The is but broader other businesses, just question like growth strategy. benefits capital efficient. follow-up had the on aren’t retirement and

areas? M&A so, these And why just wouldn’t curious, be

Charlie Lowrey

with before are Andy, is at join businesses, may that way you it we think consistent So, look is, businesses. that. to we and afterwards. I Andy said not not start in let with those me the want And investing But, what in those

-- if which continue to less for purposes I to with you are the sensitivity, growth. that, our market And businesses areas capital, don’t them in priorities But, those want to will if invest We emerging Andy, when and reallocate about but... we of in growth organic are think will, know you want higher markets. on to certainly you PGIM expand

Andy Sullivan

Charlie. No, add, nothing to

Operator

next our you. question America Thank Bank from Josh ahead. of And Securities. with Please comes go Shanker

Josh Shanker

things go difference high If annuities there certainly in are really If are strategic -- consumptive that least to, numbers I Just embedded to other we of should the that or to changes parting guess, focus put the like there back numbers that that want the already we on? motion, Day Investor the annuities. other come out? ways is at keep big strategic were capital the I or we in bringing changes those really up,

Charlie Lowrey

back Investor and you and we’ve strategic quarter, with to with be the higher What what when Day that, look of think join continues to strategy. maybe stab That at then It’s still first have a the wellness exists. a want lower where out what reallocate a and still part we in want But, our that’s to strategy, growth businesses. review I take we’ve then this rate -- still we in. terms I’ll thinking capital. environment Rob, new, much So, where you our at to much with with is come and that’s was done very presentation again, of in be is, interest there. we And say, years a three want

if So, if would be you can have a there. on? I I were know And difference, Rob, things elaborate don’t it other to you articulate

Rob Axel

you Yes, Josh, question. thank for so the

Charlie’s elaborate saying. on what bit a Just to little

around we it in as what opportunities. of Day, I that largely described think, said is you we Investor think intact, Josh, all if about growth our organic

But, I contrasted as but it’s of into -- we’re to at think reallocation environment it’s interest also away point the we facing lower at more -- in as in much articulated a aspirations said not the growth businesses. described are it’s -- with regard than rate that. Day, that Charlie we in some the what that capital just said, our Investor that and we time near-term of of around which pivot active have We from headwinds the those to reallocation annuities, were broadly

emphasis how And We we’re public in incidentally, So, will areas today. for flows. arbitrage can not in well get And -- because areas that those We getting and its just to public better -- well happen markets not it that think not a think in business. call tremendous rewarded a capital gives it’s don’t of market that it’s which the we’ve would an us of than growth very because the the to just It’s believe into value I business in good private we we annuities opportunity would capitalized. to be out reinvest just that hedged. -- that it be articulated. rewarded cash the market. produces It’s call

Josh Shanker

in we’re the plan presented to change? magnitude Is frame going dilutive, So to it the it’s less be for we’re multiple order that to market but Board, dilution of sensitivity. earnings there where to this earnings the going probably -- in presenting to higher was make out going any of get and the

Charlie Lowrey

redeployment to higher really what we’ve take repurchases balance, into the and it’s So in And, stab case, this what at really in right? businesses, what a between me Board of these It’s capital terms the and dividends. capital. to billion a And we a -- of share shareholders let but growth reallocation of balance we that. also externally $XX is a we present present articulated

we’ve attempted we’re right? growth Say, balance going higher to two, And the so, into do what is markets.

And hopefully, forward, future. in multiple we and return and we significant to will as to amount have continue shareholders capital as a past a we the yet therefore, in go the will higher so have of do done

Josh Shanker

line. I you. appreciate out math, help and will Okay. Well, some Darin Thank me the I’ll try it. down and maybe do

Operator

you. Thank

will comments. it turn Lowrey, back Charlie we for Now, to closing

Charlie Lowrey

be reinforce market-sensitive customers, on very In our will like its today, focused to new closing have Okay. less a deeply potential nimble future. just creating much. commitment a remains will growth and I’d the in one Thank and that to Prudential, higher more you that

and We’re our to forward our of we’re on this keeping we excited optimistic transformation. look updated progress. next phase And you about

us for So, joining again today. thanks

Operator

conclude AT&T Thank for you, you Service. for gentlemen. and using We does our thank conference and ladies Conferencing today. for your participation That

may now You disconnect.

Prudential Financial, Inc. 5.62 (PRS) 5 Feb 212020 Q4 Earnings call transcript