Q4 2023 Prudential Financial Inc Earnings Call

Operator: The Bulletproof Executive 2013 Ladies and gentlemen, thank you for standing by, and welcome to Prudential's Quarterly Earnings Conference Call. At this time, all participants have been placed in a listen-only mode.

Ladies and gentlemen, thank you for standing by and welcome to Prudential's Quarterly earnings Conference call. At this time, all participants have been placed in a listen only mode. Later, we'll conduct a question and answer session and instructions will be given at that time.

Operator: Later, we'll conduct a question-and-answer session. Instructions will be given at that time. If you should require any assistance during the call, please press star zero, and an operator will assist you offline.

If you should require any assistance during the call. Please press star zero and an operator will assist you offline as a reminder, today's call is being recorded I will now turn the call over to Mr. Bob Mclaughlin. Please go ahead.

Operator: As a reminder, today's call is being recorded. I will now turn the call over to Mr. Bob McLaughlin. Please go ahead.

Bob Mclaughlin: Good morning, and thank you for joining our call representing Prudential on today's call are Charlie Lowrey, Chairman and CEO, Rob Falzon, Vice Chairman, Andy Sullivan head of international businesses in PJM are global investment manager.

Bob Mclaughlin: Good morning, and thank you for joining our call. Representing Prudential on today's call are Charlie Lowrey, Chairman and CEO, Rob Falzon, Vice Chairman, Andy Sullivan, Head of International Businesses, and P. Jim, our Global Investment Manager, Caroline Feeney, Head of U.S. Businesses, Ken Tanji, Chief Financial Officer, and Rob Axel, Controller and Principal Accounting Officer. We will start with prepared comments by Charlie, Rob, and Ken, and then we will take your questions. Today's presentation may include forward-looking statements. It is possible that actual results may differ materially from those predictions we make today.

Bob Mclaughlin: I'm Feeney head of U S businesses, Ken <unk>, Chief Financial Officer, and Rob Axel Controller, and principal accounting officer, we will start with prepared comments by Charlie Robyn can and then we will take your questions.

Bob Mclaughlin: Today's presentation May include forward looking statements and it's possible that actual results may differ materially from those predictions we make today.

Charlie F. Lowrey: In addition, this presentation may include references to non-GAAP measures for reconciliation of such measures to the comparable gap measure and a discussion of factors that could cause actual results to differ materially from those in the forward-looking statements. Please see the slides titled Forward-Looking Statements and Non-Gap Measures in the appendix to today's presentation and the quarterly financial supplement, both of which can be found on our website at investor.prudential. Now I'll turn it over to Charlie.

Bob Mclaughlin: In addition, this presentation may include references to non-GAAP measures for a reconciliation of such measures to the comparable GAAP measure.

Bob Mclaughlin: A discussion of factors that could cause actual results to differ materially from those in the forward looking statements. Please see the slide titled forward looking statements and non-GAAP measures in the appendix to today's presentation and our quarterly financial supplement both of which can be found on our website at investor adopt Prudential Dot Com now I will turn it over to Charlie.

Bob Mclaughlin: Yeah.

Charlie F. Lowrey: Thank you, Bob, and thanks to everyone for joining us today. Before we begin, I'd like to comment on our CFO transition. As you saw from yesterday's news release, Janella Frias, president of Prudential's group insurance business, has been named executive vice president and CFO of Prudential, succeeding Ken Tanji. As a 27-year veteran of Prudential, Janela is a seasoned executive who brings a deep understanding of our business and industry, as well as significant finance, operations, and leadership experience. I'm sure you'll enjoy getting to know her as she starts her new role.

Charlie F. Lowrey: Thank you, Bob and thanks to everyone for joining us today.

Charlie F. Lowrey: Before we begin I'd like to comment on our CFO transition.

Charlie F. Lowrey: As you saw from yesterday's news release Janella free US President of credentials group insurance business has been named Executive Vice President and CFO Prudential, succeeding Ken Pantry.

Charlie F. Lowrey: That's a 27 year veteran of Prudential Janella is a seasoned executive who brings a deep understanding of our business and industry as well as significant finance operations and leadership experience I'm sure you'll enjoy getting to know her as she starts her new role.

Charlie F. Lowrey: Janella will become CFO effective March 15, and Ken will stay on for a six-month period to ensure a smooth transition. Ken has been a great partner and friend and has had a distinguished 35-year career at Prudential. I don't need to go back far to articulate his impact.

Charlie F. Lowrey: Hello will become CFO effective March 15th and Ken will stay on for a six month period to ensure a smooth transition.

Charlie F. Lowrey: Ken it's been a great partner and friend and has had a distinguished 35 year career at Prudential I don't mean to go back far to articulate its impact most recently as CFO, Ken guided Prudential through the financial challenges of the Covid pandemic and the market volatility that followed.

Charlie F. Lowrey: Most recently, as CFO, Ken guided Prudential through the financial challenges of the COVID pandemic and the market volatility that followed. During this same time, his leadership on strategic initiatives meaningfully contributed to our goals of becoming less market sensitive and more nimble. We are grateful to Ken for his many contributions over more than three decades and wish him well.

Charlie F. Lowrey: During the same time his leadership on strategic initiatives meaningfully contributed to our goals of becoming less market sensitive and more nimble.

Charlie F. Lowrey: We are grateful to Ken for his many contributions over more than three decades and wish him well.

Charlie F. Lowrey: Now, let's turn to my remarks for the quarter. Our financial results for 2023 reflect continued strong sales momentum across our insurance and retirement businesses and solid underlying earnings growth. The fourth quarter capped a productive year of continued transformation to make Prudential a higher growth, more capital efficient, and more nimble company. Our strategic progress and financial strength position us well to navigate the current macroeconomic environment, maintain a disciplined approach to capital deployment, and deliver long-term sustainable growth. Turning to slide three.

Charlie F. Lowrey: Now, let's turn to my remarks for the quarter.

Charlie F. Lowrey: Our financial results for 2023 reflects continued strong sales momentum across our insurance and retirement businesses and solid underlying earnings growth.

Charlie F. Lowrey: The fourth quarter capped a productive year of continued transformation to make prudential, a higher growth more capital efficient and more nimble company.

Charlie F. Lowrey: Our strategic progress and financial strength position us well to navigate the current macroeconomic environment, maintaining a disciplined approach to capital deployment and deliver long term sustainable growth.

Charlie F. Lowrey: Turning to slide three.

Charlie F. Lowrey: I will begin today by sharing a few examples of how we are transforming our business to drive future growth and unlock value for all our stakeholders. Over the course of 2023, we executed several attractive transactions, adding to our capital efficiency. Additionally, we reinsured a $10 billion block of traditional variable annuities, reducing our market sensitivity.

Charlie F. Lowrey: I'll begin today by sharing a few examples of how we are transforming our business to drive future growth and unlock value for all our stakeholders.

Charlie F. Lowrey: Over the course of 'twenty to 'twenty, three we executed several attractive transactions, adding to our capital efficiency, we reinsure that $10 billion block a traditional variable annuities, reducing our market sensitivity.

Charlie F. Lowrey: We closed a 10 billion dollar transaction of structured settlement annuities with Prisma.

Charlie F. Lowrey: We closed a $10 billion transaction of structured settlement annuities with Prismic, a life and annuity reinsurance company we launched. Prismic will enhance our mutually reinforcing business system and drive future growth by leveraging our differentiated brand, global asset and liability origination capabilities, and multi-channel distribution. In addition, we entered into a reinsurance agreement with Somerset Reeve for a $12.5 billion block of guaranteed universal life reserves, which released capital and increased earnings. We continue to strengthen the capabilities of our market-leading businesses through strategic M&A, expanded distribution channels, and created new products and solutions to meet the evolving needs of our customers across the globe and to support future growth. In PGEM, we enhanced our capabilities in the attractive area of private credit and direct lending by acquiring a majority stake in Deer Path Capital, which closed in December. To further provide investors with a cohesive offering, we brought together PGEM's private alternatives capabilities into one global team with the formation of PGEM Private Alternatives. Internationally, we continue to expand third-party distribution in Latin America through MercadoLibre, reaching a milestone of close to 300,000 policies in force last quarter.

Charlie F. Lowrey: Life and annuity reinsurance company, we launched.

Charlie F. Lowrey: Prismatic will enhance our mutually reinforcing business system and drive future growth by leveraging our differentiated brands global asset and liability origination capabilities and multichannel distribution.

Charlie F. Lowrey: In addition, we entered into a reinsurance agreement with Somerset read for a $12 $5 billion block of guaranteed Universal life reserves, which released capital and increase earnings.

Charlie F. Lowrey: We continued to strengthen the capabilities of our market leading businesses through strategic M&A.

Charlie F. Lowrey: Expanded distribution channels and created new products and solutions to meet the evolving needs of our customers across the globe and to support future growth.

Charlie F. Lowrey: And teach them, we enhanced our capabilities in the attractive area of private credit and direct lending by acquiring a majority stake in deer, Pascal which closed in December.

To further provide investors with a cohesive offering we brought together P. James private alternatives its capabilities into one global team with the formation of PGM private alternatives.

Charlie F. Lowrey: Internationally, we continue to expand third party distribution in Latin America through Mercado Libre, reaching a milestone of close to 300000 policies enforced last quarter.

Charlie F. Lowrey: In Japan, we launched expanded inheritance and new investment products to diversify our portfolio and meet a broader range of customer needs. Our Institutional Retirement Strategies business secured its second largest longevity risk transfer transaction ever with one of the biggest life insurance companies in the Netherlands. This marks our first international reinsurance deal in the Netherlands market.

Charlie F. Lowrey: In Japan, we launched expanded inheritance, and new investment products to diversify our portfolio and meet a broader range of customer needs.

Charlie F. Lowrey: Our institutional retirement strategies business secured its second largest longevity risk transfer transaction ever with one of the biggest life insurance companies in the Netherlands. This marks our first international reinsurance deal in the Dutch market.

Charlie F. Lowrey: Retirement Strategies also worked with Fidelity Investments to address growing consumer demand for a workplace retirement income solution. Our Prudential Simply Income product, a new single premium immediate annuity, is now available to employer-based retirement plans administered by Fidelity. In addition, to solidify our leadership and expand our addressable market in structured settlements, we launched a new indexed structured settlement annuity product. We also continue to create a more nimble and efficient company to meet the changing needs of our customers and maintain a competitive position in the marketplace. This included evolving our operating model and organizational structure to better support customers at the business level and leveraging technology to bring products to market faster. Our business and technology teams together launched an average of one new or enhanced product every two weeks in 2023.

Charlie F. Lowrey: Retirement strategies also worked with fidelity investments to address growing consumer demand for it workplace retirement income solution.

Our Prudential simply income product a new single premium immediate annuity is now available to employer based retirement plans administered by fidelity.

Charlie F. Lowrey: In addition to solidify our leadership and expand our addressable market and structured settlements, we launched a new index structured settlement annuity product.

Charlie F. Lowrey: We also continued to create a more nimble and efficient company to meet the changing needs of our customers and maintain our competitive position in the marketplace.

This included evolving our operating model and organizational structure to better support customers at the business level and leveraging technology to bring products to market faster.

Charlie F. Lowrey: Our business and technology teams together launched an average of one new or enhanced product every two weeks in 2023.

Charlie F. Lowrey: Additionally, we are strategically leaning into partnerships with cutting-edge technology firms within our group business to increase the speed of innovation, add capabilities, and enhance the customer experience. We enter 2024 with momentum and optimism as we have expanded and diversified our product offerings, enhanced customer and client experiences, and continued to reinvest in our businesses for sustainable long-term growth. Moving to slide four.

Charlie F. Lowrey: Additionally, we have strategically leaning into partnerships with cutting edge technology firms within our group business to increase the speed of innovation and capabilities and enhanced customer experience.

Charlie F. Lowrey: We enter 'twenty 'twenty, four with momentum and optimism as we have expanded and diversified our product offerings.

Charlie F. Lowrey: <unk> customer and client experiences and continued to reinvest in our businesses for sustainable long term growth.

Charlie F. Lowrey: Moving to slide four.

Charlie F. Lowrey: Our transformation strategy and growth initiatives are supported by Prudential's rock-solid balance sheet and robust risk and capital management framework, which have allowed us to confidently navigate the macroeconomic environment. Our double-A rated financial strength includes a strong capital position, including approximately $50 billion of unrealized insurance margins. $4.1 billion in highly liquid assets at the end of the fourth quarter and a high-quality, well-diversified investment portfolio and a disciplined approach to asset liability management. Turning to slide 5.

Charlie F. Lowrey: Our transformation strategy and growth initiatives are supported by Prudential's rock solid balance sheet and robust risk and capital management framework, which have allowed us to confidently navigate the macroeconomic environment.

Charlie F. Lowrey: Our double a rated financial strength includes a strong capital position, including approximately $50 billion of unrealized insurance margins $4 $1 billion in highly liquid assets at the end of the fourth quarter and a high quality well diversified investment portfolio and disciplined approach to asset liability management.

Charlie F. Lowrey: Turning to slide five.

Rob: Our disciplined approach to capital deployment enables us to effectively balance investing in the long-term growth of our businesses with returning capital to shareholders. In the fourth quarter, we returned over $700 million of capital to shareholders. For 2024, our board has authorized up to $1 billion in share repurchases, as well as a 4% dividend increase beginning in the first quarter. This represents our 16th consecutive annual dividend increase. And now, I will turn it over to Rob. Thank you, Charlie.

Charlie F. Lowrey: Our disciplined approach to capital deployment enables us to effectively balance investing in the long term growth of our business with returning capital to shareholders in the fourth quarter, we returned over $700 million of capital to shareholders for.

Charlie F. Lowrey: For 'twenty 'twenty four our board has authorized up to $1 billion in share repurchases as well as a 4% dividend increase beginning in the first quarter.

Charlie F. Lowrey: This represents our 16th consecutive annual dividend increase.

Charlie F. Lowrey: And now I will turn it over to Rob.

Yeah.

Robert Michael Falzon: Thank you Charlie I'll provide you an overview of our financial results and business performance for our Pizza U S and international businesses.

Rob: I'll provide an overview of our financial results and business performance for our PGEM, U.S., and international businesses. I'll begin on slide 6 with our financial results for the fourth quarter and full year of 2023. Our pre-tax adjusted operating income was $5.5 billion, or $11.62 per share, for 2023 and $1.3 billion, or $2.58 per share, in the fourth quarter. These results reflect an increase in the underlying earnings power of our businesses, including the benefits of strong sales growth and higher interest rates. This was partially offset by pressure on variable investment income and higher expenses, primarily due to a $200 million restructuring charge in the fourth quarter. Our GAAP net income for the quarter was $374 million higher than our after-tax AOI, primarily driven by net investment gains due to declining rates. Turning to the quarterly operating results of our businesses compared to the year-ago quarter, PGEM, our global investment manager, had lower other related revenues driven by lower incentive fees and agency income and higher expenses.

Robert Michael Falzon: On slide six with our financial results for the fourth quarter and full year of 2023.

Robert Michael Falzon: Our pre tax adjusted operating income was $5 5 billion or $11.62 per share for 2023, and $1 3 billion or $2.58 per share in the fourth quarter. These results reflect an increase in the underlying earnings power of our businesses, including the benefits of strong sales growth and higher interest rates.

Robert Michael Falzon: This was partially offset by pressure on variable investment income and higher expenses, primarily due to a $200 million restructuring charge in the fourth quarter.

Robert Michael Falzon: Our GAAP net income for the quarter was $374 million higher than our after tax ally, primarily driven by net investment gains due to declining rates.

Robert Michael Falzon: Turning to the quarterly operating results of our business as compared to the year ago quarter teach them, our global investment manager had lower other related revenues driven by lower incentive fees and agency income and higher expenses.

Rob: This was partially offset by higher asset management fees, including the benefits from our acquisition of DeerPath Capital and the launch of PRISA. Results of our U.S. businesses primarily reflected higher spread income driven by business growth and the benefit of higher interest rates and lower expenses. This is partially offset by lower legacy traditional variable annuity fee income as we pivot to less market-sensitive products. The earnings in our international businesses primarily reflected less favorable underwriting results, including unfavorable policyholder behavior, partially offset by lower expenses.

Robert Michael Falzon: This was partially offset by higher asset management fees, including the benefits from our acquisition of Deere past capital and are launching prison.

Robert Michael Falzon: Results of our U S businesses, primarily reflected higher spread income driven by business growth and the benefit of higher interest rates and lower expenses. This was partially offset by lower legacy traditional variable annuity fee income as we pivot to less market sensitive products.

Robert Michael Falzon: The earnings in our international businesses, primarily reflected less favorable underwriting results, including unfavorable policyholder behavior, partially offset by lower expenses.

Rob: Turning to slide 7, PJIM, our Global Active Investment Manager, has diversified capabilities in both public and private asset classes across fixed income, equities, and alternatives. PGEM's strong investment performance over the past year has also driven attractive long-term performance, with over 80% of assets under management outperforming their benchmarks over the last five and 10-year periods. PGM's assets under management increased 6% to $1.3 trillion from the year-ago quarter, primarily resulting from market depreciation. Third-party net outflows in the fourth quarter totaled $13.5 billion.

Robert Michael Falzon: Turning to slide seven teach them our global active investment manager has diversified capabilities in both public and private asset classes across fixed income equities and alternatives Peach and strong investment performance over the past year has also driven attractive long term performance with over 80% of assets under management outperforming their benchmarks over the last five and 10.

Robert Michael Falzon: 10 year periods.

<unk> assets under management increased 6% to 1.3 trillion from the year ago quarter, primarily resulting from market appreciation third party net outflows in the fourth quarter totaled $13 5 billion.

Rob: Institutional outflows of $6.3 billion were driven primarily by a large redemption of a low-fee equity index mandate and redemptions in public fixed income resulting from client rebalancing and liquidity needs. Retail outflows of $7.2 billion were primarily driven by equity, sub-advised mandates, and fixed income outflows. As the investment engine of Prudential, the success and growth of PGEM and of our U.S. and international insurance and retirement businesses are mutually reinforcing. PGEM's asset origination capabilities, investment management expertise, and access to institutional and other sources of private capital, including through the recently launched reinsurer Prismic, are a competitive advantage, helping our businesses to bring enhanced solutions and create more value for our customers. Our insurance and retirement businesses, in turn, provide a source of growth for PGEM through affiliated net flows as well as unique access to insurance liabilities.

Robert Michael Falzon: Institutional outflows of $6 3 billion were driven primarily by a large redemption as a low fee equity index mandate and redemptions in public fixed income, resulting from client rebalancing and liquidity needs.

Robert Michael Falzon: Retail outflows of $7 2 billion were primarily driven by equity sub advised mandates and fixed income outflows as the investment engine of Prudential the success and growth of teach them and of our U S and international insurance and retirement businesses are mutually reinforcing P. Jim's asset origination capabilities investment management expertise and access to Institute.

Robert Michael Falzon: And other sources of private capital, including through the recently launched reinsurer prisoner are a competitive advantage, helping our businesses to bring enhanced solutions and create more value for our customers.

Robert Michael Falzon: Our insurance and retirement businesses in turn provide a source of growth for PGM through affiliated net flows as well as unique access to insurance liabilities. In addition, we continue to grow both organically and through acquisitions, our PGM private alternatives business, which has assets of approximately 240 billion across private corporate and infrastructure.

Rob: In addition, we continue to grow both organically and through acquisitions, our PGM Private Alternatives business, which has assets of approximately $240 billion across private corporate and infrastructure credit, real estate equity and debt, and secondary private equity. Capital deployment across PGEM's private assets platform of $9 billion during the quarter benefited from robust private placement and direct lending origination.

Robert Michael Falzon: Credit real estate equity and debt and secondary private equity capital.

Robert Michael Falzon: Capital deployment across Pgm's private assets platform of 9 billion during the quarter benefited from robust private placement indirect lending originations.

Robert Michael Falzon: Turning to slide eight.

Rob: Our U.S. businesses produce diversified earnings from fees, net investment spread, and underwriting income and benefit from our complementary mix of longevity and mortality business. We continue to drive growth by transforming our capabilities to improve customer experiences and expanding our addressable market with new financial solutions leveraging the capabilities across Prudential. Retirement Strategies generated strong sales of $16.4 billion in the fourth quarter across its institutional and individual lines of business. Institutional retirement sales of $14.3 billion in the fourth quarter were driven by strong international reinsurance sales and are the best quarter for structured settlement since 2016. International reinsurance sales included a $9.2 billion transaction in the Netherlands, and with the recently passed Dutch pension reform legislation, we anticipate this market will continue to grow over time. Individual retirement posted $2.1 billion in sales, reaching the highest level since the third quarter of 2019.

Robert Michael Falzon: Our U S businesses produced diversified earnings from fees net investment spread and underwriting income and benefit from a complementary mix of longevity and mortality businesses. We continue to drive growth by transforming our capabilities to improve customer experiences and expanding our addressable market with new financial solutions, leveraging the capabilities across Prudential.

Robert Michael Falzon: Retirement strategies generated strong sales of $16 4 billion in the fourth quarter across its institutional and individual lines of business institutional retirement sales of $14 3 billion in the fourth quarter were driven by strong international reinsurance sales and our best quarter for structured settlements since 2016.

Robert Michael Falzon: International reinsurance sales included a $9 2 billion dollar transaction in the Netherlands, and with the recently passed Dutch pension reform legislation. We anticipate this market will continue to grow over time.

Robert Michael Falzon: Individual retirement posted $2 1 billion in sales, reaching the highest level since the third quarter of 2019.

Rob: Our product pivots have resulted in continued strong sales of FlexCard and FlexCard Income, which increased about 20% from the year-ago quarter, while fixed annuity sales doubled. Our individual life sales increased 33% from the year-ago quarter, reflecting our product pivot strategy towards more capital-efficient products. Variable Life Protection and Accumulation Products represented approximately 70% of sales for the year, including a benefit from our recently launched FlexGuard Life product.

Our productivity have resulted in continued strong sales of flex guard and flex card income, which increased about 20% from the year ago quarter, while fixed annuity sales have doubled.

Robert Michael Falzon: Our individual life sales increased 33% from the year ago quarter, reflecting our product pivot strategy towards more capital efficient products.

Robert Michael Falzon: Life protection and accumulation products represented approximately 70% of sales for the year, including a benefit from our recently launched flex card life product.

Rob: In group insurance, we continue to execute on our strategy of product and client segment diversification while leveraging technology to increase operating efficiency and enhance the customer experience. Our full-year sales were up 11% compared to the prior year, driven by growth in disability and supplemental health. The Group's full-year adjusted operating income was the highest in the past 15 years and included favorable underwriting experience. As a result, we are lowering our benefits ratio target range by two percentage points to 83 to 87 percent.

Robert Michael Falzon: In group insurance, we continue to execute on our strategy of product and client segment diversification, while leveraging technology to increase operating efficiency and enhance the customer experience. Our full year sales were up 11% compared to the prior year driven by growth in disability and supplemental health.

Robert Michael Falzon: Group's full year adjusted operating income was the highest in the past 15 years and included favorable underwriting experience. As a result, we are lowering our benefit ratio target range by two percentage points to 83% to 87%.

Rob: Turning to slide 9, our international businesses include our Japanese life insurance companies, where we have a differentiated multi-channel distribution model, as well as other businesses aimed at expanding our presence in targeted high-growth emerging markets. In Japan, we are focused on providing high quality service and expanding our distribution and product offerings. Our needs-based approach and protection product focus continue to provide important value to our customers as we expand our product offerings to meet their evolving needs. In Emerging Markets, we are focused on creating a selective portfolio of businesses in regions where customer needs are growing, where there are compelling opportunities to build market-leading businesses, and where the Prudential enterprise can add value. Sales in our international businesses were up 24% compared to the year-ago quarter, and Life Planner sales were up 21%, including the benefits of recent product launches in Japan to diversify our product offering. In addition, Brazil sales were up 24%, reflecting growth across all channels and leading to a full-year record. Gibraltar sales were up 27%, primarily driven by higher independent agency sales and growth in the bank channel.

Robert Michael Falzon: Turning to slide nine our international businesses include our Japanese life insurance companies, where we have a differentiated multichannel distribution model as well as other businesses aimed at expanding our presence in targeted high growth emerging markets.

Robert Michael Falzon: In Japan, we are focused on providing high quality service and expanding our distribution and product offerings, our needs based approach and protection product focus continue to provide important value to our customers as we expand our product offerings to meet their evolving needs.

Robert Michael Falzon: In emerging markets, we are focused on creating a selective portfolio of businesses and regions, where customer needs are growing where there are compelling opportunities to build market, leading businesses and where the prudential enterprise can add value.

Robert Michael Falzon: Sales in our international businesses were up 24% compared to the year ago quarter life planner sales were up 21%, including the benefits of recent product launches in Japan to diversify our product offering. In addition, Brazil sales were up 24%, reflecting growth across all channels and leading to a full year record.

Robert Michael Falzon: Gibraltar sales were up 27%, primarily driven by higher independent agency sales and growth in the bank channel.

Robert Michael Falzon: As we look ahead, we are well positioned across our businesses to be a global leader in expanding access to investing insurance and retirement security. We continue to focus on investing in growth businesses and markets delivering industry, leading customer experiences and creating the next generation of financial solutions to serve the diverse needs of a broad range of customers.

Ken: As we look ahead, we are well positioned across our businesses to be a global leader in expanding access to investing, insurance, and retirement security. We continue to focus on investing in growth businesses and markets, delivering industry-leading customer experiences, and creating the next generation of financial solutions to serve the diverse needs of a broad range of customers.

Robert Michael Falzon: And with that I'll now hand, it over to Ken.

Kenneth Yutaka Tanji: Thanks, Rob I'll begin on slide 10, which provides insight into earnings for the first quarter of 2024 relative to our fourth quarter results as noted pretax adjusted operating income in the fourth quarter was $1 $3 billion and resulted in earnings per share of $2 58 on an after tax.

Ken: Thanks, Rob. I'll begin with slide 10, which provides insight into earnings for the first quarter of 2024 relative to our fourth quarter result. As noted, pre-tax adjusted operating income in the fourth quarter was $1.3 billion and resulted in earnings per share of $2.58 on an after-tax basis. To get a sense for how our first quarter results might develop, we suggest making adjustments for the following items. First, variable investment income was below expectations in the fourth quarter by $95 million.

Robert Michael Falzon: Spaces to get a sense for how our first quarter results might develop we suggest adjustments for the following items first variable investment income was below expectations in the fourth quarter by $95 million.

Robert Michael Falzon: Underwriting experience was below expectations by $15 million in the fourth quarter, and we expect $30 million of unfavorable seasonality in the first quarter.

Robert Michael Falzon: Last we include an adjustment of 240 million for expenses and other items. This includes the $200 million restructuring charge related to changes in our organizational structure as well as adjustments for typical seasonality related to the timing of expenses and premium.

Ken: Second, underwriting experience was below expectations by $15 million in the fourth quarter, and we expect $30 million of unfavorable seasonality in the first quarter. And last, we include an adjustment of $240 million for expenses and other items. This includes the $200 million restructuring charge related to changes in our organizational structure as well as adjustments for typical seasonality related to the timing of expenses and premiums. These adjustments combined get us to a baseline of $3.36 per share for the first quarter. I'll note that if we exclude items specific to the first quarter, earnings per share would be $3.50.

Robert Michael Falzon: These adjustments combined get us to a baseline of $3 36 per share for the first quarter.

Robert Michael Falzon: So that if we exclude items specific to the first quarter earnings per share would be $3.50.

Robert Michael Falzon: The key takeaway is that our underlying earnings power has increased significantly over the past year. While we have also made strategic progress improving our risk profile.

Robert Michael Falzon: We have provided these items to consider please note that there may be other factors that affect earnings per share in the first quarter. As we look forward. We have included other considerations for 2024 in the appendix.

Robert Michael Falzon: Turning to slide 11.

Ken: The key takeaway is that our underlying earnings power has increased significantly over the past year, while we have also made strategic progress improving our risk profile. While we have provided these items to consider, please note that there may be other factors that affect earnings per share in the first quarter. As we look forward, we have included other considerations for 2024 in the appendix. Turning to slide 11.

Our capital position continues to support our double a financial strength rating, our regulatory capital ratios are above our targets and we expect pike as year end RBC ratio to be greater than 425%, our cash and liquid assets were $4 $1 billion within our liquidity target range of three to 5 billion and we have.

Robert Michael Falzon: So off balance sheet resources, we remain thoughtful in our capital deployment balancing the preservation of financial strength and flexibility investment in our businesses for long term growth and shareholder distributions.

Ken: Our capital position continues to support our AA financial strength rating. Our regulatory capital ratios are above our targets, and we expect PICA's year-end RBC ratio to be greater than 425%. Our cash and liquid assets were $4.1 billion, within our liquidity target range of $3-5 billion, and we have substantial off-balance sheet resources.

Robert Michael Falzon: Turning to slide 12, and in summary, we are transforming our business for sustainable growth, we continue to confidently navigate the macro environment with the financial strength of our rock solid balance sheet, and we are maintaining a balanced and disciplined approach to capital deployment now I'll turn it to the operator for your questions.

Operator: We remain thoughtful in our capital deployment, balancing the preservation of financial strength and flexibility, investment in our businesses for long-term growth, and shareholder distribution. Turning to slide 12, and in summary, we are transforming our business for sustainable growth. We continue to confidently navigate the macro environment with the financial strength of our rock-solid balance, and we are maintaining a balanced and disciplined approach to capital deployment. Now, I'll turn it to the operator for your questions. Thank you. We will now be conducting a question and answer session. We ask that you please ask one question and one follow-up. If you would like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question.

Speaker Change: Thank you will now be conducting a question and answer session. We ask you. Please ask one question and one follow up if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you like to move your question from the queue once.

Speaker Change: Again, we ask you. Please ask one question and one follow up our first question is coming from Tom Gallagher from Evercore ISI. Your line is now live.

Speaker Change: Yeah.

Tom Gallagher: Good morning, Ken Good luck.

Tom Gallagher: Just looking at the the 65% free cash flow conversion.

Tom Gallagher: I know that bullet was removed from the capital slides I just want to make sure that that's still the target and then relatedly when thinking about Japan economic solvency implementation can you comment on how you see that impacting sources and uses of capital and capital.

Tom Gallagher: Once again, we ask that you please ask one question and one follow-up. Our first question is coming from Tom Gallagher from Evercore ISI. Your line is now live.

Ken: Good morning and, Ken, good luck. Then, just looking at the 65% free cash flow conversion, I know that bullet was removed from the capital slides. I just want to make sure that that's still the target and then, relatedly, when thinking about Japan's economic solvency implementation, can you comment on how you see that impacting sources and uses of capital and capital generation over the next few years? Yeah, hey, Tom, it's Ken.

Tom Gallagher: And over the next few years. Thanks.

Tom Gallagher: Yeah, Hey, Tom it's Ken and thanks for the good luck I appreciate it the we didn't remove that comment I think it's pretty well understood that our our free cash flow ratio has been about 65% over time and that that's reflective of our business mix and our growth its going to vary period to period, but.

Tom Gallagher: It'll be about 60, it's been about 65% on average and we and we think that's reflective of our our approach to balance growth with sustainable and diversified sources of cash flow actually in 2023, you'll see that cash flows were actually higher than that for a variety of reasons. So so no no change there in term.

Ken: And thanks for the good luck. I appreciate it. Then we didn't remove that comment.

Ken: I think it's pretty well understood that our free cash flow ratio has been about 65% over time and that that's reflective of our business mix and our growth. It's going to vary from period to period, but it'll be about 60.

Tom Gallagher: Of ESR in Japan.

Ken: It's been about 65% on average, and we think that's reflective of our approach to balance growth with sustainable and diversified sources of cash flow. Actually, in 2023, you'll see that cash flows were actually higher than that for a variety of reasons. So, no change there. In terms of ESR in Japan, again, we believe our businesses in Japan are well-capitalized and financially strong, and that would be evident in any reasonable capital standard. We're certainly working with the FSA, advocating for reasonable and responsible standards, but we also have strategies to adapt to that new regime as well. For example, we could re-insure business internally to the U.S. or Bermuda.

Tom Gallagher: Again, we believe our businesses in Japan are well capitalized and financially strong and that'd be evident in any reasonable capital standards, where we're certainly.

Tom Gallagher: Working with the FSA advocating for reasonable responsible standards, but we also have strategies to adapt to that new regime as well, we could reinsure business internally to the U S or Bermuda, we could reinsure externally. So we have a number of strategies to manage in the new regime and that's something that we're working on.

Got you. Thanks, and then just a follow up if I could the strength in Japan and the international sales more broadly I thought was kind of notable in the quarter can you comment on.

The competition in in those markets, what's driving the stronger sales and do you think that's going to translate into stronger top line because I know, it's been sort of flattish, but you know do you expect that to inflect at all in 'twenty four 'twenty five.

Ken: We could re-insure externally. So we have a number of strategies to manage in the new regime, and that's something that we're working on. Gotcha, thanks.

Andy: And then just a follow-up, if I could, that strength in Japan and international sales more broadly, I thought was kind of notable in the quarter. Can you comment on the competition in those markets? What's driving the stronger sales? And do you think that's going to translate into a stronger top line? Because I know it's been sort of flattish, but, you know, do you expect that to inflect at all in 2425? So, Tom, it's Andy.

Tom Gallagher: So Tom it's Andy I'll take your question and thank you for noting that you've heard me say this before sales are an outcome of a strong brand great products and outstanding distribution.

Andy Sullivan: We feel that we're clearly have a competitive advantage in those areas, particularly as it relates to Japan and Brazil.

Andy Sullivan: As you heard from Rob we're very pleased that our sales were up 24% year over year up 21% in life planner.

Andy: I'll take your question, and thank you for noting that. You've heard me say this before. Sales are the outcome of a strong brand, great product, and outstanding distribution. We feel that we clearly have a competitive advantage in those areas, particularly as it relates to Japan and Brazil. As you heard from Rob, we're very pleased that our sales were up 24% year over year, up 21% in Life Planner, and 27% in Gibraltar. Once again, that success was very broad-based, as we saw growth across every channel in Brazil and across Life Planners, independent agents, and the bank channel in Japan.

Andy Sullivan: And 27% in Gibraltar.

Andy Sullivan: Once again that success was very broad based as we saw growth in every channel in Brazil and across life planners independent agents and the bank channel in Japan.

Andy Sullivan: In Japan, we continue to see lift from higher sales of our U S. Dollar product really supported by the higher U S interest rate, but also clearly our work on innovating our product designs and enhancing our customer experience in particular in digital is paying off you know if you look at Brazil and the results. There we saw double did.

Andy Sullivan: Year over year growth in every channel our life planner channel.

Andy Sullivan: Outperformed throughout all of last year with high life planner retention and strong productivity on top of that we continue to expand and strengthen our third party distribution. Once again, we saw really strong results flowing from Itaipu Bang ER and we also remain quite pleased that the expansion of our partnership with <unk>.

Andy: In Japan, we continue to see lift from higher sales of our U.S. dollar product, really supported by the higher U.S. interest rate, but also, clearly, our work on innovating our product designs and enhancing our customer experience, in particular in digital, is paying off. If you look at Brazil and the results there, we saw double-digit year-over-year growth in every channel. Our Life Planner channel outperformed throughout all of last year, with high Life Planner retention and strong productivity. On top of that, we continue to expand and strengthen our third-party distribution. Once again, we saw really strong results flowing from Ita Bank, and we also remain quite pleased at the expansion of our partnership with MercadoLibre. So, you know, you asked about the outlook. As always, our priority is going to be to deliver strong value to our customers while achieving healthy levels of profitability, but we are optimistic about our ability to grow both the top and bottom lines of our business. Hey, thanks.

Kadow Libre. So you know you asked about the outlook as always our priority is going to be to deliver strong value to our customers, while achieving healthy levels of profitability, but we are optimistic about our ability to grow both the top and bottom line of our business.

Speaker Change: Hey, thanks.

Speaker Change: Thank you. Our next question is coming from Ryan Krueger from K B W. Your line is now live.

Ryan Krueger: Hey, Thanks, good morning.

Ryan Krueger: First can you provide some more color on the key drivers of the RBC ratio in improvement in the quarter I know you haven't given us the exact RBC during the year, but it seems like it increased a fair amount in the quarter.

Ryan Krueger: Yeah, Hey, Ryan it's Ken.

Ryan Krueger: Yeah, just to remind people you know at RBC is something that is reported annually and so the greater than 25%.

Ryan Krueger: Thank you. Our next question is coming from Ryan Krueger from KBW. Your line is now live. Hey, thanks. Good morning.

Ken: First, can you provide some more color on the key drivers of the RBC ratio and improvement in the quarter? I know you had given us the exact RBC during the year, but it seems like it increased a fair amount in the quarter. Yeah, hey, Ryan. It's Ken.

Kenneth Yutaka Tanji: Where we believe our RBC will be at the end of the year, but again that will be filed and in much greater detail at the end of the month and so yeah. We did have an improvement in our RBC ratio.

Ken: Yeah, just to remind people, RBC is something that is reported annually. And so the greater than 25% is where we believe RBC will be at the end of the year. But again, that will be filed in much greater detail at the end of the month. And so, yeah, we did have an improvement in our RBC ratio in 2023. And it's really a combination of a few things.

Kenneth Yutaka Tanji: In 2023, and it's really a combination of a few things won or are enforced businesses are generating a free surplus, but that's part of it we had the benefit of admitting negative by Omar <unk> with the regulatory change that was adopted during the year.

Ken: One, our in-force businesses are generating free surplus. That's part of it. We also had the benefit of admitting negative IMR with the regulatory change that was adopted during the year. We also had a reduction in our AAT reserves, generally from the re-aggregation of policies and investment portfolios, which created some efficiency. So it was a combination of that.

Kenneth Yutaka Tanji: Also had a reduction or a T reserves generally from re aggregate of policies and investment portfolios, which created some efficiencies. So it was a combination of that and so overall, our capital position and flexibility has improved in 2023 and again, you'll see the all that when we file our.

Ken: And so overall, our capital position and flexibility have improved in 2023. And again, you'll see all that when we file our report at the end of February. Thanks. And then, can you help us understand your sensitivity to short-term interest rates, specifically as we get closer to a potential Fed cutting cycle? Yeah, sure, Ryan.

Kenneth Yutaka Tanji: Our report at the end of February.

Speaker Change: Thanks, and then can you help us.

Speaker Change: Understand your sensitivity to short term interest rates, specifically as we get closer to a potential fed cutting cycle.

Speaker Change: Yeah sure Ryan you know the bottom line is is that there's we don't expect much net impact from short term rates, we have cash and collateral balances that earn short term yields.

Ken: You know, the bottom line is that we don't expect much net impact from short-term rates. We have cash and collateral balances that earn short-term yields. And that would generally be offset by interest rate derivatives from our investment portfolio, where we're actually paying short-term rates and receiving fixed to manage duration. The two generally offset each other.

Speaker Change: And that would generally be offset by our interest rate derivatives. This is from our investment portfolio, where were actually paying short term rates and receiving fixed to manage duration.

Speaker Change: The two generally offset each other.

Speaker Change: Yeah.

Alex Scott: Okay, thanks. Thank you. Our next question today is coming from Alex Scott from Goldman Sachs. Your line is now live. Hi. So I wanted to touch on capital as well. I mean, you're in a much stronger position, sort of going into 24 compared to a year ago.

Ryan Krueger: Okay. Thanks.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question today is coming from Alex Scott from Goldman Sachs. Your line is now live.

Alex Scott: Hi, So I wanted to touch on the capital as well I mean, you're in a much stronger position sort of going into 24 compared to a year ago.

Alex Scott: Trying to get an update on how you're thinking about your priorities for deploying that capital I know at times, you've talked about finding some ways to enhance growth I mean, certainly organic growth across some of your businesses has begun to pick up as well, but you know how how are you thinking about all of that and how do you look at driving more growth into the business.

Charlie F. Lowrey: And I just wanted to get an update on, you know, how you're thinking about, you know, priorities for deploying that capital. I know at times you've talked about finding some ways to enhance growth. I mean, certainly organic growth across some of your businesses has begun to pick up as well. But, you know, how are you thinking about all of that? And how do you look at driving more growth into the business? Sure, Alex, it's Charlie.

Alex Scott: Sure Alex It's Charlie I'll take that thanks for the question.

Charlie F. Lowrey: We have said that we've always wanted to but we want to be good stewards of capital and it would result, we want to have a consistent disciplined and balanced approach to the redeployment of capital within our businesses as you said and to shareholders.

Speaker Change: And there are really three aspects to our approach on which we focus first and foremost is maintaining a rock solid balance sheet and financial strength, which is critical to fulfilling the promises we make to our customers and clients.

Charlie F. Lowrey: I'll take that. Thanks for the question. You know, we have said that we always wanted to be good stewards of capital. And as a result, we want to have a consistent, disciplined, and balanced approach to the redeployment of capital within our businesses, as you said, and to shareholders. And there are really three aspects to our approach on which we focus.

Speaker Change: <unk> is investing both organically and through programmatic acquisitions to support sustainable long term growth of our businesses.

Speaker Change: And the third is returning excess capital to shareholders as we have in the past and in this quarter. We've done all three we deployed capital to support strong sales across our businesses, including several new products to meet the evolving needs of our customers. We closed on the deer path acquisition for PJM and we returned over 700.

Charlie F. Lowrey: First and foremost is maintaining our rock-solid balance sheet and financial strength, which is critical to fulfilling the promises we make to our customers and clients. Second, investing both organically and through programmatic acquisitions to support sustainable long-term growth of our businesses. And the third is returning excess capital to shareholders, as we have in the past. And in this quarter, we've done all three.

Speaker Change: Million dollars to shareholders. So we'll continue to have this consistent and disciplined approach as we go forward.

Speaker Change: I think you a second question I had is on P. Jim flows was hoping you could just provide a little more color on what you expect going into 2024 as some of these headwinds begin to abate that have driven smell for us.

Speaker Change: Yeah, Alex it's Andy Thanks for your question. Yeah, you know, we're not satisfied with the recent flow performance of the business and we have been and we're going to continue to take the appropriate actions to restore that performance to historical norms, yeah that really starts with ensuring that we have a range of strategies and vehicles. So that we can broadly serve our customers you've seen us continue to go into.

Andy: We've deployed capital to support strong sales across our businesses, including several new products to meet the evolving needs of our customers. We closed on the DeerPath acquisition for PGM, and we returned over $700 million to shareholders. So we'll continue to have this consistent and disciplined approach as we go forward. Thank you. The second question I had concerns PGM flows. I was hoping you could just provide a little more color on what you'd expect going into 2024 as some of these headwinds that have driven some outflows begin to abate. Yeah, Alex. It's Andy.

Speaker Change: <unk> invest into the business to accomplish just that.

Speaker Change: So we've continued our expansion into private alternatives with the acquisitions of Montana capital partners, a deer, Pat you've also seen us launch new vehicles like exchange traded funds and ESG strategies all of that work adds to an already broad and diversified portfolio.

Andy: Thanks for your question. We're not satisfied with the recent flow performance of the business, and we have been, and we're going to continue to take the appropriate actions to restore that performance to historical norms. You know, that really starts with ensuring that we have a range of strategies and vehicles so that we can broadly serve our customers. You've seen us continue to intentionally invest in the business to accomplish just that. So we've continued our expansion into private alternatives with the acquisitions of Montana Capital Partners and DeerPath. You've also seen us launch new vehicles like exchange-traded funds and ESG strategies.

Speaker Change: I think I would tell you as flows in active management are correlated with investment performance and our performance strengthened throughout all of 2023, but flows can lag.

Speaker Change: So that's one of the reasons, we're constructive on the outlook looking forward third we've continued we've we've not taken our foot off the gas on investing in distribution because those three things product that breath investment results in distribution lead to active flows over the longer term.

Speaker Change: Me also add that like others I'm sure you're hearing we believe that the record money market assets that are sitting on the sideline will flow back into fixed income once the inflation rates are are stabilized and the right trajectory people are more confident we're.

Andy: All that work adds to an already broad and diversified portfolio. The second thing I would tell you is flows in active management are correlated with investment performance, and our performance strengthened throughout all of 2023, but flows can lag, so that's one of the reasons we're constructive on the outlook looking forward. Third, we've continued, we haven't taken our foot off the gas on investing and distribution because those three things, product breadth, investment results, and distribution, lead to active flows over the longer term. Let me also add that, like others, I'm sure you've heard, we believe that the record money market assets that are sitting on the sidelines will flow back into fixed income once inflation and rates are stabilized, and the rate trajectory, people are more confident in it.

Speaker Change: We're ready to capitalize on that given the strength of our investment performance with 81% of our assets outperformed the benchmark over five and 10 years. So clearly not satisfied about the recent flow performance, but optimistic looking forward I would just end by noting we saw a pickup in gross inflows towards the end of <unk> and <unk>.

Speaker Change: That has continued into this year so we're optimistic.

Speaker Change: Thank you.

Speaker Change: Thank you next question is coming from Elyse Greenspan from Wells Fargo. Your line is now live.

Speaker Change: Yeah.

Elyse Greenspan: Hi, Thanks, My first question.

Elyse Greenspan: Is on I guess sticking with PJM in this slide you still call out you know you called out programmatic M&A. There can you just provide an update just on the pipeline of transactions and like you might be thinking about there.

Andy: We're ready to capitalize on that given the strength of our investment performance, with 81% of our assets outperforming the benchmark over five and 10 years. So clearly not satisfied about the recent flow performance, but optimistic looking forward. I would just end by noting we saw a pickup in gross inflows towards the end of 4Q, and that has continued into this year, so we're optimistic. Thank you. Thank you. The next question is coming from Elyse Greenspan from Wells Fargo. Your line is now active.

Elyse Greenspan: Sure. Thanks, Felicia, it's Andy so I won't get obviously specific around pipeline, but maybe just bring it up a level we've demonstrated our strong ability to grow PGM organically over a long period of time. So we certainly don't look at it as we need M&A to grow that said, we do remain interested in augmenting our organic growth with Merck.

Elyse Greenspan: Hi Alisa, thanks. My first question is on, I guess, sticking with PGIM. In the slides, you still call out programmatic M&A there. Can you just provide an update on the pipeline of transactions and what you might be thinking about there? So thanks, Alisa. It's Andy.

Elyse Greenspan: Is it acquisitions.

Elyse Greenspan: Montana capital partners Peach of custom harvest and then obviously our closure of deer path in December those are great examples of us adding capabilities in higher growth higher fee areas at the industry. So as we look forward, we're going to continue to look to globalize the business and we're going to focus on higher growth higher fee areas. So areas like prime.

Andy: So I won't get obviously specific about pipeline, but maybe just bring it up a level. We've demonstrated our strong ability to grow PGM organically over a long period of time. So we certainly don't look at it as we need M&A to grow. That said, we do remain interested in augmenting our organic growth through mergers and acquisitions. Montana Capital Partners, PGIB Custom Harvest, and then obviously our closure of Deer Path in December are great examples of us adding capabilities in higher growth, higher fee areas of the industry. So as we look forward, we're going to continue to look to globalize the business, and we're going to focus on higher growth, higher fee areas, so areas like private alternatives and real asset capabilities.

Elyse Greenspan: Alternatives and real asset capabilities.

Elyse Greenspan: Clearly a periods of time like this that are disruptive can lead to opportunities. So we're making sure that we're in to know and then the flow on what's going on we've also seen an uptick in activity in the marketplace, but as always we're going to remain patient and disciplined in our approach.

Speaker Change: Thanks, and then my second one is on the RBC Gonzo.

Speaker Change: It is now greater than 425, right and you guys saw a nice lift in the corner would you look to maintain RBC ratio around this level or is that something that you would maybe manage down over time and look to bring on more capital on the parent.

Andy: Clearly, periods of time like this that are disruptive can lead to opportunities, so we're making sure that we're in the know and in the flow of what's going on. We've also seen an uptick in activity in the marketplace, but as always, we're going to remain patient and disciplined in our approach. Thanks.

Speaker Change: Yeah at least it's Ken.

Kenneth Yutaka Tanji: We're well within our double a financial objectives on an RBC basis now it's not the only thing that matters for our credit rating, but on that measure, where we're where we need to be and we have flexibility. So.

Elyse Greenspan: So, you know, it's now greater than 425, right? And you guys saw a nice lift in the quarter. Would you look to maintain PICA's RBC ratio around this level? Or is that something that you would maybe manage down over time and look to bring in, you know, more capital? Yeah, at least it's Ken.

Kenneth Yutaka Tanji: We again, we'll balance maintaining our financial.

Kenneth Yutaka Tanji: Natural strength, which is obviously important to our value proposition.

Kenneth Yutaka Tanji: Growth and also distributions to shareholders. So we're balancing all three of those objectives.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you as a reminder, that star one to be placed in the question queue and we ask you. Please ask one question and one follow up. Our next question is coming from SUNY come off from Jefferies. Your line is now live.

Ken: You know, we're well within our AA financial objectives on an RBC basis. Now, it's not the only thing that matters for our credit rating, but on that measure, we're where we need to be. And we have flexibility.

SUNY: Hi, Thanks, Good morning first of all thank you to Ken for all of your help over the years I really appreciate it. My first question is just on the S. G O L deal with Somerset Reed, if I remember correctly that was supposed to close in the fourth quarter.

Ken: So, you know, we again will balance maintaining financial strength, which is obviously important to our value proposition, growth, and also distribution to shareholders. So, you know, we're balancing all three of those objectives. Thank you. Thank you. As a reminder, that's question number one to be placed in the question queue.

SUNY: Obviously, we haven't seen an announcement on that yet so maybe just an update there and are you still expecting 450 million of proceeds when that deal closes.

SUNY: Sidney It's Rob Yes. The deal continues to proceed toward closing our counterparty has actually received its regulatory approval, we got one or two final steps on our end, but we expect to closing in this quarter.

Suneet Kamath: And we ask you please ask one question and one follow-up. Our next question is coming from Suneet Kamath from Jefferies. Your line is now live. Thanks. Good morning.

Suneet Kamath: First of all, thank you for all of your help over the years. I really appreciate it. My first question is just on the STUL deal with Somerset Rhee. If I remember correctly, that was supposed to close in the fourth quarter.

SUNY: Just as a couple of reminders one is recall it is retrospective to the beginning of the year. So one 124.

SUNY: And with respect to the financial impacts.

SUNY: Earnings as well as one time closing costs and capital we'll update that in an announcement once we close.

Rob: Obviously, we haven't seen an announcement on that yet, so maybe just an update there. And are you still expecting $450 million in proceeds when that deal closes? Suneet, it's Rob.

Speaker Change: Got it and then I guess on P. J M T.

Speaker Change: Italy appreciate the strong five and 10 year numbers, but it looks like the three year number.

Speaker Change: 63% outperforming its is a little bit lower is that something that you know we should.

Rob: Yes, the deal continues to proceed toward closing. Our counterparty has actually received its regulatory approval. We've got one or two final steps on our end, but we expect a closing in this quarter. Just a couple of reminders. One is, please recall, it is retrospective to the beginning of the year, so 1-1-24.

Speaker Change: That could have an impact on kind of the flow dynamics or is there something maybe that will drop off for you I just wanted to get some color on how youre thinking about that three year number.

Speaker Change: Yes.

Speaker Change: I would focus on how much our our investment performance has strengthened here in the near term.

Speaker Change: We did have a period of time you know, we're an active manager and we have many high conviction strategies designed to produce alpha.

Rob: And with respect to the financial impacts, annual earnings, as well as the one-time closing costs and capital, we'll update that in an announcement once we close. And then I guess on PGEM, I totally appreciate the strong five and 10 year numbers, but it looks like the three year number, 63% outperforming, is a little bit lower. Is that something that, you know, we should be concerned about, that could have an impact on kind of the flow dynamics or is there something maybe that will drop off, or you just want to get some color on how you're thinking about that three year number. Yeah, Suneet, I would focus on how much our investment performance has strengthened here in the near term. We did have a period of time, you know; we're an active manager, and we have many high-conviction strategies designed to produce alpha. We went through a brief period in 21-22 where we did see a dip in performance, specifically in our fixed income business, but that performance has strengthened quite nicely and is very, very strong right now. So we don't expect that to have a major impact on us looking forward. Okay, thanks.

Speaker Change: We went through a brief period in 'twenty, one 'twenty, two where we did see a dip at performance Ah is specifically in our in our fixed income business, but that performance has strengthened quite nicely.

Speaker Change: And is very very strong right now so we don't expect that to have a major impact on us looking forward.

Speaker Change: Okay. Thanks.

Yeah.

Speaker Change: Thank you next question is coming from Jimmy Beulah from J P. Morgan Your line is now live.

Jimmy Beulah: Hey, good morning, So first a question for Charlie maybe on capital and just capital deployment. Overall can you talk about what your priorities are and where do and how do you think about M&A <unk> share buybacks because it seems like you certainly have the capacity to do more in buybacks given your capital generation than you've been doing but not sure.

Charlie F. Lowrey: Or if you're prioritizing other things instead as well.

Charlie F. Lowrey: Sure.

Charlie F. Lowrey: As I mentioned to Alex earlier, we do we have a consistent and balanced approach and as a result, Jimmy we really look for again the three things one is to make sure that we have a very strong balance sheet, which we do as Ken was talking about the second is to invest organically in our businesses and you've seen us do that and we will.

Andy: Thank you. The next question is coming from Jimmy Buehler from JP Morgan. Your line is now live. Hey, good morning.

Jimmy Buehler: So first, a question for Charlie, maybe on capital and just capital deployment overall. Can you talk about what your priorities are? And where and how you think about M&A and or share buybacks? Because it seems like you certainly have the capacity to do more in buybacks given your capital generation than you've been doing, but not sure if you're prioritizing other things instead as well.

Charlie F. Lowrey: To do that to support sales growth to support the growth of all our businesses as we go forward and then to look for acquisitions that makes sense.

Charlie F. Lowrey: Those would be in higher growth areas that could be in distribution that could be in.

Charlie F. Lowrey: Geography, as well, we also see tremendous opportunities right now in the marketplace in places like P. R T right where are we.

Charlie F. Lowrey: We are one of the leaders in this business, we think there's going to be tremendous volume there and that's really good business for us as we go forward and Caroline you may want to talk about that in one moment. The final thing as we've talked about is returning excess capital to shareholders. We've done that in the past and if we think we have excess cash.

Charlie F. Lowrey: As I mentioned to Alex earlier, we have a consistent and balanced approach. And as a result, Jimmy, we really look for, again, the three things. One is to make sure that we have a very strong balance sheet, which we do, as Ken was talking about. The second is to invest organically in our businesses. And you've seen us do that, and we will continue to do that, to support sales growth, to support the growth of all our businesses as we go forward, and then to look for acquisitions that make sense. Those would be in higher growth areas; it could be in distribution, or it could be in geography as well.

Charlie F. Lowrey: We'll do so but we're gonna about we're going to evaluate that relative to our are our investment in our businesses and the opportunities that come along and Caroline you might want to talk about one in particular.

Charlie F. Lowrey: We also see tremendous opportunities right now in the marketplace, in places like PRT, where we are one of the leaders in this business. We think there's going to be tremendous volume there, and that's really good business for us as we go forward. Caroline, you may want to talk about that a moment.

Caroline: Yes, absolutely so kidney we did finish another strong year in pension risk transfer.

Caroline: The 11 transactions worth almost 6 billion dollar, finishing as the number two pension risk transfer writer and we've already built on that positive momentum this year with a $5 billion deal with shell, it's our largest first quarter pension risk transfer ever and with its win Prudential now have completed seven at the top.

Charlie F. Lowrey: The final thing, as we've talked about, is returning excess capital to shareholders. We've done that in the past. And if we think we have excess capital, we'll do so. But we're going to evaluate that relative to our investment in our businesses and the opportunities that come along. Caroline, you might want to talk about one in particular.

Caroline: Then you have to PRT transactions on record.

Caroline: Yes, absolutely. Jimmy, we did finish another strong year in pension risk transfer. We closed 11 transactions worth almost $6 billion, finishing as the number two pension risk transfer rider. And we've already built on that positive momentum this year with a $5 billion deal with Shell. It's our largest first quarter pension risk transfer ever. And with this win, Prudential now has completed seven of the top 10 US PRT transactions on record.

Caroline: We also see that strong sales trend continuing.

Caroline: Driven by healthy pipeline due to favorable funding conditions I've ever 100% and last year's market volume was roughly 45 billion and we do expect to see that healthy pipeline continue this year and although the market is highly competitive.

Caroline: With more new entrants very few competitors have that Takeda transactions exceeding $1 billion and while transactions will continue to be episodic in our guaranteed that's not our expertise and our ability to handle large complex transaction.

Caroline: We also see that strong sales trend continuing. It's driven by healthy pipelines due to favorable funding positions of over 100%. And last year's market volume was roughly $45 billion. And we do expect that healthy pipeline to continue this year. And although the market is highly competitive, with more new entrants, very few competitors have executed transactions exceeding $1 billion.

Caroline: And our leadership position in surface deliberate.

And we believe will position us well to remain a leader in the market.

Speaker Change: Okay, and then just in Latin America can you share what your views are in terms of potential pension reform in the Chilean market and what the reasonable case or sort of a worst case impact would be on prudential's business there.

Caroline: And while transactions will continue to be episodic in our PRT business, our expertise and our ability to handle large, complex transactions, and our leadership position and service delivery. Thank you very much. We believe it's a position as well to remain a leader in the market. Okay, and then just in Latin America, can you share what your views are on potential pension reform in the Chilean market and what the reasonable case or sort of a worst-case impact would be on Prudential's business there? Yeah, so Jimmy, it's Andy.

Speaker Change: Yeah, So Jeremy its Andy. Thank you for your question you know as we've talked about before our priority is always delivering for our customers day in and day out.

Andy Sullivan: We're very leaned into what's in their best interest as you would expect because of that we believe in being very proactive on advocating on their behalf. We're going to continue to advocate for reforms that improve the pension outcomes in Latin America, and specifically for the citizens of Chile.

Andy: Thank you for your question. You know, as we've talked about before, our priority is always delivering for our customers day in and day out. We're very lean into what's in their best interest. As you would expect, because of that, we believe in being very proactive in advocating on their behalf. We're going to continue to advocate for reforms that improve pension outcomes in Latin America and specifically for the citizens of Chile. You know, just to give you an update, in Chile, the constitutional referendum was rejected on December 17th, but after two failed attempts, President Borch really has moved on and is now focused squarely on pension reform.

Andy Sullivan: You know just to give you an update in Chile. The constitutional referendum was rejected on December 17th but after two failed attempts so precedent before its really has moved on and is now focused squarely on pension reform and there is a proposal that's advancing through Congress that bill proposes to eliminate afp's and doing.

Andy Sullivan: Kris employer contributions to 6% we're closely monitoring that situation as a passage would impact our habitat JV, but I would say just a couple of things or habitat JV is a high quality very well run business, it's been working to actively diversify across countries and in the voluntary savings.

Andy: And there is a proposal that's advancing through Congress. That bill proposes to eliminate AFPs and increase employer contributions to 6%. We're closely monitoring that situation as passage would impact our Habitat JV. But I would say just a couple things.

Andy Sullivan: Offerings, and if you take a step back just recognize that joint venture.

Andy: Our Habitat JV is a high-quality, very well-run business. It's been working to actively diversify across countries and into voluntary savings offerings. And if you take a step back, just recognize that joint venture, while it's obviously a larger component of our emerging markets, it's not a material contributor to PFI earnings.

Andy Sullivan: It's obviously a larger component of our emerging markets, it's not a material contributor to <unk> earnings.

Andy Sullivan: Well, we'll obviously stay very close to it and we'll let you know when we have any more clarity.

Speaker Change: Thank you.

Speaker Change: Thank you next question is coming from Joshua Horowitz from Dowling <unk> partners. Your line is all that.

Speaker Change: Okay.

Joshua Horowitz: Hey, good morning, So I know lapses periodically.

Joshua Horowitz: Periodically been an issue in Japan, just given the exchange rates. It looks like there was a pretty sizable quarter over quarter reduction in the enforce amount in both international businesses in the quarter can you just talk about what you saw in terms of overlap station there.

Andy: So, we'll obviously stay very close to it, and we'll let you know when we have any more clarification. Thank you. Thank you. The next question is coming from Joel Hurwitz from Dowling Partners. Your line is now open. Hey, good morning.

Joshua Horowitz: Yeah. So thanks, Joel it's Andy.

Joel Hurwitz: So I know lapses have periodically been an issue in Japan, but just given exchange rates, it looks like there was a pretty sizable quarter over quarter reduction in the in force amount in both international businesses in the quarter. Can you just talk about what you saw in terms of the lap station there? Yeah, so thanks, Joel. It's Andy.

Andy Sullivan: So let me just talk about the decline in the in force.

Andy Sullivan: First of all as I always start we're exceptionally proud of our Japanese businesses, they've been very consistent and stable contributors to prudential for a very long time.

Andy Sullivan: With that there are a few factors, though that are impacting the life insurance enforced a mouse.

Andy: So let me just talk about the decline in the in-force. You know, first, as I always start, we're exceptionally proud of our Japanese businesses. They've been very consistent and stable contributors to Prudential for a very long time. With that, there are a few factors, though, that are impacting the life insurance in-force amount.

Andy Sullivan: First this is important to note a significant portion of our recent sales our investment contracts.

Andy Sullivan: And that really reflects what customers are looking to buy.

Andy Sullivan: Those sales do not include a material life component, but are contributing to our earnings.

Andy Sullivan: We are seeing natural run off in the older life blocks, particularly in the legacy YOD business at Gibraltar.

Andy: First, this is important to note; a significant portion of our recent sales are investment contracts, and that really reflects what customers are looking to buy. Those sales do not include a material life component, but they are contributing to our earnings. Second, we are seeing natural runoff in the older life blocks, particularly in the legacy yen business in Gibraltar.

Andy Sullivan: And then as we've talked about in previous quarters with the recent yen depreciation we've seen a modestly elevated level of surrenders, but all that said we are confident in our ability to grow and diversify our Japanese businesses across insurance investment and retirement security and we're continuing.

Andy Sullivan: To invest in them.

Joel Hurwitz: And then, as we've talked about in previous quarters, with the recent yen depreciation, we've seen a modestly elevated level of surrenders. But all that said, we are confident in our ability to grow and diversify our Japanese businesses across insurance investment and retirement security, and we're continuing to invest in them. Okay, helpful. And then, switching gears to the group, so you reduce the benefit ratio target there.

Speaker Change: Okay helpful. And then switching gears to group. So you reduce the benefit ratio of target. There can you just talk about the overall drivers to the reduction there and then and what's the growth outlook for that business. It looks like top line for for full year was was roughly flat.

Speaker Change: Just any color on on growth expectations there.

Speaker Change: Yes, absolutely chill it Caroline Thank you so much for your question.

So first of all I'll start off by saying we had another very strong quarter for group insurance and we're very pleased with affiliate result, since it does not.

Caroline: Can you just talk about the overall drivers for that, the reduction there? And then, and then what's the growth outlook for that business? It looks like the top line for the full year was roughly flat. Any color on growth expectations? Yes, absolutely, Joel. It's Caroline.

Speaker Change: And we believe we're in not shrunk conditioning group given the progress we've made in executing on our strategy and our future earnings power will reflect the efforts we've made.

Caroline: Thank you so much for your question. First of all, I'll start off by saying we had another very strong quarter for group insurance, and we're very pleased with the full year results of this business. And we believe we're in that strong positioning group given the progress we've made in executing on our strategy. And our future earnings power will reflect the efforts we've made to grow in a disciplined and profitable manner. We continue to focus on diversifying our business by expanding in the under 5,000 live market and the association segments.

Speaker Change: When it disciplined and profitable manner, and we continue to focus on diversifying our business by expanding in the under 5000 life market and the Association segment.

We're adding new products like supplemental health and continuing our grants and disability and.

Speaker Change: And we've made progress and that diversification accurate increasing our disability premiums.

Speaker Change: And fees at a higher rate than before and our supplemental health premiums also grew at strong double digit annual credit rates and and this diversification is driving stronger core earnings with higher margins.

Caroline: We're adding new products like supplemental health and continuing our growth in disability. And we've made progress in that diversification effort, increasing our disability premium and Seeds at a higher rate than before. And our supplemental health premiums also grew at strong double-digit annual growth rates.

Speaker Change: As for our performance our full year benefits ratio.

Caroline: And this diversification is driving stronger core earnings with higher margins. So, as for our performance, our full-year benefits ratio was just over 83 percentage points and included very strong performance in our life block in the second and third quarters of last year and record disability results in the first half of the year. While we don't expect that record performance to continue indefinitely, there are certainly other factors to consider.

Speaker Change: With just over 83 percentage points and it creates a very strong performance in our Lifelock and the second and third quarters of last year and record sensibility of adult in the first half of the year.

Speaker Change: We don't expect that record performance to continue indefinitely. There are certainly other factors to consider.

Speaker Change: Overall shall I say that our group business is growing it's doing so at attractive margins.

Speaker Change: Oh they'd having transitioned to an endemic state combined with our diversification strategy I just walked you through.

Caroline: So overall, Joel, I'd say that our group business is growing, and it's doing so at attractive margins, with COVID having transitioned to an endemic state. Combined with our diversification strategy I just walked you through, as well as the investments we've made in improving our claims management capabilities and strategic partnerships, we believe we'll see underwriting performance and earnings power continue to improve. And that is why we are confident with our decision to lower our benefits ratio guidance to be 83 to 87 percent for the year.

Speaker Change: And as well as investments we've made.

Speaker Change: And improving our claims management capabilities and strategic partnerships. We believe we will see that underwriting performance in earnings power continues to improve and that is why we are we are confident with our expectation and lowering our benefit ratio guidance to be 83% to 87% for the year.

Speaker Change: And on in terms of future earnings power as well I gave you some color there as well Joe.

Caroline: And in terms of just future earnings power as well, I gave you some color there as well, Joel. We believe that future earnings power group insurance will continue to be strong as we continue to grow and execute on our strategy. It was very helpful.

Speaker Change: We believe that keeps your earnings power and Grant's insurance will continue to be strong as we continue to grow and execute on our strategy.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Thank you. Our next question today is coming from woman Virtus from Raymond James Your line is not a lot.

Wilma Burtis: Thank you. Thank you. Our next question today is coming from Wilma Burtis from Brigham and James. Your line is now live. Hey, good morning.

Virtus: Hey, good morning.

Virtus: Wondering if there's any but any I can't even prismatic I've seen that you guys are spending on the sales of fixed annuities and also with this large PRT deals that give me just an update there. Please.

Rob: I'm just wondering if there's been any activity with Prismic, you know, seeing that you guys have been focused on the sales of things to communities and also with this large PRT deal. So if you could give us an update there, please. Wilma, it's Rob.

Virtus: It will it's Rob so as we've articulated before we're quite enthusiastic about prisma and more broadly about what we see to be the the opportunities that are coming out of the intersection between asset management and insurance and specifically the role that a prismatic can play in helping us to execute.

Rob: As we've articulated before, we're quite enthusiastic about Prismic and, more broadly, about what we see to be the opportunities that are coming out of the intersection between asset management and insurance, and specifically the role that Prismic can play in helping us to execute on that opportunity. We believe it'll create avenues of growth across our businesses, not specifically for the PRT transaction that we recently announced, but the opportunity to be a source of financing for sales growth both in the retirement marketplace and our other businesses on a go-forward basis. Our investors, who are extremely large global institutional investors, share our aspirations both from a directional standpoint and from a quantum standpoint. So our expectation is to go well beyond the initial $10 billion structured security or structured settlements transaction that we completed.

Virtus: Against that opportunity.

Virtus: We believe it'll create avenues of growth across our businesses are not specifically for the PRT transaction that we recently announced.

Virtus: But the opportunity to be a source of financing for sales growth both in the retirement marketplace and our other businesses on a go forward basis.

Virtus: Our investors, which are extremely large global institutional investors share.

Virtus: Sure our aspirations both from a directional standpoint and from a quantum standpoint. So our expectation is to go well beyond the initial $10 billion structured securities or structured settlements transaction that we completed.

Rob: It's going to include some level of ongoing balance sheet optimization. It's going to include, as I noted, financing the growth across our businesses. I think what's unique in a way about Prismic is the appetite by it and its investors for longer-duration and more complex liabilities.

Virtus: It's going to include some level of ongoing balance sheet optimization it.

Virtus: It's going to include as I as I noted a financing the growth across our businesses I think whats unique in a way about a prismatic has.

The appetite by it and its investors for longer duration and more complex liabilities and we're also going to look to do third party blocks as well in Prisma, all of which will inure to the benefit of increasing the asset in our assets under management.

Rob: And we're also going to look to do third-party blocks as well in Prismic, all of which will have the benefit of increasing the assets under management for our platform and business. Thank you. And could you talk a little bit about the buyback? I think you guys stuck with the $1 billion authorization for 2024, you know, certainly with-when you guys sell blocks and run off earnings a little bit, it's good to see more capital returns. So could you just talk about how you guys are thinking about that? Thank you. Yeah, hey, it's Ken.

Virtus: For our our pizza business.

Speaker Change: Thank you and could you talk a little bit about the buyback I think you had stuck with the $1 billion authorization for 2024.

Speaker Change: Yeah, certainly when are we going to sell block in run off earnings a little bit it's gonna see more capital returns. So can you just talk about how you guys are thinking through that thank you.

Speaker Change: Yeah, Hey, it's Ken Yeah, we've had a very consistent approach to shareholder distributions using both dividends and share repurchases as a way to return capital.

Ken: Yeah, we've had a very, you know, consistent approach to shareholder distributions using both dividends and share repurchases as a way to return capital. You know, it's a, there are share repurchases for the, for this year, were approved by the board, and they consider our capital position, our outlook for free cash flow, but also opportunities to deploy that capital into organic growth, as Charlie discussed, in particular, the very So all those things factored into it.

Kenneth Yutaka Tanji: Our share repurchases for the for this year was approved by the board and they have to consider our capital position our outlook for free cash flow, but also opportunities to deploy that capital into organic growth as Charlie discussed in particular are there.

Kenneth Yutaka Tanji: Very robust PRT market. So all those things factored into it we increased our dividend again, that's now we've increased that 16 years in a row. So again it all factors into what we think is a very consistent approach balancing our all our objectives as well so I hope that color.

Ken: We increased our dividend again, that's now 16 years in a row. So again, it all factors into what we think is a very consistent approach, balancing all our objectives as well. So I hope that color helps.

Ken: Thank you. Thank you. The next question is coming from John Barnidge on behalf of Piper Sandler. Your line is now live. Good morning.

Speaker Change: It helps.

Speaker Change: Thank you.

Speaker Change: Thank you next question is coming from John Barnidge from Piper Sandler Your line is now live.

John Bakewell Barnidge: Good morning, and thank you for the opportunity and best of luck Ken My first question I. Appreciate it if we could go to the group insurance business I appreciate the benefit ratio guidance.

John Bakewell Barnidge: Thank you for the opportunity and best of luck, Ken. My first question is, I appreciate if we could go to the group insurance business. I appreciate the benefit ratio guidance. But is there an expense savings storing disability coming up?

John Bakewell Barnidge: Is there an expense saving storing disability.

Caroline: I can't help but notice improvement in administrative expenses in recent quarters and with COVID moving endemic. The ramping up of expenses should that fall to the side. Thank you. Yeah. So, John, it's Caroline.

John Bakewell Barnidge: Coming up I can't help but notice improvement in administrative expenses in recent quarters and with Covid moving to endemic.

John Bakewell Barnidge: The ramping up of expenses.

John Bakewell Barnidge: Should that fall.

Speaker Change: To the side. Thank you.

Speaker Change: Yeah.

Speaker Change: Yeah, John it's Caroline Thank you so much for your question.

Caroline: Thank you so much for your question. In terms of our overall expense management, you may have seen we saw a 100 basis point improvement in our admin ratio from the year ago quarter. That is driven by both business growth and continued expense discipline. And we will continue to focus on expense efficiencies and, obviously, then would regularly adjust our operating models to ensure the appropriate levels of service going forward. In terms of disability overall, I would say the across group disability results were driven by our focus on effective claims management, including both short and long-term disability, as well as absence and family leave.

Caroline: In terms of our overall expense management and you maintain we saw 100 basis point improvement in our admin my share from the year ago quarter and that is driven by that doesn't that's granted and continued expense discipline.

Caroline: And we will continue to focus on expense efficiencies and and obviously then with regularly adjust our operating model to ensure the appropriate levels of service going forward.

Caroline: In terms of just the ability overall.

Caroline: I would say across the group disability results were driven by our focus on effective claims management.

Caroline: Including the short and long term disability as well as the absence in family leave and we also benefited from the continued tailwind of strong employment and high interest rate environment in our disability business had an outstanding New York I would also just want to point out something else strategically what you're doing on the disability side as we continue to to grow that.

Caroline: We also benefited from the continued tailwinds of strong employment and a high interest rate environment, and our disability business had an outstanding year. I would also just want to point out something else we're doing on the disability side as we continue to grow that area. We've actually invested, John, in improving our claims management process through a strategic partnership with Evolution IQ. This is a provider of AI-driven technology that provides real-time monitoring, leading to increased recovery.

Caroline: Area, and we've actually invested John and I'm pretty our claims management process and through our strategic partnership with Appalachian IQ.

Caroline: This is a provider of AI driven technology.

Caroline: Real time monitoring leading to increased recovery. However, all I'd say in terms of expense management, we remain highly disciplined.

Caroline: So overall, I'd say in terms of expense management, we remain highly disciplined and also, obviously, very much focused in terms of our pricing discipline. The evidence there is our ability to accomplish all this growth while maintaining our price competitiveness. But with the fact that as we continue to grow our book, we're also not afraid to walk away if the pricing just doesn't make sense in any particular case. So overall, we remain confident in our decision to lower our benefits ratio guidance and feel very comfortable with our expense management and our pricing. Thank you for that answer,

Caroline: And Oh, I'll say, obviously I'm very much focused in terms of our pricing pricing discipline.

Caroline: The evidence there is our ability to accomplish all of that is correct.

Caroline: And maintaining our price competitiveness, but the fact that as we continue to grab that and we're also not afraid to walk away if the pricing because it doesn't make sense on any particular case and say that overall, we remain confident in our decision to lower benefit ratio guidance and feel very comfortable with our expense management.

Caroline: Pricing discipline.

Speaker Change: Thank you for that answer my follow up question. When you talk about globalizing. The PGM business are there markets are not large in size that you want to get bigger in where does prismatic fit within that growth opportunity for PGM internationally.

John Bakewell Barnidge: My follow-up question, when you talk about globalizing the PGM business, are there markets that are not large in size that you want to get bigger in? And where does Prismic sit within that growth opportunity for PGIM International? So, John, I'll start out, and then, Rob, if you want to jump in, you can jump in.

Speaker Change: So John I'll start out and then Rob if if you want a tailwind you can jump in so when we talk about globalizing. The business I think it's important to recognize that a majority of our assets under management today are in a in the United.

Andy: So, when we talk about globalizing the business, I think it's important to recognize that a majority of our assets under management today are in the United States. So, we've been actively working to expand across Europe and Asia for many years now, and have invested quite heavily in distribution on both the institutional and retail sides of the business. That said, as we look to continue to broaden and diversify our mix of both asset classes and geographies, we would look to Europe and Asia as key geographies that we're most interested in growing. John, it's Rob just following up on Andy.

Speaker Change: State. So we've been actively for many years now working to expand across Europe, and Asia and have invested quite heavily in distribution on both the institutional and retail side of the business that said as we look to continue to broaden and diversify our mix of both asset classes.

Speaker Change: But by geographies, we would look to Europe and Asia as key geographies that we're most interested in growing.

Speaker Change: John It's Rob just following up on Andy within Asia, and with respect to prismatic I think what I'd note is we see a huge opportunity in Japan.

Rob: Within Asia, and with respect to Prismic, I think what I'd note is we see a huge opportunity in Japan, both with regard to, as Ken alluded to earlier in the call, optimizing our own book, but also with respect to the sort of opportunities we see with third parties in that marketplace as well. I appreciate that. Thank you. Thank you. Our next question is coming from Michael Ward from Citi. Your line is now live. Thanks, guys. Good morning. I'm sorry to be the one to ask.

Robert Michael Falzon: But both with regard to as Ken alluded to earlier in the call optimizing our own book, but also with respect to the sort of opportunities, we see with third parties in that marketplace as well.

Speaker Change: I appreciate that thank you.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question is coming from Michael Ward from Citi. Your line is now live.

Michael Ward: Thanks, guys good morning.

Michael Ward: Sorry to be the one to ask just curious if there's any update on on commercial real estate side for you guys. It looked like the L. T. L T V.

Michael Ward: Just curious if there's any update on the commercial real estate side for you guys. It looked like the LTV deteriorated a little bit. I'm just kind of wondering how you feel about any kind of watch list or resolutions that you made last year too. This is Rob.

Michael Ward: Deteriorated a little bit I'm, just kind of wondering how you feel about any kind of watch list or resolutions that you've made last year too.

Michael Ward: This is Rob so I'll tell I'll take your question, Mike. So a couple of thoughts one from an overall market standpoint, let me start there.

Rob: So I'll take your question, Mike. So, from an overall market standpoint, let me start there. From peak to trough, what we've seen across the market is about a 16% correction. And that number relates to what I'll call institutional quality real estate, the sort of things that we invest in or we lend against. And that's on an unlevered basis.

Robert Michael Falzon: From from a peak to trough, what we've seen is across the market about a 16% correction.

Robert Michael Falzon: And that number relates to what I'll call institutional quality real estate to sort of things that we invest in or we lend against and that's on an unlevered basis.

Rob: Our estimate is that the peak to trough in this cycle across real estate types is probably going to be a little over 20%. So we've got 5% or 6% probably left in the way of price correction yet to experience. Now within that, the office obviously has corrected much more severely, closer to 30% to date, and probably has another 10%, 15% yet to go. Because of the construction of our portfolio, it is significantly underweight.

Robert Michael Falzon: Our estimate is that the peak to trough in this cycle are you know what.

Across real estate types is going to probably be a little over 20%. So we've got five or 6% probably left in the way of of <unk>.

Robert Michael Falzon: This correction yet to experience now within that office, obviously has corrected much much more severely.

Robert Michael Falzon: You know closer to 30% to date and that probably has another 10, 15% yet you have to go.

Robert Michael Falzon: Because of the construction of our portfolio.

Is significantly underweight office.

Rob: And because of the overall quality of the portfolio and the diversification of it across geography and property types, and importantly, because this is a portfolio that's directly originated by PGM, with a team that's deep and averages some 25 years of industry experience, we're actually finding that our portfolio is holding up quite well. So loan-to-values across the portfolio were about 58%.

Robert Michael Falzon: And because.

Robert Michael Falzon: The overall quality of the portfolio and the diversification of it across geography and property types and importantly, because this is a portfolio. That's directly originated by teach them with a team that is deep and averages. Some 25 years of industry experience, we're actually finding that our portfolio is holding up quite well.

Robert Michael Falzon: So our loan to values across the portfolio.

Robert Michael Falzon: We're about 58%.

Rob: And our debt service coverage ratios remain right around 2.5%. Within our overall portfolio, our actual valuations increased by about 6% during the course of 2023, despite the fact that we saw a double-digit decline in the office component of our portfolio. But again, because that office component is only 2% of our assets or 14% of our mortgages, the performance of the rest of the portfolio has offset that. So, with regard to portfolio performance, we're actually feeling quite good. The last thing that you asked about was sort of what we're seeing on the watch list, etc.

Robert Michael Falzon: And and our our our.

Robert Michael Falzon: Our discount our debt service coverage ratios remain right around two and a half per said.

Robert Michael Falzon: Within our overall portfolio, our actual valuations increased about 6% during the course of 2023. Despite the fact that we saw a double digit decline in the office component of our portfolio, but again because that office component.

Robert Michael Falzon: It's only 2% of our assets were 50% about 14% of our mortgages.

Robert Michael Falzon: The performance of the rest of the portfolio has as off set that.

Robert Michael Falzon: So with.

Robert Michael Falzon: Regard to portfolio performance, we're actually feeling quite good the last thing that you asked about was sort of what we're seeing.

Watch list et cetera.

Rob: I guess the way I would describe that, Mike, is that first, if we look at our experience with maturities during 2023, we had about $2 billion worth of scheduled maturities. Of those, we provided modifications for four, less than $400 million of that $2 billion, with those modifications providing longer term extensions. The remainder of all of those maturities was resolved favorably for refinancing payoffs or short-term extensions that then led or led to subsequent payoffs. In the upcoming year, 2024, we've got about $3 billion of maturities coming on. That's about 6% of the portfolio that's maturing, and while we don't expect to be immune from this cycle by any means, we do expect that, on a relative basis, we'll be quite resilient. We increased our reserves in the real estate portfolio to around $370 million as of the end of the year, and that represents about 72 basis points.

Robert Michael Falzon: I guess the way I would describe that Mike is that.

Robert Michael Falzon: The first if I, if we look at our experience with maturities during 2023.

Robert Michael Falzon: You had about $2 billion worth of scheduled maturities are of those we provided modifications for four.

Robert Michael Falzon: It's less than $400 million of that 2 billion.

Robert Michael Falzon: And with those modifications providing longer term extensions.

Robert Michael Falzon: The remainder of the of all of those maturities was resolved favorably for refinancing payoffs of short term extensions that then led or leading to subsequent payoffs.

Robert Michael Falzon: In the upcoming year 2024, we've got about $3 billion of maturities coming on that's about 6% of the portfolio that's maturing.

Robert Michael Falzon: And you know, while we don't expect to be immune from this cycle by any means we do expect that on a relative basis will be quite resilient, we increased our reserves.

Robert Michael Falzon: In the real estate portfolio tour around $370 million as of the end of the year and that represents about a 72 basis points and we think that that's well provisioned against the portfolio again, given what we've experienced in the underlying quality of that portfolio.

Rob: And we think that that's well-protected against the portfolio, again, given what we've experienced in the underlying quality of that portfolio. Really helpful. Thanks, Rob. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Mr. Lowrey for any further closing comments. So, thank you again for joining us today. The fourth quarter capped a year of continued growth and evolution for Prudential. Our strategy, coupled with our mutually reinforcing business system, positions us well to deliver long-term, sustainable growth to all our stakeholders. Our fundamentals are strong, and we are confident about our momentum going into 2024. We will continue to lead the way in expanding access to investing, insurance, and retirement security across the globe as we seek to help current and future generations build a secure financial future. Thank you again for joining us, and have a good day. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

Speaker Change: Awesome really helpful. Thanks, Rob.

Robert Michael Falzon: Thank you we've reached end of our question and answer session I'd like to turn the floor back over to Mr. Lowery for any further closing comments.

Charlie F. Lowrey: So thank you again for joining us today, the fourth quarter capped a year of continued growth and evolution for credential, our strategy, coupled with our mutually reinforcing business system positions us well to deliver long term sustainable growth through all our stakeholders. Our fundamentals are strong and we're confident about our momentum.

Charlie F. Lowrey: Going into 2024.

Charlie F. Lowrey: We will continue to lead the way in expanding access to investing insurance and retirement security across the globe as we seek to help current and future generations build a secure financial future.

Speaker Change: Thank you again for joining us and have a good day.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.